Friday, September 23, 2011

She is a commerce minister, she surely passed Eco 101. But Eco 102?

Worn out lipstick included
Meet Edmée Betancourt.  She is the commerce (and trade?) minster of Venezuela.  I heard that she is rather affable in private but prone to rather outrageous/militant public declarations.  But the one of this week deserve a special consideration because, well, if she really thinks so then she is either an ignorant or sabotaging Chavez.

As you may know, or not, it does not matter, that the regime has decided to go around price controls of essential items by simply deciding that all products must have their cost calculated and the government will decide how much more they can charge.  among the many outrageous declarations on this thing we can mention the one of Juan Carlos Loyo that people will be able to update their cost anytime courtesy of a web page from the government and thus ask for price increases as necessarily.  This in a country of very faulty internet, even faultier official web pages and this coming from a guy who has no qualm in paying countries such as Nicaragua coffee up to100% above Venezuelan coffee which price has remained blocked for years....  But I digress...

The thing is that Edmée thinks that 10% earnings is quite fair.
Todo esto se tomará en cuenta para poder estimar cuál será el precio máximo de un producto. Por supuesto que habrá un precio determinado de un producto en la matriz de costo. A partir de allí es cuando se fija cuánto será el precio máximo al público. Yo opino que una utilidad razonable de una empresa puede ser de 10%All will be taken into account to determine what will be the maximum price of a product.  Of course there will be a determined price of a product in a cost matrix (WTF ????? Editor's note).  From there it is that we will fix the maximum price to the public.  My opinion is that a reasonable earning for a business could be 10%. 
Such things cannot be made up....

That you sell a million trinkets or half a dozen heavy machinery in a year, 10% is fine.
That the inflation of a country is 30% does not matter, obviously.  You can absorb the 20% loss of capital.
That banks could pay me more than 10%  interests should not be an incentive to sell my business and put the money in the banks.
And the 10% earnings should certainly be an incentive to keep working, amen of all the fun that can be found battling SENIAT, LOPCYMAT, Inspectoria del Trabajo, Min Ambiente, etc, etc... amen of outright expropriation risks

I better stop.


  1. Island Canuck12:31 AM

    I happy to see someone finally brought this subject up.

    This is just about the dumbest law in the history of Chavismo. The most obvious is that like exchange controls they won't be able to control it. Oh sure, some "chinaman" will be hauled into court or fined like in Recadi but there is no way in hell they will be able to monitor this archaic law.

    Also it will be entirely political in nature. Chavistas will have one law & the rest of us will have another.

    How are they going to deal with say the tourism industry here in Margarita where many of us are suffering losses due to them wrecking the industry. How are they going to deal with professionals like doctors, dentists, etc. who spent years learning their trade. 10% profit. Don't make me laugh

    To say I'm angry is an understatement. It's just all so stupid that I can't even get my head around it.

    Island Canuck

  2. Sounds like Belarus....of course certain businesses are always off the radar :)

    If that lady's nose were stuck up any higher in the air,she'd have altitude sickness...

  3. I guess chavistas are warring between them to see who can concoct the most effective measure to bring about the implosion of the country in the least amount of time.

    Certainly, this one is one for the ages. 10% profit. Economic activity would stop in a screeching halt soon enough if they were able to implement it. Of course, they are too stupid to reach that goal, so they are just adding another measure of uncertainty to the economy that will have the same effect but over a longer run.

    I remember years ago when we use to ask what would happen if people in the barrios descended into the city. Well, guess what. They have, and we are witnessing what they are doing with the country. The mob has to be kept out of power. That should be rule No. 1 in a democracy. Perhaps we should revisit the Greek and Roman idea of it.

  4. The Chavistas probably see price controls are win-win. They hope to get credit for attempting to control inflation and when its not successful, they blame greedy capitalists and speculators. Will the Venezuelan public see the light, certainly not the folks who like this picture...

  5. 1979 Boat People5:46 AM

    Well, that minister should try out to sell arepa on the side walk with 10% earning.

  6. What can I say?
    We are living the economy of the 17th century in Venezuela...

  7. Anonymous7:50 AM

    "Explicó que dentro de la matriz de costo de producción se estipulan los costos fijos, es decir los servicios de agua, luz, teléfono y gas, así como los costos variables."

    She's starting out real well: I'd like her to explain to a Car Wash how water would be a fixed cost to them? - point being it seems she doesn't understand the difference between fixed and variable and which totally depends on the type of business when analyzing the value chain.

    Cost accounting is a VERY complex subject, assuming GAAP, and something I doubt chavista inspectors will be able to handle.

    Plus and since many of the products to produce something in Venezuela are imported, how will they avoid overinvoicing, the difference going to a Miami bank account?

    More red tape, inefficiency and of course opportunity for corruption...


  8. Anonymous11:50 AM

    11% ? Expropiese!

  9. Anonymous2:06 PM

    Yet another socialist scheme, propounded by economic morons.

    A 10% cap on what?

    I run a business in the USA.

    I try to get 12% gross on vehicles and 20% on accessories.

    At the end of the year I am happy to net 2%.

    My employees insist on being paid, so does the local government, the electric company, the insurance company, etc.

    Socialism fails every time it is tried.

    The planet is covered with examples of this failure, yet the socialist birth rate seems to be higher than their death rate.

  10. torres3:11 PM

    I can just imagine the worksheet they are trying to create. What will they do when it gives them "circular reference"?


  11. Anonymous4:58 PM

    Esta señora no debe saber nada de producción de lo que sea, ahora si nos aguantan la cabeza debajo del agua, y Venezuela igualito quebrada, abandonada con unos ineptos al mando. La Maga Lee

  12. 10% of what? is the right question, anonymous. Net margin or gross profit? Before or after all considerations, taxes, expenses, and other accounting adjustments, (such as union "cuanto-hay-p'a esos" and various obscure costs of doing business in Vzla..)

    This illustrious laureate monkey-minister lady could only mean "gross" profit, of course, as in Bruto, i.e. Brutiissima! The sad part is 80% of the people left in Venezuela are probably even less educated than her, so anything these foolish officials say goes under the radar popular.

  13. Is the 10% applied to the end of the chain (sales), or to every step? How is it for producers, wholesaleres, distributors, retailers, etc? 10% for each? 10% gross?

  14. Boludo Tejano7:04 PM

    Is she related by blood or by marriage to former President Rómulo Betancourt?

    To the charge the she is incompetent/ignorant of economics etc.: when has Thugo ever appointed someone competent to a position?

  15. Island Canuck7:17 PM

    If they weren't incompetent they wouldn't be Chavistas.

    I think that most companies will probably just refuse to register. They have no way of policing this.

    It's just stupid.

  16. RabbiBulla8:03 PM

    "If they weren't incompetent they wouldn't be Chavistas."
    "Everyone is entitled to be stupid but some abuse the privelage."(Chavez ?)
    "Get all of the fools on your side
    and you can get elected
    to anything. (Chavez ?)
    first quote from anonymous,
    second-Frank Dane-
    (Whose most famous quote is
    The best candidate to vote for
    is the one that will do the least
    harm.) Definitely, NOT CHAVEZ.

  17. Anonymous10:39 PM

    It is what it is IC.

    If I were you, I'd spend the money and get a REAL good accountant who can run rings around them, because the boss, Edmée Betancourt, is clueless about cost accounting.

    But I realize that this strategy could be dangerous and backfire and too costly for you, because, in the end, the inspectors will simply and arbitrarily "set" prices, if they feel the heat of being ignorant morons (and put you out of business if they really get pissed).

    Of course the easier option #2 is to just "bajarse de la mula" with the inspector and have another recurring cost that somehow needs to be passed along, but can't be shown in the books as what it really is (but creative accounting will take care of this).

    But I sure would love to sit down with Edmée and discuss (debate? hahahaha) cost accounting, for what it's worth (= nothing).

    I believe F. Toro had a post on command economies and why they just can't work. His main reasoning I believe correctly was that over time, the government will lose all references to market pricing, which of course IS one of the MAJOR forces that drive prices.

    One of his posts was this one:

    Please, IC, don’t take this as a patronizing post, it is just me ranting and venting my frustrations thinking about family that have small to medium sized businesses in Venezuela and are looking at another curve ball thrown at them, living anxious times because they can’t just go somewhere and comply and move on.

    Enough said. No, too much said.


  18. Meanwhile back at the Rancho, The website Radar de los Barrios seems to have shutdown. It centered on the gripes of the poor around Caracas and the colossal fuckups and corruption by Chavez and his revolution in dealing with poverty, crime and such. I suspect the threats became too much to ignore. I will miss it as a good street level view of Chavezimo.

  19. So does that mean that PDVSA can only charge 10% more for oil than the cost of extraction?

    Suggest it and wait for the screams...

  20. Maybe inflation will be part of the "todo esto" that they take into consideration.

    And maybe pigs will fly, and Chavez will resign out of the goodness of his heart.


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