Tuesday, June 18, 2013

Please! Export something! Anything!

The good thing about having "contacts" and clients in the real world is that they are sometimes invited to real meetings with the representatives of the regimes where neither economists nor journalists have access. But, even if not on the very same day, bloggers do get the scoop :)

The rest of the entry is under no real name to protect not only the participants, clients of mine, but also the participating officers who could get in trouble if some folks in the regime would hear them admitting some of the flaws of the "proceso".

The setting is in and important branch of the government that shall remain nameless (you know, at the level of ministry, the central bank or the nazional assembly). The motive is that the regime needs to foster imports. The guests (summoned to the meeting actually) are some of the guys that did export stuff at some point, under Chavez, besides oil or oil derived stuff.

The regime representatives startled the audience by saying stuff such as "the government needs foreign currency sources outside of oil". And "how come that most of you stopped exporting by 2005?" (1). Paraphrasing, of course, since I was not there.

Then they asked how they could help to increase exports.  Though specifying that exports could only proceed once the local market is duly supplied, as "this is a social economy" (2).

Attendants were well behaved but could not help themselves when mere simple facts sounded almost offensive for the officials.

For example one of them who still exports on occasion (that person produces a "specialty" and thus still can send an occasional shipment). S/he said that there is a need to fulfill around 70 steps and requirements with the government until eventually they were allowed to export (3- and see -1-)

Others pointed out that to produce you needed to be able to import the raw material and tools needed to produce in Venezuela. One pointed out that the permits for importing specific spare parts for his/her machinery were repeatedly refused and thus production could not increase (4).

All attendees agreed on one thing: "we are more than willing to produce enough to be able to export, but for that we should be allowed to produce first".

Apparently the attending officers looked shocked.....  Amen of their apparent inability to understand what was told to them (5).

It is to be noted that things such as price controls were not brought up since after all it is for export, but other stuff were brought up such as Venezuela being quite behind in international standards of norms and quality to be immediately competitive in foreign markets as the situation here blocked many of the industrial upgrading that other economies have experienced in the last decade.

All ended relatively well, the attendees "getting" that the regime is finally starting to be concerned, though no hint about the officials attending on their ability to obtain the changes required.

Now, my comments for thus that do not understand this post:

1- Currency control was established in January 2003 and became sort of operative a few months after. The problem with such controls is that when you export and are paid in foreign currency you are obliged to give the amount of the bill in foreign currency to the regime which gives them to you back in VEB. Since one of the aims of currency exchange control was to overvalue the VEB so that imports of food and goods would be cheaper (indirect subsidy), you can realize that within months exporters stopped making money. Besides, it became clear that importing and reselling what you used to produce was a better deal.  By 2005 the exports of Venezuela experienced a sensible to dramatic drop according to the few sectors exporting, which were rather small to begin with.

What is remarkable here is that the regime in the last ten years KNOWS that fact but seems NOT TO UNDERSTAND it.

2- Social economy means nothing.  After ten years of currency control and socialist talk, the public officials have been so brain washed that there are things they repeat without realizing that it is neither the audience, or that they make no sense at this level. There is not such a thing as self criticism inside chavismo, just a desperate attempt at reaching for straws so as to keep doing things as usual with a little bit of tweaking only. It is impressive to see that in their subconscious these officials bought hook, bait and sink the Chavez speech that Venezuela could be an autarky of sorts. They have a hard time to grasp that to produce ANYTHING in the world today you do require stuff from outside of the country. Amen of their own contradiction that the local market should be supplied first before exporting when they are the ones that ruined the local production by importing stuff for electoral purposes.....

3- The paperwork for importations through CADIVI requires anywhere from 20 to 40 steps BEFORE being able to place the order, and then at least a dozen more steps to pay your provider once you received the goods. So I can imagine what exports would be when in addition you need to prove that you will not deprive the country of goods, that you are indeed exporting "surplus". The bureaucracy to import or export has gotten out of hand and this week we learned that it is going to get worse. Now, business will have to declare that all of their workers are fulfilling their military recruiting duty otherwise the said business cannot obtain "solvencia laboral" a key paper for CADIVI. That means at the very least 3 more steps since 1) you need to demand certificates from your workers, 2) you need to submit those tot he army and 3) the army will have to send someone to do an "inspection" in situ before granting the paperwork.

4- In their desperate need to reduce foreign currency demands the regime does a lot of silly things. For example they are denying CADIVI dollars for spare parts. Or for test kits (one of my own problems). They only give for raw materials, food and "equipment". which they do not give really, but at least they pretend. Apparently they do not understand that certain processes require sophisticated maintenance that require specific spare parts worth mucho dollars.  They are truly primitive...

5- Again, I must come back on neo totalitarian consequences on thought. The regime has been so staunch on its "principles" for so long that they are unable to understand that they need to change their system if they want production to increase. The situation is dire enough that they understand some changes are necessary but they are simply unable to realize that they need to change it all. It is worse than unwilling, they are unable, sort of brain dead. That is what fascismocommie outlook does to your neurons.


  1. Anonymous11:49 PM

    In all totalitarian countries its the same, Ideology trumps practicality, even sophisticated countries like Germany, under the Nazis, ideology trumped practicality, costing them the war, Venezuela will not change as long s there is oil to sell, or dollars in the central bank, because ideology is there excuse to hang on to power. in an undemocratic way.

    Ether the regime collapses because there is no food, or as in the case of Hitler they shoot themselves!

  2. Boludo Tejano4:22 AM

    Wham, wham wham. Each sentence strikes a blow at Chavismo,setting up the next sentence, which strikes yet another blow. I suspect that even Chavistas,were they to listen to this essay in their native language, would be cringing at the end.

  3. Anonymous11:51 AM

    It has taken our factory about 18 months to get the "bendita" solvencia laboral for approx 180 employees. In the end we had to grease a few palms to get it done. This in order to get CADIVI approval for the $$ to import new machinery.

    The hoops you need to jump through to import machinery or raw materials make the RECADI days look like a picnic nowadays.

    Anon 242

  4. So if I read this correctly, the regime themselves cannot comprehend that the currency controls plays a major part in the exporting equation? like importing at the cheap dollars and selling it at the inflated black market rate allowed venezuelans to make extra Bsf? (buy 1 dollar at 6.3 bsf and then sell the same 1 dollar item for 30 bsf?) and that turned out to be cheaper than producing it locally in venezuela? hence the regime doesnt understand that if the currency was allowed to float, that it would turn out to be cheaper to produce locally than to buy it internationally? which would allow the companies to produce more, and maybe just maybe produce more than what venezuela needs so that they can export?!?!?!??!?!?! I honestly think they need to find a way to raise that gasoline prices to much closer to market rate, and then just give subsidies on food staples to all the poor.... is that even possible? or even subsidies for gas to people that are under a certain poverty line? (sorry im probably just rambling.)

    1. It is not that you are rambling, it is that the regime uses currency control exchange for strictly political purposes: to punish those who oppose by denying dollars to them and to reward the ones that support it by giving them all what they need, and more to buy their vote through corruption and blackmail.

      In other words economic logic does not apply here, but the real world eventually catches up with them and now they are starting to realize the consequences. The only mystery here is how come it took them 10 years to finally start some timid contacts with people that know better. Tells you the amount of oil money that entered the country that was able to paper over troubles for so long.

  5. lemmy Caution7:19 PM

    Tremendous posting. Best luck.


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