The Devil's Excrement

Donkeys in downtown Caracas, circa 1920

Starting this week, the Venezuelan Government will cap the prices at which cars can be sold in the country. This is yet another silly and failed policy by a Government who has done little in terms of defining any policy for the sector.

The Government did not have a policy in place before exchange controls were imposed in 2003, nor has it had a policy since.

Before exchange controls, it increased taxes on cars, such that all cars pay a basic 30% custom taxes, which becomes higher by 10% for luxury cars, which are defined as those that sell for more than US$ 30,000. After controls, the Government has gone from a free for all of imports at the preferential official exchange rate, to limited foreign currency for car parts or car imports.

In the middle, the Government did all sorts of things that simply did not help. Like allow any automobile brand to come in and give the importers cheap controlled dollars. For local manufacturers this created problems, it is hard to compete with imports, when your local costs are seeing 25% inflation year after year. Everything from fancy American cars, to German cars, to cheap Chinese imports, got cheap dollars until the numbers of cars imported (and the dollars!) simply soared to levels that were simply absurd. And the Government took notice. (They apparently weren’t watching)

Oh yeah! In the middle we were promised cheap Iranian and Chinese cars, made in Venezuela, that would break the back of all other car companies. We are still waiting.

Of course, the Government does not ask itself the basic question: Why do people want so many cars?

The answer is simple: cheap gas and cheap relative car prices relative to inflation. Cheap gas means that the cost of fueling the car is irrelevant when you buy or drive a car in Venezuela, courtesy of a crazy 8.5 US cents per gallon policy by the Venezuelan Government, since Chavez has yet to increase the price of gas even once during his twelve years in office. (Yes, with 1,300% inflation in those years!)

The second reason is that on a relative basis, cars are cheap. Twelve years ago, when Chavez took power, one dollar cost Bs. 0.575, given that inflation has been around 1,300%, that same dollar should cost around Bs. 7.45, instead the Chavez administration gives car companies dollars at Bs. 4.3 for the import of cars and parts to make cars. On top of that, in 1999 car companies could buy all the dollars they wanted to make cars, today those dollars are limited, i.e. the number of cars being sold is quite limited.

But even worse, the number of cars being sold is limited in an environment where the Government is printing money. How much money? Let me put it in perspective. In 1999, all of the Bolivars in the country would have bought 700,000 $20,000 cars. Today, all of the Bolivars out there would buy over 4,000,000 cars at the same price. That’s a factor of seven times!

Ever heard of supply and demand?

Not the Chavistas. For them it is all speculation. Thus, the “new” automobile policy is aimed at that. The solution is to regulate how much car companies can earn and they have magically decided to fix that at 10%. With 25-30% inflation that sounds like a sure no brainer so that that there will be fewer and fewer cars for sale in the upcoming years. Less investments, fewer companies, fewer cars.

It is indeed a revolution, just like Cuba, Venezuelans will be driving beaten down cars, or more romantically for a brainless revolutionary, they will be riding the donkeys or mules that their grandparents rode like the picture above.

I am still a little confused by these images from the prayer service for Hugo Chavez held in Manhattan. Are we to believe now that Maduro has become a believer? And how about Sean Penn? And you have to wonder about a church whose claim to fame was that Fidel Castro the agnostic visited once.

But it is the images that I wonder about.  The word “cursi” comes to mind (Corny in English?). But in the end who were they aimed at?

Look at the invitation:

Chavez’ pose is reminiscent of the “good” Chavez days. It looks airy, almost super natural. Very religious. The question is who are they trying to canonize? Hugo?

Or is the picture below, is that of the soon to be anointed Son and the Spirit under him?:

Is a message being sent? To whom? The Vatican or the Venezuelan people?

Or was this just another corny Chavista show?

(Note the Sixtine Chapel like shades on the purple image of Hugo!)

Now that the Human Rights Court of the OAS has ruled that Leopoldo Lopez’ political rights were violated by the Venezuelan Government, will he be allowed to run?

My gut feeling says no, although there are arguments for saying they will.

Basically, it depends on the Government’s perception (and polls) on how it affects the current race.

Currently, Henrique Capriles is the clear front runner with almost 60% of the preferences in a race that even includes Lopez. However, it will not be the same poll if Lopez is openly campaigning and is allowed to register.

Thus, it boils down to whether they think Lopez takes sufficient votes away from Capriles to allow a third, and more easily beatable, candidate to get past both Lopez and Capriles.This could work both ways, if Lopez has no impact on numbers, this would give Capriles even more strength.

My gut feeling is that they will not let him run for a simple reason, a Capriles/Lopez or Lopez/Capriles duo would make a fearsome campaigning team with no links to the IVth. Having said that, Capriles could still say he would name Lopez as VP, even if he is not allowed to register for the primaries.

Additionally, accepting the decision means all of those banned from public office due to a decision by the Comptroller would be covered by the decision.

Not an easy choice for the Government…somehow I like that…

Yesterday, there were many protests against the Government as usual, what is different is the rage of the people and who they are. These are not opposition members as Chavez tries to portray, these are “pueblo” the very supporters of Chavez that seem to be getting tired of the lies and promises that never materialize.

I found two protests that were interesting, in part because the images are quite powerful. One is by people who were left homeless in the 2010 floods and are still living in temporary housing, despite promises that their problem would be resolved soon. The result? Well, the nice policemen tear gassed the protesters and some were injured:

The second case took place in Carabobo, near Moron, where people were protesting the fact that they had spent 24 hours without electricity and blocked the highway. The traffic jam was gigantic and as night fell, the protesters started looting the trucks that could not move on the road as seen in this picture:

As you can see this was not just a few people, but everyone seemed to be participating.

And I found this image quite dramatic, a barefoot guy trying to put a stolen pig on his motorcycle to carry it away after taking it from some poor trucker nearby:

Yeah! Hugo is widely popular and a hero to the “people”. Maybe that was the only reason to try to advance the election, the problems will get worse and worse as time goes by…and they know it!