Archive for May 23rd, 2013

The Maduro Toilet Paper Crisis

May 23, 2013

toiletThis signs shows the effects of shortages in Venezuela: Not only is toilet paper scarce you can only buy one package

It has been Nicolas’ misfortune that the toilet paper crisis exploded in his face less than one month after assuming the Presidency. It is not the worst shortage under Chávez or in Nicolas’ short Presidency, but it is one that affects everyone, captures the imagination of the foreign press and is simply quite symbolic of the failures of the Bolivarian revolution.

Start with the supposed solution to the problem. Have the National Assembly approve an emergency allocation to have the Government import two weeks of toilet paper. When you need to involve the legislature to import something, you can tell the system is really screwed up. After all, why toilet paper and not antibiotics, which have been scarce since December?

The answer is simple, not everyone uses antibiotics, or high blood pressure medicines or insulin, but in Venezuela, most everyone expects to be able to buy a roll or two once in a while when it is needed. In some sense, it is the same reason why Chávez never cared too much about fighting crime. At least in the first few years of his Government, crime only affected a small segment of the population, but as it went off the charts, it became a significant problem as more people were or knew victims of crime.

And while the Venezuelan President blames the crisis on hoarding and conspiracies by the opposition, the head of the National Statistics office blames the fact that people are eating a lot. Which makes you wonder if the problem is that they are eating the wrong stuff and going to the bathroom a lot, because there are many shortages in the food sector too.

But in the end, the problem is precisely that the Government has to go and import the toilet paper, because of the simple fact that it controls everything:

-The price of the toilet paper is controlled

-The foreign currency used to buy paper pulp is controlled

-The ability to buy or import toilet paper is controlled

Beyond that, it gets even more complex, depending if you are on the importing or on the local manufacturing side.

If you are an importer, you compete with none other than the Government. First your dollars may not be approved, thus you bring nothing. But the friendly “Boliborgeois” who competes with you, gets the money to import good quality toilet paper from reliable suppliers, but ends up getting it from who knows where, making half the profit in the toilet paper and the other half on only using a fraction of the dollars allocated to buy the toilet paper. The remainder dollars can stay in dollars or you can sell them at the unmentionable rate, making a profit with them of 344% at today’s rate.

So, as an importer, you can’t compete with those “briefcase companies” mentioned by Mario Silva in his top hit recording.

But if you are crazy enough to still be a manufacturer you are in Bolivarian control hell.

Suppose you priced the roll of toilet paper at a dollar in January 2010, when the exchange rate (official) was at Bs. 2.6. Well, your raw material costs had gone up by 65% by Christmas 2012 and 142% by today, but your price increases have not reached 40%.

To say nothing about your labor costs, which I will simply adjust for inflation, ignoring the recent labor Bill. By last December, your local costs had gone up by 98% and 122% by today. This is more than double the price increases for toilet paper.

And if you needed a part for your rolling machine, the dollar the swap market that you bought at Bs. 6 in January 2010 is now worth close to four times more and that is an integral part of your cost.

That is why the manufacturer is a fool, the legal importer is trying to get lucky and the “Boliborgeois” with his “empresa de maletin” (Mario Siva dixit) is becoming a millionaire.

And that is also why the revolution has failed. It has replaced a productive system by a planned system full of controls and corruption, which favors the buddies that can get official dollars, sometimes benefits occasional importers who get lucky and screws those that are still trying to make and produce something in Venezuela.

Just think, if you were trying to get into the toilet paper business in Venezuela, which model would you want to follow?

Well, given that they hate productive capitalists and oligarchs, Chavismo and now Madurismo have also chosen the same path that any sane person like you would, it is the most profitable for those involved, but the most expensive for the country.

And yes, people are eating more food, but I am not going to get involved in a technical discussion about whether the length of the toilet paper you use is directly proportional or not to mow much or how often you eat. But the most important reason that people are eating more is the same reason why they are using more gasoline and more electricity: They are all heavily subsidized. Assign a fair price to food, gasoline and electricity and the overall economy of the country would be better off, even if individually people would be worse off. And before anyone makes the argument that I have it backwards, you could give away the food for free, the electricity for free and the gasoline for free and the country would be in deep …. and we would all need a lot of toilet paper.

And with shortages comes rationing, something Cubans have known for 50 years, but Venezuelans had very little exposure to. Something the sign in the picture above clearly depicts.

Oh! But ideology beats realism or the “people’s” well being.

And thus Chavismo/Madurismo is never going to accept that its centralized planning system full of controls, rules and corruption is to blame for any of these problems. They have a religious belief that what they call “socialism” should work, despite the fact that all historical evidence shows it has always been a failure. But like Nicolas says, he believes more in “popular” wisdom than in scientific and technical facts.

Which only shows how primitive and lost the revolution is. Maduro’s paper toilet crisis is simply a reflection of both this and his ignorance.

Notes added: To add to the craziness, El Mundo reports today that the Government imports meat from Brazil at twice the price it pays Venezuelan producers. And people who are lucky enough to find toilet paper, put it into black bags to avoid being mugged, according to today’s El Nacional.

Such a pretty revolution!