Archive for August 4th, 2013

Everyone In Venezuela Is Into Arbitrage

August 4, 2013


arbiWhen Adam Smith suggested or showed that economic self-interest maximizes economic welfare, I don’t think he had in mind the economic self-interest that is promoted by the arbitrages available under the so called Bolivarian revolution.

These pages have recorded billion dollar arbitrages, some with bonds, others with CADIVI; there was SITME, travel dollars, airline tickets, now Sicad and many more without going into much detail today.

What Chavismo/Madurismo has failed to learn throughout these fourteen years, is that the longer these possibilities of arbitrage become available, the more widespread their exploitation becomes. That is what made SITME eventually so inefficient that it had to be scrapped, what makes CADIVI such a nest of corruption and what is making SICAD unworkable in such a short time. People learn fast and exploit the weaknesses of systems to promote their self interest via arbitrage. Every time the Government announces something, people get ready to see how they an make some money off it.

Whenever I visit Caracas, I talk to people trying to find out more about what their reality is like. I mean, with inflation soaring and noticing how everything has gone up every time I come back, I have to wonder how people, particularly the less well to do, can make ends meet.

This week, it was a parking lot attendant I know. We started talking, he complained about the Government and I started asking questions.

For him, let’s call him Profito, things are ok. They are better, because the parallel dollar is very high. He said he makes a little more than minimum salary in his job, which must mean around Bs. 3,000. He sends his mother in Colombia a US$ 300 a month in a “remesa”, which costs him Bs. 1,890, but he sells half in the black market, which gives him Bs. 4,950, for a net of Bs. 3,060, which doubles his salary just like that.

Things are tough, so he decided to send his son to Colombia, it’s too dangerous here, plus the kid could become a malandro (hoodlum), with the neighbors he has. The advantage is that his expenses went down and he can send the kid another US$ 300, give his mother half and net another Bs. 3,090 in the process.

To round it all off, Profito, has also now entered the export business. When he discovered that “perfumeria” items are so much expensive in Colombia, he started shipping about Bs. 5,000 a month in supplies via MRW (a courier) and he makes “casi” (almost) 100% profit a month from this venture.

Oh yeah, he said, I do go once a year to Colombia and ask for the $2,000 dollars for travel, this year he will get less, there will be no money for the kid, but the black market has increased so much that he will make about the same. (Not quite, he will make more, as the parallel rate has doubled since December, but he will only pay once).

Totaling it all up, Profito makes his Bs. 3,000 from his job and from his arbitrage activities he will make this year an additional Bs. 6,180 a month from “remesas” to the family, about Bs. 5,000 (he claims) from his import/arbitrage and an additional Bs. 2,000 or so from his travel allowance, for a grand total of Bs. 16,180 a month, or at least five times the minimum salary. Not a bad monthly income in Venezuela and he has health care. Except only one of those minimun salaries comes from his job. The rest is all thanks to the promotion of self-interest arbitrage by the distortions of the revolution.

And the Government? Fixing the price of SICAD very low to promote arbitrage even more…


Maduro’s New Gaffe Places Raises Doubts About His Capabilities

August 4, 2013

You have to wonder about Maduro’s intellectual capabilities. He goes from gaffe to gaffe, insulting countries, showing he does not even know Venezuelan states and the like. For a man that was Foreign Minister for six years, you have to wonder how he did not even learn much in that time.

But his latest gaffe really makes you question his intellectual abilities. Maduro after all, lived in Cuba for over a year, then goes on onto this tirade praising Cuba and its supposed independence and sacrifice to be independent, getting all sentimental, grabbing the flag, joining it with the Venezuelan flag in a symbolic gesture, almost tear eyed, except…

The flag is Puerto Rico’s flag, not Cuba’s.

I know they are similar, but the colors are all inverted, Maduro should know, that flag (the Cuban one) is sadly present in too many Venezuelan Government and military facilities.