In the beginning, there were arbitrageurs, those that perform a risk free operation, whereby you take advantage of differences in prices, to buy a good cheaper that you can sell it somewhere else and make a profit. These types of arbitrage opportunities may arise because of geographical differences, or due to the presence of borders or even long distances. Arbitrage is as old as markets have existed, people are always looking for profit opportunities and if they involve no risk, they become very attractive. In general, arbitrage reduces the difference in price between the two items, making markets more efficient. If prices are more expensive in Caracas for say lettuce, those that produce lettuce will take their product to Caracas, as long as transportation costs are less than the difference and local prices will drop.
Arbitrage is at least as old as Rome, one of the first few markets that had some level of organization. Since then, arbitrage became common in finance, when numerous ways to arbitrage markets were implemented. Of course, the more these arbitrage opportunities, the smaller the differences become, but sometimes arbitrage is possible only if you have capital, a technological advantage or some legal advantage. As examples, people do arbitrage in minute and temporary differences in currencies, but they do with such large capitals that the profit is significant. Others arbitrage, for example, the price of shares that trade in local exchanges and those that trade abroad; local brokers have the advantage of direct access to local trading, while having accounts abroad to sell or buy the shares they buy or sell locally. There are costs involved, but sometimes those opportunities arise. As another example, organizations arbitrage the price of the stocks that are part of a stock index, against the purchase (or sale) of the individual stocks, whenever this is possible.
And then, there are bachaqueros…
Bachaqueo is an activity that, until recently, was nothing more than the geographical arbitrage of gasoline. Over the years, Colombia has always had higher gasoline prices, not only because its price has always been at international levels, but also because it imposed higher taxes than Venezuela on it. Meanwhile, on this side of the border, gasoline has always been cheaper at the wholesale level, because Venezuelan politicians have always set the price below international prices. There has always been a feeling that this was some form of “birth right”.
While many people think that the origin of the term bachaquero is somehow due to the town of Bachaquero in Zulia State, the truth is that the term arises from the large ants near the border, called “bachacos”, which cut leaves from plants and bring the pieces back to their nests, mostly at night, forming a long caravan. These bachacos can carry more than their weight, are very strong and can remove all leaves from a plant in one night.
And the origin of the term bachaqueo and bachaquero for gasoline smuggling arose because when price differences were small, bachaqueros, mostly in the border between Zulia State and Venezuela, would cross the border at night, each person carrying a drum of gasoline on their back, heavier than each of them, all in a single caravan, either to bypass the authorities, or to go precisely using the path where the authorities had been bribed.
Of course, as the difference in price between the two sides became wider, the business became more organized. As chips were introduced to control traffic even more, the bachaquero caravan was replaced with long lines of drums, long lines of 350 trucks and more modernly, long lines of gasoline trucks, controlled by Mafias on both sides of the border. I posted this picture a year ago:
However, as shortages became more prevalent and the Bolivar depreciated even further, the term bachaquero and bachaqueo was extended. It became a fully conjugated verb, as more and more people at all levels of society saw the opportunity for arbitrage, not only between Venezuela and Colombia, but also within Venezuela with those items that are hard to get.
Venezuelans at all levels, have become the ultimate arbitrageurs, finding that arbitrage is very profitable in the presence of widespread distortions and shortages, with gasoline, food, pharmaceuticals, you name it.
And as the Government began demonizing bachaqueros and bachaqueo, very successfully I must say, people have started buying the story of how bachaqueo is the source of our problems.
But not only has the Government created the distortions that gave rise to these arbitrage opportunities, whether legal or illegal, but it has been doing it ever since it began controls in 2003:
-It was arbitrage (Bachaqueo?) when the Government began selling bonds in US dollars in order to relieve the pressure in the parallel market in 2004. People would sometimes buy these bonds, turn around and sell them and immediately sell the dollars in the then legal permuta market, making a profit. There was some risk, but it was minimal. And the Government did it over and over again.
-It was arbitrage (Bachaqueo?) when people asked for their CADIVI dollars and immediately turned around and sold part of their dollars in the parallel market in order to pay for their trip or part of it. And this certainly was not legal.
-And it was arbitrage (Bachaqueo?) when people asked for foreign currency to study abroad and as they received the money, immediately turning around, sell the dollars and with a fraction of them, pay for the whole education.
-And my imaginary friend Oligarco Burguesito was a bachaquero, as were raspa-cupos (credit card scratchers), importers who over billed, my “Buhonero del Aire” (Airborne street vendor) friend who would go to Miami, come back with a suitcase full of veterinary pharmaceuticals, which he would sell at exorbitant prices because of shortages.
-And, of course, the ultimate crooked arbitrageours and bachaqueros, were those “insiders” that in 2012 alone requested dollars for imports that never arrived and made US$ 22 billion in profit, importing nothing, according to former Minister Giordani.
And I could go on…
But you get the point, few Venezuelans have not participated in some form of bachaquerismo and now is not the time to get outraged over it. The Government is now demonizing them and carefully chose the Barrio “La Invasión” in the border between Tachira State and Colombia to make the point and blame these poor Colombians for the shortages created by the Government’s stupid economic policies. Promoting hate and xenophobia in the process, all in the name of obtaining votes.
And it wants to make believe that closing the border between ten Tachira municipalities and Colombia will solve the problem, as if the organized bachaqueros used the Simon Bolivar bridge or formal roads to take their stuff to Colombia.
Or for that matter, to Guyana, Brazil or the Caribbean islands. (Take a Peñero full of rice sacks which cost Bs. 400 in Venezuela to Aruba and sell them each at Bs. 8,000 and you make more than the salary of a high Executive in bank in Venezuela, in just one trip)
In fact, it is well known that the large volume traffic, where millions (or billions) of dollars are made, goes through dozens of dirt roads mostly between the Venezuelan and Colombia’s Guajiras, through Zulia, not Tachira State. And those roads, or well developed “trochas” are controlled by the Venezuelan military, the Colombian military, the indians, the paramilitary, etc, but if you pay a bribe at each stop, you can get your trucks through.
It takes a few trucks to take the estimated 70,000 to 80,000 barrels of gasoline through the Colombian border.
And individual bachaqueros move only a fraction of that.
And I have yet to hear the Government jail or charge a single military officer for allowing these large scale bachaqueo to go through the border. And Maduro totally avoided this question in his “press conference” with the international press last week.
In the end bachaqueros are economic agents. If economics is about the allocation of scarce resources to satisfy the unlimited needs of the people, bachaqueros have become the ultimate agents of arbitrage, allocation and distribution of goods in Venezuela.
In one of the few finance courses I ever took, the first slide said: “When Governments create or change rules there is an opportunity for arbitrage or profit”. Bachaqueo and Bachaqueros are just the result of an absurd and infinite number of rules and controls imposed by Chavismo on the Venezuelan economy since 2002.
Blame Chavismo, not them.
And certainly don’t blame the poor Colombians from La Invasion, who have been cheated, abused, denied due process and pushed into rivers like animals, like the picture above, forced to leave what they called home for the last ten years. All under the supervision of the “Bolivarian” Armed Forces and Police. Símón Bolivar would be ashamed of the both the name and the actions.
And so am I.
The Devil's Excrement 
