Time To Reach Out ?
We’ll be heading Down The Rabbit Hole in a minute but first there’s this…I have supported sanctions against the Maduro regime from the beginning. I have always felt that if you opposed sanctions you had to believe that without the pressure the regime would act in the best interest of the Venezuelan people which the Chavistas have proven they have no interest in doing. All you need to do is look at their gasoline situation. They badly need all their petroleum resources at home and yet they continue to export to Cuba. It just makes no sense and is in violation of their OPEC charter.
That said,sanctions are a punitive measure and maybe there is something constructive we could do to help the Venezuelans in the meantime. National Review had an interesting piece on a possible opportunity to do just that. As we know, Venezuela has been in the throes of hyperinflation for years now, the second longest bout in history. Their currency has been utterly destroyed although the Chavistas were doing a good job destroying it before hyperinflation. However, the inflationary environment has forced a de facto dollarization to occur. Despite all the efforts to move people into the use of the Euro,the Yuan, or cryptocurrencies (I mean real ones, not Maduro’s fraudulent ‘el Petro’) 60% of transactions in Venezuela now involve the US dollar which Maduro has now allowed to be used.
The problem is, there is not enough hard cash in Venezuela in dollars and many Venezuelans don’t have a US bank account to access more dollars electronically. Those that do are in significantly better shape than those that don’t. This presents the US with an opportunity to help stem hyperinflation via the use of the dollar by helping Venezuelans open US bank accounts which they previously had to do in person when they visited the US. If the US would allow Venezuelans to apply for an ITIN, Individual Tax Identification Number, it would facilitate the opening of bank accounts in the US and increase the use of dollars in Venezuela. In addition to helping Venezuelans it is an opportunity to cement the dollar as the preferred currency instead of the Yuan or the Euro as the Chavistas would like to see. Surely there is a way to do this if we really want to do it. I mean come on, since the start of Covid-19 we have figured out how to do almost anything virtually so why not use the same resources to help apply for an ITIN? It would be a win for the US, a win for the Venezuelan people, and a de facto additional sanction against Chavismo. Maybe it’s time to reach out?
In other financial news we had BNN Bloomberg reporting that the Maduro regime increased gasoline prices 20X to the still incredibly low 10 cents a gallon. We did a little checking and unlike the fact checkers of US social media companies we have sources other than the Media Matters website. Venezuela media outlet, Tal Cual, reports that the actual price is 50 cents a liter, not a gallon. That puts the price of gasoline at around $2 a gallon. When you have teachers demanding an increase in their salaries that are currently under $8 a month, $2 a gallon is a lot of money.
There is some good news though on the gasoline front. Petroleum Economist reports that Venezuela and Iran have a deal to swap condensate for crude. Venezuela needs condensate to refine it’s crude and produce gasoline. Unlike many announcements by the Chavistas this is actually happening and they are currently offloading a shipment of condensate in Venezuela and a shipment of crude is supposedly on it’s way to Iran. If they don’t screw the Iranians, as they have everyone else, this may help.
We also have some potential news. The ICC, International Criminal Court , has announced new Chief Prosecutor, Karim Khan, will visit Venezuela this week. This could be interesting if he is actually allowed to see anything.
Let’s head Down The Rabbit Hole for a little more “It’s A Wrap”….
….The one area thriving financially in Venezuela is narco-trafficking.It is also controlled by the military and is headed by Chavismo’s Diosdado Cabello, who many think is the most powerful man in Venezuela.It will be a delicate balancing act for the government to siphon off revenue from the drug trade as it’s, more or less, the last financial bastion of the military.
It should be no surprise to anyone that the more centralized the government the less efficient,less productive, and more cumbersome it becomes. In my former life I handled major accounts for an equipment company. Besides all my private sector responsibilities I handled all government bidding and contracts.What an eye opener! If you think giving central government more control over anything currently run by the private sector is a good idea check this out. I could do business with a private entity with a one page contract. A village might require 5-7 pages, a city (depending on size) 20-25 pages, a state would usually be 50-75 pages, and the federal government 150 pages or more. The equation is simple, more pages equals more requirements for compliance equals more cost equals a higher price for that particular product or service. Conclusion : The private sector can, in most cases, supply goods and services faster and cheaper than the government.
So how does all this apply to Venezuela? Well, everything in Venezuela is run by the Chavistas in Caracas.To do anything requires a byzantine process of approvals by various people, departments, and ministries.What can be accomplished relatively inexpensively in a day or so in the real world will be very costly in Venezuela and will take weeks or months.It’s the perfect set up for corrupt bureaucrats and in Venezuela they are everywhere.Permits, documents, etc. are required for everything so if you want to get what you need you can either go through the interminable process or pay a fixer who has the contacts to streamline the process. There was an actual “menu” posted online with prices for passports, cedulas (government ID),drivers licenses etc. (note: drivers licenses are now available online)
To be continued…..
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