We’ll continue with our drug story in just a bit but first…BNN Bloomberg reports that the Maduro regime’s attempt to support the bolivar (local currency) and shift away from the de facto dollarization of Venezuela is risky business. Although the dollar has not replaced the bolivar as the official currency of Venezuela it has recently been widely used, accounting for more than 60% of transactions, and is credited of stabilizing inflation which had been in a state of hyperinflation for four years.
The bottom line is people still don’t trust the bolivar with inflation currently at 99% according to Bloomberg’s “Con Leche” index (the price of a cup of coffee). We’ve discussed before how Maduro couldn’t leave well enough alone as the usage of the more stable dollar stemmed the rise of inflation in the bolivar. He saw an opportunity to capture some much needed revenue by placing a tax on the use of foreign currency and/or cryptocurrency (real cryptocurrency, not his fraudulent “el Petro”). The tax ranges from 2% to 20% depending on the type of transaction and the product(s) or service(s) involved and all the parameters regarding this tax are unclear.
The chaotic roll-out of the new tax has hurt businesses with sellers not knowing what tax rate to charge or even how to charge it.The confusion has had a negative impact just as the actual tax itself has hurt business as buyers didn’t like being penalized for paying in dollars.
If the government forces the use of the bolivar and it can’t hold it’s value inflation will skyrocket, as it did before. The government has been keeping the value of the bolivar stable artificially by buying bolivars on the exchanges using dollars from the BCV (Venezuela Central Bank) earned from the rise in oil prices. The question is, How long can they keep it up? They have limited resources and revenue is needed elsewhere. (It’s needed to supply food and medicine to the people but that’s not a priority for Chavismo) Not mentioned in the article is the waiver of the tax on imports, which is about to expire. If they don’t extend the waiver it will put downside pressure on all the recently prospering import businesses.
Then we have Lloyds List reporting that the use of cryptocurrencies by tanker companies involved in the sanctions-evading sales of Venezuelan oil is keeping crude exports flowing. The question is, how will Maduro’s new tax, which includes cryptocurrencies, impact this? Will the expiration of the waiver on the import tax have an effect if, as often happens with Venezuela’s oil deals, a barter arrangement is used? There is a lot of uncertainty out there and, as any good capitalist will tell you, markets hate uncertainty…it’s risky business.
And speaking of oil deals, we have Merco Press reporting that the President of Paraguay has rejected talks for the purchase of Venezuelan oil saying, “Not for as long as Nicolas Maduro is president.”
Then we have Telesur (government media) with a piece titled “Silence and Omission in Yanomami Community Case.” The article is critical of the Brazilian Federal Police in investigating the rape and death of a 12 year-old girl from an indigenous community and there is suspicion that the silence may have been bought with gold from the area’s illegal mining. There is no mention of the silence surrounding the investigation by Venezuelan authorities into the deaths of four members of the indigenous community at the hands of the Venezuela military in a dispute over WiFi pass codes.
Telesur also tells us that the leader of PSUV (Chavistas), Diosdado Cabello, (suspected head of Cartel of the Suns drug trafficking network) refutes Colombia’s allegations that the Venezuela military violated Colombian airspace. “Their clients in the world are requesting the merchandise with which they traffic drugs, and they are not going to be able to get it through Venezuela.” Hmm…He didn’t actually deny that Colombia’s airspace was violated. Just more Chavista drug interdiction propaganda?
Then we had an interesting piece in Digital Journal. It seems that some Venezuelan migrants in Chile are considering returning to Venezuela due to better economic conditions (while more Venezuelans in Venezuela continue to leave). The main reason for wanting to return seems to be a desire to see their families more than the “economic recovery”. We contend that they may want to hold off on this. It’s too soon to tell if the fragile “economic recovery” will hold. Maduro has a track record of bad economic decisions (the new foreign currency/cryptocurrency tax?) and the country has been in recession ever since Maduro took power.
And while we’re on the topic of Venezuelan migrants in Chile, the US Department of State – Under Secretary For Security, Democracy, and Human Rights announced an additional $6 million in humanitarian assistance for Venezuelan migrants in Chile.
Then we have the Jamaica Gleaner reporting that, in addition to Saint Vincent’s debt that was recently forgiven by Venezuela, Saint Vincent will be able to essentially “buy back” $9 million it paid to Venezuela that’s sitting in a Venezuelan bank. Is it just me or does Maduro seem to be getting ahead of himself just a bit? He’s forgiving debt to Saint Vincent and other countries and wants to restart Petro Caribe, discounted oil and loans to various countries in return for political support, which was discontinued due to lack of revenue. Maybe he’s just buying into that outlier Credit Suisse estimate of 20% economic growth this year when most economists put it at 3% – 5% ?
Now, let’s get back to our drug story…” Maduro Seeks To Regulate The Cocaine Trade” (Insight Crime)
Turmoil and chaos are bad for governance and bad for business,They foment lack of responsibility and accountability.One drug-trafficking expert said “You don’t know who you have to talk to in Venezuela.” Strategies behind seizures through deployment of security forces are wildly divergent. “Loads are lost when Caracas blows the whistle – when orders come from the top.” The southern Colombia – Venezuela border state of Amazonas is an example of stability. Drug routes are controlled by FARC dissidents with collusion by the military and it’s governed by a Maduro loyalist. From January, 2019 – April,2021 there were zero significant seizures. The northern states of Zulia and Tachira, where territories are disputed, had the most seizures in the same time period.
Then you have the state of Apure. For years it was stable with almost no drug seizures. Now, relations between FARC dissidents and the military have fractured and seizures are up significantly with airstrips and processing labs destroyed. The scenario is similar to Russia following the fall of the USSR, a type of wild west capitalism with oligarchs and criminals jostling for position with an authoritarian leader trying to hold it all together. (Time will tell how Maduro handles this delicate balancing act)
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