A Basic Failure
OK, I know…”A Basic Failure” could pertain to anything…or everything related to 21st Century Bolivarian Socialism but in this case we’re talking about basic utilities. The headline in BNN Bloomberg read “Utility Bills Surge 100-Fold As Venezuela Slashes Subsidies”. Electric, water,cooking gas, everything is going up…a lot. For example : A farmer in the state of Portugesa used to pay approximately $50 a month for electricity. (FYI, in my 12 years living there my electric bill was never over a buck) That same farmer now pays $5,000. He told Bloomberg “We’re in the middle of a transition because we killed the goose that laid the golden egg.” (referring to Chavismo’s destruction of PDVSA) I’m surprised it took Maduro so long to act. It’s another sign of his financial desperation and in my humble (not) opinion, it doesn’t bode well for free and fair elections (not that they were going to happen anyway). Why would I say that?
Well, in the past Maduro (he of the 13% approval rating) could at least point to the almost free electricity and at election time Chavista trucks would be offloading appliances all over the place and Chavista food tents could be seen passing out free food in every poor neighborhood. All this was paid for by the oil revenue of PDVSA (government-owned oil company) and loans (primarily but not exclusively) from China. The Chavistas destroyed PDVSA so there’s no oil revenue and they’ve already squandered or stolen all the over $60 billion in loan money so no help there. Without the ability to buy election results Maduro must be confident in his ability to win an election through his control of the CNE (electoral council) and the TSJ (supreme court). Oh, and threats and intimidation (extortion), like the government CLAP food program (stay in line and vote for me or your food box won’t arrive) work well too. But I digress…
I’ve heard it said many times and have said it myself, “Sooner or later people in Venezuela will actually have to pay for electricity.” The cost of government subsidies in Venezuela is enormous, although actual numbers are not provided by Chavismo. The last reliable estimate came from a Caracas-based business school, and put the number at about $25 billion. To put it in perspective, over the Chavista years in power GDP has ranged from over $450 billion to under $100 billion with an average in the $200 billion a year range. Their average oil revenue (95% of government legal revenue) is about $50 billion a year. That translates to about 12% of GDP and a whopping 50% of revenue.
Another issue has been that Corpolec (government-owned electric utility) has a limited revenue base. The National Observatory of Public Services says 1/3 of Venezuela’s population pays nothing. (Remember, those millions of houses built under Chavismo’s “Gran Mission Vivienda” have no electric meters)
Even with the 100-fold increase, electricity in Venezuela is still very cheap, 1 cent per KW compared to 11 cents per KW in the US. Based on the average KW usage per person of 211 KW per month it comes out to about 2 bucks a month. I know, 2 bucks a month doesn’t seem like anything to us in the US but when a large swath of the population earns the minimum wage of only $30 a month (and this is the highest it’s been in a long time) 2 bucks for electricity is a lot. The head of FAVENPA summed it up like this, ” We used to pay cheap prices for inefficient services, now we pay high prices for the same inefficient services.”
The electric grid still hasn’t recovered from the massive blackouts of 2019 and is totally degraded after decades of neglect by the Chavistas. Without an enormous investment to upgrade electric service things won’t get better any time soon. If this increase doesn’t produce the much-needed revenue, and it won’t, where will the money come from?
Then we have this from Accesso a la Justicia. They say recent rulings by the TSJ against the lawyers guilds prove the strategy of the TSJ and CNE hasn’t changed (despite the claims of reform by the Maduro regime).
And then we have the president of the Tax Law Association telling us that problems with the IGTF (Maduro’s new foreign currency/cryptocurrency tax, billed as “The Law of Large Financial Transactions”) persist due to adapting the fiscal machines and vagueness of the law, so much so that it could generate a double tax. No wonder many businesses aren’t charging it.
And we have the National Workers Front denouncing the possibility that at least 500 employees at the El Palito refinery (remember, that’s the one with the new agreement with the Iranians to rebuild it) could be fired to hire private contractors.
And we have PDVSA ordering 100 gas stations to sell diesel at $0.50 per liter. They say there was enough diesel to send fuel to Cuba.
Then we have Compliance Week reporting that Banco Popular (Puerto Rico) agrees to pay $255,000 for sanctions violations. They reportedly failed to block transactions of accounts for two low-level Venezuela government officials. It’s not a whole lot of money (I guess it would be more if they were high-level government officials) but it proves that OFAC (US Treasury Department) will go after any violations related to Venezuela sanctions.
And how about a little hodge-podge (I don’t think that’s actually a word) regarding this week’s Summit of the Americas…BA Times reports Argentina President, Alberto Fernandez, has been all over the place regarding the summit in Los Angeles…he’s going… he’s not going… he wants a “counter-summit” in Los Angeles including Venezuela, Cuba, and Nicaragua. The only problem with a “counter-summit” is the presidents of the three uninvited countries face arrest in the US. The latest is … wait for it…he’s going.
And Digital Journal reports that the decision by Joe Biden to exclude Venezuela, Cuba, and Nicaragua from the Summit of the Americas is inline with the delegate’s decision in 2001 who declared any break with democratic order is an “insurmountable obstacle”. Venezuela, Cuba, and Nicaragua are not exactly known for adhering to democratic order.
And we have Merco Press telling us that Nicolas Maduro says Argentina will be Venezuela’s voice at the Summit of the Americas…and FYI, Mexico’s President, AMLO, says he’s not going. (Sticking with his socialist/Marxist brethren in Venezuela, Cuba, and Nicaragua)
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