It may not be big news in a lot of places but, for Venezuela, this one surprised me. Daily Mail reports that a handful of local entrepreneurs have started their own ride-sharing apps since the big names like Uber and Lyft don’t operate in Venezuela. I haven’t seen any numbers for public transit recently but the last I saw had only about one out of ten buses running in Venezuela. That, and a shortage of taxis bodes well for ride-sharing like one of the new apps, Ridery, which, thanks to the de facto dollarization of Venezuela allows customers to pay with their bank cards in dollars. A short ride costs about $3 so it’s affordable, but not cheap by Venezuela standards with a minimum wage of under $24 a month. The app now operates in 14 cities and sees about 400,000 riders a month with 12,000 drivers. The added safety for both riders and drivers is also helping demand in crime-riddled Venezuela.
Then we have SANA telling us that the head, and members of the Syrian-Venezuelan Parliamentary Friendship Committee have been appointed. I guess that rounds out the list of authoritarian dictators Nicolas Maduro is on good terms with, although I might be missing some African republic…?
And FX Empire reports that Mexico’s INM (National Migration Institute) deported 126 Venezuelan migrants this week. It sounds like a big number, in one shot, but the total number of Venezuelans deported from Mexico for the year is only 393, which is pretty low compared with the tens of thousands of Venezuelans encountered at the US border with Mexico.
And Mehr News tells us that Conviasa (Venezuela government-owned airline) has resumed (or started?) weekly flights between Tehran and Caracas. I’m sure that’s needed to keep up with the big tourist demand both countries keep talking about.
Then we have CGTN with a report that should be a surprise to absolutely nobody. When Hugo Chavez took power there were 400 large clothing companies in Venezuela. (I know it’s hard to remember but before the onset of Chavismo Venezuela had a growing middle class and was rapidly climbing out of third-world status) Now, after two decades of 21st Century Bolivarian Socialism only 20 remain and those still around are struggling to survive. Among the challenges they face are competition from imported products exempt from taxes, scarcity of materials, and a lack of sufficiently trained personnel. This is a microcosm of every sector of the economy in Venezuela.
And we have FX Empire reporting that a major project by Exxon Mobil in Guyana (yes…I said Guyana) will produce 220,000 bpd (barrels per day) by Q-4, 2023 and a MODEC project in Brazil will produce another 180,000 bpd. These two projects alone will produce more than half of Venezuela’s current average of monthly production…So much for Venezuela being a major oil producer, huh?
Then we have BNN Bloomberg reporting that the head of the Caracas Stock Exchange announced Banco de Venezuela (Venezuela government-owned bank) and CANTV (government-owned phone, internet, and cable provider) will offer 5% of each company for sale in shares available on the market with Banco de Venezuela coming first. We knew an offering was coming but didn’t know what platform would be used to offer the shares.
The stock market was derided by Hugo Chavez as a “tool of the rich” but Maduro is desperate for money. The move is modest in scope and by no means a big deal in the world of public offerings but it is dripping in symbolism.
Initial interest is likely to be limited as the offerings will be priced in bolivares (local currency) and sanctions prohibit US investors from participating. Other headwinds to the project are a dearth of financial information (Venezuela government-owned companies don’t really report all that much). Remember, the Chavistas aren’t accustomed to accountability. When Chavez took power he established FONDEN, through which 60% of government spending flows. FONDEN is not subject to oversight by the National Assembly (nor anyone else for that matter), so this will be a different world for them. Another issue going forward may be Venezuela’s law requiring the government to maintain a majority stake in any joint venture, although if Maduro says the law doesn’t apply the TSJ (Venezuela Supreme Court) will back him up, as they always do. I guess the same type of investors interested in this would be the type interested in Maduro’s ZEEs (special economic zones)…you know, those with a “high risk tolerance”.
Then we have Rappler with the headline, “Venezuela’s Slowing Inflation Is Surprising In More Ways Than One”. The article did a good job crediting Venezuela’s apparent rebound to a “tool box of orthodox economic policies”. They also mentioned the former advisors to Ecuador’s Rafael Correa, now advising Maduro and Vice President/ Finance Minister Delcy Rodriguez.They engineered the economic recovery of Ecuador and now seem to be doing so in Venezuela. This is the second time I’ve heard these guys given credit. Remember, Correa was a socialist as well.
They noted that Venezuela’s inflation, while still at 167% and the highest in the world, is down from 130,000 % from 2018.Another benefit of their policies has been the stabilization and increased use of the bolivar, which they partially credited to Maduro’s Foreign Currency/ Cryptocurrency Tax, although I would contend it’s not so much the law itself leading to increased use of the bolivar but the confusion surrounding it’s chaotic implementation.
My personal evaluation is that the policies have a chance to work if Maduro and Delcy will allow it and keep their hands off. The fragile recovery is due to a reversal of the statist policies that caused the downward spiral, as it always does. When they finally come to terms with the fact that socialist/ Marxist policies cause economic damage (not prosperity) and allow capitalism to return and rescue them things can improve.
The USSR stayed true to their ideology and it led to their collapse. China, on the other hand, after Chairman Mao’s Marxist policies led to mass starvation and killed millions, allowed capitalism to save them and it did. They recommended Maduro do this years ago (Russia did as well) and he didn’t listen to them. Why he changed his mind is anybody’s guess (absolute desperation?) but capitalism is saving him…if he’ll only let it continue. It’s worth noting, Lula did the same thing in Brazil and it led to one of the fasted growing economies in the world.
I’m reminded of the Governor of Hong Kong, back before the British handed it back to China. He was asked what was his greatest fear regarding the economy of Hong Kong and British control of it. His response was classic. “I can only hope they don’t try to fix it.”
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