The Politics Of Contraband
We’ll head Down The Rabbit Hole in a bit but first…Caracas Chronicles tells us, “Bootlegging Undermines Venezuela’s Liquor Industry”. What! Is nothing sacred? Venezuela liquor products, especially rum, are well received around the world and win international awards yet they can’t compete in the domestic market. 7 out of 10 liters of alcohol consumed in Venezuela is illegal. This has been going on for a while now. Why is that?
Having been a long-time proponent of low taxes, which leads to higher growth (It happens time after time at every level of government. They raise taxes yet revenues go down and if they lower taxes revenues go up. Why is that concept so difficult to grasp?) I’m not surprised that the problem with Venezuela’s liquor industry is taxes.
In 2014 the government raised taxes on wine, from 15% to 35%, and on liquor, from 20% to 50%, for all manufacturers and importers. Then in 2015 came the VATs (Value Added Taxes). They vary from one area to another and at different levels and they’re all stand-alone taxes that are not correlated to other taxes. Here’s how it works…
If a VAT is 7% (most VATS range from 7% – 10%) it will be paid by the manufacturer or importer (1), the distributor (2), the wholesaler (3), and the retail seller (4). That 7% tax just became a 28% tax. (It’s actually more)
When you add the VATs to the existing taxes it’s quite a burden on legitimate businesses. Legal businesses must also pay the cops, just like the illegal ones do, and they have to pay all the permit fees required by the government as well (Bolivarian Socialism requires a lot of permits). They also have to pay off all the inspectors for the government regulatory agencies. There simply is no upside to doing business legally when it comes to the liquor trade, at least not domestically.
Then we have Merco Press reporting that when Nicolas Maduro traveled to the COP27 Climate Summit he took the opportunity to present Venezuela’s firm position against “the destructive and polluting onslaught of the capitalist system on our planet earth”.
Somehow, in all his railing against “the highly-polluting, developmentalist (Is development a bad thing?) systems of the North, Europe, and the US, he failed to mention that Venezuela’s oil carries the highest carbon footprint in the world or that his “Mining Arc” is poisoning rivers, destroying the rain forest, and killing indigenous peoples as well as destroying their entire way of life.
I guess since Maduro’s regime now receives 90% of it’s revenue from trafficking (primarily cocaine) he doesn’t need to pay attention to these other minor details. By the way, he did meet and shake hands with John Kerry, Joe Biden’s “Climate Czar”.
Then we have Yahoo Finance reporting that according to a PDVSA (Venezuela government-owned oil company) document, Eni (Italy) will resume taking crude shipments from Venezuela after a four month halt in deliveries.
The schedule calls for two tankers with one million barrels each. Cargoes were halted after Eni and Repsol (Spain) were informed by PDVSA that all future shipments would be on a “cash only” basis despite the sanctions relief deal that shipment were to be for debt reduction.
At this point, terms of the deal for the new shipments are unknown. Eni and Repsol didn’t respond to requests for comment. Could it be that the powers that be (the Biden administration and the EU) are just going to accept the Chavistas backing out of the sanctions relief deal? What do you think?
Then we have Rio Times reporting that Venezuela’s artillery capabilities are now strengthened by Russian rocket launchers. So, the Maduro regime is buying rocket launchers from Russia and military drones from Iran (FYI, Venezuela has never been involved in a war with anybody since Simon Bolivar, the Great liberator, freed Venezuela from Spanish colonial rule, two hundred and fifty years ago) as the Venezuelan people die from malnutrition/starvation, lack of medicine, and have limited access to fresh water and a totally unreliable electric grid. It’s all about priorities.
And we have Rio Times also telling us that Nicolas Maduro confirmed that the head of the official delegation for political dialog will meet in Paris this week with the representative of the Venezuela opposition, Gerardo Blyde, along with Jorge Rodriguez, and representatives from Colombia, Argentina, and Brazil to discuss peace in the South American region. No word if these talks are in lieu of the Mexico negotiations between the regime and the opposition regarding free and fair elections and the restoration of democracy (the rule of law) in Venezuela.
Now let’s head Down The Rabbit Hole….
… This pretty much killed the idea of an orderly flow of food to the supermarkets. Trucks would go from a processing facility directly to the supermarkets and unload whatever product (s) they had for the waiting crowds. It was chaotic. Some locations got big deliveries while others got nothing. (It depended on who you knew and who you paid) News of pending deliveries was leaked via social media and finding out what product was being delivered where, then going and waiting in line for it, became a full time job.
When the Chavistas weren’t busy destroying farming, putting all the supporting companies, you know, everything from machinery parts for both the farmers and the food processors to seed and fertilizer suppliers etc. out of business, and dismantling the warehousing/distribution network, they directed their efforts to fraudulent schemes purported to help feed the people.
One such scheme was a 2010 project launched by Chavez with China’s CAMC Engineering Company. It was promoted as a comprehensive project including the largest rice-processing in Latin America and rice paddies twice the size of Manhattan. $100 million was allocated and after nine years the project remained half-built, but the money was not half-spent. At one of the buildings for the Hugo Chavez Plant they had a ribbon-cutting ceremony with Maduro’s Agricultural Minister doing the honors. The visuals on Venezuela state-run media were impressive, silos and everything! Looks can be deceiving. It turned out that workers inside the plant were packing IMPORTED RICE by hand instead of utilizing the proposed machinery capable of producing 18 tons per hour.
And the Hugo Chavez Plant, which hasn’t produced a single grain of local rice, was just the tip of the iceberg. CAMC was paid over $3 billion for five projects that were never completed. As with all other Chavismo- related frauds, this is one piece of a complex puzzle. PDVSA Agricola, a new unit developed by Chavez to boost agricultural production, handled the contracts. The money went from the China Development Bank to Venezuela’s Development Bank and was doled out from there. Remember, 60% of Venezuelan government spending goes through FONDEN which isn’t subject to oversight so forensic accountants would have their work cut out for them. So far, $32 billion has been tracked plus another $6 billion from an infrastructure fund created by Chavez. The ongoing investigation has already revealed dozens of people with millions of dollars going to each of them. In one of the interviews it was said, “These guys were carrying around briefcases full of contracts.” It’s worth noting that Venezuela state-run media has never reported any of this.
In another example of complete disdain “The Revolution” has for the people, former PDVSA workers went on a hunger strike. They were protesting the government’s lack of response to their requests for money they were promised by Hugo Chavez so this goes back a ways (Maduro took power in 2013). Funny thing is, the money he promised them was put in an account that was supposed to pay them in dollars. The government used outdated exchange rates from the time of the agreement and doled out a meager amount to them in bolivares, so it was a win/win for Maduro. He fulfilled the promise made by Chavez (technically, if you say that he paid them, just not in dollars) and with the favorable rates he used he paid them almost nothing. It was somewhat of a double whammy for the workers. They were on a hunger strike while their families and those around them were starving!
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