More Side-Stepping

 We’ll get started with this week’s Venezuela : Down The Rabbit Hole segment in a few but first…Rio Times reports that, in a move we are sure is championed by Human Rights violators everywhere, Venezuela President (dictator), Nicolas Maduro, announced that Venezuela is taking steps to join Russia’s MIR payment system.

 Maduro underscored the need to explore alternatives to the SWIFT network, based in the US, which hinders Venezuela’s transactions due to sanctions. “The Central Bank of Venezuela is now part of the MIR system, a payment method created by Russia and utilized globally”.

 He didn’t mention that almost every country in the world uses the SWIFT system, not MIR (and that this is purely a mechanism to side-step sanctions).

 Also from Rio Times we have the report that Venezuela President (dictator), Nicolas Maduro, instructed the National Bolivarian Armed Forces to reinforce their efforts to eliminate illegal mining activity from Venezuela territories expressing regret for the environmental threats and damage these activities have caused in the Amazon region. “We must continue the battle to defend all that is ours.”

 It would be a very righteous statement except he forgot to mention that it was his creation of the “Mining Arc” that created this environmental disaster and that reports of this damage have been coming in for years and he’s done nothing.

 After making this PR splash, we can expect a few minor news items then it will be right back to “business as usual” which is doing nothing to halt illegal mining in the region. The military is making too much money for it to be any other way.

 Then we have BN Americas telling us that Venezuela has set out some ambitious goals for implementation of telecommunications services in the country.

 For 2023-2025, according to a plan prepared by Conatel, Venezuela’s telecom regulator it will be a wide-reaching expansion of 4 G services and  an upgrade to 5 G in areas.

 I won’t get into the “pie in the sky” projections but here’s something you may not know. At the end of last year Venezuela had a total of almost 20 million mobile phone lines. A pretty impressive number for a country of about 25 million people (32 million before the migration crisis of those fleeing the Maduro regime and 21st Century Bolivarian Socialism).

 Now let’s go Down The Rabbit Hole…

 Chapter 17/ Scatter Shot…

 So far we’ve covered major categories, each deserving an in-depth look, but the extent of the destruction, corruption, and outright lunacy that is Chavismo has hit, and is hitting, every aspect of life and society in Venezuela. There is a host of subjects and issues that may not require an entire chapter to themselves but nevertheless deserve to be mentioned. Be warned, this will be all over the place and will seem a bit (or a lot) disjointed. Kinda’ like life in Venezuela.

 Let’s begin with one of my personal favorites. I call it “the magic number” and it’s $4 billion. That seems to be the number each major industry or sector had to hit before they finally “cried Uncle”. Allow me to explain…

 As I’m sure you know, each industry has a group or association which is useful to track issues or trends whether it’s the airline industry, the pharmaceutical industry, the auto industry, etc. Let’s use the airlines as an example but remember the other industries all follow the same pattern.

 International companies doing business in Venezuela have traditionally had to sell their products or services in bolivares (the local currency), which is worthless outside Venezuela, deposit the money in a Venezuelan bank, then wait for the government to allow them to convert the bolivares to dollars so they could transfer the money out of the country. Aside from the over four year-long period of hyperinflation, Venezuela has traditionally had high inflation, typically in the mid-twenties. It’s not hard to see where this is going huh?

 The longer the companies were forced to hold the bolivares the less they were worth. As the money piled up in the banks, so did the currency exchange backlog. It was common to wait a year, two years, or longer to convert the bolivares. If you had to wait two years your bolivares bought you half as many dollars. That’s quite a financial hit. I won’t get into the accounting but doing business in Venezuela was quite lucrative and the tax advantages of writing off these losses were substantial enough that the airlines would hang in there as long as the numbers were manageable. That’s the big question. At what point do the numbers become unmanageable? I can’t speak to individual airlines but I have a pretty good idea what the number is for the group as a whole. When their association announced their group, as a whole, was owed $4 billion by the Venezuelan government everything began to fall apart.

 In an attempt to play catch-up most carriers began to reduce exposure by reducing the number of flights in and out of Venezuela. Airlines that had three or four flights a day to Caracas cut back to one. Those with daily flights cut back to one or two a week, and so on.The idea was, if they could maintain the pace of bolivar to dollar conversions they could reduce the balance owed. Well, the Chavistas simply reduced the pace and maintained the $4 billion balance in Venezuelan banks. What made the situation even worse was that the airlines were required to pay for refueling in Caracas in dollars. The Venezuelan government wouldn’t even accept their own money!

 More tomorrow….

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