Even the government hates government

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Whether it’s fixing potholes or keeping our streets safe, pumping our oil safely or distributing its rents fairly, there is simply very little our government gets right. Like a reverse Midas, the government turns anything it touches into Lago de Valencia-style sewage.

Just another tired wingnut rant? Check this news item out: a decree published Thursday exempts public sector entities from the vast bulk of the import/export paperwork required of everyone else. Turns out not even the government can put up with the bureaucratic crap it deals out.

This decision is thick with irony. Doing business in Venezuela is practically impossible without importing something. Whether it’s technology, raw materials, or parts for the truck distributing your goods, you always run into the need to bring something from another country.

Imports are – pardon the pun – important. So enmeshed are imports into our national psyche that one of the challenges of transforming Venezuela into an export dynamo – one that exports other things beside oil – is the problem that our ports were built for imports, not for exports.

Yet thanks to the many roadblocks on the free flow of goods across borders, importing something into Venezuela has become a nightmare. Never mind that the infrastructure is in shambles – the biggest problem is the paperwork. The hoops you need to jump to get the hard currency to import is just the tip of the iceberg.

Want to import food? Well, you need an import license from the Ministry of Food. (Yes, there is a Ministry of Food.) To obtain it, you need to come armed with an astronomical list of papers and stamps, taxes and forms, all duly notarized and organized.

But the fun doesn’t stop there.

You also have to show a Certificate of Insufficiency, sometimes also called a Certificate of Non Production. To get this, you need to declare that the thing you need can’t be produced locally.

It’s kind of like proving something doesn’t exist.

The list of requirements to do this is completely orwellian. Make sure you read the part about where in each folder each piece of paper has to go. The whole process is so convoluted, you need an actual roadmap.

The horror stories spawning from this maze include armies of compliance staff and endless delays. There is even a market for people specialized in this stuff! Needless to say, the system is a hotbed of inefficiency and corruption.

Nobody likes to deal with this. So we can’t really blame the government for saying that public entities wishing to import don’t have to present all these permits. With the swoop of Hugo Chávez’s pen, all the usual requirements for importing are waived – for the public sector only.

As if Venezuela’s private sector wasn’t discriminated against enough, now they’ll have to compete against public imports that aren’t just subsidized, but magically paperwork-free to boot. Chávez needs to build a lot of houses if he has any chance of getting re-elected, but his own policies make that difficult. So he gives himself a pass, and if it puts private businesses at a disadvantage relative to the government, better even.

It’s good to be da boss, ¿no?

The government’s move amounts to an admission of failure. They may not say so publicly, but they have come to the realization many of us came to a long time: that the biggest impediment to Venezuela’s economic growth … is the government.

I didn’t always think this way. Years of indoctrination about the wisdom of the benevolent planner and the income inequalities caused by the free market left me sure there was a proper role for the State.

And yet whenever I came in contact with a Consulate, or had to stand in line for hours to get a paper stamped by an ill-mannered bureaucrat, or was asked for a kickback by a cop, the tea-partier that lives in my sub-conscious would remind me of Thoreau’s inmortal utterance about government being best when it governs least.

I mean, theories about the public provision of goods and services are fine for Sweden. But can we point to anything the Venezuelan government does well?

Sadly, we can’t. The government’s move, demanding it get out of its own way, confirms it. The crumbling chavista state is making all of us hate government.

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1 COMMENT

  1. “But can we point to anything the Venezuelan government does well?

    Yes we can, everything it touches/gets involved in, se vuelve mierda. In that, it is exceptionally good! In fact I would say, it has no rival, anywhere in the world, and will soon displace Cuba and Zimbabwe from the top stop.

  2. “I mean, theories about the public provision of goods and services are fine for Sweden. But can we point to anything the Venezuelan government does well?”

    And that’s one of the things. The key is in designing a system that works with people the way they are. Anyone that tries to sell a system that *depends* on changing the people involved –I’m looking at you, “new man” communism– is peddling a system of inherently lousy design.

    Another thought stemming from this post is that all those forms, rules, procedures, people, furnished spaces, etc., involved in creating the mess that you describe comes as a result of government officials dedicating time to creating them. Policies had to be thought of, discussed, drafted, voted, published, etc.. All that time has an opportunity cost. It’s time that was not spent dedicated to solving other problems. So the simpler any aspect of the system we design, doesn’t just render that particular aspect more efficient, it helps improve all other aspects because there is more resources that get to be spent on the other aspects as a consequence.

    Given the kind of government officials *Venezuela* has to work with, we need to design a system that requires the least from them. Cash distribution is one such simplification; unconditional, much more so.

    • “The key is in designing a system that works with people the way they are. Anyone that tries to sell a system that *depends* on changing the people involved –I’m looking at you, “new man” communism– is peddling a system of inherently lousy design.”

      Could not agree more here, particularly because the notion has been stuck in my head for days.

      By the way, is there a reason why there isn’t a forum in this site?

    • One key problem is that our public sector processes are designed under the assumption that burocrats should be morally perfect. The seeking of the “new man” is very common in Venezuela even among “free market defenders”. That´s why we tend to “moralize” every discussion, every analysis. We are “experts” talking about moral issues, and naive in effective incentive alignment.

    • Sure, yeah, but any new system will require you to change into a “new man,” regardless of ideology, because it will impose an additional and sometimes overriding set of moral directives called “the law”. Furthermore, all systems in place today (yes, ALL systems) at some point required society to change into some “new man.” The fact that they succeeded is not proof that they didn’t do it!

      • Point of distinction: I said a system that *depends* on a “new man” for it to work, not a system that doesn’t cause changes in society. Communism *depends* on committed or submitted people for it to succeed; that’s an inherently lousy design of a system. Free markets don’t depend on any specific kind of people for them to work, though they transform societies considerably; that’s a system with better design.

        • Stone: “The Law” is just alignment of incentives. The man is not able to create a new value, a new man, a Homo sapiens is a Homo sapiens. That´s why communism is just an abstract idea. A law does not create a “new value” Torres: I´m not talking about “free market” as an abstract concept. I´m talking about some venezuelans, acting as free market fans. Free market, in fact, puts control out of individual decision making.

          • Raul Aular, I hear you. With my distinction, I was replying to Stone Chip, who I’m guessing was replying to me.

  3. I found the decree simply beyond galling.

    Just the brazenness of the ventajismo official: it’s just breathtaking.

    Fuckin’ bastards, it’s all I have to say.

    • Odd. You seem to think this has anything to do with making it easier for the government to actually import stuff, while it’s obviously designed for making it easier for the corrupt with connections to pretend to import so they can get all the dollars they want. We haven’t forgotten Pudreval, yet, have we?

      Están raspando la olla antes de que el pueblo se levante y lo saque halandolos por la greñas! And this is just to make it easier for them to get the dollars to “retire” in their condos in Miami Beach.

    • It’s not “wrong” to discriminate against the private sector if you are publicly in favor of overturning the system that created it. On paper it’s chavista morality-proof.

      I’m only saying this because I think an all-inclusive, post-chavez society will have to face the fact that there is more than one moral-political mindset at work.

      “No es malo porque es comunista, es malo porque es corrupto.”

      • All the more important to have a system that works with the different mindsets, rather than trying to change everyone into a single mindset, as the chavistas insist on doing.

        Regarding your quote, si comunista implica no dejar que otros no lo sean, entonces sí es malo ser comunista, y peor ser corrupto también.

  4. Juan Cristobal,

    A side note. You mention, “the income inequalities caused by the free market”. Note that my basis for supporting simply giving the same *amount* to, while taking away the same percentage from, every citizen is that it can be tweaked to modify, at the extreme even eliminate, those inequalities while letting the market run pretty rampant. It’s just a matter of adjusting the amount to give out and the percentage to take away. Only two numbers to tweak for a healthy market with acceptible ranges of income in the population, no falling through cracks, no loopholes, no favors…

    And by keeping it simple, we help government apretar mucho by limiting it to abarcar poco. It’s simple, efficient, and easy to monitor.

    • When I was writing this post, I kept thinking of your ideas, torres. While I may have expressed skepticism toward them at various points, I’m coming around to them more forcefully.

  5. In the Venezuelan plastics sector, CORAMER sells what POLILAGO (polyethelene), ESTIRENOS DEL ZULIA (Styrene), and other olefin producers out in El Tablazo make, all under the PEQUIVEN banner.

    CORAMER has for the past year been unable to fulfill the orders it gets from our country’s plastics manufacturers, always sending 50-70% of what is ordered.

    Now, they have informed us that in order to import the raw material needed to make up the gap, we have to buy through them what we need to import. So you cannot go to the various international raw material producers as in times past, you have to go through CORAMER. Furthermore, this is cash on the barrel head, por adelantado, in US$ or EU, as opposed to standard 30 days invoicing, FOB La Guaira.

    This of course means CADIVI or SITME, each of which have their “gatekeeper and toll chargers” you have to deal with in order to get anything. Any increase in cost will have a knock on effect in prices down the road in many consumer goods, especially food which depends heavily on plastics.

    What’s worse is that some of the locally produced raw materials make their way to “la hermana republica”, untransformed, and sold at international prices which are higher than the local market, pa’ completar la marramucia.

    Now with this exemption, there will be a megaflood of imports in many categories that will have such a roaring vortex of dollars attached to it, it will make your head spin. Imagine the feeding frenzy now.

    “Están raspando la olla antes de que el pueblo se levante y lo saque halandolos por la greñas! And this is just to make it easier for them to get the dollars to “retire” in their condos in Miami Beach.”

    You ain’t kiddin’, No Baka.

  6. Will this put thousands of paper pushers out of work or will the private sector now have more “help” with the bureaucracy?

  7. I once read a reference–I think in El Pais of Spain–suggesting that books werealso subject to the requirement of the Certificate of Non-Production. In other words, that you have to prove that there are no Venezuelan “equivalents” of, say, Remembrance of Things Past, or The Handmaid’s Tale.

    I have never read any informed discussion of how prevalent or onerous this system is in practice, though.

    • I cannot tell you how that works for books, but for plastics and other materials that once upon a time were produced in situ and now are not, the “Certificado de Insuficiencia” is just one more toll to pay.

  8. My forever contention: The welfare state, social democracy and economic planning is feasible in some countries in Northern and Western Europe. Not in Venezuela, though… It suffices to watch the Venezuelan government and the persons that make it up at work to realize it. No abstraction involved.

    What distinguishes government in the developed World from less developed nations, is firstly, that transactions with it are so much more… SIMPLE!. Not only will they give you accurate information, but the bureaucracy involved is an order or two of greatness smaller. No Kafkian requirements, no going through three ministries, no secretary drying inch-long red nails saying “you didn’t fill this in pink fluorescent ink as required, do it again”. In the first world, you can fill a declaration in good faith and swear to it’s veracity. In Venezuela, there is no such thing, and then you have to bribe someone to get things done. Ironic…

    Either that’s why they are developed, or they are developed and it shows. I have come to compare what I see and suffer in Caracas with the experience of a citizen of Pakistan, India or Uganda. And probably there are sorry morons, even in the civil “service” and outside, thinking that such suffering is a sign of progress… right…

    On the other hand: Government officials not willing to go through the hoops they make any other mortal go through (with threat of use of violence) and waiving requirements for themselves??? Ancient History, and Universal History at that. Either there’s rule of law and rule of individual rights at that, or there’s Mafia and Mob rule.

  9. Wow, what a private sector love fest here. You can tell the “free market” worship that happens so much these days, espceially in the US, has had its impact here.

    Yet most all of the countries that have developed since WWII have all used tremoundous amounts of state intervention – South Korea, Tawain, China, etc.

    Actually, just about everyone who developed subsequent to England’s initial industrial revolution used a lot of state intervention in the economy – Germany, Japan, even the US if you count its tarrifs and large scale public works.

    And if you just look around you in the “free market” Mecca of the US you will see how important a role government plays for their to be any progress. If you get sick, it is virtually guarenteed the medicine and technology used to save you will have been developed by the government. Who developed the medium we are using to communicate right now, the Internet? Oops, the government again. And when key industries are in trouble the government bails them out (Boeing Aircraft company, the semi-conductor industry via Sematech).

    One of my favorite examples of absurd private sector worship is that some claim the US government should even get out of the space business and leave it to private companies. Really? If private companies want to launch people to outer space what is stopping them? Nothing. The sad reality is the private sector can’t do, even after a full half century of further technological development, what the government did 50 years ago!

    The private sector may be good for many things and does have its role but there are two things it consistently fails at: 1) things requring very large investments of capital and 2) things have long time horizons.

    Taking a 3rd world country from underdevelopment to 1st world status will take both huge investments and long periods of time. Hence, IMHO for Venezuela to progress the solution isn’t to reduce the size of the government and think the private sector will develop the country but rather to change the government. It is one of the very sad by products of Chavez’s stupidity and incompetance that this debate in Venezuela will likely be won by those favoring very limited government thereby perpetuating the country’s underdevelopment.

    • Where “state intervention” meant copious amounts of merchantilism, protection by tariff barriers, infrastructure projects, some internal liberalization and even offering land and tax subsidies to private business… In one word, CORPORATISM for you.

      Yeah, right, like Huguito’s Socialism, like the nationalizations in Venezuela in the 1970s… Sure, all State intervention equals Central Economic Planning. Sure, sure, all in the same league… See the fallacy?

      Ok, maybe I will buy that a first-world government that does understand it’s role in the scheme of things might produce economic growth, some at the expense of John Q. Public, some at the expense of businessmen who are not so well connected to it.

      Problem is, we have not had that in Venezuela (and most of the Third World). And probably will not have it, ever. Even now, it is simpler and cleaner to do business in Europe and the U.S.

      • It would be almost too much to expect of a government like Venezuela’s to keep infrastructure and public education working and to uphold the law and guarantee safety.

        But if it managed with those limited objectives… Maybe we would have a chance at development

    • Although most post-WWII economic miracles (Japan, South Korea, Taiwan, Germany) all organized their economies via corporatist structures, it could be argued that they already had a certain level of economic and political development which made this possible. From the early nineteenth century until the mid-twentieth century most western European nations permitted an almost savage capitalism which made enormous fortunes, albeit at the cost of social equality. However, it did create some very powerful economies and expanded those nations’ respective middle classes. Likewise Asian upstarts like Japan and South Korea adopted an intensively developmentalist mindset and practically forced modernization onto their countries, regardless of whom may have been affected by the shock industrialization.

      In Latin America, political institutions evolved much differently. In the mainly agrarian, impoverished countries of South America, wealth was (and still is) scarce and hard to come by. The result is a state whose sole function is to enrich those lucky enough to reach positions of power. Much of the corruption that takes place in Latin America occurs simply because the country is so poor. In a wealthier country many forms of corruption that take place in Latin America simply don’t exist because well-paid, unionized employees have better things to do with their time than shake down individuals for pocket change.

      The point I’m trying to make is that to expect a Latin American nation to create a state-assisted, corporatist economic model out of nothing is expecting way too much from the region. It simply isn’t in our political history to set a course for the nation and enact a series of policies that think twenty, thirty or fifty years ahead. Our political leaders want instant monetary gratification, not some delayed, altruistic plan which will bring wealth to their grandchildren. Yes, the government can be changed. However, all Venezuelan governments are constrained by political, historical, economic and social realities. Regimes have traditionally changed with almost frightening ease in Latin America and corrupt, ineffective right-wing regimes can be replaced with corrupt, ineffective left-wing regimes and vice versa. I’m not a fan of the private sector, especially its holier-than-thou attitude it can often take in South America. However, as things stand, the public sector seems to fail us with obscene regularity.

      • Your last paragraph is very true and is a huge obstacle. Venezuela is in a particularly bad situation because of the effect of rent seeking and clientism on both its population and elites. A government led develepment strategy therefore is highly unlikely to actually work in Venezuela.
        Problem is, a completely free market strategy is, in my opinion, guarenteed to not work, which makes the government led strategy better by default even if it will be very, very difficult to make work.
        Anyways, given the current government and current opposition this is all academic…

        • You may not be supporting chavez anymore, but you clearly are supporting the idea of “a chavez” that will come along and do things the way you think they should be done. The problem in Venezuela is that too many people think that natural resource money is government’s to be used as if it had been taxed. That is regressive. The irony is that the same people who point to the ills of giving unearned money to citizens don’t see the same ills to the nth in giving untaxed money to government.

          You already caused your own kind of damage shoving your badly thought out ideals of government, yet you’re still unapologetic and pushing for that same kind of government that gave us the crap we have now. You were so way off, and you still have the gall to act like your opinion is *the* sound one, when all you’ve changed is the name of your candidate to the next unknown that talks like chavez! Que caradura, OW. No shame.

    • I suspect one might be able to find a middle ground between utter laissez-faire libertarianism and “Expropiaselo!”. Just like one might be able to find a place on earth somewhere between the South Pole and magnetic north.

      • I’m not really sure how to interpret that phrase – if you know an English equivalent (not a translation), please share. I’m not talking about people per se, just saying that there are a vast range of possibilities between a completely free market and a place where the government decides all – and does so unpredictably, so you can’t even count on what they will do as a rule.

        Imagine that you quantified government regulation in an economy, and put it on a scale from 0 to 100. (The extremes are only theoretical, I think, as I don’t believe they can exist.) Now imagine that you have two countries that both have a score of 50. Are they equal for doing business, for investing? Almost certainly not. So much depends on what KIND of regulations exist, and there are plenty of other factors out there, like culture, history, current income level and many more that play into this in some way.

        Do you want to argue that less regulation is necessarily better? I don’t. Take Guatemala, for example, in the WB Doing Business rankings. It’s #1 (number one!) in all of LatAm and the Caribbean in registering property, and in getting credit. Overall, it ranks higher than Uruguay, Costa Rica and Brazil, among others. Where would you rather invest? Guatemala is a case where increased government regulation, at least if it could effectively fight crime and corruption, would be welcomed by all (except for the criminals and the corrupt, though in Guatepeor, they might actually be a majority).

        Putting free market/government regulation on a straight line and evaluating it is impossible, and therefore treating it as a dichotomy is stupid. Each possible regulation should be considered on its own, and different countries will and should end up with different answers to each question.

        One thing is for sure, though, in Venezuela – the Chavez government has erred on the side of too much regulation. Is less regulation automatically the answer? No. It depends on which regulations, and will also depend on other things. But in the current state, seeking to fix things with more regulations WILL cause more problems.

        • I agree. It’s about administrative capacity. The next government will need to build up the CAPACITY to regulate helpfully. But on current levels of administrative capacity, more will always be a problem.

        • There’s no doubt that increased capacity would greatly improve the process (and I wholeheartedly agree it is necessary in the future), but there are certainly cases where the regulation has simply gone too far. From this post, do you think requiring a “Certificate of Insufficiency,” even if issued expeditiously, is really a good thing for the country? Is it good for SENIAT to shut down businesses for days in cases with zero tax fraud/evasion found? Should CADIVI even exist? I’ll stop there, because the list could be very long.

        • Aren’t we stating the obvious? I mean if we have two countries, each with a single regulation but one of them is a 2 day moratorium on food exports while the other is a 2 month moratorium, clearly the former is better. When people talk about less regulation, they are tacitly talking about the quality of the regulation, too. The rule of thumb goes something like, if it makes individuals, businesses, and the government more efficient, it’s good, otherwise bad.

          Regarding the Guatemala example, using measures of regulations to reach invesment decisions is bad business. Investement pits risks against returns, where regulations are includen in the assessment of risks and returns, but by no means are used for a full picture. Brazil, by it’s mere market size can easily promise a greater risk x return even with much more cumbersome regulations.

          As to Venezuela, succinctness needs to be a goal simply because we can’t spare people of capacity in non essential or non priority regulatory systems of government.

    • What a load! It’s easy to point at projects done by government and claim success, because they had no competition. Pit someone against them and then it gets done better, cheaper, faster. The only reason USA got to the moon was to compete against the Russians. In other words, their success was the result of acting like a free market private enterprise would.

      Private companies will be taking passangers to space starting next year for a tiny percentage of what it costs NASA, with increased security, faster turn around, greater comfort, and for benefits yet unimaginable. Just watch the free market start mining the moon in half the time it took NASA just to go back. Same as with the best run jails, the best highways, buildings, ships. If the private sector hasn’t entered that market it is for the same reason that the private sector doesn’t build schools for the poor: unfair competition.

      INTERNET was developed by the military, but to make it useful, even to themselves, they had to enlist the servers of the largest (private) universities. Only then was its potential unleashed. And it was unleashed by the civil sector, not the government.

      The military spent decades trying to make 5 foot thick acrylic with no bubbles, they had to cover and haul away an art piece for a New York building inauguration because the artist had figured it out in months. Transparent, non metal submarines? Thanks to private endeavors.

      Tunnel from England to France? Parallel computing, cars, software, robotics, bioengineering, 3d printers, nano clothing, exoskeletons? More than 85% of all scientists and engineers who ever lived are alive today, most do not work for government, and the future is in their hands, not the government’s.

      Most of the people that government has used for its accomplishments are from private schooling. The money the governments use is mostly taken from the profits by private industries. The market is the engine that runs the economy that lets the government do things. Governments that are successful are the ones that help the market be a well-oiled machine. Goverments that limit or compete against their markets may have things to point at, but always at the cost of market blood.

      It’s the people who believe in free lunches that think governments should actually get the credit for those achievements when the investments behind each one of those governments are private enterprises. Like it’s government that has achieved supplying the world with energies and alternatives. Subsidies are what have slowed all those down.

      Think IBM and Watson, then tell me where the future lies. Think, and think it through. Don’t just stop at who ordered the work to be done. That part, anyone can do, especially when you have deep pockets and go overbudget.

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