Chavismo to Bring the Dynamism of the Home Rental Market to Used Cars

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Own a car? Want a car? Be very, very afraid: the government’s proposed Used Car Law could well mean the end of legal market for used cars in Venezuela, crippling one of the most popular means of shielding savings against the ravages of inflation at the same time.

One thing the government is right about: Venezuela’s car market is bizarrely distorted. With new car prices carefully controlled, import dollars strictly limited, and demand for wheels way outstripping supply, Venezuela must be one of the only places in the world where cars raise in value the second they move off the lot. With people forced to turned to fix assets to protect the value of their savings, waiting lists for new cars have grown notoriously long. These days, new cars are just another arbitrage opportunity; a steel-rubber-and-glass version of a CADIVI dollar.

The government’s plan to deal with it – mandating notary publics to ensure that used cars sell for no more than 90% of their price when new – is the public policy equivalent of swatting a fly off your nose with a sledgehammer.

The outcomes are entirely predictable: the (legal) used car market is going to seize up completely. And you know how the saying goes: if you outlaw used car trading, only outlaws will trade cars.

What grabs me about this is chavismo’s iron-clad commitment to policies that have failed, clearly failed, visibly failed, publicly failed, failed beyond any possibility of arguing that they haven’t failed. Because chavismo has already tried this form of regulation once, in the home rental market, with an outcome that’s out in the open for all to see. In Venezuela, today, there is no legal rental market for houses and apartments. It has simply ceased to exist, because legislation has tipped incentives so wildly against the interests of one of the parties to the transaction as to shove them out of the market altogether.

Mutatis mutandi, you could tell pretty much the same story about butter,  toilet paper,  parking spots, wheat flour, sanitary pads, chemotherapy drugs…and on and on and on. Venezuela is drowning in a sea of evidence that this policy response only makes life harder for everybody.

Yet, 14 and a half years into this charade, the principled refusal to see what’s under their noses has become the hallmark of chavismo’s policy-making practice. Every regulation-introduced distortion is fought with a further distortion-introducing regulation, on and on, ad infinitum. The refusal to consider the real world effects of ideological rigidity is now baked into the regime’s identity.

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  1. Eastern Europeans used to say that the purpose of such regulations was to force people into illegality. Multiply the regulation into every area of economic life, and no one is fully “legal”. This had important psychological implications, as most people became cheaters. Also, the fact that anyone could be prosecuted, at any time, for “speculation”, “corruption” or similar offences gave the regime a non-violent method to neuter possible opponents. This was one reason why “no one spoke up until everyone spoke up.”

  2. I don´t know why this wasn’t more vigorously denounced by the opposition, at the end it will be the same thing with home rentals, making something inaccessible for the middle class through draconian unenforceable regulations.
    In Venezuela, if you have a lot of money and are willing to pay in dollars you can rent an apartment, if you are a middle class professional you are screwed. The other day a friend from a city outside Caracas was telling me how bizarre the fact was that almost ten years ago, when she was a college student on a tight budget, she was able to share an apartment with friends in la Castellana and now, as a supposedly well paid professional, she rents a room that takes a very big chunk of her salary and the idea of her renting an apartment in Chacao is an impossible fantasy. It will be the same thing with cars. If you have a lot of money you can get the car you want, for the middle class it will be this:

    • because there is simply so much bandwidth that the opposition voices get these days, and must be carefully allocated to the most pressing issues, like indicting the last elections, for example

      • Sorry, but the fact that thanks to misguided and Jurassic policies, most Venezuelans cannot rent an apartment and are forced to live with their parents until their thirties is something very pressing, or the fact that thanks to these same policies most people, including the middle class, are unable to buy a new car.

        When you talk about these issues with regular people, many of them think that there are no apartments to rent and because the owners are greedy and that the problem with cars is because of a mafia of evil hoarders. People need to be explained that this are only consequences of idiotic laws.

        Is as like there is no historical memory that before Chavismo, middle class Venezuelans could rent an apartment and buy a new car. One of the biggest sucess of chavismo has been whitewashing and falsifying history because the opposition is to afraid to defend anything done before 1999 at the risk of been identified as an adeco.

        • “the opposition is to afraid to defend anything done before 1999 at the risk of been identified as an adeco.”

          Well put. No one dares to defend the past because there is a stigma attached to it. Chavez conditioned the minds of everyone so well that not even the politicians of the “40 years of democracy” defended their opus at the time, and the new politicians had to first declare total rejection of the past to be really considered as “new”.

          The result is that chavismo can very well declare themselves to be the best government in the history of Venezuela since no one is going to contradict them. All the opposition can do is promise that if they are elected they will do a better job in the future which doesn’t bring much in the way of credentials. Those without a past have very little to show as accomplishments.

          If we look at those (now orphaned) 40 years of “democracy” they represent the era of fastest advancement in education, infrastructure, economic, social and political (think decentralization) advancement in Venezuela’s history. Of course not everything was rosy and progress was not consistent, it went to the tune of the oil prices. But considering where we were at the end of the 50’s and what came afterward, the conclusion is still the same. Yet no one want’s to revindicate that period, no one is a son of that era.

          Maybe is time to go retro and revive that old saying (which I always detested but that is so true today) “Con los adecos se vivía mejor”

    • So when the rest of the world will have flying cars like the Jetsons, Venezuelans will still be driving today’s car or 15 years ago ones. I don’t get it, why the chavistas are imposing this law, when they all have incredible expensive cars, the Ruperti guy races sports cars in Europe, the new candidate for the PSUV “el potro” show this great car in his mediocre regeton video.. at least the Cuban upper echelon class don’t boast around with ferraris and a8s do they …. can one of the idiot Chavistas who come here to troll, care to comment his/her thoughts about how does it feel to know that from now on they will be driving the same car for the rest of his/her life? What is so revolutionary and fair about it?

  3. As a person who desperately needs a new car & can’t afford one even though I have my own business, I just laughed at this new law.

    Do these complete dumbasses really think that anyone with a used car is going to sell at these fanatasy prices?

    And where are the new cars based on Bs.6,3?

    A Toyota Corrola automatic (cheap model) currently is listed on the Toyota website at Bs.497.545

    That’s just shy of US$79,000.
    What a complete joke!!
    Even if there wasn’t a 2 year waiting list who could afford to buy it?

      • Island: Your number for the MercadoLibre Fortuner is ~$51,560 @ 32. A brand new 4-Runner; which I understand is similar to the Fortuner, sells new in the US for $31,000-$42,000. How much does it cost to bring a new car from the US? Even if at the end you pay a bit more, at least you’d be buying a new car.

        • Those are brand new Fortuners, the thing is that thanks to the distorted Venezuelan economy their price as brand new cannot be increased significantly without sanctions, but when sold as used cars it can be increased, thus given the limited supply and big demand, anybody that has some money, buys a car to resale at a 50% mark-up.

        • Charlie, the point is that the government is bringing in these new laws because they say that the car companies are receivijng Bs. at 6,3 not 32.

          Also note that there are no new cars from the dealers – just a waiting list.
          Who has Bs.1.600.000 to buy a “used” one?

      • Townie, what happens is that production of vehicles in Venezuela started to fell dramatically since 2010 as a result of the delays in Cadivi, labor conflicts and overall lack of investment protections. Additionally, the government severely restricted the importation of cars.
        Thus the supply of vehicles fell over 40% in 2012, but as there is a lot of money on the streets because of the electoral spending binge, demand for cars has increased, stimulating that private individuals and companies acquire the cars from the dealership by graft and then reselling them as used cars at a 50% mark-up.

        • The government thinks that this is because the owners of the dealerships are evil hoarders and does not even take into consideration that the gap between offer and demand after a drop of almost 50% percent in the supply is what’s causing the high prices. The mafia is just a consequence.

    • $79,000! Talk about distortions in the market. In my town (Texas) the MSRP is around $20,000, MSRP doesn’t mean we can’t negotiate it downward either.

  4. The new requirement: A seller willing to sell, and I buyer willing to buy and a government approving the price. However, the government’s price control is so low that it effectively ends transactions. So, why doesn’t the government simply forbid selling and buying of used cars! It would make everything more clear and simple! The government forbids inflation. The government forbids and forbids. The law: “if all you have is a hammer, every problem just needs another nail!”

  5. Whats wrong with the 73 Nova in the picture ? I used to own a 71 Nova, 6 cylinder, 2 speed Powerglide, it was a nice car… of course the one in the picture is a little rusty…


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