Steel Crazy After All These Years

The text on the 5 de Julio metrocable station mural makes more sense than this guy...
The text on the 5 de Julio metrocable station mural makes more sense than this guy…

This must really be – and I know I seem to write this often, but bear with me – one of the weirdest things I’ve read about Venezuela in a long time:

President Maduro has announced that CVG, the giant state-owned corruption-cesspool-cum-mining-and-metalmaking-conglomerate, will henceforth demand “fair prices” for its aluminum and steel exports, meaning prices above the international market price.

“It is the state that sets the price of these products that will be sold, it’s not some mafia … no individual is going to come here and tell us the value of a product that belongs to all Venezuelans,” Industry Minister Ricardo Menendez said last week during the launch of the new system. […]

Though it traditionally sold those metals using the benchmark prices of the London Metals Exchange (LME) – the world’s top market for non-ferrous metals options and contracts – it also offered discounts off the reference prices.

With the new mechanism, Venezuelan is now selling its metals well above the international price, according to mining industry workers, though it is not immediately evident how the companies are establishing prices.

The industry ministry did not respond to requests for clarification.

Let’s just lay this out explicitly: CVG’s crack “sovereign marketing” team is now presumably going out and informing metal buyers from New York and Madrid to Guandong and Jakarta, that Venezuela demands to be paid $700 for steel  those buyers can just as easily, just as straightforwardly, and just as quickly buy for $150 from an almost infinite number of other suppliers worldwide because, y’know, $700 is the “sovereign”, “fair” price…

See, that doesn’t even sound like “bad policy” to me. It’s more just plain weird, in a you-d0n’t-actually-understand-how-this-works-at-all-do-you kinda way. It suggests a policy-making process that’s gone beyond dysfunctional to become the bureaucratic version of psychotic break with reality. The government is determined to let it be known that it has no idea how the sane world actually works. (BTW: if, after this, you’re still a Venezuelan bondholder, let it never be said you weren’t warned.)

Our leadership seems so far gone in its koolaid drinking ways, so steeped in nonsense rhetoric, it can’t grasp that it can’t coerce the rest-of-the-world into acting against its self interest the way it can coerce people stuck within their little economic sandbox. They really can’t see that there’s no reason for anyone outside Venezuela to pay $700 for $150 worth of steel. It’s as though they’ve concluded that the fact that it costs SIDOR $700 to make steel that other companies worldwide routinely sell at a profit for $150 somehow reflects badly not on SIDOR, but on the rest of the world! 

Maybe it isn’t so mysterious, though…I mean, one way to describe chavista economic policy-making is that it’s premised on the expectation that people will act against their economic self-interest in a stable way over time. That they’ll sell rice that costs them 10 to produce for 7, and will do so willingly and steadily forever. That they’ll use a dollar to import Bs.6 worth of stuff, when they can just as easily use it to obtain Bs.30. That they’ll be pendejos, reliably, steadily, forever.

Once you’ve created an economic policy regime premised on the looney-tunes thought that people can be forced to act against their own interests forever inside Venezuela, it’s maybe not such a strange thought to you that they’ll do the same abroad. And so, CVG is launching the ultimate experiment in revolutionary marketing on a global scale: the 2-for-the-price-of-3 Sale.

Good luck with that!