Maracaibo chronicles

Latin integration indeed
Latin integration indeed

An excellent story on smuggling in Zulia state, by Bloomberg’s Anatoly Kurmanaev and Andrew Willis, on Venezuela’s unlikely and unsustainable path to becoming … a rice exporter!

The money quote:

“Sotomayor hasn’t seen rice for sale in the shops of Venezuela’s second-largest city since July, as smugglers snap up the staple for a maximum of 7.2 bolivars ($1.14) per kilogram, just $0.11 at the black market exchange rate. While many Venezuelan shelves go bare, the country’s rice exports to Colombia have doubled this year and now represent 11 percent of the market, according to the U.S. Foreign Agricultural Service and Colombian rice growers association Fedearroz.”

I’m happy the authors captured the sense of lawlesness prevailing in our roads and highways, which undoubtedly contributes to the crime wave.

It’s all related folks – Cadivi, contraband, and Mónica Spear. All part of a package called “chavista Venezuela.”

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  1. so you can make approximately a cool $1K by smuggling a ton of rice, over twice the international price of ~$400 per ton… if you carry 100kg per trip you need to work only 10 days of the month in order to make a respectable salary upwards of BsF 45-50K (considering eventual propinas to be paid at the border). why is it that we’re not all doing this? principles, is it?

  2. How long before the Chavernment enacts some sort of negative consequence to Bloomberg for having published something which is negative publicity for the government? Not to mention the taxi driver? OTOH, the Chavernment may decide to do nothing, as negative consequences for Bloomberg will only give the story wider exposure- which the Chavernment doesn’t want.

  3. At least Venezuela still produces rice. Or does it?

    I’m not sure how the racket works. Apparently rice is sold in Venezuela at BsF 7.20/kg, a nominal price of $1.13/kg, but in reality about $0.11/kg. The dealers buy it all, and sell it in Colombia for $. Rice trades for ~$500/tonne on the world market; $0.50/kg.

    So there is a huge arbitrage available to those who can get rice in Venezuela and deliver it to Colombia.

    But where does the rice come from? Bloomberg sez over 300,000 tonnes/year are imported. That rice has to be paid for at $500/tonne.

    So the state pays $150M for rice. The state then sells it for BsF 7.20/kg, collecting BsF 1.08 billion. The rice dealers sell it in Colombia for $150M. They use $17M to replace the $ they used to buy the rice, for a profit of $133M (less overhead).

    Another case of selling $20 bills for $5.

  4. …“chavista Venezuela.” There’s a problem with this kind of thinking. It’s not chavismo, at all. The mentality that brought us chavismo is the mentality that is chavismo which is the mentality that can’t figure a way out of chavismo. The package isn’t “chavista”; the package is Venezuela. The question is: If you don’t share the mentality of the package, then what do you propose to get Venezuela out from under than mentality? If your proposal begins with anything related to changing the mentality, then you’re part of the package.

    • RT+20!! fantastic comment. Indeed, the problem is the Venezuela that gave birth to chavismo, which, unless solved, will become a recurring problema for generations to come. I do think nonetheless that once the vicious incentives in place are rooted out individuals will find a way within a new framework to make a living. If we can establish a new framework that values work and ingenuity, instead of arbitrage we should be able to make headway into a new future for all of us.

      • thanks. As to the framework that needs establishing, I vote for a free, competitive, zero-poverty market, and this I propose we achieve by distributing all natural resource revenues, unconditionally and daily to all citizens.

  5. So the government buys rice in USD from Nicaragua and sells it in BsF at the regulated price in the markets of Maracaibo where professional buyers buy it and ship it to Colombia where Maracuchos have drive to buy the product in pesos at international prices to consume it back home in Maracaibo. It’s a nice trip the rice makes, Managua-Maracaibo-Maicao-Maracaibo, very efficient.

    Makes perfect sense in distortioland.


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