Cheap labor “a la criolla”

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There's a business opportunity to be had here
There’s a business opportunity to be had here

Clímax magazine, one of Venezuela’s new crop of online media outlets, has an excellent story on how Venezuela has become a haven for cheap labor.

Now, if you read The Economist and other rankings, you might think that Caracas is the most expensive city in the Americas. In fact, that’s what the headlines read a few years ago! But reality is quite different.

Yes, taken at the official rate of BsF 6.3, Caracas is really expensive. As in “a kilo of grapes costs more than $200” expensive.

But at black market rates, Caracas is dirt cheap. As in “a visit to the doctor completely paid for out of pocket costs $4” cheap.

One way to take advantage of this is to hire Venezuelans for things that would be much more expensive in other places, things like social media networks, filming commercials, and even writing. The sirloin:

“Small jobs (in Venezuelan vernacular, ‘little tigers’) come from Mexico, Panama, Colombia, Argentina, the US, and Spain. When they land in Maiquetía [airport] they become an opportunity. ‘Many of the region’s production companies decide to film their commercials here. They can cut expenses up to 80%,’ says Marcos Purroy, casting director. On the other hand, Claudio Gómez, manager for Tekki Film & Production, says: ‘here a well-made commercial with an entire production team – talent, music, costumes, locations, teams, salaries, food, transportation, and hotels – can cost between BsF 2.5 or 3 million, which in dollars would come to about 6 to 8 thousand. The cost is very low compared to Central America. In Guatemala, El Salvador, Costa Rica or Panama, the same commercial can cost 40 to 50 thousand dollars.”

It’s sad that is has come to this, but every crisis creates an opportunity. If your field of work allows you to offer up your services overseas, take the opportunity while it lasts.

In this globalized world, our misery is someone else’s gain.

(Note: Our very own Raúl Stolk is an editor over at Clímax).

1 COMMENT

  1. Ay siiiii chamo Nagel, yo tambien quiero se actriss de cine de Holiwooo!!!!! como hago pa enchufalme con un tigrito de eso? toy un poquito goldita polque aqui lo que se come ej puro calbohidrato, pero veo mij novelaj toiticos loj diaj un soy guenisima actrisss!!!

  2. Yes this is so evident nowadays! Me and one of my best friends are employed by overseas companies to do jobs, sometimes almost completely unrelated to Venezuela, and we get paid in VEF (of course). IMHO, I think these companies are underestimating our generation’s ability to land better jobs abroad… It’s unsustainable to produce $$$ and get paid peanuts.

  3. Basically, the central government created its own version of Germany’s Mini-Jobs or McJobs. Thumbs up!

  4. What would happen if, say, a small U.S. ad agency showed up in Caracas and said, “To hell with this exchange rate BS! We are looking for acting talent and will pay 5 USD/per hour, cash.

    Would they be sent packing? Arrested?

  5. Misery? I thought it was the standard response of an export boom after a severe real depreciation!
    I am exagerating a bit here of course, because Venezuela will NOT enjoy an export boom even in the face of such a steep depreciation because there are several other binding constraints to the production of tradables. However, it is somewhat refreshing to see these developments. Because, dont kid yourself, in absense of them, the situation would be even worse. Real salaries would have to fall even further and adjustment would take place with an even more accute drop in consumption.
    One of the tragedies of this very inneficient external adjustment we are living through is that we are actually not observing the standard response in the tradable sector because it has been sistematically destroyed by unfriendly domestic policies. Lets not criticize then the only bits of response we are experiencing.
    At the end, all export booms emerge from selling something cheaper than the alternative (many times, the labor embeded in those goods and services).
    If something is going to prevent for us to reach rock bottom is precisely the limited capacity of the economy to find and develop this kind of opportunities.
    So, yes, come here and film your commercial, we welcome you!

  6. I was cheap labor myself, and happily so, during 12 months after leaving Brazil for Venezuela and before moving to the U.S. I was lucky to land a 40 hrs/week long-term contract, with a company that belonged to Google, through a platform called oDesk (now it’s called upwork.com). I earned $7/hour, and lived like royalty. Had I stayed, I’d be earning more than Bs 600 thousand (600 millones de los viejos, coño) a month, but wouldn’t find much stuff to spend it in, would I?

    Free advice: Those of you still living in Venezuela, go ahead and create your profile at UpWork and try to find a long-term, 20+ hours/week job. Give it a shot.

    I wouldn’t change my middle class life in the U.S. for my royalty one back in Valencia in a million years.

  7. It’s a very astonishing fact to see how little is social tension right now in cities like Caracas, compared to what we could expect caused by shortages and high inflation. Living here, I don’t think fear of repression could never be enough to block despair. People is annoyed by lines and inflation, but is still buying, so the money is coming from somewhere.

    Then you listen this kind of histories:

    – A Colombian maid, who used to send money to relatives in Cartagena, is now receiving “remesas” from them, 50$ per month, 5 times the minimum wage. Knowing that 3 o 4 million people have close ties with Colombia, remesas via black market could be huge (barrios’ automatic stabiliser?).

    – Designers, programmers, lawyers, journalists, etc. working for foreign companies for very huge fees (300$ per month or 180kBs), or even for local companies paying ‘insane’ bonuses to some local employees (2000$ after a successful contract). After all, paying salaries in foreign currency is legal. Venezuelan diaspora is very good in this game.

    – Farmers declaring lower crops to authorities, selling real production in Colombia or Caribbean islands. Idem with fishers.

    Parts of the economy, usually in the formal sector, are disappearing from national accounts and entering in some grey sector. The real economy is working as expected, with new sector becoming competitive and exporting in response to devaluation. I don’t know how big is it, but I think it is a big part of the apparent contradiction between economic-total-collapse-in-theory and “¡por qué coño no se ha sublevado esta gente!”.

    I have even ear about a small import company, which has not imported a penny since last year, becoming an export company, buying cheap fruit pulp and selling it to USA. They are allowed to keep 50% of $ income, the rest have to be sold to central bank. This part is enough to cover local expenses and taxes, part of the $ are shared with fruit pulp company, and they are making good profits.

    Other side of the picture is middle class people, who travelled last years and amass small reserves (few thousands dollars), using it in hard days.

  8. The whole thing it’s absurd…..if you get to Venezuela with $2000 and you exchange them at black market you’ll need a wheelbarrow to move your BsF!!! As there are not high denomination bills you’ll will receive 1.200.000 BsF or 12.000 papers with Bolivar’s face on them.

  9. One thing to remember is that this is temporary. The only reason why Venezuelan goods and services are so cheap for foreigners is because the exchange rate is CHANGING rapidly. The exchange rate is one of the main causes of the inflation, even greater than excessive M2 supply. For those with foreign currency they’re ahead of the curve. When the exchange rate first jumps there is a lag before prices catch up and they get to exploit that, and if the exchange rate keeps moving then things remain cheap for those living on foreign currency because of the lag between the time when the exchange rate jumps and that exchange rate jump is reflected in local prices. For example, let’s say the exchange rate jumps to 600 making things cheap because things on the shelves are priced at when the exchange rate was 400 to the dollar, but if the exchange rate remains at 600 for enough time then eventually the goods which were ordered and purchased with dollars at 600 eventually reach the shelves with the higher prices. There was such a distortion in exchange rate priced into goods and services because the government held the exchange rate artificially low for so long that there is a big correction take place. But prices will catch up. There’s already a tit-for-tat inflationary spiral taking place with everybody trying to keep up with the rising prices around them.

    When the cost of imported things rise substantially then the prices of even locally produced products which have no relation to imports as well as local labor has to go up, because the people who sell those things also have to buy the imported things. If you make a living by taking the palm fronds from your palm tree and leaving them yourself into hats and selling on the side of the street and everything around you increases in price tenfold, what are you going to do with the price of your hats?

    If the exchange rate ever stops changing rapidly and levels off for a while then prices are going to return to normal. I suspect that eventually the pendulum will swing the other way, and it’s going to be expensive for anyone living in Venezuela whether their living on foreign currency or not.

    • anon: “If the exchange rate ever stops changing rapidly and levels off for a while…”

      How can it if it is controlled?

      “…then prices are going to return to normal.”

      How can they when they are controlled?

  10. “In this globalized world, our misery is someone else’s gain.”

    Now now, JC. Don’t let your free-trade credentials expire.

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