Containers of Debt

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A $100/dia es la gracia.

An awful lot of Venezuela’s crisis is down to bad policy made on the basis of bad ideology, and quite a proportion of it is down to plain bad luck. But some of it…some of it just bad planning. Take the US$1 billion debt for late shipping containers, the international economic equivalent of a library fine for failing to bring your books back on time. 

Quoth the Reuters:

Venezuelan state agencies have run up close to $1 billion (695 million pounds) in debts with shipping firms due to delays in returning containers, potentially boosting the cost of importing staple goods as the country struggles with product shortages and an economic crisis.

The agencies have held containers for months or simply never returned them, at times leaving the truck-sized steel boxes for years in oil industry facilities or on provincial farms even though this costs $100 per day per container, according to industry sources. […]

Freight rates to Venezuela have risen to become among the highest in region and in some cases are three times higher than other South American destinations, according to documents seen by Reuters.

Wait, though, it gets better…

In the country’s main port city of Puerto Cabello, containers worth $20,000 to $40,000 each are piled up in empty lots and along unpaved roads.

“Puerto Cabello is turning into one big warehouse,” said opposition deputy Deyalitza Aray, who has investigated what she calls the growing disorder in public imports.

A container bearing Hamburg Sud’s logo, for example, sits behind a trailer at a fertiliser plant owned by state oil company PDVSA outside Puerto Cabello. Its function is not immediately evident.

A Venezuelan shipping industry source said he traveled to a farm in the central state of Portuguesa in hopes of recovering 12 containers and ended up finding more than 100.

We can’t catch a break, can we?

But it’s not just embarrassing. Over time, this kind of mismanagement can have a consequence in the volume of imports, given Venezuela’s hard currency cash crunch.

The overvalued exchange rate/deep corruption that made bolichicos millionaires is old news. That’s one reason for the shortage crisis we’re living. In fact, according to Vz-based firm Ecoanalítica, as of 2012, 27% of total imports were made-up, accounting fictions necessary for some embezzlement shenanigan or another.

That’s bad policy made on the basis of bad ideology. Over-invoicing is pernicious because you spend dollars – which are scarce – but they don’t translate into goods in the abasto, they translate into expensive condos in Miami.

As far as priorities for the nation, buying corrupt businessmen nice condos should be pretty low on the list. It’s nobody’s idea of a priority asset. But hey, those dollars do buy something that somebody somewhere values. Container late fees don’t even do that. They’re just waste.

Without question, higher freight costs and the waste of money due to container late-fees make our imports as inefficient as the Guri dam with low water levels. This effect is boosted by the fact that the country’s ever-decreasing imports – the government is adjusting to its hard currency crunch by continuously cutting imports since the “budget party” of 2012- while keeping its domestic production stagnated. That’s one reason harsher shortages are on the way.

To put it in numbers, Venezuelan imports will collapse from USD65.9bn in 2012 to, if you believe the Wall St. consensus, around USD28bn for 2015. The same market consensus projects an even lower imports level for 2016. Possibly much lower.

When you’re this hard up, every penny counts. What you definitely cannot afford is waste because you’re not organized enough to get containers back to their owners in time. But that’s where we are.

26 COMMENTS

  1. ” Its function is not immediately evident.” (I got up really early today, and it’s getting very late for me and I’m getting really foggy – are you talking about the Venezuelan government?)

  2. How about PDVSA’s debt to Schlumberger and Haliburton in the order of over $15 billion. They said they will no longer provide services to the petroleum industry until the debt is paid. Its like owing your cardiologist and your dentist so much money that they refuse to do your check-ups. Beside being stupid it’s also very dangerous. And this happens in all the areas of the economy: medical supplies, spare parts, airlines, raw materials etc.etc. But that’s the way the criollo sees a debt. Something to be swept under the rug hoping the creditor will somehow also forget. Wishful thinking

  3. I’m just going to sit here in the fetal position rocking back and forward and muttering under my breath…

    The exercise of Public Power gives rise to individual liability for abuse or misapplication of power, or for violation of this Constitution or the law.

    The exercise of Public Power gives rise to individual liability for abuse or misapplication of power, or for violation of this Constitution or the law.

    The exercise of Public Power gives rise to individual liability for abuse or misapplication of power, or for violation of this Constitution or the law.

    The exercise of Public Power gives rise to individual liability for abuse or misapplication of power, or for violation of this Constitution or the law.

    The exercise of Public Power gives rise to individual liability for abuse or misapplication of power, or for violation of this Constitution or the law.

    The exercise of Public Power gives rise to individual liability for abuse or misapplication of power, or for violation of this Constitution or the law.

    The exercise of Public Power gives rise to individual liability for abuse or misapplication of power, or for violation of this Constitution or the law.

    • But under a revolution, it’s fine to disregard the constitution, steal, maim and murder, if it’s done for the sake of the revolution.

  4. Desidia. Nobody cares. What’s the difference between that and polluting a beautiful beach, leaving your garbage behind. None, in my mind. It’s called desidia in Spanish and it’s an old, very old Venezuelan malaise. Usually associated with folks with little values. It just so happens that very many of these folks are running the country now.

      • Desidia stands for uncaring indolence , for lacking any sense of responsability , for viva pepismo , that happy go lucky attitude that so many Venezuelans believe admirable ……..Viveza is something differen its when you gain something by violating someone elses rights or incurring in breach of an obligation , but here we are talking about something worse , where nothing is gained and damage is done to oneself thru sheer indolence !!

        • I’m wondering if the issue is lack of functioning trucks and chassis. If people are having difficulty getting spare parts, or replacing old trucks and chassis, it probably means the incoming gets priority over the outgoing. Leaving a huge expensive mess. Or maybe the truckers are not getting paid, so they are cutting back. Could be a number of things. But there’s a limit- they still need those containers to move the drugs!

          At some point you wonder when the shipping companies are going to say no mas. They are probably hoping to get their containers back first.

          What a tragic waste.

        • “…where nothing is gained and damage is done to oneself thru sheer indolence !!”

          And that, as I said, is part of the viveza criolla, because the vivo believes himself to be more inteligent than the others, yet he’s basically a moron on his pursuit if a gain, blind even to the most inmediate consequences.

          Viveza criolla is an euphemism to describe all the sociopathic anti-values that have mired and sunk Venezuelan society in the toxic dumpster that’s chavismo, ways that are deeply reviled in most developed countries, and part of the reason said countries are developed in the first place, because they do not celebrate being a cheating, swindling, criminal bastard.

          El Chigüire gave the best definition of the viveza criolla, a definition that should be burned in the minds of incoming generations if we ever hope to pull Venezuela out from this morass:

          http://www.elchiguirebipolar.net/22-10-2013/descubren-que-el-gen-de-la-viveza-criolla-en-realidad-es-el-gen-de-ser-un-mamaguevo/

          • Have an anecdote from the old days, a transnational sited in Venezuela ran a number of cargo ships, going from one venezuelan port to another . They made more money if they used local people because bringing in expatriates was expensive so they adopted the policy that the people handling the ships engine would be Venezuelans . Engines require upkeep to avoid their breaking down and upkeep requires that a maintenance program be strictly observed . After a while the engines started breaking down all the time , once they broke down the Venezuelans were geniuses at finding ways of improvizing repairs that allowed the engines to run a while longer until they again broke down, an investigation revealed that the maintenance program was not being followed , that key procedures were just ignored and forgotten causing the engines breakdown, The engine personnel were told to follow the program , they promised to do so but ultimately they lacked the discipline to keeo to the program. The transnational then with regret had to bring in the expensive expatriates to take care of the engines , they could be trusted to follow the maintenance program as required and keep the engine running . They werent as good as the venezuelans in fixing the engines when they did ocassionaly broke down or developed troubles but they did follow the program . Is this a story of desidia or of viveza criolla ??

          • It’s a story about how the group of venezuelans thought themselves to be more intelligent than the other people, and choose to disregard the established methods and procedures because “those are for twits”

            The maintenance program was made that way for a reason, yet the venezuelans thought it was done just to annoy them, and thus decided themselves to apply an empiric, made up maintenance that they considered better (and ultimately was worse)

            So, yeah, in the end, they lost their jobs because of their superiority complex, which is, viveza criolla.

    • They’re not just running the Country, they are, for the most part, El Pueblo Mesmo–little hope, really, even for the middle term–it would take a generational change in education/values at the State/family level, if that is even achievable….

  5. I like CC because I learn new and useful words and concepts!

    http://definicion.de/desidia/

    Desmoralizados. That does not apply to criollos alone, guys. Chavistas, probably. I mean, how can one feel good after seeing what one has done to an entire country? Podrido.

    Trivia question: how much food will $1,000,000,000 dollars buy?

    • Wanley,

      The $1,200 dollar used container is probably no longer certified for shipping. But, your general observation is correct. Brand new 40′ shipping containers run from $3,500 to $4,000. The article got it wrong.

  6. Does anyone on this blog due any sort of fact checking or due diligence?

    Containers at $100 per day?!?!?!?! International trade would collapse if that were true.

    Corrugated steel boxes don’t rent for more than luxury apartments. Please don’t take clearly absurd articles at face value just because they are critical of people you don’t like.

    • The number is largely correct, better do some fact checking yourself before posting such an opinión. Search for container detention fees at the shipping companies web sites. International trade would colapse if the shipping companies didn’t put some sort of penalty to disuade customers from holding to their precious containers (a business tool after all). Actual detention fees depend on container size and country, and seem to be higher than average for Venezuela (sometimes even more than USD200 per container per day) because of its high delinquency rate.

    • I’ll preface this with saying I do not know the answer to how much containers actually cost per day late. $100 seems like a lot, HOWEVER I’ll play devils advocate and point out a flaw in your reasoning.

      $100 a day RENT would be a lot. However LATE FEES are usually considerably more than “normal rent” rates, in order to discourage you from being late.

      In an industry such as shipping, which is highly logistical in nature and depends on containers for moving goods from point A to point B in a timely manner, actual net $ losses to the shipping company when containers are not returned in time to be used in the next shipment can actually add up to big numbers, far exceeding the face value of the cost of container rent.

      For an extreme example, take a look at the airline industry. What happens when Atlanta airport shuts down for 8 hours over a bomb threat? Your flight on the other side of the country from San Francisco to Alaska suddenly gets pushed back a full day because the plane never showed up.

      Like I said, I don’t know what the truth is about how much the industry normally charges for late containers. But I’m guessing that the ripple effect of containers not being returned on time forces expensive re-routing and changes to the logistical network. Thus, if i had to guess, the late fees are probably pretty high, MUCH higher than the actual materials construction value of a metal box, in order to account for that.

    • This fee is called demurrage. The shipping industry depends on their customers unloading the containers and turning them around fast, so that they are available for the next client. The fee is not so much “rental” as a liquidated damages penalty.

  7. A musing side note to all this. Mi suegro is the export manager at a very small artisan firm here, and I remember him complaining not too long ago (over a beer of course) that their latest shipment out was delayed like 4 weeks because they couldn’t find a shipping container to use. Amusing, considering.

  8. I am sure there is one or two corruption layers you are still missing in this problem.
    One of the things you need to ask yourself is: what would you do if you were Diosdado?

  9. i have brought in a number of containers to venezuela in the past. once the container arrives to port you have 10 days to get it out of customs or they charge extra storage extra everything. then when you get the container at your place of unloading you normally have 2 hours to unload it and then the trucking company charges you extra fees. the trucking company has to have it back within 24 hours clean and ready to ship out.
    the shipping companies threatens(and does) to charge you $100 a day for not getting their container back to them. It doesnt matter to them whose fault it is, you are the customer renting the container, you are responsible for paying the late fee.
    customs(audana) is a huge scam and eveyrone who works there knows it. each container has around 30 pages of docs to be signed by different people. if one doesnt sign, the container is not inspected, moved, released etc. if you dont pay under the table, nothing moves.

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