Having oil doesn’t make us rich, and we won’t evolve into a prosperous nation by doing nothing but doubling down on its extraction – especially as oil’s role in the world economy becomes increasingly uncertain. We should think hard about how to diversify into different economic sectors for which our competitiveness has been neither proven nor ruled out.

We need to promote an economic environment where productive experimentation is encouraged.

We need to promote an economic environment where productive experimentation is encouraged. Not enough thinking is being devoted to this adaptive challenge, and the sooner we start thinking about it in proper scale, the better.

That was broadly the point of one of my last pieces for CC, which hoped to be a conversation starter on the topic of modern productive development policies for Venezuela. A big argument against their use is that while diversification is a key development goal for Venezuela, the best we can do about it is not to actively pursue policies to promote it. The reason being that “there is precious little sign that Venezuela will ever be able to reach the level of institutional maturity needed as long as those outsized petro-rents are at the disposal of its politician”.

Now again, if “Sembrar el Petróleo” hasn’t worked in the past, why try again?

Agreeing on diversification as a policy priority is remarkable, as both perspectives would agree on policies that aim at the provision of public goods that lack a sectoral bias. Managing oil rents to achieve competitive exchange rates, for example, would fit that policy description. That already takes us far away from discussing whether the dutch disease is a treat or a problem, which I think makes the conversation much more productive from the get go.

You may not realize that you are choosing between agents facing different constraints, but you are.

But does the promotion of a competitive exchange rate lack bias? Not really – managing oil rents to keep a depreciated Bolivar would -at least in the short term- hurt importers and benefit exporters. It would make it more expensive for me to buy an iPhone, while it would make Venezuelan Rum more affordable for foreign consumers.

You may not realize that you are choosing between agents facing different constraints, but you are.

This is a generalizable insight for pretty much every policy decision – especially when it comes to structural transformation as a policy goal. Different economic activities are built on specific inputs, a lot of which can only be provided by the State. Dani Rodrik and Ricardo Hausmann argued that in order to provide the complex network of public inputs required by different activities, policy-makers are doomed to chose where to place resources and attention.

Let’s take an example: on my earlier piece, Michael Giambra made an incisive comment about how personal security is a key constraint to foreign investment in our country, and how we must have some iron-coated cojones/ovarios to be talking about FDI without bringing the issue up.

Mr. Giambra’s concern is spot-on: while extractive sectors might yield profits big and steady enough to justify private solutions to the personal security issue, that’s probably not the case for most of the investments that we need in order to diversify.

But does this mean that we will be productively stuck until we are able to bring national violent death rates from around 70 per 100,000 to, say, the Latin American average of 16 per 100,000?

Well, according to the Laissez-Faire point of view, no prioritization should be put on productive grounds. Investment constraints (such as law and order) would remain untackled until overall problems are somehow addressed in time and organically, through means that do not actively seek out region and sector specific productive goals.

But in terms of security, you can orchestrate how gains are achieved geographically. Security experts increasingly argue for the need to place special attention to “hot-spots” where crime concentrates. Early attention could also focus on the limited geographical areas determined for the concentration of greenfield FDI and expat residence in different sectors. This would immediately overcome security constraints on FDI, allowing for faster job creation and growth.

But you can’t do that without actively deciding where these places will be, which already gets you to the “doomed to chose” scenario in terms of regions and sectors. A more purposeful approach would recognize that you don’t get very far by having part of the sector-specific inputs everywhere, but you need to have all such inputs somewhere, and for that you need to identify sectors, their public input requirements and the places where those could be provided most economically.

While security is a necessary condition for all sectors, it is probably not sufficient for any sector. Economic activities require a all kinds of specific institutional guarantees, regulations, infrastructure, public services, human capital, licensing and certification, etc… How can all these be provided and coordinated quickly and economically? Different countries and organizations have argued for successful development ideas like industrial parks, special economic zones, industrial development corporations and even charter cities. The idea here is that if you solve the coordination failures and get the inputs and incentives right in some places and for some sectors, you’ll get a better shot at mobilizing the FDI that the whole country needs.

Nowhere is this clearer than with tourism:  no one will build a hotel if there is no attraction to visit nearby and a convenient way to get to it. No one will build an airport without an attraction to visit and a place to stay. No Disney will come about without connectivity and lodging. And none of those will happen without personal security in that particular place. Jointly, the whole deal makes economic sense, but because of this chicken-and-egg problem, nothing happens. In the economist’s jargon, robust development in this sector can’t spring without internalizing the coordination problems between different components of the tourism experience.

To deal with specific constraints on investment, you need specific solutions that may not organically come about by waiting long enough.

So nothing happens… unless the government purposefully sets out to develop an area for tourism activities. The government could provide things like airports, urban planning, water pipes, security, regulations to keep beautiful areas free of pollution, etc. and then pay back development loans with the returns from selling the land. Broadly, this was the experience of Cancún. Alternatively, the government could sell the land and provide full development authority for private parties to internalize the coordination failures, as was the case of Punta Cana.

The point here is not to promote Tourism as our next oil-like cash cow. My point is more general than that: to deal with specific constraints on investment, you need specific solutions that may not organically come about by waiting long enough.

Improving broadband internet access could help Uber finally come to Venezuela, but that’s hardly the only thing Uber needs Venezuela to get in order before making a move. We will not know what Uber needs and how to make it happen unless we actually go and talk to them. Mechanisms for public and private dialogue and cooperation are key to identifying interventions that improve the prospects of profitable investment. But not all ways to improve business profitability are positive.

Hausmann and Rodrik’s arguments are not naive to concerns of private capture, rent-seeking and corruption in this policy process. The goal is to identify win-win opportunities, which improve profitability while producing more and better jobs along with higher long-run tax revenues and environmental sustainability.

To identify and implement such interventions with public legitimacy, the authors argue for an open architecture of self-organizing private counterparts that group by commonality of needs, and that interact with independent government agencies under complete transparency. In order to mobilize effectively, the government organizes specific agencies according to the different policy instruments available, and orchestrates groups of interventions by the common needs of different counterparts.

This is the logic is behind Colombia’s Programa de Transformacion Productiva (PTP). This government initiative has a very specific goal: Raising private non-extractive and non-energy exports to $30bn by 2018. To do this, the Colombian government opened a number of public-private dialogue spaces and identified 20 groups of sectors with specific policy needs, which range from health tourism to software development to steel manufacturing.

Finally, the government coordinates cross-agency interventions for each sector around their needs in 5 broad policy instruments: Human capital development, Regulation optimization, Infrastructure and logistics adequation, Productivity and quality improvement and Access to finance. Government agencies involved in this work are Procolombia (FDI promotion agency); Bancoldex (export development bank); InnpulsaColombia (private sector development agency); the Ministry of Commerce, Industry and Trade; among others.

I don’t know if this particular approach is the right one for Venezuela, or even if the PTP will actually reach its goals in Colombia. But they are going hard at it despite two things that we do know of:

  1. Colombia’s dependence on extractive exports is less intense than Venezuela’s.
  2. Propensity to private capture of public policy is not lower in Colombia than in Venezuela.

There is this cynical, self-flagellating assumption behind the Laissez-Faire narrative, suggesting that we should not try anything until we’ve become better people, or for as long as oil extraction exists.

That’s silly. The problem with oil is not inherent to its nature, as the problem with Venezuela is not inherent to our nature. The problem with oil in Venezuela is an institutional condition that affects policy decisions in all fronts, not only when it comes to productive development. A new constitutional arrangement, one that hopes to improve the outcomes of investments in health, education, security and diversification, should drastically constrain the capacity for the executive to use oil rents with today’s level of discretion. Such institutional revision should be a priority today, as we go through the vivid consequences of opportunism, voracity and mismanagement.

We do not argue against public hospitals because of past mismanagement in the health sector.

But this institutional conversation is different from the productive development debate. We do not argue against public hospitals because of past mismanagement in the health sector. We do not argue for dollarization because of prior monetary irresponsibility. In both fronts, we argue for institutionalization. The same should go for productive development policies: we should not argue against a Venezuelan PTP because of the rent-seeking failures of the past, but we should strive for its adequate institutional design.

The Laissez-Faire idea that to achieve diversification we should ignore diversification – a sort of diversification zen – would actually undermine our shared development goal, as it would continue to hide the necessary information about absent public inputs constraining investments in different economic sectors. Abstaining from modern productive development policies would limit private investments to sectors where profitability is immediately apparent and high enough to allow for the private procurement of services that should be public – that is, it would limit private investment to extractive activities, furthering the dependence we want to overcome.

So let’s not fool ourselves: Market fundamentalism plays no role in structural transformation.

Previous articleThis is the saddest thing you will read this year.
Next articleThe Seven Point Plan
I work in development economics for countries with governments that want to deal with (some of) their issues. I think I'm a fiscally-responsible progressive. I've thought a bit about the Political Economy of oil in Venezuela, and I worry about the politics of the things that need to happen. I think Rómulo Betancourt, Adolfo Suárez and George Washington were exemplary politicians. What I miss the most about Venezuela: My family, my friends, my weather, my food, my band, and teaching in my university.

36 COMMENTS

  1. “It’s not that our policies have been wrong for the last 80 years. We just haven’t had the right bureucrats with the correct development programs!

    This time is different. Why trust in the laissez faire dogma when you can keep trying to “sow the oil” and “substitute our imports”? When has the free market brought prosperity for any nation? What a myth.

    Cepal will be so proud of us”

    Meh.

    • When has the free market worked in a place with such a disarray of social contract such as the one we have now?

      And for fucks sake not all economic policy or public planning has to be subsidies and preferences, if we can’t have an impartial and transparent state then why bother?

        • Agreed. The goal of this piece is not to oppose free markets – especially given the Venezuelan context. The argument is that for structural transformation to come about, free markets alone won’t do the job, basically because of market failures (externalities, coordination problems, lack of public inputs, incomplete financial markets, etc.). The piece is about recognizing this problem and starting a discussion on how to go about it.

          None of the examples I mention are about subsidies, grants, transfers, tariffs, tax cuts, or the alike… but they are instances of government decisions to take purposeful actions to solve these market problems so that profit-motivated agents in the country start developing absent economic activities, hence diversifying the economy. That’s it!

  2. Bolichico 1: Chamo, ¿oíste la vaina?
    Bolichico 2: ¿Qué pasó?
    B1: Lo del Programa de Transformación Productiva que inventaron los chamos estos del nuevo gobierno….
    B2: Suena ladillísima esa vaina…
    B1: No marico no creas en ese peo hay plata…
    B2: ¿Cómo es la vaina?
    B1: Sí güeón, sabes que el equipo de Leopoldo Capriles Allup anda con lo de fomentar la experimentación productiva y coño como el petróleo subió tienen un montón de plata que le van a meter a eso. Verga vamos a ver como hacemos para cuadrarnos ahí, ¿no?
    B2: Verga sí, eso es con Planificación?
    B1: No, es con Ministerio de Industria y Comercio. Esa es la vaina, sabes que mi tía todavía trabaja ahí, en el despacho del ministro Morales Arilla…ella viene de antes, de cuando era ‘Industria Ligera’, pero como es funcionaria de carrera no la pudieron botar…
    B2: Ah verga que de pinga…pero háblame claro, ¿cómo hacemos?
    B1: Nada chamo hay un fondo ahí…como es que es? ajá, acá tengo el websai, “Fondo de Transformación Estructural.” Una paja ahí que si de exportaciones no tradicionales. Plata marico, como mil seiscientos millones de verdes apartaron pa eso…
    B2: ¿Tanto?
    B1: El tema es que olvidate, van a terminar recibiendo que, como 5,000 aplicaciones para esos grants y coño puede que aprueben como 600, según me dijo mi tía…pero eso es lo de menos, yo me arreglo con ella. Es cuestión de que ella ponga la solicitud nuestra de primera en la lista…ahí no hay peo…
    B2: Ajá pero luego que hacemos?
    B1: Un carajo, chamo, eso es puro papeleo…sabes el pana este Raúl González del liceo?
    B2: El de los lentes?
    B1: Sí sí, cara’e’caucho…
    B2: Sí marico que risa, cara’e’caucho…
    B1: Bueno ese bicho está trabajando en el Seniat ahorita. Marico él nos puede pasar las constancias de exportación…ponemos cualquier vaina, que exportamos cualquier mariquera que no se esté exportando ahorita, sabes por lo de ‘no tradicional’…no sé, di tu, ¿engrapadoras, te parece?
    B2: ¿Puro papel?
    B1: Claro marico tú crees que qué, ¿que el pana este Morales Arilla va a ir a Puerto Cabello a revisar el container? Eso es puro papel chamo..
    B2: Ajá, y con el certificado que haces?
    B1: Nada lo validas con la Guardia Nacional, que ahí tambien tengo otro pana, y los dos certificados se los pasó a mi tia y chamo nos entra esa plata…
    B2: ¿Así de sencillo?
    B1: De bolas marico, es un tiro al suelo esa vaina…claro a mi tia tenemos que dejarle una vaina, y a cara’e’caucho y al pana de la Guardia tambien…
    B2: obvio obvio…
    B1: Entonces nada, mitad y mitad, yo pongo $25,000 pa los costos up-front y tu los otros $25,000?
    B2: ¿Eso paga cuando?
    B1: Chamo, es ya: estos tipos están apurados. De acá a dos meses tenemos la plata…podemos pedir, verga, $1 millon 200, fácil…mitad y mitad tambien?
    B2: Veeeeeeeeer…
    B1: Un tiro al suelo, chamo, te lo digo yo…

      • It’s just that JRMA’s piece brought to mind the old joke about what an economist does when he falls into a 50 ft. hole (spoiler: ‘first, assume a 50 ft. ladder.’)

        In this case, it’s ‘first, assume a state that already has embedded autonomy.’

        Bueno, sí, quite: if you already have the sort of state that can discipline capital, that can administer a sophisticated system of micro-level incentives, that can resist bureaucratic capture and negotiate with private partners from a position of strength without becoming overbearing or infringing property rights, if you have that kind of state then que carajo, you’re playing the game with the setting on ‘easy’.

        The point, to me, is that creating that kind of state is hard. It’s time consuming, it’s tricky, it’s it’s costly, it’s complex.

        You need to create a whole institutional infrastructure we don’t have and can’t build quickly: from a reimagined contraloria to a reinvented court system to a whole new bureaucratic culture of transparency and pay-for-performance and a whole new political culture of evidence-based policy making. It’s not just that you have to find the hundreds of trained and competent and honest administrators to run it all, is that you need to create the political equilibria to make it all sustainable. None of this is impossible, but neither is it easy, and much less quick.

        We don’t have that kind of state, and won’t have it any time soon. You gotta start from where you are now, and where we are now is on the receiving end of an 80-year legacy of dirigisme that has frozen into place a given set of understandings of what the state is and what the state is for. That’s the understanding I was trying to get at in my little imaginary dialogue above: a rentier-state culture that’s primed by long experience to look for rent-seeking angles.

        Now maybe Moncho’s right and I’m throwing the baby out with the bath water. Maybe the fact that Venezuelan capitalists are primed to seek regulatory capture is a good reason to re-double our efforts to build a state able to avoid that. Maybe the laissez-faire approach is an unrealistic short-cut out of an unavoidable task, because we are ‘doomed to choose.’

        I’m ready to entertain that possibility.

        But if that’s the case, then what I want to hear from the JRMAs of this world is a fully articulated understanding of the challenge. I want to know that they get it, that they feel it in their bones that well-positioned crooks are going to devote all their inventiveness from Day-One to gaming any system they propose.

        I want to know that they grasp that that’s what they’re up against, and that they’ll succeed or fail to the extent that they manage to create a system that’s Rent-Seeking Proof. That none of this is likely to work without an ambitious, fast-tracked mechanism to build administrative capacity, to stockpile expertise, to attract the best people to the public administration, to create transparency and accountability mechanisms that are up to the task of beating the rent-seekers at their own game.

        You can’t just assume the 50 ft. ladder. You have to build that 50 ft. ladder. That’s what this is about.

        And I don’t really see a clear understanding of the scale of that challenge in Moncho’s piece, which I find worrying.

        • But, Pana, it’s so simple–we’ll just have a Constituyente, and let the “People” decide. I’m sure, given their general level of education and rational thinking, they will make the right choices for their institutional overhaul, and for those who will administer the process….

        • Dear Quico:
          You have my apologies for long considering you closed-minded against a military role in crafting a future Venezuela. I never understood what the Caracazo even WAS until today, when I took time out to read it here.

          “Venezuela now is a fight to the death between brothers, and that is very much a consequence of the Caracazo.”

          I still think that your military (under civilian rule) is the wisest choice for defending whatever values you can agree on. But now I understand how tough it has to be for you folks to even think about how the army can be brought into the dialog.

          With apologies for bringing it up here, thank you and your team for enlightening me on the Caracazo.

          Just one criticism, though: for us gringos, finishing a meaningful paragraph with a Spanish quotation, no matter how punchy, decreases the probability that an outsider will absorb it.

          Why write in Gringo English if you hide the punch lines in Spanish?

          All the Best to all of You,

          Deedle
          🙂

    • T.R.U.E..S.T.O.R.Y..F.R.O.M..T.H.E..F.U.T.U.R.E. Eres el Alvin Toffler de Caracas Chronicles. Voy con una parte ahí también. Soy buena armando carpeticas de recaudos y conozco a alguien que trabaja en el BOD. O sea, por qué iba a salir mal OTRA VEZ????? Qué pesimistas son los “neoliberales salvajes” (uhjum). Incluso si saliera mal hacemos una expansión crediticia y listo!! Le dejamos ese peo al siguiente gobierno. Mientras más lo pienso más me gusta. Quiero un Ferrari amarillo.

    • People need to go out of Venezuela and realize that greed and corruption are not exclusive traits to our country. This negative narrative needs to stop.
      The corruption in Venezuela is byproduct of a failed system, which in time has become normalized as part of the “culture” but is not deterministic in nature and it can change and minimized.
      Given the opportunity most humans will grab the easy money regardless of race, ethnicity, gender, etc if they can get away with it.
      The real issue resides in the conception of a system that minimizes the opportunities of corruption and enforce the rule of law.
      It is not Voodoo magic, is common sense laws.
      Obviously Culture is a big factor, but a well design system has to have anti-corruption measures builtin since the lowest common denominator of actors has to be always assumed.
      Many of the current issues with Venezuela have actually an easy and fast fix.
      The hard part is removing the current utterly inept regime.

      • I agree with you: what Venezuela needs first and foremost is good governance, and to regularize the cash cow that is the oil industry. Imagine if the country was producing oil at full capacity and imagine the revenues were being invested productively in areas like education and urban planning. Imagine the justice and policing system was functioning correctly and international tourism was opening up. The country could recover surprisingly quickly, but obviously a lot of ingredients are needed to make that happen, a change of government being the first step.
        Colombia was a basket case 20 years ago: racked by civil war. Now it’s a fast-growing economy and tourism is taking off like a rocket. The tranformation in Venezuela could be even faster, if the stars line up.

    • Excelente Moncho, gracias!..El comentario de Francisco Toro es impecable y pudiera hacer un post solo de eso para convertirse en uno de los más populares de CC del año con seguridad… No considero que hayas pecado de inocente y creo que de eso no se trataba el artículo. Sin embargo coincido en que el “como” construir el “50 foot ladder” es clave para cualquier plan re reactivación económica. Con lo que no estoy de acuerdo (y con gusto pudiera entrar en detalles) es que el “como” existe y está a nuestro alcance desde un punto de vista técnico. La mayor dificultad vendrá de la voluntad política. Estoy convencido que se pueden diseñar e implementar sistemas radicalmente transparentes que logren que los recursos sean utilizados de manera eficiente. Sin embargo considero que, bajo la premisa que es la dirigencia política actual opositora quien consigue el poder. Esta no contaría con la voluntad de implementar dichos sistemas. Desafortunadamente su interés (de una importante parte) es el de preservar los mecanismos por el cual una vez llegado al poder, puedan aprovecharse al igual que lo han venido haciendo a lo largo de la historia. De ahí la importancia de a quién se le pasa la batuta si y cuando pase la actual pesadilla.

  3. The real problem with Venezuela failure to prosperity as in many other Democracies has been Political not Economic.
    I wish people spend the same intellectual effort and creativity conceiving these Economic Master Plans into thinking what political changes needs to be done so we can get qualified personal in Government. This would be revolutionary in itself.
    They should be spending their time thinking why and how a relatively prosperous Democratic Venezuela devolves into a Dictatorship with Chavez and Maduro?
    Even if Maduro resigns tomorrow, we will still have the same political structural problems that gave rise to Chavez populism and total collapse. No economic plan alone will change that if we keep the same anachronistic political system.
    I like to call this Democratic Fundamentalism, when people are so brainwashed into a system that fail to question it. This is not different than Chavistas brainwashed with Marxism despite the obvious disastrous consequences.
    The current 20th century old Democratic systems are degrading more and more into tyrannies of the masses on their obsession to pursue full representation (aka Universal Suffrage).
    I can see even despicable China moving ahead while many western democracies descend into populism, polarization, political gridlock and chaos.
    If we could change/upgrade just the Electoral System in order to put the best human talent in Government the rest would grow on that solid foundation.

  4. I agree on your general premise that structural transformation is sorely needed in Venezuela, and that a process of structural transformation will not happen on laissez-faire as we obviously lack an institutional framework designed to do something else than pumping black goo from the earth.

    Having said that, I think it would be interesting to continue delving into the theme and identifying these developing countries and regions that were able to industrialize, especially those that come from socialist/authoritarian regimes. Cases such as Poland, Thailand, Malaysia, Romania…

    I know these aren’t oil producers, but I’m getting the impression that as the chavismo and post-chavismo continues to deface our country beyond recognition, the way to turn around would be more easily understood through the history of post-socialist countries rather than the history of natural resource-heavy states. It has to do with the following intuition:

    What’s fucking up the country more right now?
    Oil dependency? Or our militarized-socialist-statist-dadaist economic model?
    I think number 2 is the obvious choice and should be the focus of our early efforts towards turning around the country.

    • Excellent comment. Maybe I spent too long in the oil industry, but I don’t see a good reason why Venezuela shouldn’t be producing 3-4 million bbl/day. This figure can be reached within a decade relying on foreign investment. And the country can recover a lot faster using attractive terms and collecting bonuses. The current setup is bizarre, inefficient, complete madness. But it can be restructured. And the oil industry can employ over 100,000 very well paid individuals. I also wouldn’t worry too much about oil becoming obsolete in the next 50 years. Instead, I would worry about the fact that Venezuela’s oil reserves are overstated.

        • You mean Rosneft. They won’t own Pdvsa, maybe a piece of CITGO and their JV shares. But there’s a lot more to the oil industry than the small piece Rosneft owns. And the international oil industry isn’t “the gringos”, I would expect Total, Repsol, ONGC, Chinese, and others to be more aggressive.

          Also, Shell and Chevron already have JVs, and those can be expanded.

          As I wrote, the key is to avoid thinking as if the Castro family Mafia were writing your script, which seems to be very common in Latin America.

      • Hola Fernando. All of what you say needs to happen, and that’s why the expertise of the petroleros is key to our development prospects. But if it happened, at current prices -and with an increasingly uncertain role for oil in the world economy- meeting our most ambitious projects in the sector would take our exports per capita by 2022 to less than half those of Trinidad 10 years earlier. This is clearly not enough if our goal is a developed, prosperous Venezuela. For that, we *also* need to diversify.

        https://www.caracaschronicles.com/2016/07/29/were-rich-and-other-myths/

    • You need to look at the African continent for examples. There are none.

      Just bought my mother a $600 winter coat at Bloomingdales… made in Romania.

      I respect the wishful thinking.

    • Romania is the biggest oil producing country in Europe, but I think in sheer amounts or scale it doesn’t really compare to Venezuela. It also has other natural resources, so it could be worth looking at.

    • Well, South Korea, Singapore, Vietnam, China… most East Asian tigers were (and some still are) authoritarian regimes at both sides of the political spectrum, which started building stuff up from subsistence agriculture levels of development. Those success stories did not come about by having governments stare at the situation long enough until private agents organized and made things happen. Sure, these were not mineral extractive economies and there may be idiosyncratic regional factors behind the common experiences, but the point remains that it was through a combination of market forces and state provision of public inputs, institutions and coordination that developments could come about.

  5. Caracas Chronicles must be the only outlet where the editors, the ones that court you, invite you, and insist via third parties that you come to write in the blog, enjoy trolling you afterwards in the comments section. As if the comment above were not pertinent to any effort of reform, other than industrial policy.

  6. This is the smartest piece on the structuring of a future economy for Venezuela that weve seen in this blog for a long long time , there is a touch of hard core profesionalism and realism thats missing in most other pieces , sure , as any piece touching on such broad difficult subject its going to bring on some critical comments , youve missed this or that……., thats to be expected, but most of us will agree that it offers a good framework from which to build an intelligent discussion of this very crucial subject ……!! Kudos to the author…!!

  7. the author places emphasis on security (that is, rights to property and physical integrity), but the real problem is the systemic inability to self-defense. In fact latinoamerican countries with the highest crime and homicide rates are those where gun laws are stricter and have been applied for longer. Mexico has a gun ban since 1972, followed by Honduras since the early eighties, and gun ownership in venezuela has been highly constrained since over a decade now

  8. Charles you are translating the US concern with guns to Venezuela where whatever the law says in practice anybody that wants to have a gun can have a gun because we are in fact a lawless country were laws and their enforcement are a joke …and the latter is one big part of the problem …..!!

    • is not the same thing when having a gun makes you a criminal to the state. People should not have to become lawless in order to defend themselves. Law should contemplate self-defense as lawful. That’s the whole issue here

      • Charles what perhaps you dont know is how criminals operate in Venezuela , its not a one on one situation, instead one criminal points a gun and threatens some one while one or more acomplices lurk in the background , so if the the victim responds with a weapon even if he is fast enough to shoot the first criminal down the others covering the back of their fellow shoot the victim down , this has happened many many times to my personal knowledge

        The other thing is that weapons attract the assault (ambush style ) of anyone with a weapon because they are valuable and can be sold at a high price…this has led to the murder of literally hundreds of police and other armed forces personnel when they are isolated or alone to take their guns away …..

        You are dealing not with criminals that operate alone but who operate in well armed bands and have a lot of practice using their weapons , so even if you are armed the chances of getting shot down if you confront that band are high……!!

        The US seems like a place of innocense some how !!

  9. Guys,

    Have you read José Domingo Díaz’s book Recuerdos sobre la Rebelión de Caracas?
    It is a fascinating account.José Domingo probably had ideas you would not share and he was a bit of a conservative Venezuelan but I do not think he was less so than the self-proclaimed liberal independence heroes of our mythology.

    In any case, I mention him because of the way he described how the people who decided to promote
    the separation of Venezuela from Spain used the yearly budget in just a couple of months.

    They – the Toros, Bolivar, etc- decided to create a series of committees and juntas where the whole money
    disappeared.

    Even Chavistas -of all people- have proposed “diversification” away from oil and fight against corruption in the typical lip service Venezuelans are so well known for.

    We need to publicly discuss how we manage to screw it up all the time where others succeed.
    How come we forget what we promise, everything just disappears in memory, nothing stays and we
    keep repeating the same mistakes time after time?

  10. This is a fair point. I think it’s partly addressed in the piece, although it’s definitely not the center of the argument. The principles laid in the Doomed to Choose paper about institutional design overlap with Evans’ idea of Embedded Autonomy. In the end, their goal is to present the importance of public inputs and coordination for new activities to appear (consistent with Evans’ rejection of the competitive advantage logic in explaining past diversification in developing countries), and lay down a vision of the institutional organization required to raise the necessary information on what’s missing (embeddedness) and how to intervene effectively (autonomy).

    What I don’t see in these two comments – the funny straw man fallacy and the second one – is a response to the main argument of the piece: that is, whether there is a way out of productive development policies if we want to achieve diversification.

    I understand the challenge of rent-seeking – I’ve written a fair amount on the matter in CC. But is it understood that overcoming the challenge of oil dependence is impossible without public coordination and inputs? Do people understand that, despite similar rent-seeking challenges throughout an extractive and unequal region, productive development policies are being used effectively in Colombia, México, Brazil, Perú, Chile and Panama? Are we self-loathing to the point of arguing that such policies are beyond what we can organize institutionally for?

    Because if we cannot organize economic institutions, then we should probably agree with Steve Hanke in saying that it’s best to dollarize than having a national monetary policy that can be captured by the short term interests of political elites. The same goes with the ubiquitous Agencia Nacional de Hidrocarburos proposal… an independent government agency charged with licensing contracts in the oil sector? Those contracts will go to los panitas. And so on…

  11. Moncho thanks for sharing your thoughts on this issue. I think in every conversation on structural reforms for Venezuela there will always be the concern on the assumptions that you need in order to have an effective implementation (or how to fix the sinking boat in the middle of the ocean). However, I value the effort because you try to shift the discussion from just plainly suggest what should be our next dollar generating activity (which I think is something still present in the minds of many people, including political leaders), into ways of facilitating the coordination between agents and support from there.

    I will only bring the question on what are the distinctive features of this proposal compared to what’s happening now, for instance with the 15 motores and mesas de trabajo and all that (“pero es que con otra gente en el poder sí camina” cannot be an answer). I bring it not because of what the government is doing but rather the claims of the productive sector. I give you an example from a few years ago in those meetings PDVSA-service sector, which I think resemble somehow on ways to tackle a productivity issue for a particular industry.

    https://tomodonnelldotnet.files.wordpress.com/2013/08/resultados-consolidados-jornadas-realizadas-presentacic3b3n-ministro-rr.ppt

    If you see the slides, they probably reflect specific interests of securing contracts with PDVSA and having credit facilities for the operation, and if you see some other meetings, some of the claims for Special Economic Zones were not only related to tax breaks but also to access to cheap credit and dollars for imports.

    I think this is bound to happen with any proposal of this type, but I don’t know how in some other countries have dealt with these issues, what type of enforcing mechanism for this firms or measurements of performance have been used and what are the commitments from the government in this sense (because you can always refrain of what you said at the beginning, as it was the case with this example). Thanks again Moncho and happy new year

Leave a Reply