Speaking to business groups yesterday, Nicolás Maduro announced that total imports last year had collapsed to a shocking, barely survivable $17.8 billion: a shocking 73% fall from their peak during the Bonanza Years just four years ago. The chart should give you shudders.

Imports, in billions of US dollars

This is bad. How bad? Early last year, when he was being very, very pessimistic, our Pedro Rosas hypothesized imports for 2016 could fall as low as $27-30 billion. He worried at that level, people would surely go hungry.

Late last month, Pedro revisited the issue and noted imports were likely to close the year nearer $20 billon: way, way worse than what he’d thought would be apocalypse back in February.

Last night, he announced a shocking — in a sense, unbelievable — figure of $17.8 billion for 2016.

[Update: There’s some question about what that means. Since the figure is quoted from a typical, rambling Maduro speech rather than a formal publication it’s possible that, for instance, PDVSA’s imports are not included in this figure. If that’s the case, the global figure would be closer to $23 billion.]

The dollars they needed for some key bit of the process weren’t around…and some unfortunate sap in the marketing department got stuck having to put ecological lipstick on that macroeconomic pig.

Either way, these import levels. First there’s the obvious fact that we produce much less food than we once did and if you don’t have money to import you can’t bring in enough food for everyone to eat. That’s clear enough. But the other reason this is horrible news is a little bit less intuitive, and takes some explaining.

Think of it as the Zucaritas Principle.

Early last year, Kellogg’s caused some waves by unveiling the ridiculous “ecological” Frosted Flakes box above, with a sad, colorless Tony looking distinctly less than grrrrrrrrreat.

It’s easy enough to figure out what happened there: amid the almighty imports crunch, Kellogg’s couldn’t import the stuff it needed to produce the traditional, colorful Zucaritas boxes we all remember from childhood. Maybe they couldn’t get the dollars to bring in the right kinds of ink, or some industrial precursor to them, or the right kind of cardboard…who knows? The dollars they needed for some key bit of the process weren’t around…and some unfortunate sap in the marketing department got stuck having to put ecological lipstick on that macroeconomic pig.

The kind of predicament Kellogg’s faced is a pretty general feature of the Venezuelan economy. It’s not quite true to say we don’t have an industrial sector, we do! It’s just that that sector is deeply enmeshed in globalized supply chains. There are very, very few products where the entire supply chain is fully internal to Venezuela (rum, maybe?) For the most part, Venezuelan industry is in the same predicament Kellogg’s found itself in: it has a few links on the supply chain and depends on foreign suppliers for others.

The supplies, the inputs, the materials and spare parts and machines and tools it takes to run Venezuela’s companies have to be bought abroad. Hell, even PDVSA is exposed! Without imports of light oil to mix with domestic heavy oil so the damn stuff will flow through pipelines, its production would wither!

Obviously, when dollars to bring in those imports dry up, things start to go wrong. La economía empieza a pistonear por todos lados, and soon you’re traumatizing your children with Breakfast Cereal that looks lifted straight out of some Tropical/Soviet mashup dystopia.

Even companies that “produce in Venezuela” come to rely on those black market dollars for their intermediate supplies (a.k.a., whatever-their-equivalent-is to the Zucaritas packaging ink.)

Of course the impact of the import cut isn’t equally distribubed. The cut hit the private sector disproportionately hard: for the first time —likely, ever— most imports now come in through the government. Econanalitica estimates that, when detailed statistics are out, it will account for 62% of imports in 2016. The previous year, it had been the other way around. So, there are not enough dollars so people can eat and the economy can function, but of course there are plenty to keep the government’s power players happy with their share of the ten-bolo dollars.

Unable to get enough official dollars to run its plants, the private sector has been hitting the black market, hard. Ecoanalitica, again, thinks 28% of private imports are carried out with black market dollars, up from 22% in 2015. That helps explain why non-price controlled goods have seen prices go haywire: even companies that “produce in Venezuela” come to rely on those black market dollars for their intermediate supplies (a.k.a., whatever-their-equivalent-is to the Zucaritas packaging ink.) Those hikes get passed on, inevitably, to the final consumer.

The Venezuelan economy’s reliance on imported intermediate goods, supplies and inputs is the reason Miguel Angel Santos likes to say that one not-terrible approximation to Venezuelan GDP is just to take your gross imports figure and multiply it by 4 or 5. It’s not the world’s most subtle estimation mechanism, but it nicely captures this basic insight that vast swathes of the Venezuelan economy just can’t work without imports.

This, beyond food, is why Maduro’s import figure announcement yesterday was so shocking. Because, remember, Kellogg’s is actually one of the fortunate few: the import crunch hit their packaging division. This made them look ridiculous, but it didn’t make them shut down.

For many other companies in Venezuela, no money for imports means nothing gets produced. Period. And that’s not grrrrrreat.

49 COMMENTS

    • BOOM! Agreed, and glad someone else finally came out and said it.
      It’d been even better if our economy allowed this simplification of the package to make the product less expensive.

      But no, we like our overpriced products in flashy cardboard boxes with colorful mascots.

    • I do as well, but I know if all the products on the store shelves looked bland like this, and King Maduro came out with a colorful brand of “Salsa” Chips, I’d probably buy the damn thing.

  1. Would someone please list agricultural products which can be produced in surplus in Venezuela? The interdependencies of modern economies are not hard to understand, but I find it beyond belief that a geography so decadently wealthy in soil and water and climate and ocean as Venezuela has to import food to stay above a deprivation level of insufficient diet. That makes no sense at all, zero sense. That is inconceivable, mind-numbing. That not only defies fact, it defies fiction! Only socialism could be counted on to screw things up so awfully royally. I use the polite form “screw things up”.

    It is known that criminal elements in rural areas destroy production. It is known that the regime has been “expropriating” production for almost two decades. Those are major impediments which could be called “pillaging” or “mob” impediments, or perhaps most succinctly, “socialist” impediments. It is known that for almost a century, oil exports made it economically rational to import food. Oil was so easy, and generated so much money, that imports were the economically sensible thing to do, but what was the state of domestic agriculture, previously? How much of the demand was met with domestic agricultural production?

    What I have trouble finding understandable is that there is not a list of agricultural products published. It is not a question of “government planning for production”. Just put the list up, and let someone add geographic production regions, and quantities of demand, costs of production (exclusive of those created by your idiot “government”). That gives farmers an assessment of the market. This data is necessary.

    I know Zucaritas is just an example, but if you gave me a choice of rice and chicken, and a ten boxes of Zucaritas, I’d take the rice and chicken – without wrapping paper.

    How much rice can be grown domestically? How much pork? How many plantains? Bananas? Beef? Milk? Goats? Beans? Corn? Lettuce? Cabbage? Tomatoes? Nuts? I’m not an agronomist; I don’t know. How many export crops can be grown? What are the costs of production for these products? Where are the biggest differentials of price / cost? Where are the biggest deficiencies in supply? All those answers begin with a list of what can be grown or raised in Venezuela. Are you waiting for a gringo to do it for you? Or the Canadian government?

    On the assumption that sooner or later the current government can be disposed of, someone has to make this data available to those who are agronomists thinking of investing their capital and resources.

    The “urban gardens” BS is just absolutely ridiculous – grazing a herd of cattle in Caracas? Where? Petare? Yeah, hey what an idea! Makes perfect sense … hundreds of square miles of pasture lands all over the country … but Petare is the ideal place to graze? … or maybe pots of grass in Centro Plaza? All along Fransisco de Miranda! Plant grass in the median! (Or level Miraflores to the ground and plant soybeans … that’s not a bad idea.)

    The major problem in Venezuela right now is insanity. It is so rampant, and so awfully efficient in destruction, that one almost has to think it is planned. The thing that makes me think it isn’t planned, but just another symptom of insanity, is that with a platform like CC here, no one has published an article about all this. Far be it for me to mess with the descendants of the unbelievable arrogance of the Spanish nose-in-the-air to the world, but you guys in Venezuela have to get rid of your Arab-style oil-dependence, and ditch those clothes for some straw hats and remember how to use plows and ride horses. Agriculture is big business these days – thousands of acres and big machines with big capital, but the surplus produced staggers the imagination.

    Get an analysis up, a list of agricultural products that can be produced in Venezuela, acreage available, supply potential, and make it known. With people starving, obviously the demand is there. The facts will produce the story, and that will be one more motivation to change governments and restart some form of rationality. That populations starve due to massive crop failures and plagues is known, but that they starve due to unspeakably gross mismanagement by “the-best-of-intentioned-socialists-acting-for-the-benefit-of-the-poor” is not just inexcusable: it is criminal on a massive scale.

    P.S. There are many, many, many people in the world who are more “understanding” than I am, more tolerant of the personal cognitive difficulties and emotional troubles of others than I am. Good intentions will not feed you unless you get some dirt on your hands and grow it. Millions of plants and animals are there more than eager to help! And they are free-market capitalists! All of them! “By God, we grow! Now get out of the way!” That’s their motto.

    • “in Surplus” is an economically meaningless category.

      Right now, the list of agricultural products that can be produced profitably contains no products. This is due to price controls.

      The food a country can produce doesn’t depend just on soil and water and sunlight. It depends on institutions, too.

    • I recall a previous post about a man who gave up his little country farm because of theft and crime. It reached the point where it was impossible for him to raise livestock because it would be stolen. It was impossible to raise crops because you could not buy seed, fertilizer, pesticides, fungicides, and herbicides. And even if you managed to grow and harvest a crop, the harvest would be stolen either at gun point, or by government mandate.

      Yes. You are right. VZ should be able to feed it self. But that first requires that farmers be left alone, and protected from theft. The current government is providing neither of those conditions to farmers.

      • Google-Fu results for U.S. cattle ranching, meat packing, feedlots: http://www.hcn.org/issues/43.5/cattlemen-struggle-against-giant-meatpackers-and-economic-squeezes/the-big-four-meatpackers-1

        Lightning summary: 4 companies control 80% of beef production (JBS, notably, is Brazilian). Most are diversified agricultural enterprises. There are a total of about 680,000 cattle ranches in the U.S..

        The U.S. has approximately 100 million of the world’s approximately 1.7 billion standing cattle, Asia having the largest cattle populations, but those are used principally as oxen and not consumption.

        Just for color, I learned that the “horn fly”, called that because this smaller than a house fly blood-sucker tends to cluster around the horns of cattle, is one of the major cattle pests.

        Uruguay is the most per capita beef eating country in the world.

  2. This is just another example of the Boiling Frog effect. Pseudo-democracies, disguised dictatorships tighten the screws progressively, so that people don’t freak out too much, and rebel. Many companies shut down, but others stay, and adjust, as Kellogs here. People get used to eating more rice and less meat, they get used to beg from the regime, Cuban style. In a few decades the population is older, millions leave the country, so less opposition, and the young are born eating colorless zucaritas y bastante yuca rebolusionaria..

  3. The current state of our economy and what it might take to restore it reminds me of that old childrens ditty:

    Humpty Dumpty sat on a wall
    Humpty Dumpty had a great fall
    and all the kings horses and all the kings men
    Could put Humpty Dumpty together again !!

  4. Zucaritas “Edicion Especial”. That is really something. Did the focus group endorsing that marketing hook find it so comical it temporarily eased their anxiety of seeing everything around them falling apart, including the very existence of breakfast itself?

    I’m waiting for the Zucaritas Edicion Eco-Diet: a plain brown paper bag with a spoonful of sugar and a chance to win a one way bus ticket to Cucuta…

  5. My family in Venezuela owned a very large dairy farm near Maracay. It had been in my family for well more than 100 years. This was a highly productive farm that employed many people and produced milk and the best traditional Venezuelan white cheese you’ve ever eaten. These were all HIGHLY educated people, who had for generations received their PhDs in animal science or animal genetics in the U.S. at either the University of Florida or the University of Nebraska. They were professors of animal science for generations back at UCV or ULA.

    These were not snooty oligarchs who went to Miami on shopping sprees. The family lived on the farm on they all worked it, getting their hands dirty tending to the animals, etc. A less pretentious, more loving group of people you never saw. They treated their workers well, I saw it.

    Around 2004-5 my great uncle died. He left the property to his three sons. However, the law on inheriting property had changed in some respect I still do not understand. The govt claimed some bogus, phony title problem and just… took it. Stole it from them. They were kicked off, the land was divided and given to local poor people, who proceeded to trash and destroy it and turn in into a barrio in no time. This was theft, plain and simple.

    My family bravely soldiered on, staying as professors at the universities as over the years, their savings and property were looted, they were threatened, and some were fired for signing this or that political item. So little by little, they began to leave. They went to the U.S. where they are associate professors at American universities. The last two, husband and wife (both PhDs from University of Nebraska) and profs in Vnzla, managed to get themselves and their two kids out last December 2015. They now live n Iowa and are scientists for a multinational in hog breeding. It was the crime as much as the economic situation that were deciding factors.

    Now I see pictures of them on FB, so happy to live a normal life again. They stroll around parks, cafes, museums, restaurants, post pictures of them making hallacas, grocery shopping. They have a new lease on life.

    These are EXACTLY the kind of people Venezuela desperately needs. Highly educated scientists in a useful area, not medieval Italian poetry. And they’re all gone from there, never to return. And that farm… how much could Venezuela use that milk or cheese these days?

    It’s all so infuriating. It didn’t have to be this way. Some respect for private property, serious control of crime, and an economic policy that had at least SOME thought put in it, this didn’t have to happen.

    Thank you for letting me vent.

      • Ok, wow. No, they are not leftists. They have stories that would make your hair stand on end. Did you not see the timeline? They stayed for more than a decade. Signed petitions, protested… They mourned for that property — they were born and raised there and it was in their blood. It was only when their children were prisoners in their own homes for fear of kidnappings etc thAt they decided enough was enough. They love Venezuela as do I. They will never forget. They tried for more than a decade. Now their children can play outside and run around without fear. Are you accusing them of being unpatriotic? Really?

    • “Now I see pictures of them on FB, so happy to live a normal life again. They stroll around parks, cafes, museums, restaurants, post pictures of them making hallacas, grocery shopping. They have a new lease on life.”

      Honestly, I don’t know if this is positive or negative.

      How can a family lose their 100-year-old extremely successful business under terrible circumstances, abandon the country, and then move on with their lives as nothing had happened?

      Maybe that explains why Venezuela is in such state? Where’s the anger? How people can be so abused and not fight back in the way they can?

      I’m not saying that people should be in eternal mourning and rage, but don’t they even try to help the ’cause’ in some way a bit? Not even funding a blog like this? Because from what you say their lives were destroyed in every way! They are not that different from Jews escaping Europe in WW2 leaving everything behind. But they seem to have moved on with their lives, and are now happy by posting selfies holding the peace sign while strolling around parks, cafes, museums, restaurants…

      If that’s really their attitude, then I’m not so sure that “these are EXACTLY the kind of people Venezuela desperately needs” at all. Sorry.

      • Ah yes, those happy, selfish people who escape persecution and economic ruin. Aren’t they horrible? Jews, Cambodians, Syrians, Venezuelans, Colombians, Sri Lankans, Chileans, Brazilians, Cubans, Guatemalans, Vietnamese, Italians, Eastern Europeans, former slaves, The Irish, Protestant French people (whatever they were called), the Scots, gay Russian people…The Pilgrims. All over our parks and cafes. Selfish bastards.

        • To escape persecution and economic ruin is good.

          To forget what you left behind by living a shallow life completely divorced from your past: not so good.

          The Jews are a good example of what to do. Never forget where you come from, mate. Don’t let the enemies go unpunished.

          • So, what are yo saying? That they have no right to live a normal life again?

            If you escape persecution and economic ruin, then, wherever you go, you cannot “stroll around parks, cafes, museums, restaurants, post pictures making hallacas, grocery shopping”?

            Are they supposed to sit at home all day depressed for what happened to them in Venezuela?

            Who told you that they “forgot what they left behind”? I didn’t read that in the post by LMN.

            What is your message? Is it “people, if something bad happens to you, don’t move on, stay miserable for the rest of your life. It is the only way for it not to be ‘a shallow life'”?

            Your post is, in a weird way, idiotic and perverse at the same time.

          • You distorted my words in order to create a straw man.

            If I write this:

            “To escape persecution and economic ruin is good.”

            “I’m not saying that people should be in eternal mourning and rage, but don’t they even try to help the ’cause’ in some way a bit?”

            And you understand this:

            “What is your message? Is it “people, if something bad happens to you, don’t move on, stay miserable for the rest of your life.”

            There’s no point in trying to discuss anything with you, I mean, I would if I were a shrink, but I’m not. Sorry.

          • “I’m not saying that people should be in eternal mourning and rage, but don’t they even try to help the ’cause’ in some way a bit?”

            How the hell are they supposed to help the cause? They live in a new country, they HAVE to move on.

            You have a problem with that, and you say I’m the one who needs a shrink?

          • Not only I say that you do need a shrink, I also believe that your nickname is what shrinks call a “Freudian Lapse”!

            One of the first things you should tell him/her is that your internet nickname is basically your unconscious calling for professional help!

            Go treat yourself first, man, later on we talk about how people in exile can help move the gears of war, there’s vast literature about that, one of the most dramatic cases being Lenin organizing all the Russian Revolution from Europe.

      • How can you say they are not doing their part in the destruction of this travesty in Venezuela? You don’t know what they do or do not do, as frankly neither do I… there are still extended or in-law family members in Venezuela so they have to be careful… They are true patriots and only left when it came to their children, who now, although facing a huge culture and language shock (they are not fluent in English as their parents are), can do something as simple as ride their bikes down the street without fear. Why does it irk you that they step into a normal American middle-class life? They arrived in the U.S. with little more than the clothes on their backs and a few more in four battered suitcases, plus some photographs and some papers, and they have been welcomed here by the govt, community, their workplaces,,, they contribute greatly to this country as they did for many years in Venezuela, and should thanked for it instead of being called traitors.

        • “How can you say they are not doing their part in the destruction of this travesty in Venezuela? You don’t know what they do or do not do”

          I only know what you told us above, and you basically said that they are now happy by being teachers and posting selfies at museums and restaurants after losing a FANTASTIC 100-year-old business, and that made me a bit nauseated, because if the government removed a similar company from my family, I would be a man at war until the last days of my life! I wouldn’t be just ‘happy’ as a teacher in Iowa, posting selfies at restaurants on facebook.

          “they contribute greatly to this country as they did for many years in Venezuela, and should thanked for it instead of being called traitors.”

          They are definitely not traitors of Venezuela, but if they will forget everything and just be happy with their normal American middle-class life, ignoring what they lost and who made them lost it, they are betraying themselves and their forefathers.

          But hey, they now can ride their bikes down the street without fear. That must be happiness and it will look good on facebook too.

          That blasé attitude you describe after so much abuse explains Venezuela so greatly. Things make much more sense to me now. Thanks for your post. I really appreciated.

          This is exactly WHY Venezuela is in such state.

          • Don’t worry LMN, it just seems that Marc really has no idea what it means to live in Venezuela, the amount of control the government has that doesn’t allow you to do anything really, and the level of insecurity that exists.

            He’s just used to the life of ” strolling around parks, cafes, museums, restaurants, post pictures of them making hallacas, grocery shopping.” that he has no idea what it means to live in a life without it (and worse things).

    • LMN – So very sorry. An old friend of mine in V. also had his land stolen, and told a very similar story to yours, that it was soon trashed. So your story really resounded with me.

      I did a bit of research, thinking that maybe I could come up with something in the way of agricultural production for V. and found (to my surprise) that expropriations had begun well before the 1976 nationalization of oil. I had deduced already that the “socialist thought” (an oxymoron) had begun earlier, and just surfaced in a big way in 1976. Perez Jimenez had tried to reverse the expropriations, but in 1960 a new set of laws was passed, and that theft of productive land was reestablished (under the excuse that most of the land was owned by a very small and wealthy percentage of the population). I would have to do a comparison to some other countries, but my bet is that this is true everywhere, since, as you pointed out, a lot of education as well as machinery and supplies go into making a farm profitable, and the small farmer finds it increasingly difficult to compete. The Wikipedia article I found on V. agricultural production was very short, and could have been written by a Chavista, so that was useless, and there were no references given for most of the assertions about “prosperity and increased production”.

      The idea I have, and the reason I am so insistent on this topic (I hope I’m not angering the site owners – there are others who posted, whom I would like to reply to, but I’m trying to keep it all short), is that one must have data to form a picture of WHERE to go. E.g. a big point in the MUD or single-party agendas should be to free the politically imprisoned land, along with the political prisoners. It is not going to be a quick and easy study to get that picture, in part because governments have very probably tried to keep everything well away from public scrutiny, and have falsified production data. It is not a small research project, but someone must have access to factual studies, if they would publish.

      Which is why input such as yours is so valuable. Again, I am very sorry for your loss. A small farmer here in the U.S. does not want to sell their land, ever. I asked why, and was told, “It may sound silly to you, but … because I love it!”

      There can be no doubt that “socialists” are bloodthirsty criminals on a scale the likes of which the world has never seen. Thank God, the cancer is DYING! Better a dictator like Perez Jimenez, than anything else, right now, for Venezuela. It will take a dictator to put Humpty Dumpty back together again.

      • The political crowd dont think the people would rally as hard behind those measures, sound economical commentary isn’t part of our political discourse because… Who the fuck knows? I’ve never heard any of the MUD heads talking about the economy in wishy washy super general terms.
        As if they dont want to commit to anythinf

      • It has been over a decade since I finished school, and I work with my hands everyday, but you may be interested in searching arable land use and land concentration. Back then Colombian was one of the top 5 countries with the highest concentration on land ownership, not necessarily a problem given adequate production. For tax purposes, it was much cheaper to have a few head of cattle and zero agricultural production, policies like this are problematic given the high concentration of land ownership. Just another example of the wealthy writing policies that they benefit from.

        Do not know how long you have been reading here, I am new, but being home sick today I stumbled upon a group of articles called “CADIVI Diaries. Discusses the recent paradigm/infestation of rent seeking. It was very enlightening for me, even with a regime change it seems that many Venezuelans may culturally/historically be inclined towards being reliant on some type of government assistance/dependence/benefits.

    • I can think of two families I know who have been through almost exactly what you described and a third which has managed to keep going notwithstanding a lengthy and extremely traumatic “leave of absence” spent in the Colombian jungle. Don’t know how they keep going. I don’t.

  6. If Maduro says that there were 17 B in imports, that means that around 10-12 Billion dollars of imports actually came on.

  7. They are blowing a wad on military wargames. They continue to play deceptive tactics and continue to get away with it. They are not being called out IMO. The mixture of oil, cocaine, and Ruskies is fascinating. Looking forward to how U.S. is going to deal with Putin and Rosneft over Citgo and Venezuela. That’s without forgeting american hostage Joshua Holt who is a political pawn of Maduro’s. I really think the U.S. needs to get serious about Mr Holt’s situation and those holding him captive. I also think that Cuba and Venezuela are joined at the hip and U.S. foreign policy needs to reflect that. Obama’s Cuba policy allowed Trump to get the Cuba monkey off his back. Now the U.S. can get aggresive. Gonna be hard to ignore Venezuela IMO.

    • Should’ve been clearer ->

      “There’s some question about what that means. Since the figure is quoted from a typical, rambling Maduro speech rather than a formal publication it’s possible that, for instance, PDVSA’s imports are not included in this figure. If that’s the case, the global figure would be closer to $23 billion.”

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