Photo: Descifrado

Alright, pay attention because we’re gonna go over this one time, and one time only: over these last two weeks, Nicolás Maduro has announced a series of economic adjustments that have everyone in Venezuela pretty concerned and confused. Last night, he threw us his economic one-two combo: the minimum wage, previously at BsF. 3,000,000, will increase to BsF. 180,000,000 (or BsS. 1,800), there’s a new fiscal policy (taking VAT from 12% to 16%) and gas is going to have a new “international” price and system of acquisition.

Most of this comes into effect in less than a month. It will affect everyone and nobody has a clue of how. Maduro released the Kraken and said he’ll explain later.

There’s a lot to cover here, but I will center today on a key aspect of Venezuelan daily life, and something that, to me, is at the heart of everything announced.

Fuel.

Today, you can pay a cargo truck full of gas for the equivalent of what you spend on a light breakfast. The last time a government considerably increased the price of gas, an apocalyptic myth was created, giving birth to an absurd but sacred subsidy. Chavismo is in dire need of dollars and not even the usual lenders are helping it out, so the proverbial extreme measures are taken. At a time when people are protesting daily for the progressive breakdown of national infrastructure, how do you sell, politically, a long overdue increase of fuel prices?

According to Maduro, gas subsidies represent “a loss of USD 18 billion per year,” considering both the money that could be made if domestic consumption were exported and potential savings if PDVSA wasn’t forced to import gasoline. To bring down that number over the next two years, the Maduro government will increase the price of fuel to meet “international prices.”

According to Maduro, gas subsidies represent “a loss of USD 18 billion per year.”

So, suppose your car uses 40 liters of gas and the price you have to pay is BsS 1 (or BsF 100,000 in oldspeak) per litre. That’s BsS 4. If you fill your tank twice a month, you’ll spend BsS 8. With the current minimum wage at BsS 3 (plus a food voucher of BsS 2.2), it would be The Viernes Negro Chainsaw Massacre and Venezuela would implode with only a privileged few having access to fuel.

And that’s why you get a new minimum wage, magnified beyond what it was. It covers a fuel price that’s magnified, too.

But that’s the economic side of the story. It has a political side:

In gas stations, people pay in cash (this is the only thing cash is worth for today), and that will continue to be so with the reconversión monetariaif they do it at all, I remain a skeptic. To handle the new price, the government will give you a golden ticket, the chavista rationing card (the carnet de la patria) so you register in the motor vehicle census and get a direct subsidy, a sort of Bono Soberano to pay for gas.

I shit you not: allegedly, there will be a new device meant to scan your carnet at every gas station in the country, to make sure you deserve this subsidy. This means that every Venezuelan with a carnet (and there’s a lot of them) must provide the State with their bank accounts to get the bonus, if everything goes smoothly and chavismo doesn’t complicate things with its usual hilarity.

Allegedly, there will be a new device meant to scan your carnet at every gas station in the country.

Not impossible. A system like that isn’t even far-fetched, but it needs a lot of organization and infrastructure. D-Day is upon us and these are the same dudes that left their voters hanging when they offered money for votes. If the captahuellas to keep price-controls didn’t work for six months in Caracas, imagine electronic ports at every gas station and every dispenser in, I don’t know, Cazorla, Guárico.

And if you’re going to keep subsidizing the damned thing for two years, then what’s the point of even changing the system?

My friend: the cake is a lie. There will be no subsidy. This political pill is nothing but anesthetics so you don’t feel the economic pill. Scared fellas are going to get the carnet (falling into Maduro’s trap) and everyone will pay whatever the government says it’s the “international price,” subsidies be damned.

Now, you tell me what’s going to happen to that wonderful new minimum wage after it goes out for a walk with hyperinflation, and what that will do to the price of gas.

And tell Nicolás too, because he’s betting everything on that.

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48 COMMENTS

  1. FAKE NEWS

    WE’RE ALL IN THE SHITHOLE, OR IN A POTHOLE MENTALLY OR OTHERWISE

    I READ FOUR MAJOR PAPERS TODAY(*) AND THERE ISN’T ONE REFERENCE TO WHAT’S TAKING PLACE IN VENEZUELA.

    TURKEY IS FAR MORE IMPORTANT. WHAT HAPPENS IN VENEZUELA DOESNT DISTURB ANYONE, NOT EVEN ITS NEIGHBORS.

    I REMEMBER CAZORLA IN MY DAYS OF CHIGUIRE HUNTING WITH MY FATHER. IT WAS PRIMITIVE. I THOUGHT IT HAD CEASED TO EXIST. WHO CARES IF THEY HAVE OR NOT A GAS STATION? I AM SURE THEY NEVER HAD ONE IN MY DAYS.

    (*) WSJ/FT/LE MONDE/FOLHA DE SAO PAULO

  2. Yesterday my stepson spent 4 hours in line in Tachira to buy gasoline. He was about up to the pump when the national guardsmen in charge of the line started letting cargo trucks with huge tanks cut in front. Eventually, he’d had enough and got out of his car and started protesting to the closest guardsman. Apparently my stepson said something he shouldn’t have (like it’s not fair to let those who are bribing you to cut in front of those who have been waiting in line for hours) and the guardman grabbed him in anger. At that moment the gas station attendant also announced that the tanks were empty.

    That announcement brought a rush of angry persons from behind who’d been waiting for hours and the guardsman made a hasty retreat. Stepson made his escape as well. He was pissed. This kid graduated as an officer from the military academy in Caracas, Venezuela’s version of West Point, and worked for a couple of years with the army on the border with Colombia before deciding he could do better on his own in the business world. He says corruption was bad enough 4 or 5 years ago when he was in the army. Today he says they are all corrupt, every last one of them.

    But then, we already knew that.

      • The quickest return on investment that also would have the most positive impact on the citizenry would have been to buy seed and chemicals along with other supplies (parts, oil, etc..) that the farmers needed.
        The US ethanol policy has driven up corn prices substantially. Making imported corn for the staple corn flour expensive.
        If they can’t afford seed, they are not going to be able to buy corn.
        This regime doesn’t have the economic know how that a six year old with a lemonade stand has.
        I am beginning to wonder if Venezuela is going to experience a type of Armageddon this coming week as everything collapses.
        When will the Bolivars 3.0 be distributed to the people as wages? Will it be immediately or in some type of cycle? Possibly that has not been announced.
        As soon as the people get money in their hands, they will want to spend it to avoid the hyperinflation destroying purchasing power. Inflation pressure will increase due to limited supply and lots of money. Couple that with the unregulated creation of money and hyperinflation was just given an incredible stimulus.

        • “The quickest return on investment that also would have the most positive impact on the citizenry would have been to buy seed and chemicals along with other supplies (parts, oil, etc..) that the farmers needed.”

          I obviously agree with this John, as I believe that agriculture, food production, is the foundation of any healthy nation. This is why I was so shocked and disappointed when I read some of Leopoldo Lopez’s thoughts on how to begin a recovery effort here in Venezuela. From what I recall, his version was based on how he’d better distribute money to the populace via the sale of oil. I think that was tried somewhere.

          • MR
            You are correct about Lopez. He was simply offering the voters something for nothing. That is the tactic that Chavez exploited with great skill.

  3. My sister migrated to 🇨🇱 and someone took care of her. Not young and makes me cry 😢 every day. My only last relative 65 yr-old also quit. Miracles happen she’s now working part time, with all regular papers and making over $1,000 a month. She’s the last of the Mohicans.

    I quit on 12-Jan-1980 to be back as an expatriate a few years later, opened an office in great fanfare and I closed it in 2004 from the USA. My company died on compliance and governance. So finally quit for good. No more travel no more chiguire, cachapas con queso llanero made by my mother from Valle de La Pascua.

    I’m sorry I’m angry, sad, truly sad.

    Yes, and sorry for the upper caps. Will not do anymore.

    The country and his people will go deeper into another forced corruption scheme even more diabolical than Erdorgan’s plans in Turkey.

    Turkey was like Venezuela. Corruption has always existed by not penetrated the people’s minds. Turkey civilians are generally hard workers and honest. But, Erdogan and his acolytes are making what once was an economic powerhouse into another shithole. And people are becoming corrupted by force. One more shithole but with two USA bases, critical to our defense.

    This is like the bubonic plague of the dark Middle Ages. Although the renaissance was the result of these plagues that killed half of the Europe population.

    Would Venezuela reborn from something like that? In a century maybe? More, less?

    How long do you guess it will take to “normalize” – who knows to become like Switzerland? Or at least like Portugal? Or Chile?

    I won’t see it for sure.

  4. There’s a mistake in the calculation for a gas tank. 1BsS is equivalent to 100000, therefore a 40-litre tank needs 40BsS to be filled. Not just 4. (I’m not complaining and I know this isn’t the point, I’m just pointing that out.

    This reminds of an episode from The Simpsons where Lisa is president and imposed a new tax calling it “reimbursable temporary adjustment” or something like that.

    I also think they may want to develop something similar to CADIVI with gas, where you sell your “quota” to a person who needs it. Or something like that.

    What I do not understand is, how on Earth are they still ruling today? It is beyond human understanding the way they don’t have an adversary worthy enough to overthrow them.
    Unbelievable. Everything is so absurd.

  5. There are other calculations mistakes but at this point I fully agree with Manuel Diaz. There will be a secondary gasoline market inside Venezuela (so far it is contraband to Caribbean islands, plus the neighborhood Colombia, Brazil & Guyana.

    This already exists in Africa (Cameroon). I saw the report in the French Chanel « France 24 »in YouTube. Also available in English. Highly recommended. And hope the link works:

    Smuggling in fuel to fill demand in one of Africa’s biggest oil-producers http://africanarguments.org/2018/02/05/smuggling-in-fuel-to-fill-demand-in-one-of-africas-biggest-oil-producers/

  6. Setting the Gas price at international levels has been the right thing to do for ages. It took them 20 years to realize that simple fact. !!
    The sad part is that some of the opposition believed also in this apocalyptic myth of gas subside.
    That can finally stop the estimated $18 billion loss per year.
    However, if the systems is so corrupt beyond repair, people will find loopholes to keep the very lucrative business of Gas smuggling going as nothing happened.
    Even if the Dictatorship is successful in its implementation, remains to be seen if the regime would just buy more military loyalty with this saved money instead of helping the population. It is a repressive authoritarian regime upon a submissive population so votes not longer matter.

  7. For months and months, CC has inundated us with stories of Nurses, Doctors, Professors, and others, who have demanded a raise, protested on the streets, walked to miraflores, in search for more $$$.

    Never did we hear a reporter ask any of them their views on why they thought THEY should be paid more, when everyone in the nation were in the same situation. Of course, if asked the response would be that “we should all get paid more”. Follow up, would be… Then would that just dilute your raise to nothing.

    The nation as a whole, will learn the effects of dilution by Sept 1

    • Dale,
      You are spot on, and also immediately those who believe they are worth more than the minimum wage will immediately complain. I am doctor, I should get paid at least 5X what manual laborer gets paid, and so on.
      In the USA, these various campaigns to raise hourly minimum wage to $15 or $20 or whatever are nearly always financed by the public employee unions, because their contract language gives them a multiplier of the local minimum wage. And it immediately creates problems for jobs that traditionally would be paid maybe double min wage. If person getting $25/hour may be perfectly content (at least with her hourly wage) when the minimum was $8, but jack the minimum to $15 or $20, she is now very unhappy with $25. It’s human nature.

      Plus, the prices will stay in USD, since everything is imported in USD, and very little produced in Venezuela, so nothing will change except the 5 zeros will quickly come back.

      • You are all confused. Don’t distinguish a cashless economy from a reduced cash one. Mistake a dollarized economy with an economy were dollars can be used to pay goods and services. Etc

        Please compare Panamá and El Salvador. Then use that to propose something for Venezuela.

        You’re all idiots. And you help Venezuelan. With friends like these who needs enemies.

  8. All of you here are get HATERS.

    This is a big deal. Don’t you see, the people are now dancing in the streets !!!

    The streets are buzzing…….. A raise of 30 times!!!

    We can fill our fridges, and stock our pantries. Fix our cars, and take our kids to the water park.

    Long Live Maduro. Long live the Chavista nation.

  9. I wonder how long it will take, after this stupid plan fails, for the regime to declare a national emergency and start seizing private bank accounts in Vz?

  10. Agreed but the declaration will include the nationalization of private business and adoption of Cuban style governance. Everything was done to reach this achievement.

  11. “Everything was done to reach this achievement.”

    Bill Crispin – you subscribe to the “Maduro et al are clever and know/desire the results” camp. Maybe, but I am in the “Maduro et al are shitty dumbfucks, have no idea what they are doing, but actually want to be liked by the people” camp. Maduro would prefer to be the hero, not the goat.

  12. I subscribe to the theory that Maduro has two goals, total state control of the economy and a one party state. The ANC and its new constitution will achieve the latter goal. The former goal requires a vast amount of economic destruction because Venezuela had developed a private economy. The economic plans the Chavistas have adopted make no sense for growing the economy but make a lot of sense if the goal is destruction of the existing private economy as a prelude to declaring a uni-party socialist state. The new minimum wage will destroy private business.

  13. DolarToday is reporting and linking to this El Nacional story.

    “Spokespersons for the parties opposed to the government of Nicolás Maduro called a national strike for Tuesday, August 21. The announcement was made by opposition parties through Twitter.”

    http://www.el-nacional.com/noticias/politica/oposicion-convoco-paro-nacional-para-martes_248510

    In the midst of all of the chaos that is sure to be created already, this will be a test of the opposition and their influence with the people. This is too little too late in my opinion. I do hope that I am wrong.
    How many people are prepared for even a one day national strike? Scavenging for food every day, the desire for people to access any funds available to them and to lose a days pay that is the equivalent of 2 months previous pay, may leave the opposition looking ever weaker if the people choose to go about their business. The people need to be prepared to go on a national strike and stay on strike until something gives.
    Public transportation, electric and water utilities and the oil sector are operating slightly above the level that would probably be maintained in the event of a strike. One day isn’t going to put any pressure on the regime. Especially considering the chaos of the money conversion.

    • Yeah, too little too late and like anything in Venezeula- no planning.

      No, let people go back to work tuesday and fight in lines and bitch about how this cono monatario is a complete disaster. Once everybody has a taste of this shit, then organize something.

  14. I constantly waffle back and forth between the regime knowing damn good and well what it’s doing, and that they couldn’t find their asses with both hands.

    I’m now leaning more towards Mr. Crispin’s viewpoint…….break the backs of the private sector once and for all, declare that they’re “unfit to help the people because capitalism is obviously a failure”, and that a government take over is needed to stabilze the economy.

    • MRubio, if the govt can stabilize the economy don’t you think they would have done it already? And why need to break the backs of the private sector and make their work impossible?

  15. A few days ago I mentioned a large farm near here where a couple of our pueblo’s finest met their maker one night as they were entering the place to rob it.

    Anyway, when I was baling hay on the place, there were at least 30-40 employees working there, perhaps more that I never saw working the orchards. One of our clients (whose husband works there) told us tonight that there are now 10 employees, but that they’ve gotten word that Monday and Tuesday will be a holiday and only 5 will be employed on Wednesday when things pick back up.

  16. Nothing will happen. I just watched the Noticiero 24H – RTVE (SPAIN). Maduro’s economic measures have received the blessings from the Spanish government. AMEN!!

    Just as good as from the Democrat party.

    The Pope is also friendly to Maduro’s garbage except he’s distracted with the latest pedophile scandal in Pensilvania. Otherwise he would be calling fault on the greedy opposition to him.

    Nothing will happen and all will be back to work like sheep conducted by the shepherd dog on Tuesday.

    Waste

  17. The regime is desperate for foreign reserves. The people that receive remittances will be better off holding the Dollars and not selling the Dollars in official exchange houses. I encourage the people that I help to only sell what they will immediately use.
    The daily auctions that are fed with more and more version 3.0 Bolivars created out of thin air will continue to feed the hyperinflation. As the Bolivar 3.0 starts to tank, there will be competition for Dollars. Black market exchanges will outbid the regime’s exchanges.
    Everything the the regime is doing is just smoke and mirrors. The fundamental problems that are causing the hyperinflation still exist and are actually being made worse by the 6000% pay increases.

    “The Minister of Information Communication, Jorge Rodríguez, said on Saturday that there will be no parallel currency market in the country because the price of currencies will be governed by the day’s auctions in exchange houses. The Pin

    “There will be no parallel market, the parallel market will disappear because the price will give what the auctions say,” he said in response to a question raised at a press conference.

    He explained that the parallel dollar will disappear, because “you will not be able to manipulate the price of the currency.” He also confirmed that a total of
    300 franchises of exchange houses will be opened in hotels, airports and shopping centers in the country.”

    https://www.lapatilla.com/2018/08/18/jorge-rodriguez-asegura-que-no-habra-mercado-paralelo-de-divisas/

    https://dolartoday.com/jorge-rodriguez-habra-mercado-paralelo-de-divisas-desaparecera-por-completo-el-dolar-criminal/

    • Well, John. Maybe Jorge is right. Because if nothing else, the Venezuelan people are law abiding to the crossed “t” and dotted “i”. If the regime says you are only allowed to trade remittances through them, then that’s what will happen.

      Sarcasm aside, how does it work in Cuba, again? What do Cuban’s get for their remittances? Do they take checks?

      • President Obama removed many sanctions. Even after President Trump reinstated some restrictions there still must be some type of access to funds.
        Tourism is a significant percentage of GDP. I believe around 10%. Free oil from the generous people of Venezuela and the “rent a medical professional” that they send around the third world keep the regime in power.
        My perception of Cuba is of a welfare state. The period between the collapse of the Soviet Union and Castro beginning his parasitic relationship with Chavez was the low point for the Cuban people.
        The people in the Trump administration and the State Dept. may be looking at the big picture. The collapse of Maduro may trigger the collapse of the Cuban regime. That would remove a constant destabilizing influence from the Americas.
        There is no country in Latin America, including the new Socialist administration in Mexico, that has the ability to prop up the Castro / Diaz-Canel regime in Cuba.
        I doubt that China wants to pick a scab with the US by supporting Cuba ala the Soviet style support. The Chinese tend to put their money where they can make money. It is anybody’s guess what Putin would do. Personally, I would be surprised if there was a long term commitment to Cuba. Russian per capita GDP is only about 20% higher than Cuba. Cuba’s GDP is vulnerable due to its dependence on Venezuela and other countries propping it up.
        Cuba is a malignancy that continues to spread around the Americas. Just like a doctor needing to remove a tumor, a free and democratic Cuba would result in a healthier region.

  18. John and Falconiano, etc. What’s your point?

    Why is happening is nobody’s business if you keep comparing with Cuba and Western Europe under the Marshal plan. And all the unnecessary BS around it.

    Outline five action items to recover Venezuela from the marasmus. Forget the time it will take, whatever it takes. Those Venezuelan are all ignorant, brutes of some sort. They don’t care. They lost hope.

    Merde, alors, vous êtes tous des cons!

  19. The Plan is there , it exists , in full detail , its made up of measures that have been succesfully tried before , has the support of a great many international organizations and foreign govts , its early times for its to become plublicized , but there are people on top of it , working on it , just waiting for the chance of implementing it , recovery can be achieved but not with this regime ……there is not enough trust and a lot of mistrust and with mistrust it doenst work , insulting people is just so dumb , too many people find great pleasure in it , but putting too much phocus in our hatred of the fiends (real and imagined) that dont stand up to our standards while human is ultimately futile ……!! One thing is clear in the beginning it needs a mass financial influx from abroad , then it gets picked up by Venezuelans , not just your average joes , but people who know how to handle their stuff , putting every one in one bag is not real, lots of different people make up a country , some the mayority that get carried away by their passions and prejudices and are mostly ignorant but there is a whole bunch of people who can meet the challenges of any broken economy and who can effect the biggest change …….even if they only constitute a minority .

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