A necessary change of optics

The fact that the Venezuelan currency was named the Bolívar and the misguided sense of that a devaluation of the same would be disrespectful to the memory of our Liberator, supported the refusal to devalue the currency during 1982 even in the face of economic reality. As a consequence, the devaluation in February 1983 was much more drastic than necessary and hastened the country’s dive over the precipice of economic chaos. We still have not managed to stop this dive.

Our sense of direction was lost basically due to inflation. Today, the private sector must follow strict accounting rules which call for re-expression of accounts. The Income Tax Law has also introduced the concept of adjustment for inflation as well as the application of tax units (unidades tributarias). In spite of this, we note a curious lack of activity aimed at requesting that the public sector establish more links with reality.

When we analyze the problems inherent in the Venezuelan economy, either we are blind, or we don’t want to see, or someone simply doesn’t want us to see. I will detail some of our economic variables in United States Dollar terms in order to allow our readers to form their own criteria as to which alternative applies. We have expressed dollar terms in real 1982 values.

1) In December 1982 the total of all deposits in the Venezuelan financial system (normally known as M2) were the equivalent of US$ 31.3 billion. In July 1997, this figure had dropped to US$ 7.8 billion, that is to say, only 25% of the 1982 total. Even if we consider possible changes in the multiplier, this indicates and incredible drop in the real economic activity in the country.

Not a day goes by without some “expert” in economics expressing preoccupation about excess liquidity. This attitude could be compared to when a physician begins to worry about left-overs when the patient is in a serious state of inanition. The real problem that has traumatized the country is not the excess liquidity (food) but the lack of economic growth (appetite).

2) In 1982, Venezuela’s international reserves had reached US$ 10 billion and were equivalent to 32% of M2 as described above. In July 1997, these reserves totaled US$ 10.1 billion (in 1982 terms) and represented 130% of M2.

It is important to note that in 1982, the country did not have sufficient dollars to satisfy the demand should all deposit holders in the nation wish to purchase dollars. As it were, the Bolívar had to be devalued in 1983. In July 1997, the situation was just the opposite; all the deposit holders in the country put together do not have enough Bolívares to purchase the dollars held by the Central Bank.

If we apply a broad analytical brush to the before mentioned figures and note that the international reserves belong to the state while M2 belongs mostly to the private sector, it is evident that the latter has become much poorer in comparison to the former. When we see that in spite of these results there is still support for maintaining and even increasing tributary pressures, the reigning economic philosophy seems to have a lot in common with a Gulag-style Soviet purge.

3. In December 1982, the Venezuelan financial system had a credit portfolio totaling US$ 16 billion while in July 1997 this amount had shrunk to US$ 4 billion, again, in 1982 terms.

We have frequently heard and read that an increase in credit activity could put the country’s banking system in jeopardy. Since lending is the essence of banking by definition, and when we take into account the low volume of credit activity mentioned above, it can only mean the opposite. If lending doesn’t increase, banking slowly dies.

If we wish to recuperate an economic orientation that makes sense for the country, it is imperative that we begin to express public finance figures in terms of real figures. By this I don’t imply that we should use the US dollar as denomination to express our national accounts. I do propose, however, that we find an element that reflects reality so that we at least liberate Bolívar from having his name associated with creative or even fraudulent accounting.

A Big Foot watches over Sabas Nieves

Sabas Nieves is one of the most popular trails up the Avila. Over the last few years, it has also been the target of frequent controversy, mainly related to how to take make correct use of it without causing undue grief to the area’s residents.

I am a frequent visitor to Sabas Nieves; during certain periods, I have become almost an addict. Having now made evident the origin of the probable subjective nature of my comments, I’ll refrain from excusing myself.

The atmosphere between neighbors and mountain climbers has boiled over frequently. It has recently come to the point where the neighbors were close to putting up barriers to limit access to the area. On top of this, having taken to heart the application of theoretical models which call for the imposing of tariffs by the state for all types of public services and rights of access, they almost started collecting toll charges.

A solid protest by users of the trails, based basically on the menacing reality of numbers (i.e. votes), handed neighbors an initial defeat. Licking their wounds, they had to retreat to their lairs and try to hatch new strategies.

Having done so, they have now renewed their attack. This time around, they have developed a plan whereby they offer the mountain climbers the alternative of parking their vehicles under the Plaza Francia (still Altamira to some of us old-timers) and be transported in modern, comfortable buses up to the base of the mountain, enjoying ecological videos and expected to sing merry praises about the advantages of such a generous solution. But, lo and behold, the initial cost of this solution is estimated to be in the order of Bs. 20 million!!

The mountaineers, on the other hand, having discovered that there are resources at hand for a “solution”, a currently analyzing the possibility of requesting the expropriation of the property of some of the neighbors in order to expand parking facilities around the entrance to Sabas Nieves.

Evidently, among the users of the trails, there are all kinds of poorly educated, disrespectful people that create all types of grief for the neighbors. However, there are shameless creatures present in all types of associations, in the best of families and even among the neighbors of Sabas Nieves.

The solution to this type of problem should normally be developed in an environment of better education and with the creation of social pressure that, through a system of punishment and stimulus, generate corrective measures. The type of solution that the Venezuelan society is bandying around in the case of Sabas Nieves, i.e., throwing money at anything that moves, must be rejected totally and absolutely it we are to have any chance of nudging the country towards a better future.

On the mountain, there are signs indicating that it is forbidden to travel the paths without a shirt and other appropriate items of dress on. As far as the shirt is concerned, this regulation seems evident since it reduces the possibility of getting sweat rubbed on you by some gasping co-mountaineer. It is also esthetically more appeasing in many cases.

Many mountaineering colleagues ignore these prohibitions and do not wear shirts. In a misguided show of solidarity, the majority of us don’t protest vehemently enough. I am sure that if Venezuelans in general begin exacting better behavior of our brethren, we would find immediate solutions to a great many of our ills. Among those, the ones festering at Sabas Nieves.

Mountaineers and Friends, it behooves us to avoid that other colleagues park badly and bother the neighbors Sabas Nieves. Maybe, then, the neighbors of Sabas Nieves can in turn keep some few exaggerated and overly sensitized neighbors from promoting extreme solutions. Maybe then, copeyanos, masistas and other such creatures will avoid and censure acts of corruption by adecos, copeyanos, masistas and other such creatures.

In the meantime, please save yourselves the buses. When I go up the Avila through Sabas Nieves early in the morning, I do so a bit for the physical exercise and mostly for the spiritual tranquility if offers that in turn helps me struggle through the daily hassles of a large city. Under no circumstances am I going to undergo the torture of an ecological bus with a suicidal driver careening from Altamira to Sabas Nieves, return trip!

Roping in the herd

We have frequently seen examples of how economies that permit total liberty for foreign investment flows, especially those that are in essence short-term investments, often must confront more difficulties than those that impose certain restrictions.

As so many things in life do, problems often have their roots in exaggeration. It is possible that on the one hand confidence and the magnitudes of the resulting flows become so great that they can actually hide problems or diminish the pressure brought to bear on local authorities to take corrective measures. On the other hand, absolute mass panic may set in, creating the medium for the type of accidents normally attributed to such a response (for example, the Mexican debacle and resulting “Tequila Effect”).

Since it is very difficult in most cases to identify a special event such as war, earthquakes, or the sudden death of an important leader as the trigger for a change in sentiment, and as we supposedly live in a world of virtual and perfect information, what could be the possible origin of the overly exaggerated reactions of fund managers?

Above all, I suspect that the financial roller-coaster rides we are subjected to have their origins in the traditional search for the type of security usually found in herds. This instinct predominates in most decision making. I refer specifically to the attitude “it doesn’t matter if things go well or not, as long as I’m in good company.”

As an example, I can go back to the period just after Venezuela abandoned exchange stability (February 1983). I watched with surprise as the treasurers of large multinational companies blithely signed contracts that insured future exchange rates at such incredible costs that they seemed outright irrational. The premium paid easily surpassed the possible exchange losses that would be caused by reasonably predictable devaluations.

When I tried to get to the bottom of this madness (frequently assisted in my investigation by offering a shot of whisky), I invariably would receive the following explanation: “We actually have two accounting registries. In the first we register the exchange earnings or losses per se. In the second we register the cost of the insurance premiums to cover exchange risks. Our head office has become so sensitive to exchange risk that it doesn’t combine both accounts to analyze the total net results. On the contrary, even if I save the company a fortune by not contracting this coverage, but incur in so much as one cent in exchange losses, I would be handed my pink slip in a flash.”

What, then, does this observation aim at? Simply that even when an individual or company is perfectly amicable, capable and basically worthy of an invitation to invest in our country, if his inclination as manager of funds is to follow the herd in stampede, the nation can simply not afford to allow him and his company to enter.

In this sense, we must ask why our monetary authorities have not managed to develop a coherent set of regulations to limit the inflow of international investment when this is obviously intended to be for irrationally short periods of time, in grossly large amounts, or both, instead of wasting time and money exchanging bonds and restructuring debt that matures in 20 years.

Countries like Chile, which have earned the confidence of international markets, limit the inflow of short-term investments. This limitation has definitely not resulted in damage. On the contrary, it has helped increase the confidence of exactly those foreign investors whom the country actually wishes to attract. They are not those that come on a 30-day visa, but rather those that come to invest for the long term.

It is important to remember that when a foreign investor risks his funds in a country in the long run, installing factories, developing projects, creating employment, and in general acquiring a real presence in the country, his interest in the future of the country becomes much more sincere and similar to that of the nation’s own population. Much more so than the interest of some fund manager sitting in New York or London.

When we speak of gaining the confidence of foreign investors, we must learn to discriminate among them.

PS. As you would want to know if those courting your daughters have serious intentions.

Published in Daily Journal, Caracas, December 4, 1997 and in "Voice and Noise" 2006.

Venezuela and Colombia today

Two weeks ago I attended a conference identified as Venezuela and Colombia in the new millennium. This event was sponsored by the Pensamiento y Acción Foundation, the Rómulo Betancourt Foundation and the IESA. It was also supported by the Andean Development Corporation (CAF) and the Banco Mercantil.

The event was excellent, having managed to impose a strictly academic ambiance in spite of an extremely delicate subject. There was absolute respect for different and contradicting ideas and sentiment. Since the event allowed for moments of reflection and thought, I would like to share a personal concern.

Over the last few years, trade between the two countries has grown dramatically in nominal terms. As a result of this, it seems that the idea that an irreversible process of integration led by markets, business and consumers now exists has become popular. On top of this, this process seems to be occurring behind the political sector’s back.

This idea is somewhat dangerous. Specially when you consider that a substantial part of the trade we have observed over the last few years is based on false premises and on factors that are not sustainable in the long run. Among these we can observe the following:

The explosion in the volumes exchanged between the two countries originated during the early eighties at a time when Venezuela was entering into its “impoverishment” phase. Before this, with the exception of certain strictly unilateral commercial activity of basically local and borderline character, Venezuela negotiated at its will, need or extravagance with the most sophisticated commercial centers in the world. Colombia had virtually no chance to participate in the Venezuelan market.

At the same time, Venezuela’s oil income caused the country to sustain an extraordinarily strong currency which made it virtually impossible to achieve levels of competitivity that would have allowed the country’s business community to make inroads into the Colombian market. Evidently, there was no incentive to export when the country was required to maintain a policy of high tariffs and import quotas in order to protect local markets.

In recent years, the introduction of artificial economic measures helped to feed this mirage of increased trade. Among these measures, one of the more important ones was the appearance of currency exchange subsidies offered Venezuelan industry in order to facilitated imports of raw material and even finished goods. This obviously generated an “export of subsidies” both in the formal as well as in the informal markets. It is also important to note that in the face of barriers such as exchange controls of various types, commerce naturally gravitated towards countries that belonged to the ALADI compensation agreement, including of course, Colombia. This also artificially stimulated Venezuelan imports from these countries.

I also harbor a suspicion that commercial flows, even when expressed in hard currency and apparently favorable to Venezuela, hide problems that should be looked at more closely. Among these problems, looked at (perhaps subjectively) from the Venezuelan perspective, we can find the following: Is the generation of jobs produced by this trade equitable? Is Venezuela exporting commodities to Colombia for which the country has always had available markets? Is Colombia being favored by this exchange, gaining access to an export market for products that are really not competitive elsewhere?

I am certainly not criticizing the increase of trade between Venezuela and Colombia. I am totally for it. However, I am convinced that the commercial trade between Colombia and Venezuela by itself does not constitute a sufficiently strong foundation to support the integration. Most specially when, as all Venezuelans desire, the country manages to emerge from its current impoverished state and as a consequence totally alters its management of trade flows.

We should definitely not paralyze this integration, but we must promote new and solid foundations that can support it. For example, it is of utmost importance for any beneficial integration between the two countries to reach agreements on the management of hydrological basins and catchment areas which will guarantee the supply of potable water to future Colombo Venezuelan generations.

Recadi rises from the dead

In a country in which the Government proudly announces in 1997 the completion of a highway on which work was initiated back in 1973, the belated results of administrative and legal initiatives should not be surprising. Nevertheless, we have indeed been surprised once again upon hearing rumors about the summons being issued, applications for reimbursement being submitted, fines being imposed, appeals being declared null and void and other such fine aromatic herbs. The clincher is that all of these are related to Recadi. Yes, ladies and gentlemen, Recadi - not OTAC - Recadi!

I remind my younger readers, who could be under the false impression that the follies of exchange control systems originated exclusively during this Government’s tenure, that in the early eighties a system of controls was implemented as an answer to new exchange rate realities during which the devaluation of the Bolívar was discovered. This system was known by the initials Recadi.

The Recadi system sent the wrong economic signals, stimulated unnecessary imports and allowed for blatant corruption though the misuse of the exchange benefits it offered. It was the most costly economic experiment in Venezuelan history. All of the accumulated losses racked up during the recent financial crisis don’t even come close to the cost incurred during the Recadi years. Only the fact that the Recadi debacle was spread out over several years diluted its effect and made it less visible as a disaster than the bank crisis.

Even though there was some opposition, the Recadi system so totally enveloped the national economy that it resulted in the creation of a kind of society of accomplices or accessories which then made it extremely difficult to correct as well as to punish the abuses that were committed under the system’s umbrella. We can still remember the comments relative to the infamous Chinaman of Recadi, the only person who, as an exception that validates the law, underwent judicial punishment.

Recadi, as does all official bureaucratic process, implied the elaboration and use of an incredible amount of documentation. This put to task the internal administrative capabilities of industry and commerce in Venezuela not used to working with government entities at certain levels. Local banks were brought into the game by the government, and against their best judgment were forced to dedicate several years and immense resources to documentation and issuing of bonds to cover incomprehensible obligations.

When Recadi finally disappeared, there was general relief all around. As a natural reaction, all parties actually involved in this involuntary process immediately began filing, stashing, hiding and losing all types of documents which could possibly remind them of their participation in this horrid chapter in economic history. New actors also surfaced to help purge filing cabinets of this damning material. New upcoming generations which never had to live through Recadi (50% of the country’s population), foreign investors and bankers. All, however, have something in common. When they see a file labeled “Recadi”, they rifle through it, define it as the product of a historic comedy and then send it to the trash bin with the efficiency, energy and arrogance of a newcomer.

Once this happened, however, official entities of all types and colors began spewing forth their edicts; the Central Bank of Venezuela, the Ministry of Finance, the banks and the different Administrative Courts.

“The Court XXX, in relation to the recourse ........... declares null and void the administrative appeal submitted by YYY against the decision issued by the External Private Debt Registration Commission in its resolution of February 1985”

“We are pleased to notify you that the Central Bank of Venezuela has requested the reimbursement of US$ XXX in advance payments for the following imports due to the fact that the corresponding documentation required to justify said advance payments was apparently not submitted on time.”

The questions that still remain to be answered are several. What strange power can manage to reactivate, almost fantasmagorically, files that up to now have been classified as “dead”? Is this the new Venezuela in which justice arrives late but does finally arrive? Could this merely be an example of “I’ll get you sooner or later”? Or could this simply be the result of the privatization of official business?

At least some conclusions seem clear: Save even your toll receipt! Watch out, OTAC is coming, maybe not this century, but certainly the next!

Daily Journal, Caracas, November, 1998

Restructuring PDVSA - some doubts

The efficiency of the oil sector in Venezuela could be of more relative importance to the common citizen than is the efficiency of the government itself. Considering the brouhaha that the search for constitutional or electoral reform would cause, it is surprising how easily the reorganization of PDVSA went down.

When faced with all the country’s problems, most of its citizens, at least those that cannot even contemplate emigration, have placed all their hopes on the imminent development of a buoyant oil sector once production has been increased to six million barrels per day. In order to avoid the onset of profound depression, it is probable that most Venezuelans don’t question or even contemplate the possibility that all is not as it should be in the oil patch.

I am one of those that await only good things from our oil industry. However, since “the eye of the owner fattens the cattle”, all Venezuelans have the clear responsibility of keeping watch, issuing opinions and generally do all that is within reach to avoid that due to lack of effective control the industry dives into a tailspin. Without this control, and should the internal meritocracy (however meritorious it may be) be allowed to simply act as it pleases, it seems evident that an organization as rich as PDVSA, dedicated to an activity generous enough to permit the sale of a product with a production cost of about US$ 5 at US$ 20, will eventually degenerate.

In this sense, it behooves us to express our reservations about the amply publicized restructuring of the oil industry. As far as we understand, the plan is based on the substitution of the current organization, represented by Lagoven, Maraven and Corpoven, all of which functioned integrally as operators, with specialized companies designed to cover specific functions, among them exploration and production, manufacture and commercialization and services.

It could be that I have been overly innocent, but I was always under the impression that by splitting the Venezuelan oil industry into three operating companies, we had the keys to some control over it. This division allowed for certain competition, guaranteed a basis for comparison and finally, created different specialized professional teams which in one way or another kept an eye on each other.

I was, however, never so innocent as to figure that this control was perfect. Evidently this three-way split created much duplication of costs. The solution, however, seemed to be satisfactory when compared to alternatives such as the politicization of the industry or the awarding of total independence (upon which we would have had to light candles to our favorite Saint).

The new Plan has been justified with the following arguments: a) estimated savings that have quickly grown from US$ 1 billion to US$ 2 billion annually; b) the need to elevate the country’s participation in the international market; and c) as a simple response to organizational tendencies and pressures relative to the industry itself.

These arguments don’t completely convince me. Evidently, some savings are always possible. However, if savings such as those mentioned above are possible without adversely affecting the company’s operations, it would imply the recognition of such an incredible inefficiency that the first administrative act we should request is the immediate removal of the entire Board of Directors of PDVSA.

The second argument, i.e. the need to elevate the country’s participation in the global market, has more to do with abandoning the agreements established by OPEC than with a plan for reorganization. Finally, we should not be comparing the organization of a state owned company like PDVSA with private oil companies that operate in a world of shareholders, stock markets and other elements that exercise control over management.

Until I hear arguments to my satisfaction that address the issue of the control that our society has a right to, the Plan simply smacks of a proposal to centralize, both functions as well as power. In this sense, I believe the Plan could simply accelerate the degeneration which I feel the industry is doomed to. Additionally, why are we so set on decentralizing the country’s government, infrastructure, etc. if centralization by function is so beneficial?

The Brady Bond swap made simple

An intense debate has been unleashed about the government’s recently executed bond swap operation. As far as the financial implications of this swap are concerned, we note that many renown financial analysts are producing studies thereof, some showing positive results while others are negative. There is great confusion all around.

A few weeks ago, before the storm, I expressed certain reserves about the operation. Above all that results of the swap definitely were not as positive as those the authorities were promoting to validate the deal. I will try to present a simple analysis which I hope will shed light on the operation and allow readers to come to their own qualified conclusions.

In order to limit the analysis to strictly financial matters, it is necessary to clarify and to eliminate the noise created by some initial aspects that may cloud the issues. The first refers to the question of legality of the operation and the second to whether corruption was present.

As far as the legal issue is concerned, I should, not being a lawyer, refrain from taking positions. However, since one of the key inputs to a legal study would be whether or not the country has taken on new debt, I find it difficult to understand how Venezuela all of a sudden ends up with an additional US$ 1.317 billion in its kitty without net indebtedness. The only possible alternatives are either that the Nation has won a gigantic Lotto or, God forbid, has been involved in some type of misappropriation in the international markets. Anyhow, it is apparent that it is frequently more important to comply with one’s duty formally than realistically. In this sense, the bond swap could be totally “legal”.

With respect to the issue of corruption, only solid police investigation could reach a serious conclusion. Obviously, any such investigation should take into consideration not only the swap itself, but also any operation that took place prior to its execution and through which people in the know could have taken undue advantage. Since I am neither an investigator nor a policeman, it is impossible to issue a factual opinion. It is also irrelevant, since corruption may be present both in excellent financial operations as well as in the bad ones.

Having eliminated the aspects of legality and corruption we can proceed to the financial issues. This analysis is, in truth, extremely simple. By the way, in our analysis we have avoided all discussion as to whether the effects of the swap should be measured from the perspective of the Ministry of Finance or that of the Central Bank. For the common citizen, both form part of the same Venezuela.

Before the swap operation, Venezuela had an obligation on paper of US$ 4.441 billion. Interest incurred annually up to the year 2020 was to have been in the order of US$ 300 million. The debt was guaranteed by collateral that produced its own return which in turn, by the year 2020, should have been sufficient to amortize the principal of the debt.

After the swap operation, which in essence canceled the beforementioned debt, the collateral originally held was returned to Venezuela. This collateral, in the form of Zero Cupon US Treasury Bonds with a current value of approximately US$ 1.371 billion, has already or will obviously be sold in the open markets. In turn, Venezuela issued new debt instruments for US$ 4 billion maturing in the year 2027 and which create annual interest payments of US$ 370 million.

As a result then, the real difference between the “before” and “after”, and therefore the only valid basis for financial analysis, is the fact that Venezuela received US$ 1.317 billion in fresh funds. The cost of these funds will be US$ 70 million in additional interest (the difference between annual interest of US$ 300 million on the original debt and US$ 370 million on the new debt) that must be paid during 23 years until the year 2020, US$ 370 million in total interest to be paid during the seven years between the years 2021 and 2027, and finally, the capital of US$ 4 billion maturing in the year 2027. If all of this were rolled into a calculation as if the fresh funds were a new loan, the equivalent interest rate would be 8.8%.

In order to reach a final conclusion as to the validity of the swap, we must analyze whether the fresh funds are to be used to produce sufficient returns and/or social benefits over the 30 year period to merit the service of additional debt at 8.8% interest or if, on the contrary, and as has been tradition, the new debt simply adds to the country’s troubles.

Obviously, all this requires personal appreciation. In its analysis, the Government has used the basic premise that its management of the funds will produce a return of 10% per annum. The result, therefore, is positive. For those who believe that the government does not have a plan of action that will guarantee sufficient returns, the result is negative. Financial analysis shows that both could be right. It all depends which lens you look at it through, or in financial jargon, which discount rate is being used.

Legalizing preferential treatment

Article 13 of the Privatization Law contemplates preferential treatment for certain parties participating in the privatization processes. Among these is the clause that allows workers of privatized entities to acquire up to 20% of the shares, which should be considered normal from all points of view. The Law also establishes the possibility of awarding certain preference to “Entities domiciled in the Federal Entity in which the asset or activity to be privatized is located..”. This does not seem to make sense.

The idea that any entity, by the sole virtue of being domiciled in any given State, should be entitled to preferential treatment is not understandable. On top of being unconstitutional as far as it is discriminatory and violates economic freedom, it could seriously and adversely affect the Nation’s income from privatizations.

The preferential treatment referred to is described according to Article 14 of the Law as the “possibility of equaling the offer presented by the winning bidder in the privatization process”. In the case of the workers, this means that they must pay the same price as that tabled by the final investors.

In the case of the parties domiciled in the same Federal Entity as is the privatized asset and that are interested in acquiring 100% of the latter the story differs. The “preferential treatment” means that they can quietly fan themselves while watching the process from the sidelines, and if the price is right take control of the privatized asset at the expense of non-domiciled parties, without paying one Bolívar more and without the expense of going through a formal round of bidding. This does not seem rational or fair if you consider that this merely reduces the number of bidders who formally go through the usually tough bid preparation process (which normally tends to maximize the results of the bid) and that only non-domiciled interested parties must do so.

To maximize the results of a bid process, it is important to have the maximum number of bidders come to the table and that all of them have been sufficiently motivated. Only interested and motivated parties would agree to run the inherent risk that their bid could possibly be on the high side and result in a bad deal.

It is not easy to interest and motivate participation in a card game with marked cards. Unfortunately this can easily happen when preferential treatment is awarded the “local boys” to the detriment of foreign investors or Venezuelan investors from other States. On top of this, think of the negative effect on the credibility of the process should this “preferential treatment” be used by “foreign” entities to perpetrate fraud by establishing suitable “local” fronts.

The “preferential treatment” is not obligatory. The Law states that “Preferential rights may be awarded..”. The mere possibility of preferential treatment, however, should be a source of preoccupation and difficulty for, say, the Venezuelan Investment Fund. It would not be surprising if the Directors of the Fund are continually faced with the conflict created by their desire to comply with their duties of maximizing income generated by privatization on one hand (i.e. safeguarding national patrimony), and the continuous vociferation of local groups (whether bona-fide or Trojan), all vying for supposed preferential rights, on the other.

A formal legal complaint has been recently introduced in the corresponding courts by Drs. Fredrik Kurowski and Santiago Cabrera on behalf of a firm interested in the privatization of Fesilven. (Dr. Fredrik Kurowski is the brother of the undersigned and so more that simple coincidence must be acknowledged).

This legal process requests that, in the specific case of the privatization of Fesilven, no “preferential treatment” as discussed above be awarded by the Venezuelan Investment Fund. Obviously, this firm considers that only the clear definition of this situation prior to the actual bid date will allow them to be sufficiently motivated in order to proceed with the expensive due diligence and analysis required.

It would make sense to believe that other interested investors must harbor the same concerns, whether they are domiciled on another continent or simply on the other side of the Orinoco River.

Hopefully this legal process, initiated by an entity that is evidently demonstrating its confidence in the country’s development through its will to invest in the latter, produces rapid results. They would only be for the good of foreign and national investors, the managers of the privatization process, the Directors of the Venezuelan Investment Fund and, last but not least, of the country as a whole.

Pequiven, Sidor – double standard?

During the last few weeks, we have been informed about the national petrochemical industry’s (Pequiven) ambitious ten-year investment plan which calls for outlays of US$ 8.3 billion.

Investments for the first three years are estimated to be US$ 1.53 billion. During this same period, Pequiven’s cash flow is projected to be US$ 680 million. The question that immediately arises is how to fund the resulting deficit during the years 1998, 1999 and 2000 which comes to US$ 850 million. To begin with, a bridge loan is to be negotiated with its head office, PDVSA. In addition, the idea is to exonerate Pequiven from the debt limits imposed on it by the Organic Law of Public Credit.

The press notes that accompany the news describe the debate relative to whether this investment plan should be implemented with the participation of the private sector (evidently without giving up government control) or if, on the contrary, the Nation should reserve for itself the totality of the shares in Pequiven and fund this growth with debt and State funds.

This debate is depressing. It is a clear indication that we have made few inroads into the identification of a horizon for the future of our country. I’ll explain what I mean.

Why is it that while the country is trying with great difficulty to come to terms with the privatization process, for example Sidor, in other corners of the official bureaucracy, someone is brazenly developing investment plans for a whopping US$ 8.3 billion?

In the meantime, where is the Nation’s financial management? Pequiven’s projects admittedly will yield returns of between 9% and 12% in dollar terms. This seems like a meager result for project risk, specially when compared with the returns in excess of 9% being offered by the Republic to the 30-year bond holders, presumably without risk.

A few weeks ago, the press published what seemed to be a scolding by a government official, stating that since the flow of funds received from the National Government has stopped, “FIV’s teat has dried out”. This has made it impossible for the FIV to continue subsidizing the power sector in order to accelerate privatization of the latter, which simply “requires a sufficiently attractive tariff structure” (i.e., an expensive one).

Going back to the cash flow for the next three years of US$ 680 million that Pequiven maintains it will generate, the following questions arise: Who establishes the country’s investment priorities? Can the management of a State-owned company allocate the firm’s entire cash flow into eternity to perpetuate its growth? Is it possible that Pequiven’s investment plan, with its dubious returns, is more important that, for example, insuring power supply at reasonable cost for the Island of Margarita, or even more imperative, ensuring that the country’s youth receive decent physical and spiritual nourishment?

In spite of the multiple accolades awarded Venezuela by the International Monetary Fund (which frequently and justifiably are not understood the common citizen), there are rumors circulating that the IMF is slightly preoccupied with the disorganization in entities responsible for the management of the country’s economy, Cordiplan among them. In view of the apparent institutional vacuum in which Pequiven’s investment plan is being hatched, it is important that we join the IMF in its preoccupation.

And while we are at it, we should strive to avoid the tragic results which normally result when a public (or private) entity is allowed to fall back on bridge loans, “while the situation is being defined”. Unfortunately, we are much too inclined to allow transitory patches to quietly convert into permanent fixtures.

Hopefully, we will not have to ask the Central Government (as we have done so many times before) to assume an immense amount of Pequiven debt a few years down the line in order to facilitate its privatization. Hopefully, Pequiven’s investment plan will contribute heavily and positively to the country’s future development and well being, and that these uncomfortable feelings will be proven to be unjustified.

Energy in Venezuela

The local press has recently published articles referring to the presentation by the National Executive to the National Energy Commission of a document which will lay out the plans to finally eliminate Venezuela’s rentist mentality. This means, basically, that increases in tariffs and prices of fuel are around the corner.

It seems clear that this document, in addition to establishing the bases for justifying new sources of income for the central government, will once again promote the thesis that the principal rentists of Venezuelan society are the common citizens, not its politicians and governors.

The identity card debacle is still fresh in our minds. This is a classic example of parasitic behavior. The Government was ready to dish out a macro-investment of US$ 500 million to solve the problems with our national identification system rather than putting just a little bit of effort into developing realistic and sane administration of the latter.

One of the main arguments used in the aforementioned document has to do with efficient use of our natural resources. The gist of the matter is that we are basically to forego the comparative advantages given us by nature in the form of abundant oil, gas and hydroelectric energy. Faced with high utility bills, companies and citizens alike must learn how to optimize and make more efficient use of these resources. The prime example of inefficient use of energy the authors of the document could come up with is that the Venezuelan aluminum and steel industry uses three time the amount of energy used in Japan.

This logic does not necessarily make sense, since Venezuela has abundant energy resources while Japan does not. The mix of production inputs such as capital, raw material and labor are usually established according to the conditions in each country. Surely most people would much rather see our comparative advantages be biased in favor of cheap energy rather than on cheap wages. It seems we don’t see eye to eye with the current or previous Governments on this.

On top of this both the aluminum and the steel industry have been managed by the State. Could it not be possible that this supposed inefficiency in the use of energy resources be related more than anything else to poor government administration?

The final blow was the publication in the press (on the same day the news of the document broke) of the invitation to prequalify for the privatization process of the power generation system of the State of Nueva Esparta. The basic terms of the invitation clearly stipulates that 100% of the shares will be sold to the highest bidder, on a strictly cash basis and without financing by the Venezuelan State.

This undoubtedly means that the power generation system will be allocated to the candidate who guarantees maximum income for the Central Government (which basically means charging higher rates to insure a return) rather than to the bidder that offers the Margariteño the best service and the lowest tariffs. Again, as far as I can see, this is just another example of the parasitic fiscal planning that has cost Venezuela immense amounts of financial resources and time. Why should Margarita pay tariffs that are higher than the in the rest of the country and might even be higher that what Venezuela will charge Brazil and Colombia for our exports of electricity? This makes no sense either.

For example, the implications of drastic increases in electricity rates for the hotel industry are horrible. A hotel needs a supply of abundant and continuous energy and there are preciously few ways to increase efficiency unless there is an unlimited amount of capital available which, for example, would allow for the importation of efficient but costly airconditioners. Today, faced with depressed room rates due to a flood of state owned supply and the lack of steady transportation due to Viasa’s exit, Margarita’s tourism industry simply does not have these resources.

Finally, as a sweetener, the Government most generously promises to limit its fiscal appetite to levels established by export values. This implies that it is it’s intention to at least not take undue advantage of the monopolistic conditions that tend to skew prices. We will live, eternally gratified with the hope that our average Venezolano will not one day pay more for each kilowatt of power than the average citizen in Tokyo.

Guaranteed - 100% artificial

Several years ago, on a bottle which contained a liquid of dubious quality, I saw a promotional phrase displayed with obvious pride which spelled out “Guaranteed 100% Artificial”. I remember having thought of this slogan, which converted a negative argument into a positive one by a total and shameless acceptance of the it’s failings, as a marketing masterpiece.

However, that was many years ago. Since then, our politicians have provided several examples of the application of this marketing strategy, proving that they have taken its development to new heights. This week, I got the impression that I am being taken for a ride again.

Obviously, something must be done about Venezuela’s foreign debt. The point is, why do we have make such a jolly occasion out of a relatively sad affair, something like joining a funeral procession in New Orleans.

There has been much ado about the development of a new strategy for the management of this debt. Among the incredible advantages we have achieved, through the efforts of our financial magicians, the following have been readily bandied about:

“Above all, the country would manage to establish a yield curve similar to those in other countries which would allow for future issues of debt instruments....”. Splendid! Imagine, we would now have our very own yield curve! Just what the doctor ordered for Venezuela at this moment! There is no doubt in my mind that this would pave the way for new, and possibly indiscriminate, indebtedness.

“In addition, Venezuela would attain savings due to the elimination of the requirement for collateral as is the case for the Brady bonds already issued...”. Part of the external debt was guaranteed by low yielding bonds which in one way or another reduced the country’s net indebtedness. Once these collateral bonds are released, the government is free to use the funds for other “productive” expenses. This means that our national debt will be increased, bringing our net indebtedness up to the level of our gross indebtedness.

The new bond issue, which if successful could top US$ 1 billion, would carry an estimated spread over the US Treasury Bill rate of “only” 3.5%. The former is today approximately 6.5%, which bring the total annual rate to about 10%. This should technically be marvelous for a country “which has in the past had to issue Brady Bonds which carried interest rates with spreads of up to 6.5% over the US Treasury Bill rates”. I’m not about to discuss the cost to the Nation of previous issues. May those responsible for these transactions defend themselves. One thing is a 6.5% spread (if this is indeed the case, which I doubt) established for instruments with relatively short maturities. Another, totally different, is tying into a 3.5% spread over a whopping 30-year period. The favorite tool used to calculate the “savings” for the Nation is based on analysis of the present value of money, i.e. the value of a dollar today versus the value of a dollar tomorrow. Beware, these are the very same tools that were used to argue Venezuela into the current debt crisis in the first place.

A simple initial calculation would indicate that Venezuela would undertake interest payments over a 30 year period of US$ 1.085 billion in excess of what the United States would pay for a similar US$ 1 billion issue. If we were to extend this calculation to include the cost of accumulated interest at the full 10% per annum, the value of this interest payment differential would explode to US$ 6.368 billion. 

Politicians used to blame international bankers for our high levels of debt. One President even stated that he had been mislead by them. Today international banks are the men in the white hats. On the other hand, bank analysts consider Venezuela worthless one day and worth billions for 30 years the next. Seems like nobody can make up his mind.

We have been told that another advantage of this new financial strategy is that the country’s debt profile will be changed. The new 30-year bond issue will give future budgets some “breathing room”. This means the pressure to reduce government spending and streamline its bureaucracy will have been effectively trashed. I can almost hear the following dialogue in the back rooms of several ministries: “Well boys, enough of the critiques of our sons who lament not being able to go to Disney World or to a University abroad like we did because we have misspent our oil income and, on top of it all, have increased the country’s indebtedness. Let’s change the signals! We’ll postpone the payment of our external debt and lay it square on the backs of our grandchildren. You know what they say, “if it’s the same we are not cheating” (“lo que es igual no es trampa”).

Finally, I wish to make my own contribution, however small and humble, to the science of successful marketing of dubious results. The next time there is a general strike in Venezuela, I suggest the headlines should read: “Bravo! This strike is a healthy indication of social and economic development in Venezuela”. We all know that only well-developed countries such as France, England and the United States can afford a nation-wide strike.

A good lesson on how not to win at tourism

Tourism on our beautiful Island of Margarita has been harshly battered over the last few months. There are many factors that contribute to this situation, but I would like to specifically shed light on three of them since these have a common denominator: The problems could have been solved by more coherent official intervention.

The first factor refers to the administration of hotels by the official entities responsible for the management of assets recuperated during the recent financial sector crisis. The concentration of the supply side of the equation in the hands of a few players, without apparently requiring a minimum return on occupied rooms, has totally altered the structure of the hotel industry on the Island. 

As a result, Margarita has today abandoned the possibility of applying a sophisticated marketing strategy so aptly illustrated by the slogan “The Best Kept Secret in The Caribbean”. Instead, it has been introduced to the world of cheap-package tourism based on three elements, low rates, lower rates and lowest rates.

This strategy is outright dense In an petroleum-based nation like ours, where the local currency tends to revalue, making it difficult to compete. This is occurring today; we have had a relatively stable exchange rate for the last year while local inflation has burned underneath. There are islands in the Caribbean with less attractive infrastructure and landscapes that are applying tariff structures five or ten times higher than those actually in force in Margarita.

Having seen the immense dedication Pro-Competencia gave the Pepsi-Coca Cola fiasco, a case of obvious magnitude and importance but in which the dispute was between a few shareholders, it surprises me no end that they have not found it necessary to intervene in the hotel market in Margarita. The subtle control the government exerts over such a high percentage of hotel rooms definitely affects free competition. The sheer fact that it has placed rooms on the market at rates that barely cover variable costs, without requiring either returns or recovery of capital investment, raises the possibility of an anti-dumping suit.

The government could easily have avoided this sad situation should it have insured that the management contracts were awarded to various hotel operators and, among other things, required a return on each room occupancy. The fact is that the market has been seriously damaged and as a result the State has less possibilities of recuperating its investments.

The second problem which could have been avoided by timely and intelligent government intervention, was caused by the cancellation of Viasa’s flights to Margarita. Routine flights between Europe and Margarita fed hotel room demand and allowed tourists to travel directly, and to then pick and choose among hotels at their whim.

Charter flights, even though very welcome, have the disadvantage of transferring the act of selecting hotel accommodation in the country of origin. In this sense, the foreign tour operator is in a win-win situation as far as tariff negotiations is concerned. In other words, the lion’s share of the package paid by the tourist is allocated to the air-fare while little is left to cover the hotel room.

It is inconceivable that, knowing the vital importance of these flights to Margarita, the government did not ensure the immediate entry of other carriers to substitute Viasa’s canceled flights from Europe to Margarita. This can only be explained in terms of indolence and/or incapacity.

Finally, I’d like to comment on the issue of energy supply to the Island. There is no doubt that lack of regular supply of electricity seriously affects the tourism industry anywhere. I’m sure that, given the right type governmental intervention, the Island would be benefitting from an abundant supply of energy.

In this sense, it is surprising that resources were not made available to Edelca to finance the installation of an additional transmission line to the Island. That would allow Margarita access to Venezuela’s vast availability of hydroelectric power.

I don’t understand what is holding officials back from recuperating the tourism industry in our beloved Margarita. It seems that the entire official sector has dedicated all its energy to the debate on casinos and bingos. When will they realize that the development of tourism is not merely a game!

Per Kurowski

It just must get smaller

Last week, the Minister of Finance declared that “there will be no modification to the sales tax simply to comply with the requests of the business community”. Immediately thereafter, he stated that “when tax evasion is reduced ... we could think of reducing the percentage of the sales tax”. There is no doubt that the official sector has become expert at applying the “divide and conquer” formula.

The desire to reduce sales tax levels is completely normal and common, typical of tax payers world-wide. The reduction of sales tax levels doesn’t only benefit the business community. On the contrary, given the progressive nature of this tax, the salaried workers are normally the ones who benefit most from this reduction. In this context, to divide Venezuelans into businessmen on one side and workers on the other seems out of place.

Another such “division” is between income earners that actually pay their taxes and those that don’t. This would imply that the payment of taxes in Venezuela is simply the result of individual social responsibility and not as in other countries, the result of the existence of an efficient tax collection entity which is perceived as severe but just.

Normally, a State would not even have the right to apply new taxes in the face of such a deplorably poor and inefficient collection process. If it does, instead of complying with its duty as promoter of justice, it is merely promoting just the opposite. Evidently, there is a dose of truth as far as its final implication is concerned, when the Minister declares that there is a possibility that our taxes will be reduced if and when our neighbor pays his. This, however, does not imply that we must become the collector of our neighbor’s taxes. This function is still exclusively in the hands of the States.

This discussion, however, is totally irrelevant in Venezuela. Since the State enjoys unrestricted use of “our” oil income which, by the way, is obtained through the use of a fiscal collection system that is so efficient that we don’t even notice it, it should not collect one more cent. The Venezuelan State is so immense for a country with a population of 20 million, that it is difficult for even the shrewdest of politicians to hide it.

These declarations, which point toward the probable lack of fiscal pressure in Venezuela, were written in the midst of the negotiation and signing of the centralized public administration labor contract framework which will benefit seven hundred and fifty (750,000) workers. For those who worry about the State’s capacity to efficiently manage such a large public sector, an olive branch is offered; the labor contract upholds advancement by merit and awards benefits for individual achievement and for fulfillment of duties as a public servant.

In reality, these comments are simply variations of old and well-known themes. Subjecting this article’s readers to another version of the Venezuelan tragedy is not meant to be an expression of refined sadism, but is unfortunately the result of the identification of new threats that block the development of solid public opinion that would demand, for the benefit of all, a real reduction in the size of the Venezuelan State.

One of these threats comes from international multilateral entities. After much insistence on the necessity of reducing the role of the State in favor of the private sector, the message has now been increasingly oriented towards the need to improve the efficiency of the state. That is to say, there seems to be no need to reduce the size of the State. What it should be, is more efficient. This position, which is obviously logical when applied to the efficiency of a State which has already been reduced in size, will unfortunately simply be an excuse for our pro-bureaucracy politicians to maintain, or even increase, the size of our public sector.

The second threat is endogenous, much more subtle and therefore much more dangerous. The theory that the problems facing the administration of the public sector in Venezuela are based not on its size but on the will, capacity and affection for the country of its leaders has resurfaced as an issue around one particular pre-candidacy for the next presidential elections. This is evidently based in turn on this official’s excellent and admirable administrative achievements at a local level. We are again beginning to feel the first consequences when debates about the qualities of the pre-candidates bring up discussion about the merits of having solid political party administration experience versus the merits of political independence based on administrative capacity and personal integrity.

For someone convinced of the fact that even Bill Gates, reborn as Simón Bolívar (in other words, Mandrake The Magician) could not efficiently manage a country in which the State is as omnipresent as it is in Venezuela in the long run, these new theories are undoubtedly distressing.

Personally, and in order to be able to give unconditional support, I will have to continue my search for a candidate with a less developed ego who recognizes that the future of our beloved country depends more on the dismantling of official bureaucracy than on its great will and capacity for work.

Per Kurowski

 

 

Dreams and visions for Venezuela´s year 2000

To only think of the possibility that my three pretty, intelligent daughters must, together with their other Venezuelan companions, cross the threshold of the next century holding hands with any of the current options we have for the next presidential election, creates a lump in my throat. By saying this I do not wish to imply that none of these options are based on efficient and well meaning people. It’s just that until now, none of them have managed to present an inspiring vision or dream.

This country is in dire need of dreams and visions of the future. Without them, we will not be able to stimulate neither the efforts nor the sacrifices required to elevate Venezuela into the ranks of the truly developed nations. Evidently, there are no perfect prescriptions to achieve this development, but I do remember that an old Chinese proverb recommends that we aim for the sky, since even if we don’t reach it, we will surely have achieved more that if we had aimed at a lower target.

Let’s analyze an example of a dream. In Malaysia, a country with a population of 20 million living in an area one third the size of Venezuela, authorities recently launched an initiative to create an information technology park at an estimated cost of US$ 20 billion. This park, located somewhere between the capital city of Kuala Lumpur and the international airport on a plot of land of about 50 square kilometers, will consist of two new cities, the installation of fiber optic communications networks of immense capacity and the promise to develop both government as well as a series of laws designed for the management of this cybernetic reality - basically a cybernetic bubble.

Some of the main technological firms of the world have been invited to occupy this park and will be incentivated to participate in a series of futuristic projects such as the creation of “intelligent schools”, teledirected medicine and the design of electronic procedures that will eliminate the use of paper in government.

Until now, based on benefits such as fiscal incentives, protection of intellectual property and guaranteed freedom from censure (something extremely important in the world of Internet), a number of important firms have shown serious interest in joining this project.

Without making judgment as to the validity or not of this Malaysian plan, Venezuela definitely has nothing even similar. If we were to analyze the current local supply of dreams and visions, we would find that we have a depressingly poor selection, headed by the possibility of an intelligent identification system with cédulas with 4K memory chips.

Even in the case of the much heralded and promised train to Cúa, the latter’s recent rebirth is based on publicity calling it a “solution to Caracas’ problems” rather than the initiation of development and progress. In dreams of previous times, when trains criss-crossed the entire country, plans for a train station in Cúa probably didn’t even exist.

Audacious plans, for example the use of the resources obtained during the recent bids in the oil patch to equip four million students with modern computers, offering them total access to information and opening the possibility of a real educational and social revolution, are schemes that are not even being considered as possibilities.

On the contrary, these resources from the oil aperture, obtained by sacking the future flows that really belong to our children and grandchildren, will most probably be used to satisfy and cover the labor costs of a bloated bureaucracy, which, maybe anticipating the Malaysian experiment, seems to have also eliminated the use of paper, even when not by design but by sheer logistical incapacity. What egghead could be happy when confronted by the fact that the international reserves of the Central Bank have now reached US$ 18 billion when the country’s real reserves, its youth, is deprived and undernourished, both physically as well as mentally.

As a nation, I consider that we all have the immediate responsibility to develop plans and visions for the future that would provide not only a sense of direction but that would also satisfy the need for illusion and dream so proper of youth. We must expect and more importantly, require, from our leaders the capacity to understand these plans and visions, to assimilate them and to convert them to reality.

I hope to God that when December 31st, 1999 rolls around, I will not have to announce to my daughters that we will be moving to a successful park in Malaysia. I hope to God that the illusions twinkling in their eyes will include Venezuela.

Just how low can salaries get in Venezuela?

During a trip we recently took to a Caribbean island, I saw a local salesman selling arts and crafts supposedly typical to that island. One of his products was a t-shirt that boldly stated “Different Island - Same Sh..”. This same message could easily be applied to the economic policies implemented in our countries. These policies seem to be based on an economic Hit Parade list rather than on a profound analysis of the problems at hand. This can be good or bad.

It can be good if it forces our authorities to apply rational economic measures in order to avoid the indignity of looking out of place and time in the televised debates that have become so popular in spite of their boring economic themes. It is bad if it implies trying to adapt measures that may be rational in one country, but not in another.

Fifteen years ago, Venezuela was a country that attracted foreign investment by flaunting its sustainable economic advantages. Among these was cheap gasoline, electricity and fertilizers. Additionally, internal production was protected by a series of import duties. This compensated for the fact that the country’s oil income allowed it to maintain an exchange rate that rendered the non-oil sector uncompetitive.

Today, having applied a large part of the economic recipes that are currently en vogue, we find that the only sustainable economic advantage which remains is a rock bottom salary level. This definitely does not seem correct.

On which strange theory is the government basing its policy of raising the price of gasoline sold in the local market to international levels while at the same time paying doctors, teachers and other professionals’ salaries that are only a fraction of what they would receive elsewhere? Should the country really need to introduce certain artificial measures to maintain its economy’s competitivity levels up to par, it would be much easier to justify applying subsidies to fertilizers than to exact the sweat of our farm workers by paying miserable salaries and benefits.

Obviously, this note does not imply that we should be subsidizing inefficiency or that we should be paying salaries to those that do not show up for work. Those that do not work evidently do not deserve a salary either in New York, Tokyo or Caracas. On the other hand, those that do work deserve salaries that are reasonable in New York, Tokyo and Caracas.

When a public sector worker is competent and performs his or her duties with responsibility while receiving a fraction of the pay that would be reasonable, he or she is making a contribution to the state that is exactly equivalent to the payment of taxes. As is the custom, this tax payment will never be accounted for in our so-called fiscal paradise.

The difficult problem Venezuela is currently suffering through with regards to labor and salary structures, and which has resulted in salary levels comparable to poor countries rather than to an oil rich nation, is clearly a product of the failure to properly select and adapt an economic policy.

I attribute this failure to two basic factors. The first is that while the selection of an economic plan was aimed at strengthening the private sector, the only parts of this plan that were actually implemented were those that increased the state’s income. The magic used to achieve this was the ability to effectively disguise planning officials armed with a soviet style centralist philosophy in a neoliberal skin.

The second factor is that due to a cyclical weakness of the oil sector, the need to adjust any measures to the basic reality that we are indeed an oil country was blithely ignored. As an example of this, you may remember that some experts managed to find a comparative sustainable advantage in the cultivation of apples in Venezuela.

The reality is that in spite of the fact that our politicians have hawked a series of agendas, the country does not have a coherent model that can guide it’s development and guarantee workers, handymen and professionals a reasonable income in a globalized world. Obviously, the only way to develop such a model is by means of a unified effort by the main players in our economy, that is, the business and labor sectors. The first logical step is to avoid the traps set by the party guilty of having set them against each other in the first place.

In the absence of other subsidies and advantages in Venezuela, only salary levels remain as a means of attracting productive investment that can offer Venezuelans dignified occupation. Given the inefficiencies of the state such as bad infrastructure and the lack of physical, judicial and social security, these would most likely have to be offset by accepting salaries that wouldn’t cover the basic requirements of a Tibetan monk on a vegetarian diet.