Democracy a la venezolana

At the moment, everything is black or white. It is either "yes" or "no". There is no possibility for a "yes plus" or a "no minus". Normally, when hesitant, one is the target of all type of efforts to win you over. Currently, one is ignored and irrevocably branded as an enemy by both sides

In these circumstances, to put one’s head into today’s debate about the constitution is risky unless this is done firmly within the traditional Venezuelan concept of neither one, nor the other, but just the contrary.

At an interesting conference by Alberto Rial on competivity in times of crisis which I attended, the eternal conflict was raised once again about how to straighten out our path to the future. In this sense, in order to plot a proper course, which we wish to do, it would be necessary to leave by the wayside a series of cultural values which could lead to the possibility of becoming irreversible Swiss, which we do not wish to do.

One of the few sectors that has showed incredible vitality in these times of economic recession is the lottery. It has now become the most important capital market in the country, to the point that it has probably also become the nation’s biggest creator of jobs after the consolidated public sector.

In order to rise to the occasion and to find democratic solutions that fit within the framework of our reality and our national values, the following occurs to me:

The Parliamentary Lottery Law

Art. 1 – Of Congress. Congress should be composed of 200 members, of whom 40, whose five-year term expires, should be retired every year on the 19th of April. A new group of 40 would be elected to replace them.

Art. 2 – Of the Election of Members of Congress. The election of the new members of Congress will be done by way of a lottery among all Venezuelans who have achieved an academic degree above Bachillerato (High School). They must also have expressed their desire to participate and to serve the Nation as a Member of Congress and have purchased a ticket worth Bs. 25,000.

Since some people may question the seriousness of this proposal, I would like to highlight some of its more favorable aspects.

Anyone that has studied finance should remember the story of the blindman throwing darts against a board on which are pasted the names of all stocks traded on Wall Street. By investing on the first 100 he hits, he has a much better chance of striking it rich, than someone who spends even 1$ looking for the sage advice of a banker on share selection.

None of the Members of Congress that are selected will have had to invest one single minute, or dime, in the task of cementing those relationships of dependence and conflict of interest that induce action by authorities that so often harm national interest.

The limited duration of Congress (five years), without a real chance of hitting the lottery again, will stimulate the members to do the best they can during their tenure. On top of this, the cost of the ticket to participate will cover the cost of the process.

If we did this, we would undoubtedly have much better representation of the country’s good intentions. Evidently, as in every average, many would be useless. This is most common today. However, those that do cut the mustard, would be able to work in a much healthier environment.

With today’s proposed system, it is perfectly possible to insure a truly random selection in which the only innocent hand is God's.

Finally, much to my sorrow, I realize that the prospects that this proposal will be implemented are very slim. The reason for this is that in many ways, democracy has become a business, and in this sense all those participating, such as fund raisers, bus drivers taking people to meetings, political analysts, publicity firms will oppose the elimination of the traditional electoral system.

Of course, I propose we use the lottery method only in those cases where the results mean we can and must live with an average. In the case of the President, for example, in which only one person is finally elected, there is definite advantage in going the traditional, straightforward election route.

When I analyze the advantages of the lottery system, as any proud father would do, I am convinced that its democratic characteristics are such that there must be more than one Swiss national who must be thinking about the possibility of applying for Venezuelan citizenship. Irreversibly.

The world’s real petro-pirates!

This week's column is dedicated to those meetings up in Seattle this week.

When, as a citizen of an oil producing country, Venezuela, I see oil being valued by the market at US$ 150, and we only receive about US$ 20, I believe that I have the right to feel a bit let down by all those who promised us a rose garden if we duly signed up on all the international commercial agreements peddled by GATT; and lately by the World Trade Organization WTO. What do I mean? 

From one barrel of oil, one can approximately and simultaneously obtain 84 liters of gasoline, 12 of jet fuel, 36 of gas oil, 16 of lubricants and 12 of heavy residues. 

In Britain today, educated consumers are paying (voluntarily and out of their own pockets) US$ 1.38 per liter of gasoline (sorry, petrol) using the traditional way of establishing a product's value. 

Even if we just consider the gasoline, we obtain a value of about US$ 116 per barrel of oil and then by adding the rest of the products, we should be close to US$ 150 since refining and distribution costs are fairly small. 

I am well aware that the value US$ 150 is achieved by the taxman forcing himself in at the point of sale of gasoline, as an extremely expensive middleman, keeping 85% of the gross. But, was this not exactly the things that world governments agreed not to do, in order to foster free trade and growth ... and that which we believed when we signed up on all those reductions of protectionist duties, accepting to lend the developed world a hand, collecting, their pretensions of royalties for intellectual property rights? 

Today's result is therefore that, when an oil producing country is selling it's non-renewable and scarce resource to the world, it's only getting a fraction of the real value. 

The hurt and pain I feel at seeing so much poverty in my country, that could be alleviated by just a little bit more of justice by the developed consumer countries themselves, is made worse by thus adding salt to the wound.

Their bankers sold us on the idea, in the mid-seventies, that oil was going to increase in value, and therefore that we could calmly take on the responsibility for servicing a huge country debt ... they never told us that all the increase in the value of oil, which has actually occurred since then, was going to be confiscated by their taxmen.

We producers were, and still are, the remaining scapegoat for all inflationary pressures derived from any price increase in gasoline and other derivatives ... even when these were just the result of higher taxes.

We oil producers were, and still are, branded as the most wanted criminal in environmental issues when, in fact, we are the ones paying 100% of the cost of all the protection plans that through their taxes reduce world demand for oil.

Today we hear of even higher future oil taxes when Germany (for example) announces a plan of annual increases as a way to reduce their workers' social security payments and discriminate against us by not taxing coal and other energy sources.

For what it's worth, I would like to remind the developed world in good conscience that, when you're giving generous assistance to the under-developed world, much of it is with money properly belonging to the oil producing nations. 

When I see the suffering of my more destitute fellow countrymen, I blame myself, I blame all those lousy governments we have had ... but I also rightly blame the taxmen in the consumer countries, who are the true petro-pirates of the world.

http://petropolitan.blogspot.com/1999/12/worlds-real-petro-pirates.html

Today, let us talk about the bribers

On the 26th of October, Transparency International, TI, published its annual index ranking the Perception of Corruption that exists of various nations. As usual, Venezuela was somewhere down at the bottom of the list. However, for the first time, TI also published an index related to the Payers of Bribes (BPI).

This index ranks the 19 countries with most exports and is based on the perception of how corporations from those countries use bribes to generate business. 

A professional firm interviewed 770 high level executives in 14 emerging markets with geographically diversified imports. Venezuela was not included among the interviewed parties, since most of its imports come from the United States.

The executives interviewed belonged to large firms, banks, chambers of commerce, auditing firms and law firms. A result of 10 points means no bribes are used while 0 means, naturally, that bribing is used as a norm. The countries with the highest ranking were Sweden (8.3), Australia and Canada (8.1) and those at the bottom of the ranking were China (3.1), South Korea (3.4) and Taiwan (3.5). 

The ranking of some of our main trading partners were England (7.2), Germany and the United States tied at (6.2), Spain (5.3), France (5.2) and Italy (3.7). 

Just like the Corruption Index, the Briber’s Index will create much argument and rebuttal, especially from those that were not favored by their ranking within the index. 

Among the traditional arguments, we are sure to find that many will maintain that the index is not really objective, but is really all about perception and that therefore, before being an ethical problem, it is really just a problem of the image. 

We will perhaps also hear technologically inspired arguments, such as accusing the better-positioned countries of using advanced versions of corruption, something like anti-radar, "stealth" technology.

I have often seen how citizens of many developed countries shed their shackles and truly enjoy the tourist (and humanistic) experience of trying to avoid a traffic ticket by negotiating avidly with the particular public servant that has accosted them. 

Also in other cases many people are better behaved when they are away that home. We see it over and over again when Venezuelans, who are notorious tax evaders, travel overseas and become exemplary citizens in every sense. 

Based on the above, one of the things that interests me is to analyze if, when the two indexes are compared side by side, there is a significant differences between the outcome.

With the exception of 5 countries, all those that have been ranked in both indexes, are basically in the same relative position. As it were, Sweden is first in both indexes while China is last.

The two main exceptions to this rule are Singapore which, in this group of 19, appears as 3rd in terms of the least corrupt nations but as number 11 in the Bribers Index and Belgium which, contrary to Singapore, ranks as number 15 of the least corrupt nations, but comes out a lot better among the Bribers, having been ranked as number 8.

In lesser degrees, Taiwan is in a situation similar to Singapore, while Austria and Australia accompany Belgium.

The simple translation would tell us that Singapore and Taiwan behave relatively well at home, but goes haywire and are a menace when abroad. 

I am no expert in these matters and therefore allow myself to suppose that this is due to a combination of a commercially aggressive style and oriental discipline. I can very well imagine that they respect everything at home and compete with anything overseas.

Without a doubt, both countries are formidable competitors in foreign trade, and one would entreat the OECD to insure they are also enrolled among those countries that have recently signed the Anti-Corruption agreement.

But how about those Belgians, Austrians and Australians? Although developed, they seem to be less behaved  Surprisingly they seen to be more behaved inside than out. I am truly surprised.

Could this be the above mentioned "stealth" technology at work? Could it be that they on purpose wish to be perceived as corrupt at home, in order to enhance their human nature? Could it be that they simply have decided to invest in a change of their image abroad, and that this was ultimately successful?

We shall see what gives next year. Investigative technology requires that you explain the unexplainable.

Vanity and the nation's economy

Last week in this column I enumerated the advantages of indexes and rankings as a means of synthesizing today’s overabundance of information. I also mentioned that it would be good to have access to an index ranking compliance with commercial treaties, especially those pertaining to agriculture. 

The reason for this is that in my opinion Venezuela, in this area as well as in others, is much more compliant than the world that surrounds it. This should not be forgotten by our international negotiating teams that usually are more interested in the applause of the outside world than in ours.

A few days later, I received an e-mail saying: “You and your indexes. Take this one. Attached you will find one published by ABCNews.com which states that without a doubt, Venezuelans are by a long shot the vainest people in the world.” The index reveals that 65% of Venezuelan women and 47% of Venezuelan men say they “think about what they look like all the time”. In Germany, for example, virtually no one confesses to this.

From the tone of the e-mail, I suppose that the sender considered the high ranking achieved by Venezuela in this index as being unfavorable, and I also suppose that he would like me to share to some degree a feeling of guilt for having raised the matter of indexes in the first place. Well, I DON'T!

Intuitively, I am pleased to be part of a country in which my compatriots are worried about their appearance. 

The study, which places Russian women and Mexicans of both sexes a somewhat distant second, establishes the global average at 23% for women and 18% for men. It also mentions those places where the people “never thinks about how they look”. In India, 33% of the population never worry about looks, followed by Malaysia (25%) and Spain (22%).

I think we can come to certain conclusions from this index which could be of great importance, even for the development of the country. The fact that our society holds dear to the heart a feeling of vanity over and above levels in other countries, certainly differentiates us from the rest. It should be analyzed within the context of comparative advantages.

The dedication of someone like Osmel Sousa to events like the Miss Venezuela beauty contest has elevated our country to the apex of world perception of the beauty of Venezuelan women. By using the word “perception”, I do not intend to question the objective beauty of our women (God forbid, I have four of them at home!). I wish to make a point of the importance of the general perception per se. This, by the way, renders even the less pretty Venezuelans beautiful.

With the ranking of vanity and the results of the Miss Venezuela pageant we can put together an input-output matrix which could shed light on interesting economic possibilities in the area of care and improvement of appearance. Let us see how this would work. 

Any country culturally geared towards taking care of physical appearance for centuries, that has managed to develop methods and formulas that have been time tested and proven and have been transmitted live to the rest of the world, has in its hands a tool to attract tourism that other countries would give one arm and half the other to have.

Venezuela, being an oil exporting nation, has its hard currency requirements covered as far as it commercial balance of payments is concerned. 

On the other side of the coin we find that our oil income keeps the Bolivar overvalued and therefore makes it increasingly difficult to develop activities that generate employment and are competitive enough so as to not require subsidies or protection.

I have frequently explained this using the simile that there is no place in Venezuela for textile industry that produces cheap clothing but that there is plenty of room for activities that imply more value added. 

When we stimulate micro-businesses with financial assistance to purchase sewing machines, we must remember that what we really wish to promote is the development of designers and not necessarily seamstresses.

Within this line of reasoning, there is no doubt that the area of personal care is one that conforms to the basic requirements. It is a service area that can generate a great deal of employment and which allows for high value added.

I promptly pushed the “reply” icon on my computer and sent off the following message:

"Thanks for having sent me the Vanity Index. I think there must be certain mistakes in the Index since I believe that the figures for Venezuela are too low. In Venezuela, I would say that 100% of the population worries about how they look." 

"While we talk about appearances, you should see the results we have achieved with a treatment supervised by the stylist school of Caracas which includes massages in the turbulent waters of the Caroní river and scrubbing with powerful and mystic Orinoco algae, while listening to the sensual rhythm of the beating of the herons' wings and drinking a skin reconstituent, malt based beverage. 

And all this under the indiscrete tropical moon, for only US$ 1,680 per day!

PS. I used this piece in my Voice and Noise of 2006

https://ourcaribbean.blogspot.com/2007/06/vanity-and-nations-economy.html

Corrupter and corruptee

Once again, next week, Transparency International (TI) will publish its annual index on how the world perceives corruption in the various countries included in the ranking. It is not necessary to mention that our country has never been able to occupy a reasonable placing within this ranking, although there are some expectations that we could achieve advances after putting into law a new Constitution, in year 2000 or 2001. 

But it takes two to tango! This year, by public acclaim, they will also publish an index that represents the other side of the coin. This index will rank the corrupters and will be denominated the Bribe Payer’s Index. I believe this will raise blood pressure levels in many countries that normally celebrate their high ranking in the Corruption Index.

Evidently, no one believes that the world will ever manage to totally eradicate corruption. In a sense, I hope it doesn’t, since this could mean the elimination of something that is an integral part of humanity, something like reducing human bio-diversity. However, I do believe that there are many means out there with which we can minimize the pernicious consequences of corruption and in this respect, no one needs it more than the developing nations.

Among the instruments at hand we must not underestimate the impact of these rankings. The modern world sees in them a comfortable, although probably somewhat simplistic, way of synthesizing today’s overabundance of information.

I believe the new TI index is appropriate and will be useful among other aspects in minimizing the effects caused by looking at only one side of the problem. For instance, until just recently, in one of those countries that normally come out smelling like roses from the corruption ranking, it was standard and legal practice to deduct for income tax purposes bribes and “payments” if and when the same are a “normal customary practice” in the country in which they were actually made. In this respect there was the very disturbing possibility that The Corruption Index itself could possibly promote corruption by evidencing a “normal customary practice” of bribing. Hopefully tax deductibility of bribes should perhaps be more difficult to justify if we have an index that ranks corrupters as well.

About a year ago and as I surfed through TI’s web site, I ran into a commentary made by a reader which literally said something like: ‘As a President of an international company, I find your corruption index of various countries to be a very helpful tool in my everyday business dealings”. In the face of such cynicism I researched a bit more who this person and company were and, lo and behold, they did not really have a relevant position in the global market after all.

By the way and on a quite separate issue, it is incredibly how frequent it is to find web sites put up by some small-time entrepreneur and who, even though his dealings are strictly local (like the proverbial corner barbershop), evidently believes that with it, he has acquired global presence. The same could probably happens to writers of articles, like myself, and in this respect The Web must surely be the napoleonic complex’s best ally.

But coming back to the matter at hand. It is evident that anyone that dares to say that the Corruption Index is a ‘helpful tool in my everyday business dealings’ should be negatively ranked in the Bribe Payer’s Index. Actually, when we analyze civilization, or at least its various religions, we find that in general terms they consider that he who tempts (a role usually assigned to the Devil) is considered to sin more severely than he who succumbs to temptation does. It is surprising that these contradictions have not come to light earlier. We welcome them.

And while we are at it. I would much appreciate it if TI, or any other organization with similar status and credibility, could develop an index that encompasses the matter of compliance with commercial treaties. 

For example, I am sure that if we were to generate an index that reflects compliance with agreements signed on agricultural policy issues, Venezuela would come out towards the top while those countries that today chastise us would be among the least compliant. Indexes like these would be very useful to small countries like Venezuela. They would show them how to navigate in a reasonable way in the very complex world of international commercial treaties.

The Petropolitan Manifest

  The Petropolitan Manifest

We are an oil country, but one day we will stop being one. Interpreting that “sowing oil” means having to move in advance from one economy to another, applying an economic model and developing economic activities unrelated to an oil reality, is wrong and constitutes the perfect excuse for today's apathy.

 

This month, in England, with oil at more than US$ 20 per barrel, the consumer must pay Bs. 820 per liter of normal gasoline, of which the distributor receives Bs. 31, the producer, who sacrifices a non-renewable asset, obtains a paltry Bs. 117, while the English Treasury charges confiscatory taxes of Bs. 672. In fact, what is charged by the Treasury, when compared with what is received by the producer, indicates the existence of something similar to a commercial tariff that around 600%.

 

The same happens in Germany, Japan, Spain, etc. The taxes that consuming countries apply to petroleum products imply for them only a redistribution of their national income, while, due to their negative effects on the demand and prices of petroleum, they cause a real reduction in the national income of the producing countries.

 

The obscene levels at which these taxes are today in most of the world, with the threat of becoming higher every day, constitute a trade war declared against the economic interests of Venezuela. The fact that our country does not protest about this, just as it did not protest about the ban on the use of Orimulsion in Florida, is indicative of a lack of will and national conscience, without which, with or without oil, we are nothing.

 

The historical indifference of the authorities (Government and PDVSA) towards the aforementioned problem led to the formation of the PETROPOLITAN movement. Its activities are nourished by a series of beliefs, not inscribed on stones, but based on the continuous interpretation that its members make of the best interests of the country, which we summarize below:

 

We Petropolitans believe that the true “sowing of oil” must mean the sowing, in the hearts of Venezuelans, of the will to defend, with pride and responsibility, their real interests, which in essence are and will continue to be so for several decades, his oil interests.

 

1. We Petropolitans believe that the true “sowing of oil” must mean the sowing, in the hearts of Venezuelans, of the will to defend, with pride and responsibility, their real interests, which in essence are and will continue to be so for several decades, his oil interests.

 

2. The value of a good is calculated based on the price that the final consumer is willing to pay. Hence, the difference between what the world consumer of gasoline pays today and the little that the producer receives shows, within the framework of the principles of free trade, the presence of a scam.

 

3. Certain that there is strength in unity and even more so in a globalized world, we support Venezuela's permanence in OPEC. However, we demand that that organization develop new and better defenses of its interests. Not fighting taxes and limiting production only guarantees its extinction.

 

4. We object to any inference to an absolute and necessary relationship between oil revenues and a wasteful economic model. The results obtained to date have no relationship with a rentier model. If we had applied a true and responsible rentierism, living off a portion of the income and not the capital, the story would be different and Venezuela would be in a very envious economic situation.

 

5. We reject any derogatory expression, such as “devil's excrement”, which hinders the emergence of a necessary feeling of respect and gratitude for oil, without which it is impossible to manage our wealth for the good of future generations.

 

6. Since we know that oil is a non-renewable asset of the country, we believe that the defense of its price and value should be the main objective of our industry and we reject the concept of a maximization of current income, which is based on the maximize sales volumes.

 

7. Even though their fiscal purpose is evident, oil taxes are hidden behind the cloak of "green protectionism." At the same time that we affirm a commitment to the defense of the environment, we reject, as unfair, that the producing countries must pay 100% of their cost.

 

8. Oil certainly doesn't create many jobs. However, we must avoid falling into schizophrenic models where the country, being an oil producer, deals with the anguish of not being one, making mistakes whose impact on the generation of stable employment is even more negative.

 

9. The results of the international agreements signed by the country during the last decades do not compensate the cost of having to respect the sources of income of the developed world, such as trademarks and patents, without them respecting our right to obtain the majority of what corresponds to the valuation of our oil asset.

 

10. In the defense of oil, it is not possible to replace the importance of a solid will of the country, with the hiring of international advice and lobbying.

 

11. There are Patriots willing to give their lives in the event that a foreign entity enters our country, in order to extract barrels of oil. Oil taxes imposed by the consuming world are, in essence, a similar invasion. It is the responsibility of the Petropolitan to report this.

http://petropolitan.blogspot.com/1999/10/el-manifiesto-petropolitano.html

http://theoilcurse.blogspot.com/1999/10/the-petropolitan-manifesto.html

I privatize you, I privatize you not

The sad truth is that for a very long time now - decades really - the country simply has not had anything even remotely close to a coherent economic policy. Without one, it will be very difficult to drag the country out of its current emergency, the bottom line of which is serious unemployment and poverty. I still have fresh in my mind that infamous cocktail of eighty “urgent” measures presented to the previous administration by Fedecámaras.

It is even more difficult to find a good direction due to the fact that our dilemma as a country is situated within the context of globalization process that seems to threaten national identities even further.

In these circumstances, it is no wonder that magic, instant solutions, and quick fixes seem to be coming from everywhere. Among these, none is more beautiful and tempting than the privatization of PDVSA. It seems to be to the economy what the Constituent Assembly is to politics.

Before I continue on this track, I wish to make the point that by referring to a state- run oil industry I refer only to activities in exploration, extraction, refining and distribution to basic markets. All other downstream business such as the petrochemical field, among others, is subject to such intense competition that the cruel efficiencies of the private sector are required for it to be successful. Any intervention by the State in this secondary business, can only result in the loss of part of the riches initially created by the basic activities mentioned above. There is not doubt that downstream business must be privatized.

We return, then, to the beautiful siren song (the sirens themselves are not so beautiful): The sale of PDVSA and oil reserves, Nirvana, Shangri-La and immediate gratification.

Evidently, it is not logical for a country as potentially rich as Venezuela to be in the state it is in. The sale of PDVSA could mean, among other things, that we could cancel all of our public debt. If we were able to resist taking on new debt, there is no doubt that the country would have a rather promising future, at least in the short and medium term.

Evidently, any industry that is not subjected to the critical and continuous surveillance by a greedy owner, can easily be led astray and would produce unsatisfactory results.

Evidently, it would not seem to make any difference who really owns PDVSA’s assets. The source of business would remain in Venezuela and the country would continue to benefit from royalties and income tax.

Why is it then, that like Ulysses, I would want to be strapped to the main mast in order to resist the siren song? My reasons are partly intellectual and partly from the heart.

On the intellectual side, the most important reason is that I am not convinced that the country can maximize the value of its oil without OPEC. The privatization of PDVSA would in essence mean our disincorporation from OPEC. This does not mean I am expressing satisfaction with the management of OPEC, which leaves much room for criticism.

The interests of the current players, management and the government, may be in conflict with those of the Nation. Additionally, there is no effective way to evaluate management of the industry. The sirens affirm that the privatization of PDVSA would solve this problem since its valuation in the open market would be a measure of management’s success, and would indicate the way forward. Personally, I believe one way to solve the problem is to require the transparency of information and to create the Office of the Oil Ombudsman. This would allow for the introduction of some national and long-term variables, which are frequently ignored in an increasingly globalized, and short term oriented marketplace.

Notwithstanding, I do admit that in these times, irrational reasons driven by the heart may be weightier by far. To begin with, I am not among those that disqualify the government as a manager.

Defense of oil requires decisive protest against those that prohibit the use of Orimulsion without reason, and against those that impose confiscatory taxes on oil derivatives, meaning that we receive only a fraction of its value. I still have not lost hope that this need for defensive action could rally us to unite as a nation and not simply as greedy individual shareholders.

I do not believe that as a generation that has failed in its management of oil resources we have the moral right to continue to anticipate even more cash flow. 

Should PDVSA actually be privatized and should there be a surplus that can be distributed, I hope it will be distributed among Venezuelans under 21. This opinion will most likely be contrary to that of those people that preach privatization of PDVSA in the same way children try to get to the end-of-party gifts in order to get away early from a boring piñata.

On the other hand, I recognize the value of all the arguments against centralization of fiscal income. Quickly, please... tie me to the mast!

Fighting for one's country

Today, debates of the “cross-fire” or “opposite poles” type in which participants each defend opposite or extreme positions are very popular. 

I recently had the opportunity to be present during one of these debates, live, between to prestigious personalities from a European country. In simplified form, one represented “one trend” (the right), the other represented “the other trend” (the left) and the debate was about “exactly the opposite” (the third way).

 

The debate, needless to say, was excellent. I enjoyed the intellectual capacities of the debaters, as well as the abilities in the art of debate both of them displayed. Taking advantage of the presence of such distinguished personalities, of the serious academic environment in which the debate took place and the invitation to ask questions, I took it upon myself to ask the following:

 

"Gentlemen: It is well known that in the country you come from, a tax that is often above 800% is levied on the value of gasoline.

This type of tax is without a doubt the main reason why our country does not perceive more income from its oil exports. As a citizen of an oil producing country, I ask how, in your opinion, and from the perspective of “exactly the opposite”, the existence of these taxes can be explained in the context of the commercial aperture that is being developed worldwide?"

 

That was the end of “cross-fire” and “opposite poles”. My question immediately fused the opinions of the debaters into one, as if by chemical reaction, and both seemed liberated from any type of academic requirements. 

Almost in unison both responded something like: "Boy!" (I am almost 50 years old now, but the response was basically as if I was being treated as “Boy”). 

You should know that these taxes are imposed in order to reduce gasoline consumption and save the world’s environments from contamination. 

Additionally, you should be aware of the fact that your country’s main problem is that it is wholly dependent on oil and in this sense it should thank us for any help we can give you in order to reduce this dependence."

 

This response, the result of a solid defense of national interest over and above any ideological consideration, was for me a true lesson in the policy of economic development. It clearly indicated that any country that cannot rally its people to fight the commercial war, body to body, that globalization has initiated, is utterly and completely lost.

 

The taxes on oil based products that I have mentioned above are no small matter. According to information obtained for June, courtesy of the Petrol Retailer’s Association of the United Kingdom, a liter of gasoline was sold at the pump for the equivalent of Bs. 661. The distribution of this amount is basically as follows: Bs. 47 (7%) for the distributor, Bs. 68 (11%) for the producer and Bs. 552 (83%) for the British tax authorities.

 

The taxes apparently have no limit. Governments such as the United Kingdom and Germany have recently formally approved future increases. The Sunday Telegraph of the 29^th of August estimates that the gallon of gasoline in England in the year 2010 will be sold at £ 6.90, which is equivalent to Bs. 1,800 per liter. Out of this amount, the producer and the distributor must divide 10% since the taxman intends to keep about 90%. 

 

There is no doubt that should these taxes not exist, Venezuela would today be selling more oil at better prices. There is also no doubt that these taxes represent a major threat to the future of our oil industry. In this sense, the problem should be one of national interest.

 

Notwithstanding the above, there has been an absolute absence of formal protest in Venezuela. What is worse, only a tiny fraction of its citizens are aware of the problem. 

Worse still, the majority of those that work in the oil industry or that are experts therein, express surprise when confronted with the magnitude of these taxes.

 

Oil prices have recently risen. These increases are historically very modest. The European press, however, is full of attacks on the “bad boys” of the OPEC. In The Observer of the 5^th of September in England I read that the fault was attributed to “a number of far-flung dictatorships (and the odd democracy)….”, and the fact that OPEC had reduced its production somewhat, and OPEC's petroleum-addicted economies were suffering”.

 

In Venezuela, we see nothing in the way of response in the sense that the real “petrol-addicted” entities are the fiscal authorities of consumer nations. Our dailies basically limit themselves to reproducing articles that reflect preoccupation with possible inflationary pressures, making the uninformed Venezuelan feel like he is at fault for potential world crises.

 

It is high time that Venezuela begins to defend itself in a globalized world. For me, the negative effect to the country of having part of the value of our non-renewable assets commandeered by the taxmen in consumer nations is exactly as the same as if guerillas from a neighboring country come across the border and carry away a few barrels. Why do all our patriots have blinders on?

Petropolitan: http://petropolitan.blogspot.com/1999/10/fightning-for-ones-country.html  

Close to crying 'Yankee go Home'

I am a Venezuelan of European background and was born a few years after the end of World War II. I grew up under the influence of Audie Murphy movies and comic strips that extolled the valor and sacrifice of American soldiers in their efforts to save Europe from the clutches of fascism. As an adolescent, although against the Vietnam War, my little piece of American heart prevented me from participating in public protests outside the US Embassy, and even more so from flag burning.

However as I am nearing my fiftieth birthday, I suddenly have an incredible urge to yell “Yankee Go Home”. This occurred most recently when I read another of Rowan's articles, in this case blasting away at the latest changes implemented at PDVSA.

Theoretically, had we successfully arrived at the end of the opening of the oil industry, the recent cuts in production, which have had such positive effects over the last few months, would have been impossible to execute since the private sector would have to be compensated. The oil opening per se implied a departure, albeit clandestine, from OPEC. Since I have never been convinced that OPEC was losing relevance, I publicly opposed this oil opening policy, asking that its implications be democratically discussed.

I also considered that the Venezuelan oil industry benefited from being divided into several different entities. Even though this evidently represented additional costs, it was a good way of achieving mutual and cross supervision by experts in the industry. 

Therefore, when we were sold a restructuring based on supposed and overestimated savings (an annual figure of US$ 2 billion was brazenly bandied about) and which simply implied a total centralization of power, I loudly cried foul.

We were told that due to the lack of internal resources it was necessary to invite foreign capital to participate in the development of basic activities such as exploration and production.

Soon after, as if by magic, resources suddenly appeared tand were quickly invested in the “strategic” but very poorly explained building of gasoline stations that could also sell fast food. I felt misled and publicly informed PDVSA that the risk of Kuwait building a gas station in Las Mercedes in Caracas in order to compete directly and sell its ultra-light gasoline to the local market was really very slight.

I also protested, and continue to do so, when PDVSA, in the face of an upward trend in outsourcing of services, created the CIED in order to sell seminars and courses to captive clients. I protested and continue to protest when PDVSA, without much explanation, used an inmense amount of resources to finance studies of commercial ports in rivers in the eastern part of the country, for example.

The President of PDVSA should occupy his post as if he were a soldier on a battlefield on a sacred national mission. It wrenched my soul to see how he thinks he is a General Patton instead, and finds his way onto an entire page of the Wall Street Journal as Executive of the Year. Perhaps it should have been Entrepreneur of the Year.

Three years ago, as I traveled in the interior of the country, I observed how high interest rates, new taxes and a foreign exchange policy that in real terms strongly revalued the national currency were taking the country on a wild ride towards recession. 

At that point, while expressing my anguish at the possibility of a permanent loss of jobs, the then President of PDVSA, as if he were any common politician on TV, happily informed whoever would listen, that Venezuela was "condemned to success”. I almost cried with rage.

Last week, Rowan wrote that PDVSA’s ex-President, Luis Giusti, had produced a bonus of US$ 2.3 billion for the state with the oil opening - as if this were not simply the fruit of oil income perceived in advance, unfortunately already frittered away.

Rowan wrote: “Giusti’s strategy was brilliant. From a national perspective, Giusti was a patriot”. With respect to the recent changes at PDVSA, he wrote: “The development of this country has just been set back twenty years. The only institution in active transition to modernization, professionalism and meritocracy in Venezuela has been sacked. It’s been vandalized, ruined by ideologues from a Dark Age”.

I recently registered a NGO called Petropolitan, and through it I am fighting against the taxes on oil products imposed by a majority of the oil consuming countries of the world. These charges prevent oil-producing countries from receiving what they should rightly be receiving from the sale of their non-renewable resources.

The real value of an item of goods is normally measured at the consumer level, and in this sense the average value of a barrel of oil in the world might have already surpassed US$ 100. Of that value, up to a few months ago, the producer only received US$ 10, and today still has to settle for a meager US$ 20. I hope that someday when the absurd confiscation by taxmen in the developed world is eliminated, they will receive, say US$ 40 or more. If this defense of what is rightly ours classifies me in Rowan’s world as being one of the ideologues of the Dark Ages, then that is exactly what I am, and am proud of being so.

Daily Journal, Caracas, September 24, 1999

Petropolitan: http://petropolitan.blogspot.com/1999/09/close-to-crying-yankee-go-home.html

Rising global info-confusion

About a week ago, I took a humble and run-down taxi from the airport to the capital city of a small Central American country. During the ride, the equally as humble taxi driver gave me a masterly lesson about globalization. After having informed him about where I’m from, he asked in one long breathless phase, “Has Comandante Chavez managed to get rid of Magistrate Sosa yet? By the way, where exactly is Venezuela? Near Spain, no?”

The taxi driver had simultaneously shown a surprising knowledge about Venezuela’s internal politics and an almost embarrassing ignorance about basic geography. This incident prompted me to reflect about the matter of global information. To begin with, it is evident that when speaking about this confusing issue, more is not necessarily better. Greater quantity of information can simply mean more irrelevant data, more often than not at the expense of pertinence. Likewise, too much information can confuse things and plant so many trees that it becomes impossible to see the forests.

In Venezuela, for example, and without getting into details, it is surprising to see how most of the nation is still blind to the terrible implications that the taxes on oil products levied by consuming nations have on our country.

The above-mentioned example makes it tempting to establish priorities. However, who are we to determine whether the internal politics of a country are more or less relevant to someone like my taxi driver than that same country’s geographical location. What’s more, when you think about it, it could just be that in a globalized world, geography as I studied it is not really relevant any more.

Upon observing how fast the volume of information is growing, I remember that a few years ago I maintained the thesis that the lack of information could actually be valuable as a promoter of development. On occasions, ignorance of certain matters kept alive the dreams of finding the greener valley.

These dreams are the ones that drove Americans to invest in Italy, Italians to move to Venezuela and Venezuelans to find work in the United States. This generated economic growth all around.

The increasing speed of today’s information flow also raises some doubts. 

Although it is certainly advantageous to insure that correct and relevant information as well as good news is transmitted rapidly, it is also certain that this same speed is usually applied when propagating incorrect and irrelevant information, as well as increasing volumes of bad news.

For some not totally identified reason, I feel that the magnifying effect of speed upon bad information is somehow greater that on good information. Making peace, for example, requires time which is often not available. Provoking war often takes just a matter of seconds.

Just who the creators and receivers of information are is also deserving of reflection. There is no doubt that the foreign investors the country most wishes to attract are those that bring with them a long-term vision and who will therefore create many permanent jobs

Unfortunately, however, we frequently confuse economic policies that are positive and adequate for the country with the information that short term capital wants to see. The main reason for this is that it is precisely those short-term investors who pressure the most for urgent and globalized information.

As a result of this, we often see economic schemes based on high interest rates, a strong currency, fiscal equilibrium and economic puritanism. All the long-term investors really want and need however, is a good internal demand and a competitive exchange rate.

I write articles, and to achieve this I frequently use sources of information that, in spite of offering a lot of detail, are not necessarily relevant or complete. My taxi driver reminded me of this risk. I may have come off as an idiot in many of my articles and probably don’t even know it due to the cordial discretion of my readers. If this were the case, thank you. Remember that my ego is not as strong as that of the New York Times, and if I have sinned, I prefer not to know.

PS. In 2003, as an Executive Director of the World Bank, I formally warned: "Nowadays, when information is just too voluminous and fast to handle, market or authorities have decided to delegate the evaluation of it into the hands of much fewer players such as the credit rating agencies. This will, almost by definition, introduce systemic risks in the market"

The mouse that roared

This is dedicated to all of those who consider that the only way to combat the actual lack of self esteem present today in the country is to reduce it even further.

Last week, columnist Michael Rowan issued several recommendations for Venezuela, among these that you should “Ask not how you can be protected from the world. Ask only how best you can live in it”. 

I have frequently asked myself this question, but since the response that begins to develop in my mind is vastly different from the text book type answer hinted at by Mr. Rowan, I wish to make note of some of these differences.

To begin with, and even though I agree that a lot of the country’s internal problems as mentioned by Mr. Rowan really do exist, I consider it to be wrong to label Venezuela as a protectionist country. 

It could be that he did not know the Venezuela of old, but as of 1989 the country has, not always in a straight line and more often than not out of necessity rather than conviction, been submerged in a process of commercial and cultural aperture of such import that it is today one of the least protectionist countries in the world.

Upon rereading some of the articles I have written over the years, I find clear evidence of the fact that I have always been a constant defender of the markets as prime regulators and motors of the economy and as a consequence of this, I have also always been totally against what is today know as protectionism. 

In this sense, I am worried that Venezuela’s opening has not produced the desired results.

The commercial recipes common in today’s world are comprised primarily of the following two commandments: 

1) Open your borders and allow the products, services and capital offered by the rest of the world to come in so that all of your citizens may have access to the best the world can offer, produced in the most efficient manner possible; 

2) Respect the rights to intellectual property and to brands and patents in order to insure the adequate return of costs and to allow those who today fuel development to continue their mission.

In exchange for compliance with these commandments, the interested party is offered a first class ticket on the Train of Sustained Development on the way to a better economic future. 

Certainly, some of the passengers will be weaker than others. However, if all follow the same basic diet and exercise plan, based on the exploitation of inherent strengths with the adoption of an effort towards specialization, sooner or later, so goes the theory, all will be more or less equal.

Chile, for example, is a good example of what excellent results a ride on this Train can produce. Unfortunately, Venezuela, while having complied with the commandments almost religiously has absolutely nothing to show in the way of favorable results. Why? 

Rowan would answer, ‘It is Venezuela’s own fault’. I would say that while he is partially right, it is also important to say that the world is not playing a fair ball game.

The indisputable fact is that the world is applying duties on products derived from oil, as is the case of taxes on gasoline that in some parts of the world top 800% and that bar the producers from receiving his fair share of the sale of their resources. 

If these taxes were eliminated or were simply limited, for example, to something like the 26% duty imposed by Venezuela on the importation, Venezuela’s income would be much greater. Easily US$ 10 billion greater!

In this sense, if I am to respond to Mr. Rowan’s questions as to “How best you can live in it (the world)”, I would not be lying if I told you that I am feeling dangerously close to suggesting that we quit being stupid and that until the world comes around and gives us a fair shake by eliminating the damaging taxes on oil, we begin to behave as rogues.

As a first measure, it would be most tempting to raise all import duties to the same levels each country applies to oil. To follow up I could suggest we violate all brands and intellectual property rights, copy all medicines and facilitate their generic sale world wide. Finally, I would ask PDV to quit building fancy gasoline stations in Venezuela which, being sure that Kuwait is not waiting in the wings to compete on our turf, do not generate the sale of even one extra liter of gasoline. 

Instead I would construct large floating gasoline stations, anchor them off the coast of Europe and offer each European entrepreneur with a neoliberal bend the right to freely commercialize our gasoline tax free.

Am I exaggerating? One of the principal elements of discussion in the universe of ecological taxes, the ecotax, is how to insure that oil producing nations are also convinced to adopt fiscal policies involving high oil or energy taxes. 

The reason for this, in layman’s terms, is that if we don’t, industries that consume large amounts of energy could conceivably move to those countries with cheap energy, causing the loss of jobs in non-oil producing countries. So much for the specialization credo.

We should declare total and absolute war on the injustices of today’s system of commercial interchange. Just like the small country that declared war on Europe in the movie The Mouse That Roared, we have absolutely nothing to lose and much to gain. With so many enemies without why do we need to have enemies within?