The curse

  The curse

Lately, articles that analyze the supposed curse that weighs on countries rich in oil resources have been published like rice. At first glance it would seem that there is a certain basis of support for these theories of obscurantism, however, for proper reading, it is important to clarify one or another detail.

First of all, and judging by the immense number of existing offers to free ourselves from this cursed burden, it is obvious that we are not talking about a common curse. There are even those who generously offer to assume their risks, even paying us for the right to such sacrifice.

A suggested exorcism is to leave OPEC to sell oil at its marginal extraction cost, thus guaranteeing that we avoid earning the dirty rent for oil. Another way is to privatize it, against a tasty and tempting initial payment, to cancel the current public debt... and get into debt again? As you can see, both methods have a strange similarity with selling the sofa.

Finally, considering that the European treasury earns about 100 dollars net per barrel, while those who sacrifice the resource only get 25 dollars, gross, it is not very obvious who is the cursed one.

The indisputable thing is that oil revenues have not been used well, but as you can understand, this has less to do with the abundance of resources and more to do with the damn system used to distribute them. Currently, the entire oil revenue enters the government's coffers alone and effortlessly, thus unbalancing the democratic system, since we all know that the happy holder of a full oil checkbook has little incentive to pay attention to the citizen.

How do we get out of this? To begin with and due to the obvious and incurable lack of talents of our rulers, we must apply the parable of the talents in reverse and bypass them, delegating a greater part of the administration of oil revenues directly to the citizens.

However, since we civil society members are not very different from our politicians, like-minded, like-minded, perhaps we should, just in case, pay the oil dividends with educational tickets.

Chances of it? Few, due to that true curse, the one that leads our leaders to believe that everything bad in the past is miraculously cured with their arrival in power (with the checkbook) and, us, to believe them.

Translated by Google

https://petropolitan.blogspot.com/2003/11/la-maldicion.html

https://theoilcurse.blogspot.com/2003/11/the-curse.html

Together or at odds

If you look at Venezuela and Colombia on a map, reaching from the Atlantic to the Pacific, you see that in the end it will be impossible to avoid the many opportunities that integration would offer. It is clear that either the two countries will join, or one will take hold of the other, or someone else will stick them together… by force and according to their own geopolitical interests. Which would you prefer?

Consider the countries of Europe today: with all their differences - linguistic ones being the least - less than sixty years after the war, they have submitted to a political-economic community and are drawing up a common constitution for the humble purpose of trying to maintain their level of development. Their example contrasts with the pettiness of our political leadership in Colombia and Venezuela, yesterday’s and today’s.

There is no doubt that both our countries are in very bad shape, but instead of trying to capitalize on the possibilities of a true union of markets, which could help us at last find that lost course never found, our leaders – if they can be called that – spend their time feeding and fanning tensions, hiding their own ineptitude.

In today’s world it is not easy to come up with a plan that can simultaneously satisfy the urgent needs of our people of dreams, while providing the credibility that the markets demand. A strong commitment to total integration, beginning with establishing a harmonized monetary, exchange and trade policy, must be one of the main components of any such plan capable of offering us a better future.

How do we accomplish this? I wish I knew, but I confess I have no idea… except that it requires leadership capable of subordinating today’s pettiness to tomorrow’s grandeur, though this appears very difficult in a world in which the increasing demand of our people for instant gratification is surpassed by that of most of our politicians.

Nevertheless, since it is true that every crisis brings opportunity… if we consider the magnitude of the crisis in our countries, who knows if suddenly, when so many material needs meet up with so many spiritual needs, conditions will finally be there for us to awake from our lethargy and fulfill the historical mandate for a Great Union.

El Universal, Caracas November 6, 2003

Of course, there is always a fourth alternative – the worst between brothers: a new bipolar world with a great Colombo-Venezuelan wall as a border.

Together or mixed up

Together or mixed up

If you look at Venezuela and Colombia on a map, you will know that in the long run, it will be impossible to avoid the multiple opportunities that their integration would offer, so it is clear that either the two countries unite, or one of the two grabs the other, or Someone will bring them together... in a macho way, under the umbrella of their own geopolitical interests. What do you prefer?

Contemplate how European countries, with all their differences, linguistic ones being the least, today, less than sixty years after the war, subordinate themselves to a political-economic community and are drafting a common constitution, with the humble purpose of trying to maintain its level of development, serves to highlight the smallness of our political leaders in Colombia and Venezuela, yesterday and today

Both countries are doing badly, very badly indeed, but instead of seeking to capitalize on the possibilities of a true union of markets, which would allow us to recover that lost direction that has never been found, our leaders, if they can be classified as such, are rather dedicated to feed and fuel tensions, hiding their own inadequacies.

It is not easy to design a plan in today's world that simultaneously feeds a people hungry for dreams and inspires the credibility that the markets demand. Committing ourselves fully to integration and beginning it by establishing a consistent monetary, exchange and trade policy must be one of the main components of any plan capable of offering us a better future.

How do we do it? I wish I knew, but I confess that I have no idea... except to know that it requires leadership capable of subordinating the little things of today to the greatness of tomorrow, which would seem very difficult to achieve in a world where the growing demands of our peoples for immediate gratification, are surpassed by those of the majority of our politicians.

However, and because every crisis means an opportunity...if we think about the size of the crisis that our countries are experiencing, who knows if suddenly, when so many material needs have been combined with so many spiritual needs, the conditions will finally be met. so that we can wake up from our lethargy and fulfill that historic mandate of achieving a Great Union.

Of course, there is always the fourth alternative, the worst between brothers, that a new bipolar world emerges with a great Colombian-Venezuelan wall as a border.

https://perkurowski.blogspot.com/2001/01/my-colombia-plan.html

Translated by Google.

Time to scratch each other’s backs

Do you remember the ‘no-driving day’ in Venezuela? Somebody’s brilliant idea to ease congestion! Depending on your license plate number, there was one day a week when you couldn’t drive your car. Even if the idea had worked, I still would never have liked it because, as traffic kept growing, logic would lead us towards a blind alley as—inevitably—the next step would be two no-driving days, then three, all the way up to seven, when everything comes to a complete standstill. It’s rather like applauding the fact that a patient’s breathing problems have ceased—because the patient died. 

There’s a hint of all coming to a standstill in the theory about how globalization will optimize the world economy, by ensuring that merchandise will always be produced at the lowest marginal cost. What good does it do us to have products where the cost of the labor component gets smaller by the minute, if workers can’t buy the very products they produce?

What could be waiting for us at the end of that tunnel is a world of desperate wage earners, willing to work for pennies, who might never be able to afford even a reasonable part of the fruit of their efforts. Doesn’t it seem as if we’re getting nowhere?

This wouldn’t be as much of a problem if there were more jobs than workers, but unfortunately, that isn’t the case. Just ask the millions of professionals competing for jobs as taxi drivers in the world’s capital cities! Not even the United States has managed to escape unharmed from the pangs of globalization. In fact, over the past few months, for the first time, we have seen economic growth in the United States coupled with an increase in unemployment. As it turns out, over the past three years, the United States has “exported” 2.5 million jobs to low-wage countries like China.

I don’t have a solution. How can we increase profits, create jobs, increase wages, put an end to poverty, and make everybody happy? Nonetheless, sometimes I’ve toyed with the idea of a macro global fiscal reform aimed at creating jobs. The principle behind it would be that whoever requires the most services ends up creating the most jobs, and so should end up paying the least taxes. Under such a system, you’d pay double sales taxes on a frozen pizza you eat at home; standard sales tax on a pizza you order over the phone for home delivery, while a pizza eaten at a restaurant wouldn’t just be tax free; it would automatically be credited on your income-tax return. 

Friends, let’s give one another jobs, scratching each other’s backs—paying each other good salaries of course.

From El Universal, Caracas, August, 2003

Family Remittances

In recent publications of the World Bank and other multilateral organizations, there has been emphasis on the significance of family remittances for many developing countries, such as El Salvador, where these remittances reached $1,900 million dollars in 2001. This phenomenon has many bankers scrambled, trying to find out ways to attract part of the financial gains that such an influx represents, ranging from transfer services to the issuance of bonds backed by the projections of future remittances.

Likewise, they are studying the impact on a poor country when hundreds of thousands of its workers could be sent to developed countries on a temporary visa, where they could have access to greater remunerations which could even have a greater economic potential than the long-promised agricultural openness and liberalization.

After allowing their markets to be captured by external suppliers, after allowing free flow of resources, after forcing themselves to respect foreign income sources, such as intellectual property rights and patents, and finally, after many of its educated professionals have been captured by better economic gains somewhere else, poor countries, it would seem, have all the reasons to request greater access to global markets for their unskilled workforce.

Nevertheless, during our technical discussions, we should not forget the human aspect of migration, with the enormous incurred sacrifices and the generosity with which immigrants share their income with family members who were left behind. It has been more than 150 years since big groups of Europeans had to emigrate due to famine in their countries, among other reasons. They left their homes knowing that they would not see their parents, siblings, and everything they had known and cherished in their life. Even though today’s emigrants have in general greater possibilities of returning to their home countries, their vicissitudes are not necessarily negligible, since they are frequently victims of rejection and marginalization.

In this sense, all that is left to do is to stand in awe while observing the significant amount of transfers that Salvadorian emigrants, among many others, send to their homes nowadays. These are only one example of family values, traditions, and solidarity that our countries still possess. They might be poor in monetary terms, but thank God these countries are rich in human, family values.

From El Universal, Caracas, August 2003 

http://theamericanunion.blogspot.com/2003/08/family-remittances.html

Place us next to something profitable …

I recently visited a country here in the Americas where I flew over a valley that appeared very fertile—a vast, thick green carpet beautifully woven by plantations of African palm trees. I was enthusiastic, thinking that at last I had discovered development in action—that is, until I landed.

The contrast between the wonderful view from above and the misery below screamed out that the African palm, far from being a motor of development, could be the mother of all poverty traps. By contrast, take, for example, a coffee bean. It may be worth very little in the field, but at least it lets us dream of the chance of capturing a bit more of the value suggested by the fact that some people pay four dollars or more for a cup of it at Starbucks. But in the case of the African palm, no dreams seem possible. Just for a starter, its saturated fats are considered undesirable.

In this sense, the difficult cultivation of the African palm would seem to be doomed to mark the borderline of lowest overall marginal cost, that is, where the least is paid to farmers for their labor. Palm farming now has such a small margin of profit that it does not even cover the costs of registering a union, and so, Mr. Planner, just in case, don’t place us next to the palms, please place us next to something profitable.

When analyzing agricultural margins of profit, we must not forget that in most cases in which farmers’ margins allow them to maintain a decent standard of living, this is due to some kind of subsidy, protection, or market interference. So, of course, if we’re offered the chance to grow African palms in France, we might just consider it. 

It is one thing to be a marginal agricultural producer and it is another very different thing to be an agricultural margin capturer. In a supermarket in the United States I came across 11 kinds of eggs, ranging in price from 95 cents a dozen for caged, industrial production to $3.99 a dozen for eggs certified as coming from organically-fed free-range hens.

For countries whose hopes focus on Cancun and on agricultural opening, I hope that the above leads them to stop, think, and realize that opening in itself does not work miracles if farmers do not also receive other kinds of aid, such as those offered in many developed countries.

Friends, as I have said many times before, if we let globalization simply pursue the lowest marginal cost of labor, then Great Bad Deflation will inevitably come.

From El Universal, Caracas, July 2003

And as published in Voice and Noise of 2006

The Clause

“As of this date, the Bolivarian Republic of Venezuela agrees not increase its current level of public debt, nor to contract public debt with payment due in less than ten years. In the case of failure to comply with the above, all current public loans will be considered due and payable immediately. In order to guarantee that any future government does not employ subterfuge to evade the spirit of this Law, the Nation agrees to abide by international arbitrage.” …Just this simple clause, typical of the those applied in the private sector to control corporate debt levels, would enable, as if by magic:

An immediate and dramatic drop in the interest rates applied to the country, when international markets realize that the country, with its relatively modest debt, is determined to put an end to the distortion of short-term debt, the refinancing of which has been the eternal reason for charging high rates, while at the same time guaranteeing that the resulting relief in servicing the debt is not used as a pretext for increasing it. 

The end of the country risk financial rating, when after only a few days credit raters will have to classify Venezuelan public debt as worthy of investment.

Opening the economy to all kinds of private initiatives on the part of individuals, families, companies and cooperatives, since all would have access to new loans under reasonable conditions – something which to date has been blocked by our political leaders’ hunger for tax income and the consequent increase in debt.

Friends, I am sure the clause I propose would help put our country on the road to sustainable economic development but - I swear! - how difficult it is to convince our leaders of the past and present who blithely condemn old debt while at the same time extolling the virtues of new debt.

It sounds easy but... could it be done? Indeed it could! The hard part will be to free ourselves of loans traffickers and to ensure that our eternal paradigm changes actually change – even if only one little paradigm. 

Some may rightly say that the country would lose part of its independence. However, it would be well worth it if this would allow us to decree an abolition of public debt slavery, the same way we abolished slave labor long ago. 

Translated from El Universal, Caracas, July 3, 2003

An Unsustainable Sustainability

An Unsustainable Sustainability 

The latest fashion in the academic world of international finance is to calculate what is known as the Sustainable Debt Level (SDL). As you may have guessed, it has to do with the level of public debt a country can sustain without entering into a crisis. Normally the SDL is calculated based on the size of the economy (GNP) or on a country’s exports.

Whatever scientific approach is given to the SDL issue, it sure seems somewhat obscene to the citizenry of countries where it is evident that public debt engenders low or even no productivity.

If a credit is granted properly, the credit is repaid and then debt levels never become a problem. It is only the bad or mediocre loans that accumulate—those that do not generate their own repayment. So it could be said that what is really being calculated with the SDL is the level of bad debt that a country can get saddled with. Quite frankly, a developing country with real needs cannot afford the luxury of canceling even one cent in interest on a debt level arising from a series of credits that are nonproductive on the average.

From this perspective and since what we really mean is sustaining something that is unsustainable, this question remains: wouldn’t it be better to skip calculating this debt level and try to free ourselves once and for all from these mortgages, instead of condemning future generations to live forever under the weight of an SDL that has been perfectly calculated? How much torture can the torture victim take before passing out?

And who encouraged these countries to go into debt? Ask those who are well-acquainted with the temptation that credits pose to politicians. In China, they say that you wish for your enemies to live in interesting times. In Argentina, because of the suffering provoked by excessive debt, it would seem that what their enemies could have wished upon them was the trust and confidence of international markets.

On the day that our country Venezuela firmly and irrevocably sets upon the path of totally canceling its debt, on this day an enormous opportunity will open for all those private and collective initiatives that need financial oxygen. Unfortunately it will not be easy, since our politicians, while condemning past debts, have mastered the magic of simultaneously preaching the benefits of new credits.

From El Universal, Caracas, June 5, 2003
As translated in my "Voice and Noise" of 2006

http://unsustainabledebtsustainability.blogspot.com/2003/06/unsustainable-sustainability.html

And this article lead me here:

The financial handicap

The financial handicap

In horse racing, to try to equalize the chances of victory among the competitors, the handicap system is frequently used, which implies putting a greater weight on the horses, which have shown a greater ability to win. The world of finance is not so benevolent, there more weight is imposed on those who, according to the market, have fewer prospects... present greater risk.

Every morning when a Venezuelan goes out to build his future and that of his Homeland, whether he is a public or private servant, he carries on his shoulders the weight of the country risk (CR) that the financial markets have set that day. That CR, which in principle is calculated based on how much more interest the market requires for Venezuela's external public debt, compared to a similar one in the United States, is currently located at 11% - 14%.

CR affects not only the public sector, but permeates the entire economy. Effectively, we see, for example, a private person who wishes to contract external debt and if he does not have external guarantees to offer, he must pay his normal interest rate, plus the CR. In terms of public service rates, the models indicate the need to reward the investor with a normal profit margin, plus the CR.

A high CR is economic contamination, which covers everything and prevents breathing normally. If Venezuela wants to recover from this economic emphysema, there is no better way than to reduce the CR fast and considerably.

Obviously, CR has many causes and many origins, but the main one is generally related to the ability to service the country's public debt.

In this sense, I guarantee you that if we only manage to spread the amortization of our public debt over a much longer term and guarantee to the market that this is not done to increase it later, due to its relatively modest size, we could quickly achieve that our debt was classified as investment grade, which would reduce the CR considerably.

All it takes is a little will and drive. If the discordant parties insist on preferring to fight suffocated and short of breath, then so be it. However, I am convinced that the oxygen that reducing the CR would produce would benefit both the Government and the opposition, not to mention the rest of our country, which needs and deserves it so much.

Translated from El Universal
http://unsustainabledebtsustainability.blogspot.com/2023/02/the-financial-handicap.html

I was a very early anti-fragilist!

In April 2003 this is what I argued in a formal written statement delivered as an Executive Director of the World Bank:

"A mixture of thousand solutions, many of them inadequate, may lead to a flexible world that can bend with the storms. A world obsessed with Best Practices may calcify its structure and break with any small wind. Who could really defend the value of diversity, if not The World Bank?"

Out of the box tourism: Lessons from Florence

THE CONTEST!

My apologies to the Florentines, but their beautiful city is like the Magic Kingdom of the Renaissance. The inexhaustible flow of tourists, hotels, prices, and lines for attractions, fast or slow meals, and souvenirs, all makes one question, between Medici and Disney, just who copied the model of whom. In my opinion, not only are the gelatos of Florence richer, but also, with the possible exception of Goofy, Michelangelo’s David and the frescos of Fra Angélico are far superior to Mickey, Pluto, and the rest. 

What an inheritance the Medicis left to their city! The Florentine economy will always be easy to manage, since the only thing that their Paperon de Paperoni (Scrooge McDuck) has to do is fix admissions prices. The one little cloud on the horizon could be the quantity of English, Venezuelan, German, and other immigrants who try to take advantage of the infrastructure. What would Machiavelli have thought about entering the European Union?

We know that despite all its possibilities, Venezuela, in a local saying, still has not managed to connect the foot to the ball when it comes to developing its tourism industry. This will never be resolved by naming ministers who spend their time conducting publicity campaigns, or visiting Orlando and Florence. We are not proposing that other Medicis substitute for those who govern us—we can discuss this on another day. But in the meantime, we could emulate the experts.

In Florence 500 years ago, the contest system was used to assure that the best artistic proposals were utilized to adorn the city. So let’s organize a grand contest.

It will be a grand contest to choose a grand team and a grand plan for the strategic development and management of the tourism sector for the next 30 years, with an estimate of costs and results.

A qualified panel of judges should choose the best three proposals, and the proposals should be publicly debated on television. The losers will receive an important prize, and the winners will be commissioned to execute their proposal during thirty years, with a significant fixed, indexed and guaranteed annual budget.

Since televised public contests enjoy high ratings, this contest could also be a way to build pontes novos, new bridges, in our divided society.

The Santa María del Fiore Cathedral took more than 100 years to construct, and for a long time everyone thought its dome would be impossible to build. And so, friends, let’s not lose the hope of finding a local genius like Brunelleschi for our Helicoide (a local 45-year-old monstrous white elephant). 

From El Universal, Caracas, April 10, 2003

Extracted from "Voice and Noise" 2006