Democracy a la venezolana

At this moment in time, 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 systems 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!

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 adding salt to the wound in many ways.

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. 

On the other hand I have also seen people who behave better away that home. We see it over and over again when Venezuelans, who although notorious tax evaders at home, become exemplary citizens when overseas… to the extreme of paying their taxes. 

Because of those contradictions it could be interesting to compare the two indexes side by side, and find out whether there are some significant differences in ranking. It does not look that way as 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 as number 8 among the Briber’s. Let us speculate a bit about the meaning of these results.

On Singapore the results would indicate that it behaves very well at home, but goes haywire and is a menace when abroad. Without a doubt, a country like this must be a formidable competitor in foreign trade and one would entreat the OECD to insure that it is also enrolled among those countries that have recently signed the Anti-Corruption agreement.

But how about those Belgians? Surprisingly they seen to be more behaved abroad than at home. Could this be some kind of special "stealth" technology at work? Could it be that they on purpose whish 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

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

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 could 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?

An e-mail to our accusers

We were recently surprised by a lawsuit brought against Venezuela by an organization of independent oil producers in the State of Oklahoma in the United States. The suit was based on the charge of dumping oil. 

In simple terms, 'dumping' occurs when one country exports products at a price lower than their real cost of production or at a price lower than the sales price in its domestic market. In order to calculate the real cost, one must consider the effects of all state subsidies. Dumping is considered to be unfair competition and is therefore prohibited. If proven in this case, it will also give rise to serious retaliatory commercial measures. 

As an outside observer, I feel that this suit is a real threat to Venezuela, but I also think that if may be an opportunity as well. To understand this, it is important to analyze who is really behind this lawsuit. 

There is an incredible amount of oil wells in the United States, hundreds of thousands. In Texas alone, it is said that there are at least sixty thousand wells that produce less than one barrel per day. Due to low oil prices, the number of wells that have reportedly been shut down is equally as incredible. An organization known as IPAA estimates that more than 136,000 wells were shut down between November 1997 and February 1999.

Behind these wells are not only large oil companies, but also hundreds of thousand people, small businessmen, workers, widows who receive royalties, suppliers of goods and services, all of them voters at one time or another. It should, therefore, not surprise us that this sector possesses great political clout. 

To Venezuela, this means that, even though the lawsuit may not be based on solid ground, it may be more successful than we at first thought. We just have to remember that a small interest group in the State of Florida managed to block the usage of Venezuela Orimulsion. Can you imagine what a large group can do? Since I have always thought that Venezuela was lax in protecting its interests in the case of Orimulsion. I honestly hope that in this more recent case, authorities will be more careful, and will take the necessary measures. 

However, as I mentioned above, this lawsuit may not just be a threat, but may present an opportunity for Venezuela as well. For months now, I have been promoting a movement I have named Petropolitan. The purpose of this group is to protest and make known the fact that oil producing countries are subjected to commercial discrimination when the consuming nations apply taxes or duties so that producers receive only a fraction of the real value of their oil. 

For example, according to the Retail Motor Industry Federation of the United Kingdom, the price of premium unleaded gasoline on June 4th, 1999 (one month ago) at the pump was US$ 4.17 per gallon. Out of this elevated value, evidently real since the English motorist is willing to pay it, only US$ 0.43, that is 10%, ends up in the producer’s pocket. The distributor receives US$ 0.26 and the English tax authority, the only real rentist in this chain, stays with US$ 3.48, representing 83.5% of the retail sales price. 

When we compare the US$ 3.48 levied by the [UK] taxman to the US$ 0.43 received by the oil producers in lieu of a non-renewable asset, it is evident that the duty is more than 800%. This duty is unquestionably a main reason for the low oil income, not only ours, but of those in Oklahoma as well. 

The situation gets worse with every day that passes. Based on laws already passed,we can foresee that the price per gallon of gasoline in Europe will be US$ 10 by the year 2006, of which the producer will receive only US$ 0.50, that is, 5%. Germany, for example, has recently approved a “shift from personal income tax to an energy users tax”. These taxes will be used by the German government to “finance the lowering of old age security premiums”. 

By the way, it is not only Europe to which I refer since most of the world is currently levying taxes and duties on oil. One of the few exceptions is the United States where there has been more moderation. Because of the above, and were the decision mine, I would be on the next plane to Oklahoma in an attempt to educate our accusers as to who our real enemies are. I would tell them that the latter are laughing while we fight over the crumbs, and I would try to convert them into powerful allies. 

Executives at PDVSA are either not seeing the forest for the trees or have been lulled to sleep by their own internal realities. In any case, they do not seem prepared to take radical steps. Likewise, the common citizen is too far away from the industry to react with strength in the short term. 

Who knows? Maybe the small Oklahoma producer, the one that suffers and personally feels the current injustices of this situation, the one that most likely has the will to go out and avidly defend his interests, the one that belongs to a country that can defend bananas it does not produce, the one that today is our accuser, may ultimately be the ally that Venezuela really needs. Just in case, I have already sent them an e-Mail.

https://petropolitan.blogspot.com/1999/07/an-e-mail-to-our-accusers.html

It’s electricity Margarita needs

I haven't even moved to Margarita (about 15 years to go) and already I must ask my readers to bear with me because, once again, I just have to write about something related to the Island. I believe my reasons will be understood.  

This week we witnessed in the press the first skirmish resulting from the privatization of the electricity sector of Margarita, a process I have always, publicly, held as fundamentally flawed. Of course, the system broke down and the submarine cable, 22 years old and never really maintained, refused to cooperate with the new owners.

By sheer coincidence, this week I saw the publication of a series of impressive photos showing the advance of the construction of the power lines to Brazil and read about the new government's commitment to reinitiate in 10 to 14 weeks, the privatization of other electricity companies, hoping that way to raise more funds.

I will not only repeat myself I will also do it shamelessly by quoting from my own articles. There is no "I told you so" intentions but just the need to show that all the current issues were well known, at that time. In February 98, in an article named electricity to Brazil I wrote: 

"I am convinced that if we are to invest in transmission lines, Margarita for one, is probably much more deserving than Brazil. I simply don’t understand how and why an important pole of development for the country such as Margarita is being forced into more expensive generation systems such as, for example, the time-worn idea of a gas pipeline from the mainline to the island, while we are simultaneously developing mega-projects in order to export power to Brazil.

You don’t have to be an expert in environmental affairs to suspect that a 217 Km. suspended power line which must be supported by 512 towers, each of them 36 meters high, spread out through environmentally sensitive areas such as the Canaima National Park, the Imataca Forest Reserve and the Southern Protection Zone of the State of Bolívar, must have serious implications. It is not enough to assert that there will be special care taken to camouflage the towers in order to reduce contrast with the horizon.

I propose that we study the possibility of a swap. A new power distribution system for Margarita, via suspended lines and or submarine cables, in exchange for a gas pipeline (underground) to Brazil. The latter can then build it’s own power plants wherever and whenever it sees fit."

This line of reasoning had its origin in an article published June 1997 and where I, with some vehemence expressed:  "I would consider it unjust if the Island of Margarita ended up paying the highest tariffs in the world for its energy just to satisfy the need to offer an acceptable return to an investor who would not only be required to invest serious amounts of resources in an expansion and investment plan, but also to maximize the income for CADAFE, FIV or any other state entity."

Then I wrote about 4 articles more up until September 1998 when SENE was finally privatized and the results were (for me) much worse than expected. Again I quote myself "If Cadafe and FIV say they would have been happy with the base price of US$ 35 million, why then, will they take the US$ 55 million premium away from the island? We must remember that the entire US$ 90 million, and specially the premium of US$ 55 million, will be ultimately footed by Margarita’s population" 

Although I had wanted that the concession had been sold for 1 US$ so as to obtain more reasonable rates, as a remedy I suggested in that article that at least the US$ 55 million premium be retained by the island" for the submarine cable, a new pipeline of potable water, or any other need. But, that was not to be.

In response to the government's euphoria I also wrote " We obviously understand the laughter and back slapping by State officials. We can almost hear them say “Marvelous. We have gotten rid of the responsibility of the supply of power to the island. On top of this, we have received a front-end tax payment of US$ 90 million on top of all the other taxes we will be able to charge in the future! Nobody was the wiser for it! What a deal! Let’s do the next one!” - And that is, to the tune of a minimum US$ 700 Million, what they are announcing now.

Today we can still try to mend it or at least, not make it worse. First of all, reading that the current owner of SENE is interested in the gas pipe to Margarita, let's make it perfectly clear to him that the island, as the rest of the country, is not interested in gas per se but inexpensive electricity and that in Venezuela, until now, this has meant hydro electricity. If gas is finally imposed Margarita should at least request a supply contract of gas, valid for 50 years, and at a price equal to marginal cost.

An alternative is for Margarita to have first recourse over the new funds the government will receive from the new privatization in order to recover the full US$ 90 million that was diverted from the island, and to help pay for the submarine cable that should have been put in place before privatizing in Margarita. And of course, renegotiate the whole tariff structure.

Daily Journal, Caracas, July 6, 1999

http://suombudsmanelectrico.blogspot.com/1999/07/its-electricity-margarita-needs.html