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