Overprotected or not?

Overprotected or not? 

Coming from the United States, I received a small bottle of water and a bag of peanuts from the flight attendant. On the bottle, as usual, there was the comforting information that its calorie content was zero, it would be very worrying if that were not the case. However, the legend of the bag drove me crazy, when I read that to obtain its nutritional information, I had to write to the address indicated there. What was I doing at 35,000 feet, eating it or not? This made me reflect on the incredible number of regulations designed to protect the consumer.

We read that in Japan there is great concern because its people have adopted excessively exaggerated hygiene customs, which could reduce their resistance to microbes. Would a possible Darwinian evolution, forcing the Japanese to live in air bubbles, also apply to the overprotection of the American consumer?

I went to my sister, who because she was a doctor, I considered her to be the great guru of this epidemic of crazy rules and other stupidities of the gringos, being married to one of them, to ask her confidentially, without my brother-in-law finding out: What kind of society could require protecting its citizens in such a way? Are they so gross? Her answers were enlightening, so I'll tell you what I deduced from them.

In international trade, the United States is considered an open country, with the lowest tariffs in the world. Which is not necessarily true, if we consider that their average tariffs are made up of some of 0%, applied to products of little commercial significance, such as a nuclear reactor, and others very high, of 60%, applied to products, which for protect their own, they want to scare away, like orange concentrate.

Just as in commerce, reality does not coincide with common belief, in terms of regulations on quality, content and form of use, the United States does not have all the overprotection that we believe, suffering sometimes from absolute lack of protection.

In my sister's opinion, it is not that Americans are brutes (for my family history records, my brother-in-law has never seemed that way to me) the fact is that all the regulations that we observe in that country only constitute a weak line of defense, in the face of the legal uncertainty that has been created by the addiction of its judicial system to lawsuits. She tells me that the terror is so great that even in baby strollers there are instructions that recommend taking the baby out before folding him. In ironing, they insist on not ironing the clothes while they are on.

The lawsuits and their damages are not fictions. You can demonstrate this by asking any shareholder of a tobacco company in the United States what they think about legal uncertainty. You will surely get very interesting answers, in terms of monetary damages per capita. Likewise, we see that the insurance premiums, which doctors must pay to defend themselves, exceed the annual salary of many Venezuelan doctors. We know how difficult it can be for us to find a trustworthy doctor, but for American doctors, it is probably even more difficult to find a trustworthy patient.

We see in the news that in Florida they want to sue for the annulment of the electoral result, alleging that 20,000 voters were supposedly confused. Because of the difficulty they have in agreeing on who should be their next president, faced with a vote divided 50-50, I believe that those who are truly confused are many more, they are all the voters. Maybe they should outsource their government. Disney?

Speaking of legal security and trade openness, these were recently evaluated in the 2001 Economic Freedom Index of the Heritage Foundation, where Venezuela has once again earned being in the basement, with number 115 and the United States with 5. That is why, as a Venezuelan trying to get the point across, today I am spitting somewhat towards the north, instead of just straight up.

Translated by Google (and me) from an OpEd in Venezuela

The OPEC that I want to see

Towards the end of 1980, oil of optimum grade such as Arabian Light was being sold at US$ 36 per barrel. By the end of 1998, its price had fallen to US$ 12.20. The latter is equivalent to US$ 6.50 in 1980 US dollar terms, and represents only 18% of its value in 1980. This would seem to imply that whatever the strategy was that OPEC used to defend its oil was simply dead wrong.

This situation was so disastrous that at the end of 1998 the only alternatives that were ventilated publicly were either to violently increase production capacity or to simply sell or privatize the entire industry.

To limit oneself to the simple increase in production capacity would be to repeat the same errors that were committed with the other raw materials and natural non-renewable resources. It would mean to resign oneself to receiving the marginal contribution that results from being the sector’s low cost producer. It is sad that a country that has been so blessed with a valuable resource such as oil has to adopt a model that, at the end of the day, would let it to sell it at the variable cost of production. Something like receiving a valuable family inheritance and then turning around and selling it for what it costs to wrap it and ship it to the buyer.

In the same vein, the outright privatization of the oil sector would eliminate all possibility of geopolitic negotiation and the only thing we would receive as a going away present would be the resources to solve the existential problems of an entire generation of Venezuelans that have, for the last 20 years, not been able to decide if they were coming or going and that lived in a sort of Limbo State in the duty free zone of our international airport.

Today, when OPEC, for well know reasons (albeit not well recognized reasons) has received a new lease on life, it would be naughty not to wish it success in taking advantage of this second wind to build itself into a solid organization capable of facing the new challenges. If it fails, this will surely be its last breath. This is why I wish to share with you what I would consider the OPEC I want.

The OPEC I want would be able to win the confidence of all of its members in order to consolidate in one single block all the resources necessary to really defend it oil. These resources go far and beyond the simple turning of the tap.

The OPEC I want would be one that, upon observing how consumer nations have usurped the value of oil by increasing taxes (the UK, for example, increased taxes from 85% in 1980 to 456% ad valorem in 1998), would humbly accept the fact that they have lost the battle to an able opponent, but is now regrouping in order to win the war.

The OPEC I want would train the world’s100 best environmentalists in order to insure that, even though it shares the conviction and responsibility of taking care of our fragile world, the costs of defending the latter would not be laid squarely and unjustly on oil’s shoulders and that the environmentalist’s arguments will not be used for other hypocritical ends.

The OPEC I want would train the world’s 100 best experts in international commerce who would help avoid measures like direct subsidies for carbon as well as taxes that are aimed directly at oil and not at other sources of energy and that are evidently discriminatory and therefore not permitted under the norms established by the World Trade Organization.

The OPEC I want would train the world’s 1000 best scientists who would work in the world’s best laboratories and study, research and develop new uses for oil in order to minimize pollution or maximize added value as well as alternate sources of energy that could be used in the future.

The OPEC I want would not recognize the rights to intellectual property, brands and patents that, like a rabbit pulled out of a hat, generate income for the countries that own these rights which are definitely renewable, while the income obtained from the sale of a non-renewable natural resource such as oil is simultaneously being treated in a discriminatory fashion.

The OPEC I want simply would not allow a company to abscond with a hefty portion of the value of oil because it has formulated an additive that (supposedly) permits gasoline to be less polluting and based on a process that has dubiously been patented.

The OPEC I want would train the best image and marketing advisors in order to insure that the world’s public opinion does not continuously receive distorted information about OPEC and its members.

The OPEC I want would be staffed with the best team of diplomats and negotiators that would insure adequate representation at all international forums.

The OPEC I want would not allow gas and other sources of energy who’s values are not set under the OPEC umbrella to be introduced into the market like Trojan horses in order to compete with oil.

The OPEC I want knows that it counts with other resources other than oil to defend itself. The mere addition of all its international purchasing power would allow it to receive better treatment by imposing uniform special duties on all those who discriminate against oil.

The OPEC I want would not be formed by managers that think that their only objective is to perform comfortable bureaucratic tasks, but rather by soldiers that know and accept that they are on a mission aimed at improving the lot of their nations and that borders on being sacred.

The OPEC I want knows that it is not totally unimportant and is able to rally the solid support of its members and above all, of the population of its member countries.

The citizens of countries belonging to the OPEC I want know that even though their happiness and well being does not depend only on oil, it does depend on being able to defend what is theirs.

In the OPEC I want everyone prays to his respective God to give them strength to take full advantage of the meeting in Caracas.

Caracas, Venezuela, Daily Journal, September 2000

Originally published in Spanish in El Universal, Caracas, Venezuela August 26, 2000

Our economic policy suffering of complex

Protectionism, without a doubt, creates economic distortions, which means that its implementation must be continually subjected to an intelligent, creative and disciplined effort in order to reduce such distortions.

In Venezuela, an immense part of the professional elites have become “the Buddha” of protectionism; Hence today, when we find ourselves in a state of economic emergency, which requires a certain protectionism, there is a risk that it will be implemented by the least experienced.

Protectionism, whether we like it or not, managed to generate an important industrial base in the country through the import substitution policy. However, as it came to present a large accumulation of inefficiencies, the rulers in power, instead of making the corrections that, although not easy, were necessary, succumbed to the siren song of commercial opening and proceeded to burn the bridges. or to sell the sofa, destroying the little institutional capacity that existed to administer protectionism.

I have frequently argued that Venezuela seems to suffer many times from the same complex of an insecure teenager, who when he enters a party with mud on his nose, breaks down emotionally due to the certainty that everyone is watching him – when, as we well know, that never happens since everyone is busy with their own muds.

Only the existence of a complex like the one described could justify both the excessive desire to seek applause and international acceptance, as well as the presence of several of the true phenomena of misinterpreted economic orthodoxy, which have led us to the regrettable economic situation that we live currently. Below, I would like to comment on some of those orthodox phenomena that I have detected:

Commercial opening. The process of trade opening itself was carried out with all zeal and fanaticism, however, no effort was made to ensure that the country's efforts were duly rewarded; Evidence of this was that while Venezuela lowered its tariffs, the world increased those applied in a discriminatory manner to petroleum derivatives. On the other hand, it should be noted that this process began without taking into account the reality of the country, to such a degree. that the economic sectors were almost never consulted, nor informed regarding the transition or adjustment periods to be implemented. Perhaps part of the blame lay with the economic sectors themselves by ignoring the ongoing process and letting Fedecámaras represent them, knowing that Fedecámaras does not represent anyone, except its own leaders.

Fiscal policy. At the most inopportune moment of all, in the midst of the initial phase of an economic recession, the country decided to satisfy the demands of multilateral entities for fiscal balance and launched the introduction of VAT (or its substitutes, whatever they were called), with the aggravating factor, furthermore, of abandoning the function of seeking a better distribution of income, via the income tax.

Financial regulations. Banking, in addition to promoting savings, offering reasonable returns and certainty of recovery, must fulfill the functions of supporting economic growth and democratizing access to capital. In terms of banking regulation, it would seem that the country has forgotten these last two functions, accepting, without blinking, the Basel regulations, much more appropriate for the banking of an already developed country than for ours. There is nothing wrong with being a developing country, what is wrong is believing that by simply adopting different positions, you can reach another level of maturity – like a little girl who borrows her mother's lipstick to feel grown up.

Exchange policy. Without going into discussing it in detail, the truth is that in exchange matters, during the last four years, rates have been allowed to evolve in a way that threatens local productive economic activity to such a degree that its justification can only be attributable to mental health problems. Sometimes, I even think I hear our central bankers addressing their colleagues saying, "whatever it is, we will kill inflation in Venezuela, even if we have to kill the Venezuelan."

Foreign investment. In few cases is the complex, to which I referred initially, as clearly drawn as in that of foreign investments. The ones that make the most noise in this globalized world are, above all, those investment funds that represent short-term capital – swallow capital – that fly through the skies in search of opportunities to speculate. In the face of such investors, the country has bowed, offering them restrictive monetary policies with absurd differentials, to the point of having ignored the needs of our national investors or our true foreign investors, which are those companies that ensure employment with their physical presence in Venezuela.

I would not hesitate to decree strong protection measures – such as immediately closing the border to imported vehicles – of course, such a measure should be done in accordance with Colombia, given that it is currently our only and true business partner. By the way, on occasions I have suggested applying to the import of vehicles a tariff equivalent to that applied to gasoline in their countries of origin and that would mean, for example, in the case of the Mercedes Benz from Germany, a tariff of more than 400%.

I, on the other hand, would tremble at the thought of implementing protectionist measures, without counting on the knowledge of many of those who do know about the dangers of protection. To them, I beg you, even temporarily, to abandon your doubts and/or intellectual complexes and lend your shoulder to a country that needs it. (I promise you that I am not going to tell anyone, especially those multilateral entities – where perhaps in the future you will apply for a job – for whom protectionism and everything that smacks of that, is fo, fo and fo.)

Petropolitan
Finance for Development

The rights of intellectual property users

As we all know, Microsoft has been declared guilty of monopolistic conduct by a US court. What would have happened if the United States, based on the fact that Microsoft is an American company, had simply ignored these problems? Would it have been up to our humble Pro-Competencia to initiate the legal proceedings against this giant among giants?

All evidence leads us to suspect that as far as the protection of intellectual property is concerned, we are still in an embryonic stage. There is still a lot to discuss and decide upon. As an example we can cite the unilateral statements issued by President Clinton and Prime Minister Blair in which both guarantee free access to data produced by research into the decodification of the human gene. This caused share prices of firms dedicated to this research to tumble. Likewise, serious debate has been stirred up in the press about the validity of many patents issued in the world of the Internet.

When I then received (as did many others) a letter and brochure illustrated with a set of handcuffs and in which I was curtly advised I should legalize all the software I was using before the 30th of April. Should I not do so, I would be confronting severe fines, would have my hard disk sequestered and would be subject to up to four years in prison, I was galvanized into reflecting a bit more on this issue.

My first conclusion was that due to the fact that all of the legal apparatus that regulates this matter was developed by the owners of 99.99% of intellectual property rights, countries like Venezuela that only have users and royalty payers, must with urgency develop their own theoretic frame of reference. The following are some points for discussion:

Any idea produced by a human being is the result of what the latter has inherited from human civilization and makes that person simply a conveyor and official spokesman of these ideas. He or she should not expect any other remuneration other than sincere thanks for work well done or in very few cases, maybe a Nobel Prize.

Any investment in the publicity of trademarks is equivalent to investment in protectionist barriers and in this sense does not lead us towards the maximization of the benefits that can be produced by a real free market. For example, the possibility that a pirate McDonald’s could be allowed to set up right across the street from an original McDonald’s, leaving it up to the consumer to decide which is better, would dramatically expand the frontiers of free competition.

When the authorities award Microsoft the rights to ownership of a particular software, they do so with the understanding that there are other parameters and competitive elements in the market that limit the capability of this company to abuse its position of advantage. This could be valid in a domestic market, but may not be in a globalized world. Microsoft establishes its prices for software based on the American market in which it considers its prices to be reasonable. Should Venezuela have been Microsoft’s only market, I am sure the price of this software would be one tenth of the prices it currently charges. By transferring to Venezuela the protection awarded to Microsoft in the United States, we can infer that since the price is the same in both countries, what in the US is seen as reasonable protection could be seen in Venezuela as monopolistic behavior.

You may ask yourselves what could possibly stimulate the acidity of the abovementioned hypotheses relative to the rights of the Users of Intellectual Property, Trademarks and Patents. I remind you of my opposition to the abusive ad-valorem taxes that are indiscriminately being imposed on oil production by many nations around the globe.

Based on data taken from the “World Oil Trends 1999” published by Arthur Andersen and Cambridge Energy Research Associates in the UK, for example, taxes on gasoline which in 1985 were 85% have now reached an absurd 456%. Evidently, these taxes have caused the increase of the price of oil based products for the consumer. In England, the price index for these products went from 100% in 1980 to 247% in 1998. The result of this for Venezuela is clear as day. Demand for crude oil dropped and the price index of crude oil went from 100% in 1980 to a mere 18% in 1998.

The above simply means that Venezuela’s oil income was affected very negatively. This leads me to think that there is no reason for us to undersign treaties or pacts that obligate our judges to be modern day Sheriffs of Nottingham, thereby helping others to defend intellectual aspirations to intellectual income. Especially when we consider that oil is a non-renewable resource while other intellectual products are by definition renewable resources.

Human genetics made inhuman

Lately world leaders have issued statements labeling research into the human genetic blueprint as “one of the most significant scientific projects of all time.” They have also suggested that “to realize the full promise of the research, raw fundamental data on the human genome including the human DNA sequence and its variations should be made freely available to scientists everywhere.”

As of this moment, all I have read about the mapping of human genes has been so upsetting that it only brings to mind the title of the musical Stop the World, I Want to Get Off. I am very far from making my mind up about this difficult issue, but I need to share some of my initial concerns with as many people as possible.

A report cited in Reuters from the Daily Telegraph, London, indicates that “the government plans to allow insurance companies to use DNA testing to assess whether people are at risk of inheriting serious illness and should pay higher premiums.”

I believe strongly in the importance of the market as a means for the distribution of resources in society. However, I also believe that the benefits of development should accrue to all, not leaving any behind. What we now seem to be able to accomplish with research on the human genome multiplies manifold the difficulties of harmonizing these two previously contradicting objectives.

For instance, it would be great if genetics allowed the insurance companies to decide who will pay lower premiums, that is, those with less risk of developing serious illness. However, who will be responsible for those declared genetically second-class citizens, who will be forced to pay double or triple the premium, or who will ultimately be turned down altogether?

This problem is not limited to insurance. Reuters also reported on a conference to be held in mid-April in the United Kingdom in which “Genetic testing of children and testing for physical and social characteristics, as well as medical traits, would be high on the agenda.” Does this imply the possibility that even access to the university will some day be determined in part by genetic analysis?

What would parents who today limit their background search to asking their children who their friends’ parents are do tomorrow? Would they be obliged to ask about their genetic charts? The potential for discrimination is great, and would only reinforce the motivations of overly twisted Darwinists.

This genetic investigation might also represent a serious commercial threat for those countries that are not participating in this area. One of the companies racing to use information from gene mapping to make profits declared that it had hooked up with a center to find genes associated with breast cancer. If the efforts of this company are successful, it will be sitting on a patentable product and would be in a position to become a monopolist in a market with very inelastic demand. Can rationality be guaranteed within the openly declared and not unreasonable intention to obtain profit from the venture?

Many countries have signed commercial agreements that obligate them to respect patents to the extent of having to collaborate with other countries and punish unlawful use of protected discoveries. In the future, advancements in genetic science may force the revision of these accords, to decide whether they are still valid or whether, on the other hand and for the good of the common citizen, they should just look the other way.

What to do? It is very hard to say. Today, and just out of practical considerations, I limit myself to suggesting that all insurance companies design a plan which obligates them to issue policies for all of those who undertake a genetic examination. This policy should cover the negative impact and consequence that could arise from anyone getting access to such information.

I know this is only a Band-Aid, but what else can I do? I am not among those that resign and lie down to cry, even though this matter actually would justify just that.

From The Daily Journal, Caracas, March 2000

From Voice and Noise, Booksurge 2006

https://voiceandnoise.blogspot.com/2006/08/human-genetics-made-inhuman.html

Genes humanos hechos inhumanos 

A mediados de Marzo el Presidente Clinton y el Primer Ministro Tony Blair declararon in a joint statement que research into human genetic blueprint was "one of the most significant scientific projects of all time." Sugirieron también que "To realize full promise of the research, raw fundamental data on the human genome including the human DNA sequence and its variations, should be made freely available to scientist everywhere." Sonaba maravilloso. 

Desde ese momento solo he leido sobre aspectos relacionados con el mapeo de los genes humanos, tan perturbadores,.que a cada momento me recuerda el titulo del musical, Stop the world I want to get off. En la materia me encuentro muy lejos de encontrar una posición pero la angustia que me crea, me obliga a compartirla con muchos. 

Lo peor fue un reporte de Reuters en el cual, citando como fuente al Daily Telegraph de Inglaterra, se indica "The government plans to allow insurance companies to use DNA testing to assess whether people are at risk of inheriting serious illnesses and should pay higher premiums." 

Para alguien que como yo cree tanto en la importancia del mercado como mecanismo de asignación de recursos en la sociedad, como en la necesidad, objetiva y moral, que el desarrollo no solo alcance una parte de la población, y deje rezagada a la otra, las posibilidades que visualize, multiplicaron por mil las dificultades de harmonizar entre los dos algo contradictorios objetivos. 

Que bueno si la genetica permite cobrar una prima mas baja a quién no esta predispuesto a ciertas enfermedades, pero, quién se responzabiliza por el que resulte declarado ciudadano geneticamente de segunda y a quién le exigiran el pago doble, triple, o simplemente le rechazaran una cobertura. 

Lo anterior no se limita a seguros. La Reuter reporta también sobre una conferencias a mediados de Abril en Inglaterra y en la cual "Genetic testing of children and testing for physical and social characteristics, as well as medical traits, would also be high on the agenda." - lo cual dibuja en el horizonte la posibilidad de que hasta el acceso a las universidades se determine por analisis genetico. 

Los padres madres quienes hoy con toda normalidad le preguntan a sus hijos sobre quienes son los padres de sus amigos, qué harán mañana? Estarán en la obligación de preguntar sobre la carta genetica? 

Aparte de su potencial discriminatorio - que solo puede reforzar los argumentos de aquellos genéticamente desviados Darwinistas que buscan la raza suprema, la investigacion genetica también presenta una profunda amenaza comercial para los paises que hoy no tienen una presencia en esta area de la economia. 

Las primeras reacciones a las declaraciones de Clinto y Blair por parte del mercado financiero de empresas y laboratorios dedicado a la ciencia genetica fue negativa - se abre el mercado y se impide el monopolio. A los pocos dias la Casa Blanca declaraba "The whole point of this is to make raw data available so private companies can innovate, create new medicine and treatment and make a profit." y las aguas volvieron a su cause. 

Lo anterior plantea inmensos retos regulativos. Por ejemplo, Celera Genomics, one of the companies racing to use information from gene mapping to make profits, said on Monday it had hooked up with a center to find genes associated with breast cancer. Si los esfuerzos de tal empresa son exitosos obtendra un producto curativo y patentable, y se ubicara como monopolista en un mercado con una demanda inelastica. Como se garantiza la razonabilidad en la declarada y nada equivocada intención de obtener una ganancia. 

Un pais como Venezuela, ha firmado acuerdos comerciales que hoy lo obligan a respetar las patentes, hasta el grado de colaborar y perseguir el uso ilegitimo de estos. En un futuro, el desarrollo genético puede obligar a revisar estos acuerdos, para decidir si se siguen honrando o si, por el contrario, para el bien de sus ciudadanos, debe hacerse la vista gorda. 

Las reacciones emotivas que el tema produce, inspira escribir. Hoy termino proponiendo que las empresa de seguro, de inmediato diseñen un seguro, de caracter obligatorio para todo quien se haga un examen genetico, y que cubra las consecuencias negativas que se puedan derivar de poseer tal informacion. 

Reconozco que lo anterior solo es un pañito caliente, pero qué hago. No soy de los que renuncio y me hecho a llorar - aun cuando en este caso si provoca.

Oil and the Stockholm Syndrome

 Fact No. 1: In 1980 the nominal price of oil (Arabian Light) was US$ 36 per barrel. In constant dollar prices calculated using the GDP deflator with 1998 as base, this was equivalent to US$ 67. By the end of 1998 the price of oil was US$ 12.20. In real terms it means that if the price index of oil in 1980 was 100% then in 1998 it was only 18%.

Fact No. 2: The index of oil products retail prices in 1980 was equal to 100%, in the United Kingdom, it reached 247% in 1998.

Fact No. 3: The amazing difference in how the two oil-related indexes developed can only be explained by taxes. As an example, in the UK in 1980 the ad-valorem taxes on gasoline were 85%; at the end of 1998 the same taxes were 456%.

Conclusion. Oil demand and oil prices are being held hostage by the taxes levied on various oil products by most oil-consuming countries. Had it not been for these sky-high discriminatory taxes, Venezuela would today be selling more oil at higher prices, easily repaying its foreign borrowings, and not even requiring a credit rating.

Adding insult to injury, the before mentioned taxes were slammed on Venezuela's main export at a time when the country was busy reducing custom duties and opening up its economy to all type of foreign competition.

It is difficult, then, to understand why, thanks to their country’s press, radio and television, Venezuelans can only worry and feel guilty of the fact that perhaps the recent increases in the price of oil will be the detonator for inflation and worldwide recession.

Could it be that the Stockholm syndrome affects Venezuela (as well as all of the OPEC nations)? As all pseudo-psychologists and writers should know, the Stockholm syndrome is what happens when someone that has been kidnapped finally becomes sympathetic with the position of his captors and ultimately even begins to defend them.

If you doubt what I am saying, just think of how our neoliberals, while talking up the maximization of income as one of their credos, blithely forgive their foreign heroes by either ignoring the issue or by creating lame environmental excuses or by simply repeating absurdities as “being rentist is really not very good for the country”. I would specially like to see them sustain this last thesis in other countries, for example in those that do all that is possible to maximize their rent from intellectual property, to the point of turning us into their best collectors.

That’s it then. There is no doubt in my mind that the Stockholm syndrome, or something very similar, is alive and well in Venezuela’s economic policies.

We need a couple of couch sessions, this time with psychologists that are very different from those we have used up to now. Dr. International Monetary Freund turned out to be simply an unethical Dr. Fraud. While the latter was pretending to give us good advice, he would travel behind our backs throughout the world, preaching the marvels of increasing taxes on oil-based products, and when this was not sufficiently convincing, simply forcing the adoption of the policy.

With its inaction, OPEC is also a prime suspect of having come down with the same affliction. I sure hope that during their sessions next week, to be held in Vienna, they will find time to get the advice of a true Dr. Freud.

Only then will they realize that at US$ 30 per barrel, the price of oil is still less than 45% of what it was in 1980.

Only then will they be able to understand the true injustice present when a taxman of a consumer country perceives an income 4.8 times more than the producer of a non renewable asset. During February this year, premium unleaded gasoline was sold at the pump in the UK for US$ 1.18 per liter, distributed as follows: 20 cts for the producer, 5 cts for the distributor and 93 cts for the British taxman.

Only then will they know that the world is not threatened by oil prices. The world and economic growth is above all, threatened by taxes implement for the sake of easy tax collection.

Only then will they remember to ask for a reduction of oil taxes, as a quid-pro-quo for any increase in oil production.

OPEC friends, … please remember Stockholm.

Calculations based on information in World Oil Trends 1999 published by Arthur Andersen and Cambridge Energy Research Associates.

In the Daily Journal, Caracas, March 24, 2000

https://petropolitan.blogspot.com/2000/03/oil-and-stockholm-syndrome.html

Globalizing markets and salaries

Photographs taken in Caracas back when black and white was the only game in town show us how the population usually wore coats and clothing adequate for temperate climates. This should already have been history since the world by all accounts was already heading towards global warming.

Something must have happened to explain why a famous Spanish store, located in an equally as famous shopping center in our tropical capital offers and actually sells winter clothing – not autumn – winter clothing.

As a result of a comment I made to one of my partners to this effect, he waved his newly issued and stamp free Spanish passport in my face and argued that this had nothing to do with climatic evolution but rather with the new realities imposed by a globalized world. As you understand, my partner belongs to that group of Venezuelans that has instantly acquired Spanish citizenship as a result of Spain’s incorporation into the European Common Market.

As stated by my partner, his fellow patriots are numerous in Venezuela and also represent an important purchase capacity. In this sense, the above mentioned store was only servicing a domestic market that had been globalized. I must have put on a surprised look since he then asked my who I though I was to question the right of Spaniards in Venezuela to have access to the same goods and services as do Spaniards in Spain.

It was never my intention to question my partner’s rights, and I told him so, ratifying my profound admiration for the globalized service offered by Spanish chain stores. Unfortunately, it was too little, too late. He continued to expand on his arguments in a slightly agitated manner - sort of confirming the origin of his genes.

“It is not fair that I, as a globalized Spaniard, do not have automatic access to the same financial services that my co-patriots have simply due to the fact that they live in Spain and I do not.” I immediately understood where he was coming from, and wishing to conserve our partnership, I joined in, throwing more coal into the fire.

I maintained the thesis that all banks of Spanish origin with offices in Venezuela should offer all Neo-Spaniards resident in the country, mortgages with 30 year maturities at 6% annual interest rates (or whatever the advantageous conditions in Spain currently are). I finished off my spiel with “If Spanish banks can bring to Venezuela something as Spanish as the piglets and lotteries, they should also have to bring their cheap loans with them as well”. Happily, this finished off the conversation. 

Afterwards I continued to think about the relationship between the domestic markets and the globalized markets. Some unexplored possibilities seem interesting enough for further analysis.

According to the tenets of commercial integration, the differences in salary levels from one country to the next are in principle only temporary. Supposedly, the resulting economic growth should make these differences disappear. Without a doubt, however, these differences in salaries are initially an important tool with which developing nations can compete. If not so, it would have been extremely difficult to sell market opening.

In recent months we have been surprised by certain arguments put forth to the World Trade Organization by some organized trade unions in developed countries. There is increasing pressure in favor of protectionist measures designed to compensate for unjust competition which, according to these organizations, comes from developing nations with low salary bases. This does not bode well for the latter as they are threatened with renewed commercial restrictions.

Simultaneously, we have also seen how the offer of professional services worldwide is increasingly concentrated in the hands of fewer firms. As a result, our lawyers, accountants, publicists and other professionals must commit more and more of their income towards the payment of franchise fees exacted by this modern day privateering. This trend is definitely changing the traditional scope of non-tradable services, and I am not at all sure this is favorable for our country, or for any developing nation for that matter.

While trying to develop a way of defending ourselves from this trend, it occurs to me that one way of returning the ball can be found in the following questions: If it is possible to refer to the possibility of globalized domestic markets, could we then also be thinking about globalized domestic labor conditions? And if labor unions in developed nations can use differences in salaries to negotiate protection for their tradable goods, could we not apply the same concept to our non-tradable services?

In that respect, a starting point would be to analyze the possibility of requiring international firms that operate locally in the service sector, accounting firms for example, to remunerate their local staff with salaries equivalent to those being paid in their countries of origin.

If what is equal is fair for them, then what is equal should not be unfair for us.

Kafka and global banking

My partner was on the phone to his bank. From the tone of his voice, I realized that the matter discussed was delicate. He explained to the person on the other end of the line that some of the withdrawals made from his account through an ATM machine were not his, and that they were therefore fraudulent.

 

Initially, things did not go well. An anonymous voice responded that unfortunately, in the bank’s opinion, the withdrawals seemed to be in line with the regular movement registered for the account and there seemed to be no indication of irregular activity that could be evidence of fraud. The sad implication of this is that the answer implied that the perpetrator of the fraud was my partner himself.

 

The next few weeks were a nightmare for my partner. Finally, having established that the amounts withdrawn exceeded the amounts that he himself as account holder was allowed to withdraw in the same period of time, the bank finally decided things were not quite so normal and an investigation was initiated. The matter has still not been resolved, two months later.

 

The misfortune was about as traumatic for me. The mere thought that some vagabond could randomly identify my account, blithely initiate a series of ‘normal’ fraudulent withdrawals, have me lose days and maybe weeks of my life and lots of money on overdraft interest payments and phone bills while trying to sound honest over the phone in order to convince an anonymous voice on the other end makes me shudder.

 

During the ordeal I remember thinking "thank God we still have several banks to work with". Imagine if we would have had to discuss the issue with an official of the One and Only World Bank (OOWB). Without a doubt this would present us with a future full of horrendous Kafkaesque possibilities.

 

This leads me to think about the consolidation currently going on among banks. With every day that passes we have fewer and fewer banking institutions worldwide with which to work. This trend has been marketed as one of the seven wonders of globalization.

 

In addition to the above-mentioned problem, which puts defenseless users on the spot, I believe the trend introduces other risks which have either not been sufficiently commented on or which have simply been ignored. Among these I can identify the following:

 

A diminished diversification of risk.  No matter what bank regulators can invent to guarantee the diversification of risks in each individual bank, there is no doubt in my mind that less institutions means less baskets in which to put one’s eggs. One often reads that during the first four years of the 1930’s decade in the U.S.A., a total of 9,000 banks went under. One can easily ask what would have happened to the U.S.A. if there had been only one big bank at that time.

 

The risk of regulation.  In the past there were many countries and many forms of regulation. Today, norms and regulation are haughtily put into place that transcend borders and are applicable worldwide without considering that the after effects of any mistake could be explosive.

 

Excessive similitude.  By trying to insure that all banks adopt the same rules and norms as established in Basle, we are also pushing them into coming ever closer and closer to each other in their way of conducting business. Unfortunately, however, nor are all countries the same, nor are all economies alike. This means that some countries and economies necessarily will end up with banking systems that do not adapt to their individual needs.

 

I remember that John K. Galbraith once wrote that the economic development of the west of USA was helped by the fact that in the eastern part of the United States, banks were big and solid but that in the west, banks tended to work with much greater flexibility. The fact that some of these banks went bankrupt from time to time was simply taken as a normal cost inherent in development. Today, Venezuela's economy might be in dire need of some Wild West banks. 

 

The cost of global assistance.  When Venezuela’s banking system went down the drain, there is no doubt that the cost of the crisis was paid integrally by the country itself. In today’s world, when we see that a series of international banks are investing in our country’s institutions, I often wonder what will happen when one of these behemoths runs into serious trouble in its own country. Will we have to pay for our part of the crisis, less than our part of the crisis or more than our part of the crisis?

 

As bank mergers and acquisitions increase and stock exchanges worldwide call for more, I analyze what happened to my partner and have my own doubts. I ask myself if we should not be imposing the creation of special reserves for especially large banks. The larger they are, the harder they fall, and the greater the need to avoid disaster. 

https://subprimeregulations.blogspot.com/2000/02/kafka-and-global-banking.html

Tricks, and the environment

This week we read in the papers about a report to the British Parliament by the London Geological Society. In it they issued an alert over the real possibilities of a mega volcano eruption that would cause global cooling with dramatic consequences. Why is that hot volcanoes lava emission cools, while oil emissions are supposed to warm? Is someone taking us oil-producers for a ride? 

During the week ending January 21, one liter of premium unleaded gasoline was sold at the pump in England for US$ 1.20. Out of this amount, 19cts went to the supplier, 5cts went to the distributor and 95cts went towards various taxes.

It is evident that an oil producing country like Venezuela is severely affected by these taxes which, by the way, amount to 500% of what the producer receives. If these taxes were eliminated, both prices as well as the demand for oil would be much higher.

There can be no doubt that the only reason for these discriminatory taxes is a healthy fiscal appetite. However, with an almost subtle hypocrisy, these taxes are normally explained as only being related to environmental protection.

When we observe the poverty in our country, which would at least be reduced by increased oil income, any person preoccupied with the environment, may harbor a natural conflict. Up to this moment, I have solved my own conflict by telling myself that it is logical to have high prices in an effort to minimize consumption of oil, but that it is illogical and unjust that the margins produced by the same should only accrue the taxman in the rich consumer nations.

I say ‘up to this moment’ because I just read a book written by Dr. S. Fred Singer called Hot Talk Cold Science which certainly questions current environmental credos.

Singer's credentials as an expert in environmental matters seem to be impeccable. He has a Ph.D. in physics from Princeton and is professor emeritus of environmental science at the University of Virginia. He was the first director of the US Weather Satellite Service, Director of the Center for Atmospheric and Space Physics, and Chief Scientist for the US Department of Transportation.

In his book, Singer spells out arguments, that wipe out any justification for these taxes on environmental bases. Among other things, he says:

"The gap between the satellite observations and existing theory is so large that it throws serious doubt on all computer-modeled predictions of future warming"

"Even if global warming were to occur, it would most likely lead to positive benefits overall rather than to disbenefits."

"No credible attempt has been made to define what constitutes a dangerous level of CO2; thus the goal of the U.N. Climate Treaty is arbitrary." 

In relation to the concentration of CO2, Dr. Singer details methods that in his opinion are much more feasible in economic terms than those solely based on the reduction of emissions. These methods are based on sequestering the CO2 from the atmosphere, either through reforestation or the fertilization of oceans, the latter option being the one favored by Mr. Singer. 

Dr. Singer is not alone in his appreciation. In his book he cites the Leipzig Declaration which came out of a 1995 conference which was attended by almost 100 experts. This Declaration states "In a world in which poverty is the greatest social pollutant, any restriction on energy use that inhibits growth should be viewed with caution. For this reason, we consider carbon taxes and other drastic control policies ' lacking credible support from the underlying science - to be ill advised, premature, wrought with economic danger, and likely to be counterproductive".

Why, then, do such great discrepancies exist between the opinions described above and those of other scientists with similar recognized careers? Singer puts forward his explanation: "Nearly all research is funded by government; the rationale for expending taxpayer's money is to prevent hazards to the general population. Funding agencies therefore do not look kindly on research proposals that could demonstrate environmental hazards to be not serious or even non existent."

As a citizen of an oil producing country, affected by this evident injustice, I would be more inclined to advance the possibility that the financing of such environmental studies is more motivated by the need of justifying the taxes levied on oil. In this sense, many of the environmentalists are probably unknowingly soulmates of the famous taxman, the Sheriff of Nottingham, who in Robin Hood's days taxed the poor to give to the rich - i.e. the government.

In a country like ours, so dependent on its oil income, I am surprised at the absence in our universities and other centers of investigation of courses on environmental studies which are so necessary in order to minimize damage caused us in the name of the environment by hypocritical governments of the developed world.

https://ourpiedaterre.blogspot.com/2000/02/tricks-and-environment.html

The Oil Cruiser (Making Venezuela competitive)

In December 1999, unleaded gasoline in the UK was being sold for the equivalent of Bs. 763 per liter. Out of this amount, Bs. 118 went to the producer who sacrifices a non-renewable resource. Bs. 37 to the distributor, and Bs. 608 to the UK taxman’s coffers in the form of various types of taxes.

The value of something is simply what the buyer is willing to pay for it. It is clear that in the above case, the producer of the oil is only able to extract a minimal portion of the value of the same, i.e. 16%. This should theoretically oblige him to take action. 

The first and foremost, is to protest and fight against the indiscriminate and confiscatory taxes most countries that consume oil and its derivatives impose on it. In this sense, I am doing what I can through an organization called Petropolitan. Today, however, I wish to refer to other possibilities of extracting more value from oil.

I heard while watching a documentary, that a large cruise ship crossing the Atlantic consumes about US$ 80,000 worth of fuel oil per day. I am not sure when this documentary was produced, but there is no doubt that the cost of oil is of vital importance, both for cruise ships as well as for airlines.

Interested in the subject, I managed to get hold of a copy of a report that detailed by name and dates the different cruise ships that are to visit a particular island in the Caribbean during the month of January 2000. 

With the help of a Cruise Guide I studied the list and obtained the following results:

During the month of January of this year, 54 cruise ships were scheduled to visit the island of Saint Martin, some of them more than once. 

These ships represent a basic population of 92,846 passengers (two per cabin) who are cared for by a total of 39,345 crewmembers. Upon visiting the island, they get to know it, they buy things, they eat and drink, they re-supply the ship, and in general, they put the island on the tourism map.

Worldwide, the cruise industry sells more than eight million tourism packages per year (5.5 million in the United States alone), based on a fleet of almost 300 ships or which 85 have a capacity to accommodate more than 1,000 passengers.

I ask myself if it would be possible, by using our oil intelligently, to introduce Venezuela to this market and thereby manage to obtain higher yields from our oil sales than we are getting at this moment.

For example, we could come to agreements which would guarantee that each ship that docks at two Venezuelan ports and stays a minimum of 6 hours at one and 18 hours at another, has the right to take on fuel at a preferential price not greater than the marginal production cost and in quantities adjusted to the number of passengers each ship carries.

Evidently, preferential prices for fuel oil do not guarantee success. There is no doubt that passengers must want to come to Venezuela in the first place. I am sure, however, that if we were to put into place a plan like this which could be effectively sold to the owners of the cruise lines and that somehow guarantees traffic for a period of ten years, investment would immediately begin to flow towards the required infrastructure and Venezuela could achieve the required specialization in order to compete with other destinations.

I do not think anyone in rest of the Caribbean would object to this program, since the only thing that can result is an increase in tourism activity in the entire area, which would benefit everyone.

It is also possible to extend the benefits of a plan such as this one to the aviation sector. I can envisage packages, which would enable tourists to fly from New York to Porlamar in Margarita, to stay at a hotel for a week and then go back on a cruise ship.

The proposed might help to reverse the oil sector’s low job creation capacity. One employee in the tourism industry mentioned the fact that during the winter months, some Canadian cruise lines concentrated their activity in Miami. He referred to this as a “shot in the arm” for the Miami economy. I do not wish to exaggerate the possible impact of a program such as the one described here, but honestly, if Miami’s economy needs a shot in the arm, doesn't Venezuela's?

With our geographic advantages, our oil and a bit of will, Venezuela could surely become the southern capital for cruise lines in the Caribbean. This could probably be achieved without using our oil, but why not make the best use of a comparative advantage?

https://alborotandoturismo.blogspot.com/2000/01/el-crucero-petrolero.html