Place us next to something profitable …

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

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

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

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

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

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

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

From El Universal, Caracas, July 2003

And as published in Voice and Noise of 2006

The Clause

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

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

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

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

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

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

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

Translated from El Universal, Caracas, July 3, 2003