Learning to appreciate

It is absolutely incredible. There is no anthropologist who understands it. Ours is a nation that dedicates serious effort to the art of national, religious, pagan and other such festivities. However, there is absolutely no mention of any holiday, not even a minor municipal one somewhere out in the wilds of Venezuela, to celebrate what undoubtedly must be the most important single object for the nation, its reserves of black gold.

The magazine Debates IESA recently published an article in which, precisely to create food for thought and debate, I tackle the subject of oil. I forward the possibility that our usual habit of labeling oil as something bad and disagreeable, to the point of actually calling what in most other nations would be considered to be God’s gift, the devil’s excrement, is simply part of an intelligent plot to cover up mistakes and avoid a severe audit of accounts.

While oil income continues to be considered “dirty” and has not been channeled through our pockets as ordinary citizens in order to avoid soiling or corrupting us, we will not give any importance to the efficiency with which the administrators to which we have delegated the task of handling these resources actually go about it. It would be another story, however, if this oil income would be considered squeaky clean and be the object of devout attention every Sunday at mass.

I ask you to reflect on the value of an educational program that would instill in even the poorest child the need to a) thank God for the Bs. 200,000 of oil income that would correspond to every single Venezuelan citizen (and which all of us have subrogated to the government in 1997), and b) to assume direct responsibility for its clean and correct administration.

Tongue in cheek aside, I am an economist and have a Master’s Degree in Business Administration. During my career if have learned, and taught, the basic precept that the most important step required in order to develop a solution to a problem is the clear identification of the resources you have on hand. Here, the opposite seems true. Colleagues, social planning gurus, VIPs and other such well-intentioned people seem to insist on preaching a model based on the theory that Venezuela should try to ignore its oil income. Something like supposing we decide that we should really be leaving the oil underground and immediately thereafter begin praying one hundred “ceteris paribus” to compensate for the fact that we continue pumping it anyhow.

Our oil income continues to exist, and all the efforts being undertaken under the umbrella of the oil sector opening seem to be aimed an increasing the same. In light of this reality, I propose in my article the thesis that maybe the best model for Venezuela is exactly a rentier one.

Many people would label this as heresy, but I steadfastly maintain that in my opinion, a rentier model has nothing to do with having a laid-back attitude or being a vagabond. On the contrary. A rentier model obligates us not only to save, but also to develop solid characters in order to assume the responsible management of our wealth to the benefit of future generations.

For example, experts from multilateral agencies and, of course, politicians thirsting for more resources to spend, seem to be basing their advice on models which are closer to being sado-masochistic than macro-economic. They advise us to completely ignore the horrifying experience we have been subjected to by our State administrators and to continue, in the name of fiscal deficit reduction, to pump more and more resources into our leaky fiscal system.

In stark contrast to this, we can well imagine the simple wisdom of the rentier model often used in the private sector and which motivates the owner of a company to cut off his capital contributions and avoid future indebtedness at all cost should his manager prove to be a useless failure after having misused the company’s resources.

I think, therefore, that an honest and simple application of a rentier model would allow us to identify with more clarity the true comparative advantages upon which to base Venezuela’s real development and which would in turn generate employment commensurate with our reality as an oil producing country.

Maybe then we could escape the mortal trap we have fallen into as a country by assuming that in order to initiate development we must substitute the traditional mix of incentives such as low prices for energy, communications and fertilizers with a salary structure almost comparative to a banana republic.

Certainly, it is not ethical to be poor rentiers and to throw out our income in order to work with the sweat of our brows. It would be ethical and logical to simply become excellent rentiers.

Venezuela and Colombia today

Two weeks ago I attended a conference identified as Venezuela and Colombia in the new millennium. This event was sponsored by the Pensamiento y Acción Foundation, the Rómulo Betancourt Foundation and the IESA. It was also supported by the Andean Development Corporation (CAF) and the Banco Mercantil.

The event was excellent, having managed to impose a strictly academic ambiance in spite of an extremely delicate subject. There was absolute respect for different and contradicting ideas and sentiment. Since the event allowed for moments of reflection and thought, I would like to share a personal concern.

Over the last few years, trade between the two countries has grown dramatically in nominal terms. As a result of this, it seems that the idea that an irreversible process of integration led by markets, business and consumers now exists has become popular. On top of this, this process seems to be occurring behind the political sector’s back.

This idea is somewhat dangerous. Specially when you consider that a substantial part of the trade we have observed over the last few years is based on false premises and on factors that are not sustainable in the long run. Among these we can observe the following:

The explosion in the volumes exchanged between the two countries originated during the early eighties at a time when Venezuela was entering into its “impoverishment” phase. Before this, with the exception of certain strictly unilateral commercial activity of basically local and borderline character, Venezuela negotiated at its will, need or extravagance with the most sophisticated commercial centers in the world. Colombia had virtually no chance to participate in the Venezuelan market.

At the same time, Venezuela’s oil income caused the country to sustain an extraordinarily strong currency which made it virtually impossible to achieve levels of competitivity that would have allowed the country’s business community to make inroads into the Colombian market. Evidently, there was no incentive to export when the country was required to maintain a policy of high tariffs and import quotas in order to protect local markets.

In recent years, the introduction of artificial economic measures helped to feed this mirage of increased trade. Among these measures, one of the more important ones was the appearance of currency exchange subsidies offered Venezuelan industry in order to facilitated imports of raw material and even finished goods. This obviously generated an “export of subsidies” both in the formal as well as in the informal markets. It is also important to note that in the face of barriers such as exchange controls of various types, commerce naturally gravitated towards countries that belonged to the ALADI compensation agreement, including of course, Colombia. This also artificially stimulated Venezuelan imports from these countries.

I also harbor a suspicion that commercial flows, even when expressed in hard currency and apparently favorable to Venezuela, hide problems that should be looked at more closely. Among these problems, looked at (perhaps subjectively) from the Venezuelan perspective, we can find the following: Is the generation of jobs produced by this trade equitable? Is Venezuela exporting commodities to Colombia for which the country has always had available markets? Is Colombia being favored by this exchange, gaining access to an export market for products that are really not competitive elsewhere?

I am certainly not criticizing the increase of trade between Venezuela and Colombia. I am totally for it. However, I am convinced that the commercial trade between Colombia and Venezuela by itself does not constitute a sufficiently strong foundation to support the integration. Most specially when, as all Venezuelans desire, the country manages to emerge from its current impoverished state and as a consequence totally alters its management of trade flows.

We should definitely not paralyze this integration, but we must promote new and solid foundations that can support it. For example, it is of utmost importance for any beneficial integration between the two countries to reach agreements on the management of hydrological basins and catchment areas which will guarantee the supply of potable water to future Colombo Venezuelan generations.