The mouse that roared

This is dedicated to all of those who consider that the only way to combat the actual lack of self esteem present today in the country is to reduce it even further.

Last week, columnist Michael Rowan issued several recommendations for Venezuela, among these that you should “Ask not how you can be protected from the world. Ask only how best you can live in it”. 

I have frequently asked myself this question, but since the response that begins to develop in my mind is vastly different from the text book type answer hinted at by Mr. Rowan, I wish to make note of some of these differences.

To begin with, and even though I agree that a lot of the country’s internal problems as mentioned by Mr. Rowan really do exist, I consider it to be wrong to label Venezuela as a protectionist country. 

It could be that he did not know the Venezuela of old, but as of 1989 the country has, not always in a straight line and more often than not out of necessity rather than conviction, been submerged in a process of commercial and cultural aperture of such import that it is today one of the least protectionist countries in the world.

Upon rereading some of the articles I have written over the years, I find clear evidence of the fact that I have always been a constant defender of the markets as prime regulators and motors of the economy and as a consequence of this, I have also always been totally against what is today know as protectionism. 

In this sense, I am worried that Venezuela’s opening has not produced the desired results.

The commercial recipes common in today’s world are comprised primarily of the following two commandments: 

1) Open your borders and allow the products, services and capital offered by the rest of the world to come in so that all of your citizens may have access to the best the world can offer, produced in the most efficient manner possible; 

2) Respect the rights to intellectual property and to brands and patents in order to insure the adequate return of costs and to allow those who today fuel development to continue their mission.

In exchange for compliance with these commandments, the interested party is offered a first class ticket on the Train of Sustained Development on the way to a better economic future. 

Certainly, some of the passengers will be weaker than others. However, if all follow the same basic diet and exercise plan, based on the exploitation of inherent strengths with the adoption of an effort towards specialization, sooner or later, so goes the theory, all will be more or less equal.

Chile, for example, is a good example of what excellent results a ride on this Train can produce. Unfortunately, Venezuela, while having complied with the commandments almost religiously has absolutely nothing to show in the way of favorable results. Why? 

Rowan would answer, ‘It is Venezuela’s own fault’. I would say that while he is partially right, it is also important to say that the world is not playing a fair ball game.

The indisputable fact is that the world is applying duties on products derived from oil, as is the case of taxes on gasoline that in some parts of the world top 800% and that bar the producers from receiving his fair share of the sale of their resources. 

If these taxes were eliminated or were simply limited, for example, to something like the 26% duty imposed by Venezuela on the importation, Venezuela’s income would be much greater. Easily US$ 10 billion greater!

In this sense, if I am to respond to Mr. Rowan’s questions as to “How best you can live in it (the world)”, I would not be lying if I told you that I am feeling dangerously close to suggesting that we quit being stupid and that until the world comes around and gives us a fair shake by eliminating the damaging taxes on oil, we begin to behave as rogues.

As a first measure, it would be most tempting to raise all import duties to the same levels each country applies to oil. To follow up I could suggest we violate all brands and intellectual property rights, copy all medicines and facilitate their generic sale world wide. Finally, I would ask PDV to quit building fancy gasoline stations in Venezuela which, being sure that Kuwait is not waiting in the wings to compete on our turf, do not generate the sale of even one extra liter of gasoline. 

Instead I would construct large floating gasoline stations, anchor them off the coast of Europe and offer each European entrepreneur with a neoliberal bend the right to freely commercialize our gasoline tax free.

Am I exaggerating? One of the principal elements of discussion in the universe of ecological taxes, the ecotax, is how to insure that oil producing nations are also convinced to adopt fiscal policies involving high oil or energy taxes. 

The reason for this, in layman’s terms, is that if we don’t, industries that consume large amounts of energy could conceivably move to those countries with cheap energy, causing the loss of jobs in non-oil producing countries. So much for the specialization credo.

We should declare total and absolute war on the injustices of today’s system of commercial interchange. Just like the small country that declared war on Europe in the movie The Mouse That Roared, we have absolutely nothing to lose and much to gain. With so many enemies without why do we need to have enemies within?

The Petroleum Ombudsman revisited

Almost one year ago, I published an articled titled “The Petroleum Ombudsman”. In this article I raised the need to institutionalize the figure of a qualified entity that could satisfy the requirements of the Venezuelan citizens of objective and independent information and analysis related to the country’s oil industry.

At that time, my observations were initially driven by a desire to know what effects on the industry the vast restructuring of PDVSA’s organization would have. In my opinion, there was a risk of centralization of the company.

Today, upon reviewing the myriad of questions PDVSA’s actions have raised in the Venezuelan society over the past year, I am even more convinced that the matter of the ombudsman for the petroluem sector must pass from being a mere suggestion to being an outright and urgent requirement. Let us see some examples:

The Oil Opening was justified by a lack of availability of resources to continue PDVSA’s investment plans. All of the funds raised by the opening, however, went directly into the Nation’s fiscal coffers. Who can explain that?

Without the slightest remorse, the National Executive requested that PDVSA withhold or delay payment of its obligations to local suppliers in an effort to further fight inflationary pressures, thereby becoming just another poor payer. Could this have been the beginning of an interesting swap aimed at sending Mr. Guisti to the Central Bank in return for Dr. Casas?

We are continually bombarded by adds in the press, selling courses and seminars to be dictated by an educational affiliate denominated PDVSA Cied. One single session, from 8 AM to 5 PM costs Bs. 300,000, an evident divorce from the economic realities of the country. When was PDVSA authorized by the country to expand its scope of activities in this manner?

Everyone has been made aware of the dangers of lead in gasoline. The solution for this seems to be of lesser importance than the revamping of an immense amount of service stations which, in addition to dispensing gasoline, are also to sell snacks. Who establishes investment priorities?

If any market is to be considered a captive client for PDVSA, it should be the Venezuelan one. I find it difficult to visualize a supertanker from the gulf trying to pass gasoline through our port authorities with the aim of selling me the concept “Put a camel in your tank”. If this is so, and if PDVSA truly is short of resources, on what basis can they announce a plan to invest US$ 800 million over the next nine years in order to improve their service station network. Why aren’t these resources invested in countries who’s markets we should be conquering?

And while we are talking of PDV, how much did the changes in image and the marketing of a new logo and trademark cost us?

And speaking of logos and trademarks, I haven’t seen any of the large oil companies now coming into Venezuela to participate in the local markets make these changes in order to compete in our environment. In a world of global markets, global coherence would seem to be important. We are all aware of the PDVSA’s important participation in the US markets through its holdings in the CITGO network. Why, then, don’t we support this trademark and market it in Venezuela as well?

By raising these questions, I don’t wish to give the impression that I argue in favor of the Petroleum Ombudsman only to supervise PDVSA. It is also important to note that this office could also launch a vigorous defense of the industry’s interests at times when fiscal pressures are brought to bear by the National Executive. These pressures could ultimately lead to further indebtedness and/or endanger our goose of the golden eggs in many other ways.

If anyone still harbors doubts as to the need for the office of this ombudsman, it should be enough to reflect on the confusion and ado created by the question as to whether PDVSA has or has not legally complied with is fiscal obligations.

PDVSA is a State owned company, headed by Directors and Management designated by the State. We should therefore be able to expect a certain confidence an adherence by the same with the norms handed down by the State. If this were not so, it would seem to indicate a much more serious problem, one that cannot be solved merely by establishing a special SENIAT office within PDVSA.