Out of the box tourism: Lessons from Florence

THE CONTEST!

My apologies to the Florentines, but their beautiful city is like the Magic Kingdom of the Renaissance. The inexhaustible flow of tourists, hotels, prices, and lines for attractions, fast or slow meals, and souvenirs, all makes one question, between Medici and Disney, just who copied the model of whom. In my opinion, not only are the gelatos of Florence richer, but also, with the possible exception of Goofy, Michelangelo’s David and the frescos of Fra Angélico are far superior to Mickey, Pluto, and the rest. 

What an inheritance the Medicis left to their city! The Florentine economy will always be easy to manage, since the only thing that their Paperon de Paperoni (Scrooge McDuck) has to do is fix admissions prices. The one little cloud on the horizon could be the quantity of English, Venezuelan, German, and other immigrants who try to take advantage of the infrastructure. What would Machiavelli have thought about entering the European Union?

We know that despite all its possibilities, Venezuela, in a local saying, still has not managed to connect the foot to the ball when it comes to developing its tourism industry. This will never be resolved by naming ministers who spend their time conducting publicity campaigns, or visiting Orlando and Florence. We are not proposing that other Medicis substitute for those who govern us—we can discuss this on another day. But in the meantime, we could emulate the experts.

In Florence 500 years ago, the contest system was used to assure that the best artistic proposals were utilized to adorn the city. So let’s organize a grand contest.

It will be a grand contest to choose a grand team and a grand plan for the strategic development and management of the tourism sector for the next 30 years, with an estimate of costs and results.

A qualified panel of judges should choose the best three proposals, and the proposals should be publicly debated on television. The losers will receive an important prize, and the winners will be commissioned to execute their proposal during thirty years, with a significant fixed, indexed and guaranteed annual budget.

Since televised public contests enjoy high ratings, this contest could also be a way to build pontes novos, new bridges, in our divided society.

The Santa María del Fiore Cathedral took more than 100 years to construct, and for a long time everyone thought its dome would be impossible to build. And so, friends, let’s not lose the hope of finding a local genius like Brunelleschi for our Helicoide (a local 45-year-old monstrous white elephant). 

From El Universal, Caracas, April 10, 2003

Extracted from "Voice and Noise" 2006

Tourist Mementos

Just taking flight to Porlamar triggers reflections. Flying over Cubagua, what a good place!... to set up the mother of all "Surviving" episodes, placing 10,000 ultra pro and 10,000 ultra against Chavistas and letting them, unarmed, negotiate an islet project.

I landed at the Porlamar International Airport and speculated on the impact that a photo would have for Joe W. from Texas, a fan of adventure tourism, where “Er Arcarde” [the local mayor] gave him, for his personal use, a latest model Cavim bulletproof vest.

At the airport I confirm that the “duty free” type stores, which in the whole world mean high prices, are camouflaged and do not stand out in a “duty free” area and I remember having proposed to tax “L'Aisla” with very high taxes, to then encourage tax evasion tourism, thus reclaiming its venerable smuggling tradition. For Hans from Hamburg, there should be no antelope head that can compete with a tax evasion certificate issued by the Chamber of Commerce.

And following the same vein, imagine the shy and obedient Lisa from Birmingham, taking a photo “negotiating with the authorities”, with that fat traffic guy who always stopped me at the intersection of Rómulo Gallegos and Los Ruices.

Hans and Helga, the environmentalists from Amsterdam, will remember their protests in front of the power plants that burn oil, because of the geniuses who prefer to cross the Gran Sabana with a power line, to sell our hydroelectricity to Brazil, cheaper than the one we bought to Colombia.

Frank from Boston will be able to visit the Miss Venezuela museum, that should be built; and Moníque from Cannes, could rebuild her ego in Playa El Agua, noting that there are still those who are not indifferent to her uncovered parts.

Finally, and as a great departure gift, everyone will find in their hotel, bound in leather, a copy of the Official Gazette of July 15, 1998, which contains Instruction No. 1 for the Public Servant, which among others, in Article 19 forces the use of “You”, prohibiting familiarities, such as “my love”.

Some time ago I read the label of a soft drink, which proudly proclaimed “Guaranteed 100% artificial” and learned about the importance of mental attitude. Frankly, Margarita is too much of an Island to follow the same route as the others in the Caribbean, where, even on the souvenir flannels we can read, “Different Island...same shit....”

http://alborotandoturismo.blogspot.com/2001/08/momentos-turisticos.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

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

Not much added value to the value added tax on Margarita Island

If there is anything that has to do with economics that has been proven with absolute clarity over the last few decades is the unsurpassable capacity of the Venezuelan State to misspend its resources. 

In this sense, an recipe for getting ourselves out of this inherited economic disaster that begins with the transfer of additional resources to the government is utterly incomprehensible to me, and I am a fierce enemy of all new taxation, even more so when we are talking about the Value Added Tax (IVA) that does not provide even the slightest redistribution of income.

However, in the case of the Island of Margarita, I refuse to spend much of my energy in protesting the recently decreed VAT. My reasons? As the say in local argot, what’s one more stripe for a tiger?

In Venezuela today, tourism is the only sector that promises the potential of creating so many externally competitive and productive jobs. The Dominican Republic’s income from tourism during last year was in the neighborhood of US$ 2.5 billion. There is no question that today we should be rallying the entire country around a National Plan for Tourism, centered principally in Margarita.

But no! In September of last year, instead of investing in a submarine cable to Margarita from the mainland so as to be able to supply the island with cheap energy (a public service of utmost importance to tourism), the latter divested in tourism when it blithely sent the US$ 60 million obtained from the privatization of its power company to the National Treasury. Margarita’s hotels often spend more for power than they do in covering its payroll.

A real plan to promote tourism on the island would focus everyone on finding solutions for getting water to the island’s population and hotels cheaply and securely. This could, for example, be done either by installing a new pipeline under the sea from the mainland financed by multilateral entities or by offering to supply free or cheap gas which would permit the fueling of desalination plants that would not be ruinously expensive. Today, all we see are plans to install gas lines so as to be able to sell gas to the island at international prices.

Anyone that had a real interest in promoting tourism on Margarita would not allow the Bolivar to overvalue to the point that the only tourism promoted is the international tourism of Venezuelans.

Anyone that had a real interest in promoting tourism on Margarita would have offered fuel at marginal cost to all international flights that come from more that 1,000 kilometers away, that carry 100 tourists that will stay for over one week. In Europe, for every 100 units paid for gasoline by the consumer, only 10 goes to the producer of the same. I am sure that each barrel “given as a gift to tourism” would be economically more beneficial to the country than its direct sale.

More investment in Margarita would create more jobs. Instead, mediocre advisors recommend the application of the VAT for Margarita in the name of anti-national national solidarity and based on minor issues that only promote equality downwards. Even some representatives of the private sector applaud the application of another tax.

But all is not lost. On this marvelous island, where the ingenuity and genes of its native and assimilated population are put to work full time to confront all this adversity with spunk and elan, new promotional strategies are being designed and produced on a daily basis.

We are all aware of the fiscal pressures imposed on the European tourist at home. A new attraction is now being developed in Margarita; a new variant of adventure tourism called Fiscal Tourism.

Today, thanks to the VAT, Margarita can offer the European Tourist the tropical and liberating experience of being able to participate in tax evasion. Very soon, merchants on Margarita will offer Evasion Receipts, which will most surely be souvenirs, competing directly with any of the dried and lacquered fish sold at any souvenir shop in the Caribbean. 

Local groups are studying the possibility of raffling a citation by the SENIAT among every 5,000 tourists. It must be exciting for any German from Stuttgart to be able to frame and hang this citation from the tax authorities. This is much better than trophies such as the head of an African antelope no matter how wide its horns may be.

For Heaven’s sake, let us create some added value on the island before we think of taxing it!

http://ourcaribbean.blogspot.com/1999/05/not-much-added-value-to-tax-on.html

Energy in Venezuela

The local press has recently published articles referring to the presentation by the National Executive to the National Energy Commission of a document which will lay out the plans to finally eliminate Venezuela’s rentist mentality. This means, basically, that increases in tariffs and prices of fuel are around the corner.

It seems clear that this document, in addition to establishing the bases for justifying new sources of income for the central government, will once again promote the thesis that the principal rentists of Venezuelan society are the common citizens, not its politicians and governors.

The identity card debacle is still fresh in our minds. This is a classic example of parasitic behavior. The Government was ready to dish out a macro-investment of US$ 500 million to solve the problems with our national identification system rather than putting just a little bit of effort into developing realistic and sane administration of the latter.

One of the main arguments used in the aforementioned document has to do with efficient use of our natural resources. The gist of the matter is that we are basically to forego the comparative advantages given us by nature in the form of abundant oil, gas and hydroelectric energy. Faced with high utility bills, companies and citizens alike must learn how to optimize and make more efficient use of these resources. The prime example of inefficient use of energy the authors of the document could come up with is that the Venezuelan aluminum and steel industry uses three time the amount of energy used in Japan.

This logic does not necessarily make sense, since Venezuela has abundant energy resources while Japan does not. The mix of production inputs such as capital, raw material and labor are usually established according to the conditions in each country. Surely most people would much rather see our comparative advantages be biased in favor of cheap energy rather than on cheap wages. It seems we don’t see eye to eye with the current or previous Governments on this.

On top of this both the aluminum and the steel industry have been managed by the State. Could it not be possible that this supposed inefficiency in the use of energy resources be related more than anything else to poor government administration?

The final blow was the publication in the press (on the same day the news of the document broke) of the invitation to prequalify for the privatization process of the power generation system of the State of Nueva Esparta. The basic terms of the invitation clearly stipulates that 100% of the shares will be sold to the highest bidder, on a strictly cash basis and without financing by the Venezuelan State.

This undoubtedly means that the power generation system will be allocated to the candidate who guarantees maximum income for the Central Government (which basically means charging higher rates to insure a return) rather than to the bidder that offers the Margariteño the best service and the lowest tariffs. Again, as far as I can see, this is just another example of the parasitic fiscal planning that has cost Venezuela immense amounts of financial resources and time. Why should Margarita pay tariffs that are higher than the in the rest of the country and might even be higher that what Venezuela will charge Brazil and Colombia for our exports of electricity? This makes no sense either.

For example, the implications of drastic increases in electricity rates for the hotel industry are horrible. A hotel needs a supply of abundant and continuous energy and there are preciously few ways to increase efficiency unless there is an unlimited amount of capital available which, for example, would allow for the importation of efficient but costly airconditioners. Today, faced with depressed room rates due to a flood of state owned supply and the lack of steady transportation due to Viasa’s exit, Margarita’s tourism industry simply does not have these resources.

Finally, as a sweetener, the Government most generously promises to limit its fiscal appetite to levels established by export values. This implies that it is it’s intention to at least not take undue advantage of the monopolistic conditions that tend to skew prices. We will live, eternally gratified with the hope that our average Venezolano will not one day pay more for each kilowatt of power than the average citizen in Tokyo.