A true fountain of inspiration

I recently learned of the demolition of the famous Hotel Fuenti, located on the beautiful coast of Amalfi in Italy. This structure had become a symbol of what seems to be known as environmental "abusivismo” in Italy. At least this is what comes out of the automatic translator I use when navigating Italian web sites. I am sure that this case is fascinating to those who are interested in administrative law or in the study of Italian society. To begin with, this case has been around for the last thirty years.

The demolition of 34,000 square meters of reinforced concrete structure is no small matter anywhere. Exactly how these measures are approved and taken in order to effectively defend the environmental rights of a society or an individual without resulting in legal "abusivismo” is a challenge to one’s imagination.

I am sure that most of us, without going into much more detail, are absolutely sure that whatever the legal regulations the promoters of the Fuenti violated, there are thousands of worse violations that will never suffer this drastic fate.

On the other hand, most of us will probably not shed too many tears over what may be a total injustice that the Fuenti’s owners are being subjected to. One explanation of the above may be what one could call the Fuenti’s high Visual Contamination Index (VCI).

In order to understand the VCI, let us imagine that we can assign points to the ugliness of any structure, ten points for the ugliest to 1 point for the least ugly. Likewise, we could assign points for the relevance or beauty of its location, from one point for the most insignificant to ten points for the most beautiful and relevant. By multiplying both rankings, we can obtain the VCI. In the Fuenti case, if we assign an eight for ugliness and multiply this by an eight for the beauty and relevance of its location, we obtain a total score of 64. This apparently is enough to send the structure to the gallows.

Does this seem easy and fair? Not necessarily. Imagine trying to get two Italians to come to an agreement about the assignation of points for beauty and relevance!

I sincerely hope that the case of the Hotel Fuenti will serve as an inspiration so that we can begin to confront the serious problems of visual contamination that occur in Venezuela, specially on the Island of Margarita.

Playa El Angel, Playa Guacuco, Playa Anywhere. In all of these we can observe how half-finished structures, like a herd of dinosaur skeletons, provide eyesores to all those who care to pass by. Is it possible that these structures insolently consider that simply because they have suffered an accident, financial or otherwise during the initial construction period, they have the right to contaminate our island. Just as an airplane is required to take on sufficient fuel to get it to its next destination, any construction project should be required to have enough resources to get it to completion.

When you study some of the laws that govern this matter, for example the Urbanization Law, you can find plenty of articles that allow, for one reason or another, authorities to paralyze work on any construction project. Surprisingly, there is no mention whatsoever that refers to the obligation of a project’s promoters to actually finish what they started. Evidently, since the laws are drafted by politicians who are not exactly known for their ability to finish what they started, the word “surprisingly” is probably overdone.

Although I consider the road to the demolition of existing structures to be a dangerous one if based simply on visual contamination, I do believe it is possible to develop a good set of rules to handle half finished projects. Obviously, any law drafted to regulate this matter must guarantee affected parties the right to develop alternatives within a specified period of time (years, not decades!).

We must also analyze those projects that, due to simple lack of use or care are severely deteriorated. We are all aware that fashion once considered that holes in blue jeans were “chic”. Likewise, any amount of building materials has been used to create a rustic look to buildings, mostly with a lot of success. However, when we observe walls that are crumbling due to lack of care or, even worse, to bad construction practices, we do not need rocket science to see that something has gone seriously wrong and that we must find a cure.

With every day that goes by, all aspects of defense of our environment become more and more critical. For an island like Margarita that lives of tourism and that is faced with increasingly heavy competition from other locations, the avoidance of visual contamination is more than critical, it is vital.

http://alborotandoturismo.blogspot.com/1999/06/el-fuenti-una-fuente-de-inspiracion.html

PS. And nowhere will you find a visual contamination like nowadays Margarita LagunaMar. I do not want to show you the pictures, as it breaks my heart.

Mobility and economic growth

I still remember going through MAD Magazine at least thirty-five years ago and seeing one particular cartoon strip in which the North American population slowly lost their lower extremities due to atrophy as a result of using their cars to cover even the shortest of distances. 

They all ended up looking like bowling pins. In the last frame, a Chinese army easily bowled over these odd looking pins.

Evidently, none of this happened. On the contrary, in Kosovo, the United States and its allies have shown without a doubt that you don’t need your lower extremities even to wage war.

I have recently published several articles in which I write about the exorbitant taxes that are imposed on gasoline around the world the effect of which I consider to be like discriminatory commercial taxes or duties, which keep the oil producers from receiving what is rightly due.

In this sense, there is a marked difference between the United States and Europe. In the United States, gasoline is sold for 25 cents per liter while in Europe the final consumer must pay about US$ 1 per liter. This fourfold increase is due exclusively to these “taxes”.

I have also had the opportunity of writing about the growth in unemployment and have made some similar comparisons between the United States and Europe. In both cases the generation of jobs in traditional sectors such as agriculture and industry are basically the same, 2.5% and 17.5% respectively.

The United States, however, is today a miracle of job generation while Europe is submerged in a crisis of high unemployment that is close to being structural in character. The difference lies basically with the service sector. In 1997, the service sector in the United States represented 54% of the total population of working age while in Europe; this sector employed only 39%, a whopping 15% less.

The observed difference between the level of taxes on gasoline and the generation of jobs in the service sector allows me to suggest the thesis that the only way Europe can solve the problem of unemployment is by drastically reducing the tax charge per liter of gasoline consumed. Once this has been done, the European consumer will most certainly venture out of his home more often rather than staying in.

This means more trips to the restaurant, the movie theaters, etc., all of which generate jobs.

Some European countries have already announced a plan that will increase taxes on gasoline annually by about 6% over inflation. If so, by the year 2006, consumers should be paying about US$ 2.50 per liter.

Since the oil producer would only obtain about 12.5 cents of said price; we are in the presence of a great commercial injustice. Additionally, if Europe insists on levying such taxes on gasoline, they are not only contributing to unemployment on their own continent, but will also be guilty of putting the brakes on economic development worldwide.

I clearly remember when the world in general accused the oil producing countries of pushing them into global recession during the oil boom of 1974. As a remedy, these countries were obliged to recycle their petrodollars, which they did with such enthusiasm that they went overboard and ended up with immense public external debt. Today Europe as well as many others keeps the price of gasoline higher than ever even though most of the final selling price is tax, causing recession and unemployment.

The difference is, however, that today nobody accuses them of anything.

I think the world should seriously rethink its energy policy and study the elimination of these duties. This is the only way to get out of the vicious circle which, aggravated by the development of the Internet, cable TV and other such technological progress, conspires to increasingly isolate consumer within his home, where he simply restructures his purchase habits, mostly to the detriment of job creation.

In the Venezuela of today, submerged as it is in a profound recession, we must certainly not forget when it comes time to consider increases in the price of gasoline that many jobs still exist only because the cost of mobilization has been kept low.

Similarly, I consider the revision of our fiscal policies to be an absolute necessity. I simply cannot accept that the basic income tax with its definite advantages as far as redistribution of wealth is concerned, is subrogated to VAT or taxes on gasoline, which only punish consumption and therefore economic activity per se.

Finally, we must remember that only healthy global economic growth will make resources available to develop technology that will make gasoline a cleaner burning fuel.

Let's talk about official advertising (and exchange rate anorexia)

Let's talk about official advertising (and about an exchange rate anorexia)

If the constituents of the time when the Constitutions, which currently inspire those of the Western world, were drafted, had had a notion of the importance of publicity and understood its irresistible temptation for a politician, they would surely have established all kinds of limitations to the same.

Advertising is for a politician, like drugs for a drug addict, he cannot live without it. In normal times, under a fully current Constitution the Nation is administered by politicians. Hence, it would be impossible, like asking for pears from an elm tree, to ask those same politicians to generate effective self-regulation in advertising matters.

In a Constituent Assembly, since there is a greater possibility of a certain apolitical representation, it would be the almost unique opportunity to introduce the limitations on politicians that civil society believes are necessary.

What limitations can be proposed? Before answering, it would be helpful to illustrate what you want to avoid. The following are just a few examples, although, of course, readers will surely have their own list.

The fact that to “inaugurate” a small "green" space of 12 m2 with some nuances, awnings, chairs, sound equipment, gifts and other promotional material are hired, shows an absolute disrespect for the citizen.

Surely many have observed, when passing through some highway, crews of workers who are actually doing a good job of cleaning and maintaining the road, who, unfortunately, are forced to carry, like a cross, a sign that weighs more than than his work team and that only fulfills a promotional function.

We see throughout the country so many posters that announce, with the name and surname of the official on duty, the fulfillment or supposed fulfillment of duty, of the President, Minister, Governor and Mayor. All these advertisements, surely expensive, only serve to remind us why we are not politicians. Out of simple politeness, we would be embarrassed.

To avoid abuses such as those expressed above, I would love to include in our Constitution, within a chapter entitled "Limitations for officials in the use of advertising", the following articles:

1. Advertising expenditure related to the execution and start-up of any civil work is prohibited, exceeding 1% of the cost of said work.

2. Any public servant is prohibited from using, in relation to any official activity, any adjective intended to give a favorable connotation to the way in which said activity has been carried out.

3. In any activity that can be classified as promotion, advertising or information, and regardless of the origin of the funds for payment, whether public or private, the use of one's own name, photo, or any other element that, directly, can personally identify a public official or a political organization.

To the extent that in our next Constitution we manage to introduce some type of limitation on the shameless self-promotion of the politicians in power, to that same extent we will be able to say that we have achieved a new Constitution, with real possibilities of producing results. Only in this way can we have, at least the hope, that the politicians of the future will have to dedicate themselves to achieving real fruits of their management, instead of spending resources and time trying to sell us imaginary fruits. Does that seem little to you? This alone would almost justify the Constituent Assembly!

Another different matter. [An exchange rate anorexia that can plague a centralized oil-revenues cursed nation] 

A respectful question to Mr. President. Just for my historical archive.

The rate of the bolivar against the dollar should be at 900, but it is at 600. As a result, a hotel, when converting the 40 dollars it obtains from a tourist, receives, instead of Bs. 36,000, only 24,000 and goes bankrupt. If you try to obtain the Bs. 36,000 you must charge 60 dollars, then the tourists go to another destination and you go bankrupt. The disaster affects everyone. Today we read about a small gypsum plant that had to close because it is cheaper to import gypsum from Spain. 

Even postgraduate degrees (the paid ones, not the free ones) are cheaper abroad. It is true that a devaluation, by itself, does not remedy anything, but I believe there is more than enough evidence that anorexia would change if it kills

I have no doubt that if I were responsible for the country's economic policy and had to face uncertainty regarding exchange rates, if I sinned, I would always, always prefer to do so in favor of the national producer and not the foreign one. Since, upon reviewing my files and finding that the first date, on which I got on my knees begging for a greater rate of devaluation, was in July of '98 and since then, I have cried out for it, "so many hundred" times, I know , that they didn't pay attention to me.

Mr. President: Who was it? Who was it that convinced you to continue with Dr. Kevorkian's exchange rate policy? Was it Casas? Was it Natera? Was it the International Monetary Fund? Was it a military man? Was it Kelly? Was it Alfaro? Was it Emeterio? Who was? Don't you remember? - With respect, I recommend you remember - Many others are going to ask you... and very soon.

Translated by Google from an OpEd published June 15, 1999

Time, the ANC and meridians

I have no intention of putting the right to punctuality in the same category as the basic traditional human rights such as the right to education, security, access to health care, food and work. 

However, in a country such as Venezuela we can easily lose up to three hours per week waiting for something or another, due mostly to a total lack of respect for the value of our time. Accumulated over our average active life span of 55 years, this adds up to approximately one year of our lives. I therefore think that this matter is not at all irrelevant, less so in times of a constituent assembly.

 

As a matter of fact, our Constitution and laws supposedly protect the common citizen against the unjustified loss of his or her right to freedom. All civil rights organizations in the world would go ballistic if someone would dare propose the possibility of unjustified arrest, even if it were for only one year. 

So how come nobody says anything when we lose our liberty for more that one year, even if it is bit by bit, due to the lack of punctuality or mediocre and/or non-existent services.

 

I am not a candidate for the constituent assembly. My other responsibilities to my family and country allow me to avoid a process which would only bring my lack of powers of assembly to light. However, this does not limit nor my right nor my obligation as a citizen to present proposals and observations to the process. 

In this sense, I must remind the 131 members of the constituent assembly that, for example, when the State requires the country’s population to carry an identification card and the latter takes more than fifteen minutes to issue, we are essentially in the presence of a clear violation of human rights.

 

But in the case of the lack of punctuality, it is evident that we need a total reform of all civil society. There is no doubt that among the majority of the population, both among defenders of human rights as well as among those that complain about the public administration, there hide a bunch of vulgar violators of human rights who, without remorse whatsoever, blithely ignore the existence and purpose of the clock.

 

How, then, do we reform our civil society? This is a difficult question to answer, specially when you consider that should we require punctuality as a basic prerequisite for election to the constituent assembly, it would surely be very difficult to complete the roster of 131 members.

 

One alternative would be the creation of a Punctual Venezuela, parallel to the actual one. For example, if we start to use a little symbol that could be printed on all invitations to those activities that really require punctuality at the risk of being either excluded from the event or publicly chastised, we could possibly begin to create some semblance of civility.

This symbol could be a watch, but I would rather leave that up to the specialists in advertising.

 

The interesting part of this alternative is that it would simultaneously allow us to impose, as of today, a heavy public sanction for those who lack punctuality without having to request that notorious sinners must go through a process of painful public remorse. Additionally, the mere fact of maintaining the option of a “Punctual Venezuela” alive, would allow us to simultaneously allow us to continue to humor those foreign visitors who, with a tropicalisation which rivals that of the inhabitants of Borburata, take every chance to take revenge on and/or liberate themselves of the yoke of punctuality.

 

I wish to take this opportunity to mention another problem that preoccupies me and that also is related to time. We have recently been witness to public spectacles such as the fight the United States has sustained with Europe about bananas. I have often suggested that the effect of global warming has been much greater that we first suspected. It seems to have moved the parallels normally identified with Banana Republics northwards towards Washington.

 

I consider, however, that not only the parallels have gone crazy, the meridians have gone haywire as well. I often take my daughters to parties that begin at midnight, which to me simply seems like a real and crude version, in cinéma vérité, of Saturday Night Fever. I can not but suspect that their generation has simply decided to substitute the East Coast’s meridian for that of the West Coast. Some of the television channels seem to suffer from the same syndrome. Somehow, I always seem to go to bed at night watching comics while, if I am not careful, my daughters wake up with XXX.

Three bullets on punctuality

Time and human rights

I have no intention of putting the right to punctuality in the same category as the right to education, security, health care, food, and work. 

However, in a country such as ours (Venezuela) where we because of sheer lack of punctuality can easily lose up to three hours per week waiting for something or another, this, over our an average active life span of 55 years, adds up to around one year. 

As civil-rights organizations normally go ballistic whenever anyone is arrested without justification even for a couple of hours, I wonder how they let this pass.

There can be no doubt that the majority of our countrymen do, without any remorse whatsoever, blithely ignore the existence and purpose of the clock, and so it is evident that in terms of punctuality we need a total reform of our civil society. How do we achieve this? 

One alternative would be the creation of a “Punctual Venezuela,” parallel to the actual one. For example, if we start to use a little symbol that could be printed on all invitations to those activities that really require punctuality at the risk of being either excluded from the event or publicly chastised, we could possibly begin to create some semblance of civility. This symbol could be a watch, but I’d rather leave that up to the specialists in advertising.

The interesting part of this alternative is that it would allow us to impose, as of today, a heavy public and social sanction for those who lack punctuality without having to request that “notorious and incurable sinners” kick the habit cold-turkey. Also, maintaining the option of a not punctual Venezuela alive would allow us to continue to humor those foreign visitors who with a tropical flare that rivals our best take every chance they get to free themselves from the yoke of punctuality.

About parallels and meridians

We have recently witnessed public spectacles such as the fight the United States has sustained with Europe about bananas. Perhaps the effect of global warming has been much greater than we suspect as it seems to have moved the parallels normally identified with Banana Republics northward.

However the meridians might have gone haywire as well. I often take my daughters to parties that begin at midnight, which to me simply seems like a real and crude version, in cinéma vérité, of Saturday Night Fever. I cannot but suspect that their generation has simply decided to substitute the East Coast’s meridian for that of the West Coast. Some of the television channels seem also to suffer from the same syndrome. Somehow, I always seem to go to bed at night watching their afternoon comics while, if I am not careful, my daughters could wake up with their XXX-rated after midnight material.

My daughter’s cult

She is rarely late but she is absolutely never ever a minute early. She follows that Just-In-Time cult that drives us inhumanely nuts.

Extracted from "Voice and Noise" 2006. The first two bullets are based on an article published June 11, 1999 in The Daily Journal

We will be watching you, NCA

The country is rapidly approaching the moment when the National Constituent Assembly (NCA) must get down to business. The fact that Venezuela should begin the new millennium with a brand new constitution fills me both with enthusiasm and fear. The results arising from the NCA could either be wonderful or an absolute fiasco. A lot will depend on the way our civil society participates in the process.

Even though the formal responsibility of the NCA lies with the 131 elected members, I feel this does not diminish the responsibility or duty all of us as citizens have of trying to positively influence the process. Those who for some reason do not wish to be elected, or those that are up for election but realistically do not expect to be one of the chosen few, that is to say all but the 131 members finally elected, should begin to plot our strategy without delay. The following are my thoughts about the matter.

The assembly must take into account the country as a whole while undertaking its duties. Even though I do not believe we should televise the entire proceedings, something like Mr. Simpson’s trial in the United States, I do believe we must under no uncertain circumstances maintain records of all the proposals presented as well as of all the debates. Above all, we should register, with names included, the votes cast by the assembly’s members.

With this data in hand, society should organize its system of evaluation in order to publicly congratulate those members who have honestly and successfully complied with their duties and publicly chastise, with means that will be registered in the annals of history, those that do not. In this sense, it is important to develop a reasonable method of evaluation, which should, of course, take into consideration that not all of the assembly’s functions are the same and that not all must be complied with by all of its members.

Included in the members’ duties that must be evaluated are the following four. The number I have put in parenthesis are simply for the purpose of presenting examples of how many of the 131 members could be dedicated to a particular task.

  1. The generation of coherent political visions that would give the assembly a real meaning (5)

  2. Continual interaction with the civil society in order to insure that the latter’s proposals and desires are coherently included in the final output (20)

  3. The study, analysis and brainstorming of each specific article in order to insure that the final product is coherent (101)

 4. The final coherent write-up of the new document so that Venezuela can show the world with pride that it has produced a real Constitution for the next millennium (5)

Evidently my use of the word “coherent” in all four of these activities, makes it evident that this is extremely important for me. Some of my other colleagues in the NGO that must necessarily be formed and that could be called “Watch the NCA” will undoubtedly include other parameters. This should permit us to create a ranking which although not perfect should at least allow us to identify the names of 10 of the members who’s performance was outstanding and 10 who’s performance were disgraceful. 

This does not necessarily have anything to do with the intellectual and curricular capacity of each of these members. Those members who were given the right to occupy one of the 131 seats on the assembly on the basis of their ample and well documented legal know-how could conceivably receive a much lower ranking than a mother that has come out of her household to be present in dignified representation of her compatriots and by just honestly and correctly choosing among the options presented to her.

I have heard that there are candidates out there that are members of unions and other representative groups who’s only stated purpose is to insure the continuation of the prerogatives they figure come with their professional investitures. Evidently, should these people be elected to the assembly, they would be prime candidates to occupy the last places in the ranking, both to their own detriment as well as to that of the groups they represent.

Another member of the assembly that would insure a place at the bottom of the list is the one that insists on including constitutional guarantees for each and every right that he or she can think of without worrying about how they will be complied with. 

I am the first to acknowledge that the Constituent Assembly is a national act of much more importance and intimacy than that of a simple election and I would therefore not be inclined to formally invite external observers. However, the ONG would have the right to look for advice, wherever this may come from, in order to fulfill its duty and be vigilant during the process. I am sure that entities such as the International Institute for Democracy and Electoral Assistance (IDEA) and Transparency International, among others, could give us support and good advice.

For decades, our society has been demeaned due to the lack of social sanctions. We cannot run this risk with the NCA. Our ranking should be a part of the tools to be used to stimulate and punish.

Margarita as the El Dorado of golden years of tourism

In tourism, as in so many other activities, the correct identification of a market segment and the true specialization in attending to this market is of utmost importance. One prime example of this is Playa El Yaque in Margarita. 

With the help of Mother Nature, this site was identified as a prime spot to develop one particular market, windsurfing. While the rest of the island’s generic tourism sector, which only with a few exceptions lacks any character at all, is suffering through a severe recession, entrepreneurs and hotel operators in Playa El Yaque have found the going much smoother.

I am convinced that one of the principle challenges of our society today is that of creating new and productive jobs for our younger generations, by choosing the right productive sector and designing strategies that will allow us to develop and take advantage of our competitive advantages. 

For Margarita, the industry of rendering services for the elderly presents an interesting option. Whether in tourism, recreation or general care, those living through their "golden years" demand so many services that they represent a real El Dorado, in terms of job creation.

What can Margarita do to explore and capitalize on this opportunity in the name of Venezuela? A lot, I think. Margarita has the people, has good communications and has the perfect natural setting, with calm beaches, absence of hurricanes and a minimum of 280 days of sun per year. Additionally it has the Centro Medico Nueva Esparta (CMNE) and that in my opinion is the ideal place to use as a flagship for the promotion of this new sector.

The CMNE is a hospital with modern and impressive installations located on a hill in La Asuncion, near the Castillo of Santa Rosa. The property currently belongs to Fogade who must soon define what the infrastructure will be used for and who will ultimately own it.

Should CMNE with the help of specialized firms and universities, both foreign and local, be able to truly specialize in the care of the elderly, including medical services, equipment, development of post-graduate courses, nursing schools, recreation and other activities and necessities, I suspect that local authorities will have a very powerful tool with which to attract the required international investment, technology and know-how.

In this respect the value of CMNE would also increase if an annex originally designed to be a Spa was to be finished, thereby making more specialized rooms available. For this purpose perhaps one could use financing packages put together by multilateral agencies and that I believe are already earmarked for tourism infrastructure. 

Nothing I have proposed in this article has been said with the intention of suggesting that the other hospitals and clinics on the island of Margarita are not capable of offering similar or better service than the CMNE. Also none of the above implies that CMNE, "photographed" from another angle, cannot continue to provide valuable support, as an excellent general hospital, to local and international tourists and, of course, to the local population as a whole.

Although CMNE could signify in itself a powerful tool in developing the sector, it is no less true that other institutional efforts are required. One of the peculiarities of tourism for the elderly is that it should not be adventure tourism and requires above average confidence in the quality of the services rendered. The creation of a regulatory board with sufficient authority to oversee and intervene in matters of tariffs and quality of the services offered, should therefore be considered.

If Margarita were to have a CMNE specialized in tending to the elderly as well as a dedicated and qualified Regulatory Board, there would be many opportunities for projects that today are outright impossible without a minimum of institutional support. In my particular case, for example, due to my close connections with Nordic countries, I could very well be interested in developing a small resort designed to cater to the elderly of this particular market, including specialized baths, few stair cases or physical obstacles, nearby flowered areas, etc. 

The island’s Governor, Irene Saez, is without discussion a person with many of the qualifications necessary to take over the vital role of Ambassador of the Island of Margarita to the world. It would be a great shame to miss this opportunity simply because we have not provided the necessary tools that would enable us to be truly competitive in an increasingly complicated market.

How I would like to see Irene take a flashy promotional video on her next trip abroad, packed with images that show how we have successfully joined forces to make Margarita the world’s foremost place to spend some of those golden years... [and among these, some images of the renamed Hospital Santa Rosa.]

http://alborotandoturismo.blogspot.com/1999/05/margarita-el-dorador-del-turismo-de-los.html

Forget the market for a while

The financial markets are continually boasting about having the best information available. They are right, but this continuous improvement in their capability to disseminate information comes at the cost of too much data too quickly. This results in an increased sense of the short term and no long-term vision.

It is only this that could possibly explain why today’s financial markets would impose interest rates on a country’s foreign debt that are so high that they can only be justified by the premise that the corresponding debt is to be repaid immediately and all at once. This is the case of Venezuela, a country with relatively little external debt.

This particular problem of disinformation in an era of information has resulted in an increasing volatility of the short-term capital market. This in turn has caused financial crises in many of the emerging markets and is being closely studied by many of the world’s monetary authorities.

In an article titled The Reform of International Financial Architecture published in Madrid’s newspaper ABC, Robert Rubin, former Secretary of the Treasury of the United States, recognizes the market’s basic responsibility, declaring that he is convinced about the need for government intervention in order to insure a better-market performance.

Mr. Rubin states that it continues to be necessary to solve the shortfalls in the risk valuation that have contributed to the worsening of the recent crisis and suggests that intervention should be made in the form of better international directives (i.e., the Basel Committee) which would increase dependency on long term loans instead of short-term financing. This type of intervention seems to me to be rather timid.

As a citizen of a country that due to internal and external causes finds itself in a bit of a mess, I wish to take advantage of the appointment of Mr. Lawrence Summers as new Secretary of the Treasury to ask him be more proactive.

For example, we would advance in leaps and bounds towards Mr. Rubin’s objectives should the United States guarantee the underwriting of a Venezuelan debt issue for US$ 25 billion with 30 year maturities with which Venezuela would repay all current debt that carries shorter maturities, which would make Venezuela one of the most solvent debtors in the world, which would make its debt instruments among the most attractive in international markets, which would insure that these could be placed at reasonable rates, which would allow the United States to free itself of any and all obligations thus obtained in a matter of minutes or hours.

Impossible, you say? Today, a firm that sells books, with no major asset base, and without immediate prospects of turning a profit is valued by the capital markets at US$ 30 billion, based primarily on its presence on the glamorous Internet. I simply cannot believe that the United States and Venezuela together cannot jointly put together an operation and negotiate the appropriate guarantees so that all parties come out smelling like roses.

I think that the majority of the authorities, government officials, professionals and individuals like Rubin, Summers and, modestly, myself, respect the free-market forces and system but also believe that it is sometimes necessary to promote government intervention. Where we may differ is in how this intervention should be enacted and how these two agents, market and government, should interact.

For example, over the last decades, the perception has been that a country like Venezuela should be very attuned to the requirements of a sophisticated financial international market. Attaining this markets approval would theoretically ensure that this country is on the right road to development and prosperity.

I believe this has been exaggerated. A country like Venezuela, which banks basically on one exportable product, has certain internal advantages and strategic strengths.

There is no reason why this country should bow to market forces. It has the right, and even the duty, to develop other options to ensure development that don’t necessarily include the markets.

Perhaps our problem today is not Venezuela’s external debt per se, perhaps our problem is the market. Faced with this reality, let us go out and negotiate options, government to government. This does not have to include subsidies or hand-outs. These options can very well be developed in an economically more reasonable atmosphere than that present in today’s market.

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

All bureaucrats should be created equal

In the second volume of his autobiography titled “The Invisible Writing”, the European intellectual Arthur Koestler (1905-1983) writes about the time during the early thirties when a primitive town, in the area of Pamir in the south of Central Asia, received the visit of a Russian patrol unit mounted on bicycles. 

The local folk ran away in total terror. During their lives they had seen many airplanes, but never a bicycle. The planes were seen to be simple machines and so they seemed quite normal. 

However, the fact that a person could glide along on two wheels without touching the ground could only be explained by the intervention of Satan himself.

Thirty years have gone by since I read about this incident which I believe illustrates in a curious way a less than harmonious development. 

Since then, I have been repeatedly reminded of this by living in a country such as ours, where the modern lives together with the antiquated without any complex whatsoever. Obviously, our public administration has been a fertile area in this sense.

Last year I had the opportunity to visit both the recently created Banco de Comercio Exterior (Bancoex) as well as the National Institute for Minors (INAM). Without going into which of the two entities is of more importance for the country, the differences between the two were so great that they seemed abominable to me.

I cannot faithfully express the magnitude of the surrealism, but it should be sufficient to say that Bancoex has modern offices, systems employing the latest technologies and an organization with staff selected with the assistance of an international advisory firm while the INAM, accessible only by means of a rickety elevator which takes of every half an hour towards the 42nd floor of one of the towers of Parque Central, has papered its walls with wall to wall Oslo type files labeled with things like “Invoices – Meat Purchases Month of February 1994”.

If a government determines that it must assume the direct responsibility of fulfilling two specific functions, whichever they may be, it should at least try to do both with the same enthusiasm and with the same service standards. 

We are constantly harping about the fact that we should fight to narrow the social gap in income distribution that creates first class and second class citizens. 

Likewise, it is equally as important to avoid creating first class bureaucrats and second class bureaucrats. Sometimes I believe we even have third class bureaucrats.

This does not mean I am promoting automatic and irrational equality as far as salaries of public officials is concerned. It has much more to do with the identification of the role and the social support given each public servant in order to stimulate his or her pride. 

He who thinks or feels that other believe his work is not important, or who is actually doing work that is indeed not important and should therefore be eliminated is as incapacitated emotionally as a baseball player who has lost his arms.

In the same way, as we head towards the Constituent Assembly which initiates the debate on the role of the State it is of utmost importance to establish the norms and regulations that require the State to comply with its current responsibilities before it is permitted to accept new ones. 

Should we not do this, we should not be surprised about the capacity of certain sectors to negotiate resources that allow them to incur in new initiatives that normally possess noteworthy or glamorous characteristics at the expense of other that, although no less important, require quiet dedication, day after day, from 9 to 5.

I now wish to share with my readers a nightmare I have over and over again. During the last decades, the Venezuelan State has frittered away an immense amount of resources. 

Thank God that in spite of this, most of the spending occurred in public service sectors and that therefore it did actually leave something, however small, for posterity. Does this mean that if the State actually goes full tilt into privatizing public services (at the behest of ourselves) without having previously negotiated a corresponding reduction in their income, 100% of public spending will be wasted?

The town folk in Pamir did not bat an eyelash when airplanes roared overhead. They did not know that human beings were strapped inside at the controls.

Had they known this, the panic would have been absolute. I sometimes think about the high expectations we have of the privatization processes in Venezuela. Are we by chance also ignorant of the fact that there are human beings in these private companies?

I cannot resist finalizing with a quote that I underlined almost thirty years ago in the before above mentioned book by Koestler. 

“I automatically learned to classify all that is repugnant as an »inheritance from the past», and all that is attractive as the »seed of the future». With the aid of this automatic classification, it was still possible for a European in 1932 to visit Russia and continue to be a communist.”

Daily Journal, Caracas, May 7, 1999

Virtual tulipomania in New York City

I was told  this week that New York was more beautiful than ever. The tulips planted all along Park Avenue were in full bloom in a kaleidoscope of colors.

By chance, I also read this week about the share price of one particular firm reaching the skies on a stock exchange in New York. Both things conspired to remind me of a book by John Kenneth Galbraith, A Short History of Financial Euphoria.

This book addresses a curious speculative process, which took place in  Holland around the year 1630 and which revolved around tulip bulbs. of one particular chapter of the book, The Tulipomania, I have extracted the following quotes:

“Speculation, it has been noted, comes when popular imagination settles on something seemingly new in the field of commerce or finance.” “. . . by 1636, a bulb of no previously apparent worth might be exchanged for ‘a new carriage, two grey horses and a complete harness.’” 

The value of one particular bulb, the Semper Augustus, would be the equivalent of US$ 50,000 at today’s prices! Everyone, from nobles to servants, speculated, cashing in their property and investing in flowers. Capital inflow inundated Holland. “In 1637, came the end.”

In New York, the share price of a company which initiated operations in 1995, has never registered a profit, has (according to management itself) no short-term possibility of doing so either, does not possess any major tangible assets, and has issued a management report in accordance to SEC rules and regulations in which it makes known a series of risks that would make any investor’s hair stand on end, is traded at US$ 200 per share, when it was quoted on the exchange AT US$ 10, only one year ago.

Evidently, the firm described above operates in Internet commerce, sells books and, in my humble opinion,  has joined the rank and files of the “tulipomanias”. In order to arrive at this argument, it is sufficient to analyze some of the risks the firm itself has enumerated in various reports.

The Internet, the Net, or the Web, however you wish to call it, is above else a medium for the transfer of information. In this context, developing technology known as “shopping agents” will permit clients to quickly compare one company’s prices to those of its competition.

This would seem to presage an eventual but fierce price war, an environment that is not exactly the breeding ground for profits that back the market valuation we are observing. 

The low cost of entry and the probability that sooner or later some efforts will be aimed at prohibiting any monopolistic controls of the Web are also factors which can make the advantages created by an early incursion disappear in a flash. 

This has nothing to do with the company itself. All that I’ve read leads me to believe it is well managed and that it probably has a brilliant future. The problem lies solely in the market’s irrational expectations. Today’s market value of the firm, equivalent to the share price times the amount of the shares issued surpasses US$ 33 billion.

Make your own calculations. The firm reported in 1998 total sales of US$ 610 million, a net loss of US$ 124 million and a book value (assets less liabilities) as of 31st of December 1998 of only US$ 139 million. 

Total book sales in the United States during 1998 were worth close to US$ 23 billion. If we assume that a profit margin of 8% would be reasonable, this would mean that there would be US$ 1.8 billion available to reimburse capital invested, both equity as well as debt financing. 

If we then, for the sake of simplicity assume an overall return of 10%, we can estimate the global value of companies that sell books in the United States in the order of US$ 18 billion. 

If the company that's the object of this analysis, and today commands less than 3% of market share eventually attains a whooping 20%, its value could then reach US$ 3.6 billion. 

This is not even remotely close to the market values of US $33 billio I've mentioned earlier.

This Financial Euphoria seems to have infected many firms associated with the Internet, I conclude that this must be a modern version of the speculative Dutch tulips. I also conclude that both these and the real tulips thrive in New York in spring.

From The Daily Journal, Caracas, April 30, 1999

PS. And I gave this article the following introduction in my 2006 book  "Voice and Noise"

My book, Amazon’s profits and the value of its shares

I am including below “Virtual Tulipomania in New York City,” an article that I wrote in April 1999 for the following reasons:

When I started to write this book in 2004, I fretted over having to invest tremendous efforts in getting a publisher interested and, if successful, then having to negotiate lengthily in order to defend my copyright interests. Then I discovered the existence of some new publishing facilities that allow a rookie book writer like me to outsource. As these new facilities print the book “on demand,” there is no need to invest piles of money in printing too many copies that would reflect the author’s general sense of optimism and that could only later end up as tombstones in memory of shattered dreams. Well, it so happens that the new-wave publisher I chose was recently acquired by Amazon and as the article has to do with that company, I also found the perfect excuse to include it … for a very worthy reason … that of shameless self-promotion.

As a financial analyst (which is what an economist frequently does for a living) I am especially proud of this article since it evidences how I managed and dared to question the whole dot.com boom, at its peak, just by doing some thinking on my own. Of course, now, with the profits Amazon should expect from its new investment … and my book, I guess that once again the sky should be the limit for them.

One brief note though about these new “on demand” one-at-a-time printing methods. With them it seems that what we know as “editions” first, second, third, will in fact disappear and this might negatively impact book collectors and rare-book stores. Will they disappear?

Not necessarily, since this method could make collection even more challenging as you could view each individual book as an individual edition and therefore be able to improve your collection by moving up few slots at the time, perhaps from the 12.834th to the 235th edition. Whatever, just in case, you better hedge your bets and rush out and buy a second copy of an early edition of this book. 

Given that it is so easy and inexpensive to make changes to the book by using this publishing system, we could also have an incredible amount of different editions which might make debates about the book much more interesting—in one, I would write in yellow, and in another, in blue, and so I might finally reach the green I am looking for— by seeding confusion. Then rare-book stores would have unlimited access to rarities.