Globalizing markets and salaries

Photographs taken in Caracas back when black and white was the only game in town show us how the population usually wore coats and clothing adequate for temperate climates. This should already have been history since the world by all accounts was already heading towards global warming.

Something must have happened to explain why a famous Spanish store, located in an equally as famous shopping center in our tropical capital offers and actually sells winter clothing – not autumn – winter clothing.

As a result of a comment I made to one of my partners to this effect, he waved his newly issued and stamp free Spanish passport in my face and argued that this had nothing to do with climatic evolution but rather with the new realities imposed by a globalized world. As you understand, my partner belongs to that group of Venezuelans that has instantly acquired Spanish citizenship as a result of Spain’s incorporation into the European Common Market.

As stated by my partner, his fellow patriots are numerous in Venezuela and also represent an important purchase capacity. In this sense, the above mentioned store was only servicing a domestic market that had been globalized. I must have put on a surprised look since he then asked my who I though I was to question the right of Spaniards in Venezuela to have access to the same goods and services as do Spaniards in Spain.

It was never my intention to question my partner’s rights, and I told him so, ratifying my profound admiration for the globalized service offered by Spanish chain stores. Unfortunately, it was too little, too late. He continued to expand on his arguments in a slightly agitated manner - sort of confirming the origin of his genes.

“It is not fair that I, as a globalized Spaniard, do not have automatic access to the same financial services that my co-patriots have simply due to the fact that they live in Spain and I do not.” I immediately understood where he was coming from, and wishing to conserve our partnership, I joined in, throwing more coal into the fire.

I maintained the thesis that all banks of Spanish origin with offices in Venezuela should offer all Neo-Spaniards resident in the country, mortgages with 30 year maturities at 6% annual interest rates (or whatever the advantageous conditions in Spain currently are). I finished off my spiel with “If Spanish banks can bring to Venezuela something as Spanish as the piglets and lotteries, they should also have to bring their cheap loans with them as well”. Happily, this finished off the conversation. 

Afterwards I continued to think about the relationship between the domestic markets and the globalized markets. Some unexplored possibilities seem interesting enough for further analysis.

According to the tenets of commercial integration, the differences in salary levels from one country to the next are in principle only temporary. Supposedly, the resulting economic growth should make these differences disappear. Without a doubt, however, these differences in salaries are initially an important tool with which developing nations can compete. If not so, it would have been extremely difficult to sell market opening.

In recent months we have been surprised by certain arguments put forth to the World Trade Organization by some organized trade unions in developed countries. There is increasing pressure in favor of protectionist measures designed to compensate for unjust competition which, according to these organizations, comes from developing nations with low salary bases. This does not bode well for the latter as they are threatened with renewed commercial restrictions.

Simultaneously, we have also seen how the offer of professional services worldwide is increasingly concentrated in the hands of fewer firms. As a result, our lawyers, accountants, publicists and other professionals must commit more and more of their income towards the payment of franchise fees exacted by this modern day privateering. This trend is definitely changing the traditional scope of non-tradable services, and I am not at all sure this is favorable for our country, or for any developing nation for that matter.

While trying to develop a way of defending ourselves from this trend, it occurs to me that one way of returning the ball can be found in the following questions: If it is possible to refer to the possibility of globalized domestic markets, could we then also be thinking about globalized domestic labor conditions? And if labor unions in developed nations can use differences in salaries to negotiate protection for their tradable goods, could we not apply the same concept to our non-tradable services?

In that respect, a starting point would be to analyze the possibility of requiring international firms that operate locally in the service sector, accounting firms for example, to remunerate their local staff with salaries equivalent to those being paid in their countries of origin.

If what is equal is fair for them, then what is equal should not be unfair for us.

Kafka and global banking

My partner was on the phone to his bank. From the tone of his voice, I realized that the matter discussed was delicate. He explained to the person on the other end of the line that some of the withdrawals made from his account through an ATM machine were not his, and that they were therefore fraudulent.

 

Initially, things did not go well. An anonymous voice responded that unfortunately, in the bank’s opinion, the withdrawals seemed to be in line with the regular movement registered for the account and there seemed to be no indication of irregular activity that could be evidence of fraud. The sad implication of this is that the answer implied that the perpetrator of the fraud was my partner himself.

 

The next few weeks were a nightmare for my partner. Finally, having established that the amounts withdrawn exceeded the amounts that he himself as account holder was allowed to withdraw in the same period of time, the bank finally decided things were not quite so normal and an investigation was initiated. The matter has still not been resolved, two months later.

 

The misfortune was about as traumatic for me. The mere thought that some vagabond could randomly identify my account, blithely initiate a series of ‘normal’ fraudulent withdrawals, have me lose days and maybe weeks of my life and lots of money on overdraft interest payments and phone bills while trying to sound honest over the phone in order to convince an anonymous voice on the other end makes me shudder.

 

During the ordeal I remember thinking "thank God we still have several banks to work with". Imagine if we would have had to discuss the issue with an official of the One and Only World Bank (OOWB). Without a doubt this would present us with a future full of horrendous Kafkaesque possibilities.

 

This leads me to think about the consolidation currently going on among banks. With every day that passes we have fewer and fewer banking institutions worldwide with which to work. 

This trend has been marketed as one of the seven wonders of globalization. In addition to the above-mentioned problem, which puts defenseless users on the spot, I believe the trend introduces other risks which have either not been sufficiently commented on or which have simply been ignored. Among these I can identify the following:

 

A diminished diversification of risk.  No matter what bank regulators can invent to guarantee the diversification of risks in each individual bank, there is no doubt in my mind that less institutions means less baskets in which to put one’s eggs. One often reads that during the first four years of the 1930’s decade in the U.S.A., a total of 9,000 banks went under. One can easily ask what would have happened to the U.S.A. if there had been only one big bank at that time.

 

The risk of regulation.  In the past there were many countries and many forms of regulation. Today, norms and regulation are haughtily put into place that transcend borders and are applicable worldwide without considering that the after effects of any mistake could be explosive.

 

Excessive similitude.  By trying to insure that all banks adopt the same rules and norms as established in Basle, we are also pushing them into coming ever closer and closer to each other in their way of conducting business. Unfortunately, however, nor are all countries the same, nor are all economies alike. This means that some countries and economies necessarily will end up with banking systems that do not adapt to their individual needs.

 

I remember that John K. Galbraith once wrote that the economic development of the west of USA was helped by the fact that in the eastern part of the United States, banks were big and solid but that in the west, banks tended to work with much greater flexibility. The fact that some of these banks went bankrupt from time to time was simply taken as a normal cost inherent in development. Today, Venezuela's economy might be in dire need of some Wild West banks. 

 

The cost of global assistance.  When Venezuela’s banking system went down the drain, there is no doubt that the cost of the crisis was paid integrally by the country itself. In today’s world, when we see that a series of international banks are investing in our country’s institutions, I often wonder what will happen when one of these behemoths runs into serious trouble in its own country. Will we have to pay for our part of the crisis, less than our part of the crisis or more than our part of the crisis?

 

As bank mergers and acquisitions increase and stock exchanges worldwide call for more, I analyze what happened to my partner and have my own doubts. I ask myself if we should not be imposing the creation of special reserves for especially large banks. The larger they are, the harder they fall, and the greater the need to avoid disaster. 

https://subprimeregulations.blogspot.com/2000/02/kafka-and-global-banking.html

Tricks, and the environment

This week we read in the papers about a report to the British Parliament by the London Geological Society. In it they issued an alert over the real possibilities of a mega volcano eruption that would cause global cooling with dramatic consequences. 

Why is that hot volcanoes lava emission cools, while oil emissions are supposed to warm? Is someone taking us oil-producers for a ride? 

During the week ending January 21, one liter of premium unleaded gasoline was sold at the pump in England for US$ 1.20. Out of this amount, 19cts went to the supplier, 5cts went to the distributor and 95cts went towards various taxes.

It is evident that an oil producing country like Venezuela is severely affected by these taxes which, by the way, amount to 500% of what the producer receives. If these taxes were eliminated, both prices as well as the demand for oil would be much higher.

There can be no doubt that the only reason for these discriminatory taxes is a healthy fiscal appetite. However, with an almost subtle hypocrisy, these taxes are normally explained as only being related to environmental protection.

When we observe the poverty in our country, which would at least be reduced by increased oil income, any person preoccupied with the environment, may harbor a natural conflict. 

Up to this moment, I have solved my own conflict by telling myself that it is logical to have high prices in an effort to minimize consumption of oil, but that it is illogical and unjust that the margins produced by the same should only accrue the taxman in the rich consumer nations.

I say ‘up to this moment’ because I just read a book written by Dr. S. Fred Singer called Hot Talk Cold Science which certainly questions current environmental credos.

Singer's credentials as an expert in environmental matters seem to be impeccable. He has a Ph.D. in physics from Princeton and is professor emeritus of environmental science at the University of Virginia. 

He was the first director of the US Weather Satellite Service, Director of the Center for Atmospheric and Space Physics, and Chief Scientist for the US Department of Transportation.

In his book, Singer spells out arguments, that wipe out any justification for these taxes on environmental bases. Among other things, he says:

"The gap between the satellite observations and existing theory is so large that it throws serious doubt on all computer-modeled predictions of future warming"

"Even if global warming were to occur, it would most likely lead to positive benefits overall rather than to disadvantages."

"No credible attempt has been made to define what constitutes a dangerous level of CO2; thus the goal of the U.N. Climate Treaty is arbitrary." 

In relation to the concentration of CO2, Dr. Singer details methods that in his opinion are much more feasible in economic terms than those solely based on the reduction of emissions. 

These methods are based on sequestering the CO2 from the atmosphere, either through reforestation or the fertilization of oceans, the latter option being the one favored by Mr. Singer. 

Singer is not alone in his appreciation. In his book he cites the Leipzig Declaration which came out of a 1995 conference which was attended by almost 100 experts. This Declaration states "In a world in which poverty is the greatest social pollutant, any restriction on energy use that inhibits growth should be viewed with caution. For this reason, we consider carbon taxes and other drastic control policies ' lacking credible support from the underlying science - to be ill advised, premature, wrought with economic danger, and likely to be counterproductive".

Why, then, do such great discrepancies exist between the opinions described above and those of other scientists with similar recognized careers? Singer puts forward his explanation: "Nearly all research is funded by government; the rationale for expending taxpayer's money is to prevent hazards to the general population. Funding agencies therefore do not look kindly on research proposals that could demonstrate environmental hazards to be not serious or even non existent."

As a citizen of an oil producing country, affected by this evident injustice, I would be more inclined to advance the possibility that the financing of such environmental studies is more motivated by the need of justifying the taxes levied on oil. 

In this sense, many of the environmentalists are probably unknowingly soulmates of the famous taxman, the Sheriff of Nottingham, who in Robin Hood's days taxed the poor to give to the rich - i.e. the government.

In a country like ours, so dependent on its oil income, I am surprised at the absence in our universities and other centers of investigation of courses on environmental studies which are so necessary in order to minimize damage caused us in the name of the hypocritical governments of the developed world.

https://ourpiedaterre.blogspot.com/2000/02/tricks-and-environment.html

PS. "oil-producers" Sorry, I realized later we do not produce one barrel of oil, we extract it.

http://petropolitan.blogspot.com/

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

Democracy a la venezolana: The Parliamentary Lottery Law

At the moment, everything is black or white. It is either "yes" or "no". There is no possibility for a "yes plus" or a "no minus". Normally, when hesitant, one is the target of all type of efforts to win you over. Currently, one is ignored and irrevocably branded as an enemy by both sides

In these circumstances, to put one’s head into today’s debate about the constitution is risky unless this is done firmly within the traditional Venezuelan concept of neither one, nor the other, but just the contrary.

At an interesting conference by Alberto Rial on competivity in times of crisis which I attended, the eternal conflict was raised once again about how to straighten out our path to the future. In this sense, in order to plot a proper course, which we wish to do, it would be necessary to leave by the wayside a series of cultural values which could lead to the possibility of becoming irreversible Swiss, which we do not wish to do.

One of the few sectors that has showed incredible vitality in these times of economic recession is the lottery. It has now become the most important capital market in the country, to the point that it has probably also become the nation’s biggest creator of jobs after the consolidated public sector.

In order to rise to the occasion and to find democratic solutions that fit within the framework of our reality and our national values, the following occurs to me:

The Parliamentary Lottery Law

Art. 1 – Of Congress. Congress should be composed of 200 members, of whom 40, whose five-year term expires, should be retired every year on the 19th of April. A new group of 40 would be elected to replace them.

Art. 2 – Of the Election of Members of Congress. The election of the new members of Congress will be done by way of a lottery among all Venezuelans who have achieved an academic degree above Bachillerato (High School). They must also have expressed their desire to participate and to serve the Nation as a Member of Congress and have purchased a ticket worth Bs. 25,000.

Since some people may question the seriousness of this proposal, I would like to highlight some of its more favorable aspects.

Anyone that has studied finance should remember the story of the blindman throwing darts against a board on which are pasted the names of all stocks traded on Wall Street. By investing on the first 100 he hits, he has a much better chance of striking it rich, than someone who spends even 1$ looking for the sage advice of a banker on share selection.

None of the Members of Congress that are selected will have had to invest one single minute, or dime, in the task of cementing those relationships of dependence and conflict of interest that induce action by authorities that so often harm national interest.

The limited duration of Congress (five years), without a real chance of hitting the lottery again, will stimulate the members to do the best they can during their tenure. On top of this, the cost of the ticket to participate will cover the cost of the process.

If we did this, we would undoubtedly have much better representation of the country’s good intentions. Evidently, as in every average, many would be useless. This is most common today. However, those that do cut the mustard, would be able to work in a much healthier environment.

With today’s proposed system, it is perfectly possible to insure a truly random selection in which the only innocent hand is God's.

Finally, much to my sorrow, I realize that the prospects that this proposal will be implemented are very slim. The reason for this is that in many ways, democracy has become a business, and in this sense all those participating, such as fund raisers, bus drivers taking people to meetings, political analysts, publicity firms will oppose the elimination of the traditional electoral system.

Of course, I propose we use the lottery method only in those cases where the results mean we can and must live with an average. In the case of the President, for example, in which only one person is finally elected, there is definite advantage in going the traditional, straightforward election route.

When I analyze the advantages of the lottery system, as any proud father would do, I am convinced that its democratic characteristics are such that there must be more than one Swiss national who must be thinking about the possibility of applying for Venezuelan citizenship. Irreversibly.

The world’s real petro-pirates!

This week's column is dedicated to those meetings up in Seattle this week.

When, as a citizen of an oil producing country, Venezuela, I see oil being valued by the market at US$ 150, and we only receive about US$ 20, I believe that I have the right to feel a bit let down by all those who promised us a rose garden if we duly signed up on all the international commercial agreements peddled by GATT; and lately by the World Trade Organization WTO. What do I mean? 

From one barrel of oil, one can approximately and simultaneously obtain 84 liters of gasoline, 12 of jet fuel, 36 of gas oil, 16 of lubricants and 12 of heavy residues. 

In Britain today, educated consumers are paying (voluntarily and out of their own pockets) US$ 1.38 per liter of gasoline (sorry, petrol) using the traditional way of establishing a product's value. 

Even if we just consider the gasoline, we obtain a value of about US$ 116 per barrel of oil and then by adding the rest of the products, we should be close to US$ 150 since refining and distribution costs are fairly small. 

I am well aware that the value US$ 150 is achieved by the taxman forcing himself in at the point of sale of gasoline, as an extremely expensive middleman, keeping 85% of the gross. But, was this not exactly the things that world governments agreed not to do, in order to foster free trade and growth ... and that which we believed when we signed up on all those reductions of protectionist duties, accepting to lend the developed world a hand, collecting, their pretensions of royalties for intellectual property rights? 

Today's result is therefore that, when an oil producing country is selling it's non-renewable and scarce resource to the world, it's only getting a fraction of the real value. 

The hurt and pain I feel at seeing so much poverty in my country, that could be alleviated by just a little bit more of justice by the developed consumer countries themselves, is made worse by thus adding salt to the wound.

Their bankers sold us on the idea, in the mid-seventies, that oil was going to increase in value, and therefore that we could calmly take on the responsibility for servicing a huge country debt ... they never told us that all the increase in the value of oil, which has actually occurred since then, was going to be confiscated by their taxmen.

We producers were, and still are, the remaining scapegoat for all inflationary pressures derived from any price increase in gasoline and other derivatives ... even when these were just the result of higher taxes.

We oil producers were, and still are, branded as the most wanted criminal in environmental issues when, in fact, we are the ones paying 100% of the cost of all the protection plans that through their taxes reduce world demand for oil.

Today we hear of even higher future oil taxes when Germany (for example) announces a plan of annual increases as a way to reduce their workers' social security payments and discriminate against us by not taxing coal and other energy sources.

For what it's worth, I would like to remind the developed world in good conscience that, when you're giving generous assistance to the under-developed world, much of it is with money properly belonging to the oil producing nations. 

When I see the suffering of my more destitute fellow countrymen, I blame myself, I blame all those lousy governments we have had ... but I also rightly blame the taxmen in the consumer countries, who are the true petro-pirates of the world.

http://petropolitan.blogspot.com/1999/12/worlds-real-petro-pirates.html

Today, let us talk about the bribers

On the 26th of October, Transparency International, TI, published its annual index ranking the Perception of Corruption that exists of various nations. As usual, Venezuela was somewhere down at the bottom of the list. However, for the first time, TI also published an index related to the Payers of Bribes (BPI).

This index ranks the 19 countries with most exports and is based on the perception of how corporations from those countries use bribes to generate business. 

A professional firm interviewed 770 high level executives in 14 emerging markets with geographically diversified imports. Venezuela was not included among the interviewed parties, since most of its imports come from the United States.

The executives interviewed belonged to large firms, banks, chambers of commerce, auditing firms and law firms. A result of 10 points means no bribes are used while 0 means, naturally, that bribing is used as a norm. The countries with the highest ranking were Sweden (8.3), Australia and Canada (8.1) and those at the bottom of the ranking were China (3.1), South Korea (3.4) and Taiwan (3.5). 

The ranking of some of our main trading partners were England (7.2), Germany and the United States tied at (6.2), Spain (5.3), France (5.2) and Italy (3.7). 

Just like the Corruption Index, the Briber’s Index will create much argument and rebuttal, especially from those that were not favored by their ranking within the index. 

Among the traditional arguments, we are sure to find that many will maintain that the index is not really objective, but is really all about perception and that therefore, before being an ethical problem, it is really just a problem of the image. 

We will perhaps also hear technologically inspired arguments, such as accusing the better-positioned countries of using advanced versions of corruption, something like anti-radar, "stealth" technology.

I have often seen how citizens of many developed countries shed their shackles and truly enjoy the tourist (and humanistic) experience of trying to avoid a traffic ticket by negotiating avidly with the particular public servant that has accosted them. 

Also in other cases many people are better behaved when they are away that home. We see it over and over again when Venezuelans, who are notorious tax evaders, travel overseas and become exemplary citizens in every sense. 

Based on the above, one of the things that interests me is to analyze if, when the two indexes are compared side by side, there is a significant differences between the outcome.

With the exception of 5 countries, all those that have been ranked in both indexes, are basically in the same relative position. As it were, Sweden is first in both indexes while China is last.

The two main exceptions to this rule are Singapore which, in this group of 19, appears as 3rd in terms of the least corrupt nations but as number 11 in the Bribers Index and Belgium which, contrary to Singapore, ranks as number 15 of the least corrupt nations, but comes out a lot better among the Bribers, having been ranked as number 8.

In lesser degrees, Taiwan is in a situation similar to Singapore, while Austria and Australia accompany Belgium.

The simple translation would tell us that Singapore and Taiwan behave relatively well at home, but goes haywire and are a menace when abroad. 

I am no expert in these matters and therefore allow myself to suppose that this is due to a combination of a commercially aggressive style and oriental discipline. I can very well imagine that they respect everything at home and compete with anything overseas.

Without a doubt, both countries are formidable competitors in foreign trade, and one would entreat the OECD to insure they are also enrolled among those countries that have recently signed the Anti-Corruption agreement.

But how about those Belgians, Austrians and Australians? Although developed, they seem to be less behaved  Surprisingly they seen to be more behaved inside than out. I am truly surprised.

Could this be the above mentioned "stealth" technology at work? Could it be that they on purpose wish to be perceived as corrupt at home, in order to enhance their human nature? Could it be that they simply have decided to invest in a change of their image abroad, and that this was ultimately successful?

We shall see what gives next year. Investigative technology requires that you explain the unexplainable.

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

Corrupter and corruptee

Once again, next week, Transparency International (TI) will publish its annual index on how the world perceives corruption in the various countries included in the ranking. It is not necessary to mention that our country has never been able to occupy a reasonable placing within this ranking, although there are some expectations that we could achieve advances after putting into law a new Constitution, in year 2000 or 2001. 

But it takes two to tango! This year, by public acclaim, they will also publish an index that represents the other side of the coin. This index will rank the corrupters and will be denominated the Bribe Payer’s Index. I believe this will raise blood pressure levels in many countries that normally celebrate their high ranking in the Corruption Index.

Evidently, no one believes that the world will ever manage to totally eradicate corruption. In a sense, I hope it doesn’t, since this could mean the elimination of something that is an integral part of humanity, something like reducing human bio-diversity. However, I do believe that there are many means out there with which we can minimize the pernicious consequences of corruption and in this respect, no one needs it more than the developing nations.

Among the instruments at hand we must not underestimate the impact of these rankings. The modern world sees in them a comfortable, although probably somewhat simplistic, way of synthesizing today’s overabundance of information.

I believe the new TI index is appropriate and will be useful among other aspects in minimizing the effects caused by looking at only one side of the problem. For instance, until just recently, in one of those countries that normally come out smelling like roses from the corruption ranking, it was standard and legal practice to deduct for income tax purposes bribes and “payments” if and when the same are a “normal customary practice” in the country in which they were actually made. In this respect there was the very disturbing possibility that The Corruption Index itself could possibly promote corruption by evidencing a “normal customary practice” of bribing. Hopefully tax deductibility of bribes should perhaps be more difficult to justify if we have an index that ranks corrupters as well.

About a year ago and as I surfed through TI’s web site, I ran into a commentary made by a reader which literally said something like: ‘As a President of an international company, I find your corruption index of various countries to be a very helpful tool in my everyday business dealings”. In the face of such cynicism I researched a bit more who this person and company were and, lo and behold, they did not really have a relevant position in the global market after all.

By the way and on a quite separate issue, it is incredibly how frequent it is to find web sites put up by some small-time entrepreneur and who, even though his dealings are strictly local (like the proverbial corner barbershop), evidently believes that with it, he has acquired global presence. The same could probably happens to writers of articles, like myself, and in this respect The Web must surely be the napoleonic complex’s best ally.

But coming back to the matter at hand. It is evident that anyone that dares to say that the Corruption Index is a ‘helpful tool in my everyday business dealings’ should be negatively ranked in the Bribe Payer’s Index. Actually, when we analyze civilization, or at least its various religions, we find that in general terms they consider that he who tempts (a role usually assigned to the Devil) is considered to sin more severely than he who succumbs to temptation does. It is surprising that these contradictions have not come to light earlier. We welcome them.

And while we are at it. I would much appreciate it if TI, or any other organization with similar status and credibility, could develop an index that encompasses the matter of compliance with commercial treaties. 

For example, I am sure that if we were to generate an index that reflects compliance with agreements signed on agricultural policy issues, Venezuela would come out towards the top while those countries that today chastise us would be among the least compliant. Indexes like these would be very useful to small countries like Venezuela. They would show them how to navigate in a reasonable way in the very complex world of international commercial treaties.

The Petropolitan Manifest

  The Petropolitan Manifest

We are an oil country, but one day we will stop being one. Interpreting that “sowing oil” means having to move in advance from one economy to another, applying an economic model and developing economic activities unrelated to an oil reality, is wrong and constitutes the perfect excuse for today's apathy.

 

This month, in England, with oil at more than US$ 20 per barrel, the consumer must pay Bs. 820 per liter of normal gasoline, of which the distributor receives Bs. 31, the producer, who sacrifices a non-renewable asset, obtains a paltry Bs. 117, while the English Treasury charges confiscatory taxes of Bs. 672. In fact, what is charged by the Treasury, when compared with what is received by the producer, indicates the existence of something similar to a commercial tariff that around 600%.

 

The same happens in Germany, Japan, Spain, etc. The taxes that consuming countries apply to petroleum products imply for them only a redistribution of their national income, while, due to their negative effects on the demand and prices of petroleum, they cause a real reduction in the national income of the producing countries.

 

The obscene levels at which these taxes are today in most of the world, with the threat of becoming higher every day, constitute a trade war declared against the economic interests of Venezuela. The fact that our country does not protest about this, just as it did not protest about the ban on the use of Orimulsion in Florida, is indicative of a lack of will and national conscience, without which, with or without oil, we are nothing.

 

The historical indifference of the authorities (Government and PDVSA) towards the aforementioned problem led to the formation of the PETROPOLITAN movement. Its activities are nourished by a series of beliefs, not inscribed on stones, but based on the continuous interpretation that its members make of the best interests of the country, which we summarize below:

 

We Petropolitans believe that the true “sowing of oil” must mean the sowing, in the hearts of Venezuelans, of the will to defend, with pride and responsibility, their real interests, which in essence are and will continue to be so for several decades, his oil interests.

 

1. We Petropolitans believe that the true “sowing of oil” must mean the sowing, in the hearts of Venezuelans, of the will to defend, with pride and responsibility, their real interests, which in essence are and will continue to be so for several decades, his oil interests.

 

2. The value of a good is calculated based on the price that the final consumer is willing to pay. Hence, the difference between what the world consumer of gasoline pays today and the little that the producer receives shows, within the framework of the principles of free trade, the presence of a scam.

 

3. Certain that there is strength in unity and even more so in a globalized world, we support Venezuela's permanence in OPEC. However, we demand that that organization develop new and better defenses of its interests. Not fighting taxes and limiting production only guarantees its extinction.

 

4. We object to any inference to an absolute and necessary relationship between oil revenues and a wasteful economic model. The results obtained to date have no relationship with a rentier model. If we had applied a true and responsible rentierism, living off a portion of the income and not the capital, the story would be different and Venezuela would be in a very envious economic situation.

 

5. We reject any derogatory expression, such as “devil's excrement”, which hinders the emergence of a necessary feeling of respect and gratitude for oil, without which it is impossible to manage our wealth for the good of future generations.

 

6. Since we know that oil is a non-renewable asset of the country, we believe that the defense of its price and value should be the main objective of our industry and we reject the concept of a maximization of current income, which is based on the maximize sales volumes.

 

7. Even though their fiscal purpose is evident, oil taxes are hidden behind the cloak of "green protectionism." At the same time that we affirm a commitment to the defense of the environment, we reject, as unfair, that the producing countries must pay 100% of their cost.

 

8. Oil certainly doesn't create many jobs. However, we must avoid falling into schizophrenic models where the country, being an oil producer, deals with the anguish of not being one, making mistakes whose impact on the generation of stable employment is even more negative.

 

9. The results of the international agreements signed by the country during the last decades do not compensate the cost of having to respect the sources of income of the developed world, such as trademarks and patents, without them respecting our right to obtain the majority of what corresponds to the valuation of our oil asset.

 

10. In the defense of oil, it is not possible to replace the importance of a solid will of the country, with the hiring of international advice and lobbying.

 

11. There are Patriots willing to give their lives in the event that a foreign entity enters our country, in order to extract barrels of oil. Oil taxes imposed by the consuming world are, in essence, a similar invasion. It is the responsibility of the Petropolitan to report this.

http://petropolitan.blogspot.com/1999/10/el-manifiesto-petropolitano.html

http://theoilcurse.blogspot.com/1999/10/the-petropolitan-manifesto.html

I privatize you, I privatize you not

The sad truth is that for a very long time now - decades really - the country simply has not had anything even remotely close to a coherent economic policy. Without one, it will be very difficult to drag the country out of its current emergency, the bottom line of which is serious unemployment and poverty. I still have fresh in my mind that infamous cocktail of eighty “urgent” measures presented to the previous administration by Fedecámaras.

It is even more difficult to find a good direction due to the fact that our dilemma as a country is situated within the context of globalization process that seems to threaten national identities even further.

In these circumstances, it is no wonder that magic, instant solutions, and quick fixes seem to be coming from everywhere. Among these, none is more beautiful and tempting than the privatization of PDVSA. It seems to be to the economy what the Constituent Assembly is to politics.

Before I continue on this track, I wish to make the point that by referring to a state- run oil industry I refer only to activities in exploration, extraction, refining and distribution to basic markets. All other downstream business such as the petrochemical field, among others, is subject to such intense competition that the cruel efficiencies of the private sector are required for it to be successful. Any intervention by the State in this secondary business, can only result in the loss of part of the riches initially created by the basic activities mentioned above. There is not doubt that downstream business must be privatized.

We return, then, to the beautiful siren song (the sirens themselves are not so beautiful): The sale of PDVSA and oil reserves, Nirvana, Shangri-La and immediate gratification.

Evidently, it is not logical for a country as potentially rich as Venezuela to be in the state it is in. The sale of PDVSA could mean, among other things, that we could cancel all of our public debt. If we were able to resist taking on new debt, there is no doubt that the country would have a rather promising future, at least in the short and medium term.

Evidently, any industry that is not subjected to the critical and continuous surveillance by a greedy owner, can easily be led astray and would produce unsatisfactory results.

Evidently, it would not seem to make any difference who really owns PDVSA’s assets. The source of business would remain in Venezuela and the country would continue to benefit from royalties and income tax.

Why is it then, that like Ulysses, I would want to be strapped to the main mast in order to resist the siren song? My reasons are partly intellectual and partly from the heart.

On the intellectual side, the most important reason is that I am not convinced that the country can maximize the value of its oil without OPEC. The privatization of PDVSA would in essence mean our disincorporation from OPEC. This does not mean I am expressing satisfaction with the management of OPEC, which leaves much room for criticism.

The interests of the current players, management and the government, may be in conflict with those of the Nation. Additionally, there is no effective way to evaluate management of the industry. The sirens affirm that the privatization of PDVSA would solve this problem since its valuation in the open market would be a measure of management’s success, and would indicate the way forward. Personally, I believe one way to solve the problem is to require the transparency of information and to create the Office of the Oil Ombudsman. This would allow for the introduction of some national and long-term variables, which are frequently ignored in an increasingly globalized, and short term oriented marketplace.

Notwithstanding, I do admit that in these times, irrational reasons driven by the heart may be weightier by far. To begin with, I am not among those that disqualify the government as a manager.

Defense of oil requires decisive protest against those that prohibit the use of Orimulsion without reason, and against those that impose confiscatory taxes on oil derivatives, meaning that we receive only a fraction of its value. I still have not lost hope that this need for defensive action could rally us to unite as a nation and not simply as greedy individual shareholders.

I do not believe that as a generation that has failed in its management of oil resources we have the moral right to continue to anticipate even more cash flow. 

Should PDVSA actually be privatized and should there be a surplus that can be distributed, I hope it will be distributed among Venezuelans under 21. This opinion will most likely be contrary to that of those people that preach privatization of PDVSA in the same way children try to get to the end-of-party gifts in order to get away early from a boring piñata.

On the other hand, I recognize the value of all the arguments against centralization of fiscal income. Quickly, please... tie me to the mast!