
Venezuela president raises fuel price, devalues bolivar to tackle crisis - csomar
http://www.theguardian.com/world/2016/feb/18/venezuela-president-raises-fuel-price-by-1300-and-devalues-bolivar-to-tackle-crisis
======
rafaelm
Just to put things in perspective, filling up a gas tank here is still cheaper
than buying a two liter coke bottle.

30 liters of gas will cost Bs. 30 or Bs. 180 depending on the type you use. A
2 liter coke costs Bs.500. A McDonalds meal costs around Bs.1000 (Add Bs. 500
if you want fries fries. Fries are imported for some reason. I might be off on
the price, I haven't been there in a while.)

And this will not stop the smuggling of gasoline to Colombia and Brazil, since
the price differential is still so big. It reduces profits a bit, but it's
still worth it for those that can do it (mostly military mafias that control
the border).

EDIT: just to expand a bit on the subject, the price has been fixed since 1996
I think. The govt subsidies on gas are ridiculous. The country was losing
around US$12500 million a year through the subsidy. Add to that, Chavez
started PetroCaribe as a way to "sell" cheap oil to caribbean nations (in
exchange for loyalty) that was never paid , or paid with beans,etc.

Now that the oil prices are so low, we have no income.Most of the money that
came in to the country was stolen by govt officials (composed mostly of
military men) and we have a huge debt obligations and low international
reserves. Now it's time to tighten our belts.

Lines to buy food are enormous. You can only buy certain things twice a week
if you can find them (according to the last number of your national ID).
Medicines are dissapearing.

Maduro is looking everywhere he can to find some money, but there's not much
he can do really.

~~~
JumpCrisscross
> _the country was losing around US$12.50 million a year through the subsidy_

Try $1.7 billion as of 2013 [1].

[1]
[https://translate.google.com/translate?sl=auto&tl=en&js=y&pr...](https://translate.google.com/translate?sl=auto&tl=en&js=y&prev=_t&hl=en&ie=UTF-8&u=http%3A%2F%2Fwww.abc.es%2Finternacional%2F20130515%2Fabci-
venezuela-gasolina-201305142039.html&edit-text=&act=url)

~~~
rafaelm
Yeah , I realized I missed a zero there! Edited. This Forbes[1] article has
even worse numbers. Filling up the tank here is something people don't think
about. People even tip the gas pump attendant two or three times the cost of
the full tank (that's obviously over now).

The reason we are angry is not because we now have to pay a very low price for
gas. The reason is that this country had a huge bonanza and it was all stolen
and now the govt says its because of the "economic war" the US and allies are
waging against Venezuela. Apparently, the fact that the US is extracting shale
oil is all just a plan to topple Putin and Maduro. And now that OPEC wants to
break the shale oil companies is another evil plan.

It's everyone elses fault that after 18 years of the highest income we've ever
had, we now have no money for the rainy days.

[1][http://www.forbes.com/sites/timworstall/2015/01/26/that-
vene...](http://www.forbes.com/sites/timworstall/2015/01/26/that-venezuelan-
economic-experiment-gasoline-isnt-just-cheap-its-free/#73ba1f193c41)

~~~
SEJeff
As an American who attempts to keep up with the political situation going on
in Venezuela... I know that Chavez stayed in power relatively easily during
the oil boom by giving free handouts to many of the impoverished. How does
Maduro actually stay in power?

It seems like from the outside, with the violence, inflation, and general
instability, that Maduro has failed to keep the Bolivar Revolution viable.

Do you think Maduro, or one of his chronies will eventually be voted out by
the populace? I'm genuinely interested in your side of the story as I can't
get non-biased news in the US about Venezuela.

~~~
rafaelm
I hope I'm totally wrong, but I don't see a scenario where Maduro or one of
his chronies just gives up on power. I don't see one peaceful scenario where
they leave power or try to negotiate some sort of power sharing agreement with
anyone.

IMO, the thing to understand here is that it's not Maduro holding on to power,
it's the military. They are involved in most of the corruption, drug
trafficking, human rights violations,etc in the country. They are getting rich
beyond their wildest dreams. That's not something that people give up on
easily.

Chavez remained popular while oil prices where high, that way his wacky
economic model worked, even when they stole most of the money that was coming
in (confessed by Giordani, former Minister of the Economy, one of the
architects in this disaster). If Chavez was still alive, the situation would
be the same, with the difference that he had a charisma and incredible hold on
the population.

Maduro now has to face the legacy of his disaster and he doesn't have the
personality, charisma to deal with it. You could almost feel sorry for the
guy. He's being pressured from the military side, and now he has to face the
pressure from the population that is getting restless.

I don't know what the outcome is going to be like. I think some sort of
violent looting escenario is inevitable, by the poorest parts of the
population when they really start feeling the hunger. That brings repression
by the govt forces and death. Maybe then will we see something similar to
Egypt, Ukraine,etc where the military has a limit on how many people the are
willing to kill on the streets and they flee.

It's a sad, sad situation.

------
mangeletti
This is a very sensational title, and I'm sick of media companies exploiting:

1) the natural tendency for people to read "by X,XXX%" as "X,XXX times"

and

2) the fact that raising something from nearly 0 to anything that's not nearly
zero will naturally be a large percentage increase, even if it is a small
absolute increase

Guardian, here's a better, albeit, less apocalyptic and click-bait title:

Venezuela raised gasoline prices from nearly free ($0.02) to about 1/12th of
what the rest of the world pays ($0.20), because government oil revenue is
down.

~~~
gruez
>1) the natural tendency for people to read "by X,XXX%" as "X,XXX times"

Is that actually a thing? I understood it just fine.

~~~
Vraxx
Even if it's not to that extent, the bigger number leaves a bigger impression
without giving it much thought, even in a relatively trained mind. Once you
parse that it says percent, sure, you can deduce that it's describing it
proportionally and infer that the price was probably pretty low to begin with,
but why do we need to have titles that require this to get the gist of it when
we could describe it in a more clear manner from the beginning?

edit: changed punctuation mark.

------
joolze
"Putting these prices in perspective for western readers should result in
laughter: the new price for 95-octane is equivalent to $0.11/gallon using
weakest official Simadi FX rate of about 203 VEF/USD, and 5 times less using
the black market FX rate. The price previously was 0.097 bolivar/liter or
about one-fifth of a U.S. cent per gallon.

And while the price is indeed laughable to western readers, price increases
such as this one are all too tragic to the local population which is paid in
local currency terms, and for whom this is merely the latest checkmark on the
hyperinflationary wall."

[http://www.zerohedge.com/news/2016-02-17/venezuela-
devalues-...](http://www.zerohedge.com/news/2016-02-17/venezuela-devalues-
currency-37-maduro-announces-62-fold-increase-gasoline-prices)

------
JumpCrisscross
This is a positive development. Too little, too late, but a better direction
than the "vice president for the economy" Maduro appointed last month who,
quite literally, does not believe in inflation [1].

Venezuela owes $15.8bn in debt payments in 2016, has less than $1bn of cash,
and holds most of the rest of its reserves in gold [2]. Between 2011 and 2013,
fuel subsidies cost Venezuela 7.1% of their GDP on a pre-tax basis [3]. (Note
that this "measure of subsidies constitutes a lower bound, as it does not
include forgone tax revenues or the cost of negative externalities".) This
costs its government more than $1.7 billion a year [4].

Similarly, when one can buy a dollar for 6.3 bolivars from the government and
sell it for 500 to 1 000 on the market, it should not be surprising that
dollars are seldom to be found. This places an implicit but extreme tax on
imports, creating shortages. Curiously for the socialist republic, this tax is
levied by private interests as access to dollars at the official rate is
rationed to the regime's friend. This was one way Chavez controlled the army.
It is also why reducing the market-to-official gap of 100x is so difficult.

[1] [http://www.reuters.com/article/us-venezuela-economy-
idUSKBN0...](http://www.reuters.com/article/us-venezuela-economy-
idUSKBN0UL27820160107)

[2] [http://money.cnn.com/2015/10/29/news/economy/venezuela-
selli...](http://money.cnn.com/2015/10/29/news/economy/venezuela-selling-
gold/)

[3]
[https://www.imf.org/external/pubs/ft/wp/2015/wp1530.pdf](https://www.imf.org/external/pubs/ft/wp/2015/wp1530.pdf)

[4]
[https://translate.google.com/translate?sl=auto&tl=en&js=y&pr...](https://translate.google.com/translate?sl=auto&tl=en&js=y&prev=_t&hl=en&ie=UTF-8&u=http%3A%2F%2Fwww.abc.es%2Finternacional%2F20130515%2Fabci-
venezuela-gasolina-201305142039.html&edit-text=&act=url)

~~~
cubano
Maduro is an idiot, and his crony socialism is destroying a once-great and
proud country.

None of these stop-gap measures are going to save things down there, and while
Maduro and his fellow party leaders will ride off into the sunset as
billionaires (if his people don't kill him first), the poor Venezuelian people
will suffer for many years to come.

~~~
spikels
"suffer for many years to come"

Unfortunately it will probably take decades to bring the Venezuelan economy
back to a normal.

Almost every local industry is in shambles and foreign investors will need at
least a decade to resolve all the claims from past nationalizations and settle
all the debts.

Perhaps the worst economic problem is that any entrepreneurial spirit in the
country has been crushed. For more than a decade the way to get ahead was to
manipulate the system or leave.

Lastly the political institutions are completely broken. Another charismatic
strongman could come along or the military could simply take over.

None of this is a quick fix. Things can - and probably will - get worse for
years before they get better.

An analogy: If a well functioning economy is like a rain forest with thousands
of interacting systems and species in a complex dynamic equilibrium, Venezuela
is crappy zoo with most of the animals sick or gone, incompetent and cruel
zookeepers and no money for feed.

------
mixmastamyk
The cheap gas in Vz sounds great but has many horrible effects.

In Brazil you'll zoom about in clean, small alcohol-compatible cars. But in
Caracas, people are driving around in 1980 Chevy Impalas spewing thick black
smoke. They only recently stopped producing leaded gas. I was reacquainted
with the "black boogers" I had not experienced since a trip to India in the
90's.

It's disgusting really, and a shame for country that should have so much going
for it.

------
CydeWeys
> The official exchange rate used for food and medicine imports will weaken to
> 10 bolivars per dollar from 6.3, as of Thursday, while a second rate will be
> allowed to float.

How can you have multiple exchange rates on the same currency? That makes no
sense. And seems like it would lead to rampant cheating, e.g. shipments of
food not being classified as such, or vice-versa, whichever is advantageous at
a given time.

~~~
rafaelm
That's precisely the problem. The govt decides who gets dollars at rate #1
(Bs.10/$) and who gets the other rates. Of course, only govt officials and
friends get rate #1.

They establish a company in say, Panama. Their venezuelan company imports food
from Panama at rate#1. They claim they imported 1 ton of food, for example,
while they only actually bring in half a ton. Or they buy the food at a
certain price and they overbill the govt. Expand that to every facet of an
economy where EVERYTHING is imported: food, medicine, appliances, cars,
tires,etc.

The black market rate is at Bs.1000 per dollar. That's a Bs.990 difference.
It's practically a money printing machine! Buy dollars at Bs.10, sell them at
Bs.1000, restart the process. Over and over until there's no money left, which
is our current situation.

~~~
sremani
But who is selling the government USD for 10 Bolivars? I guess they are
swindling from foreign investors trying to do business in VZ.

~~~
slv77
The government nationalized their oil companies which, even at these prices,
is still a reliable source of USD that is converted to Bolivars at the
official exchange rates of 6.3 to 1.

Importers could then bid for these dollars at different exchange rates to buy
medicines and raw materials. As long as US companies like Kimberly Clark,
Clorox, PepsiCo, Goodyear and airlines had access to import raw materials at
the official exchange rates they could, on paper, be profitable but couldn't
expatriate any earnings. They were also motivated by the threat of
nationalization.

Recently many of these companies have started to write off these earnings by
marking down bolivar holding and writing down assets.

~~~
rafaelm
The oil company, PDVSA, has always been national. They are practically selling
oil at the cost of production right now, so there's no money.

Maduro said yesterday that during January , only $77 million entered the
economy from oil sales, down from $37.000mm in January 2014.

International companies have their assets tied up in worthless bolivares here
[1], so that's the reason there are no tires for example, and if you find one
in the black market, they cost around Bs.70.000. The minimum wage is
Bs.13.000, after yesterday's raise.

[1][http://www.ft.com/fastft/2016/02/09/goodyear-
takes-646m-hit-...](http://www.ft.com/fastft/2016/02/09/goodyear-
takes-646m-hit-on-venezuela/)

~~~
slv77
The PDVSA didn't have the technical expertise and capital to fully explore and
exploit their oil fields. The oil majors had stakes in several projects that
were nationalized starting in 2007:

[http://www.reuters.com/article/venezuela-nationalizations-
id...](http://www.reuters.com/article/venezuela-nationalizations-
idUSN1E79I0Z520111201)

Exxon and ConocoPhillips filed arbitration claims which resulted in an attempt
to repatriate PDVSA assets. That resulted in the planned sale of Citgo and may
have also motivated the repatriation of gold reserves held overseas (but who
knows). Citgo eventually ended up issuing $2.5B dollars worth of bonds which
stripped the asset of a lot of it's value.

Ouch on the price of tires.

------
edpichler
People, forget about the gas being cheap on Venezuela even still after this
arise.

That country is with serious problems for years. For instance, citizens need
to be on slow and humiliating lines to buy food, that is limited by
government. Recently, government also said that the prices of milk increased
because people are drinking it too much.

~~~
GFK_of_xmaspast
> Recently, government also said that the prices of milk increased because
> people are drinking it too much.

Isn't that literally how supply-and-demand is supposed to work.

~~~
ancap
Not exactly. In this case it is the government which is mandating the prices.
While market prices would naturally rise due to increased demand, the
statement "because people are drinking it too much" does not necessarily
denote increased demand.

Market prices are one of the most essential aspects of a healthy economy. It
is the lack of market prices which right off the bat dooms any form of
socialism to failure. Any time you see large scale, perpetual shortages of any
kind you can know there is some form of price fixing or market manipulation
going on by the government.

~~~
beambot
You covered demand... But what about supply?

You can have perpetual shortages on the supply side that keep prices up. The
entire luxury goods market relies on this, as an example.

I'm afraid I'm not confident in your analysis; seems to oversimplified.

~~~
ancap
>You can have perpetual shortages on the supply side that keep prices up. The
entire luxury goods market relies on this, as an example.

You'll have to go into more depth on your example. I'm not sure to what you're
referring.

>But what about supply?

Reread the second paragraph in my comment. Generally, when the term
"shortages" is used, it refers to supply.

As for the "perpetual shortages on the supply side that keep prices up", I'm
not sure you are using the term "shortage" as it is understood in economics.
Just because something is not available at a price I prefer does not connote a
shortage (as defined in economics). Otherwise the fact that I cannot buy a
Lotus car for $10k would mean there is a shortage. However, if the government
introduced price controls on Lotus cars so they could only be sold for $10k,
you would definitely have a shortage because more people would want them
(demand) at that price point but no one would be willing to sell them
(supply).

~~~
phonon
Look up Artificial Scarcity.

~~~
ancap
Explain how artificial scarcity could exist in a free market

~~~
beambot
Chanel captures the entire market for Chanel handbags. Their company entirely
controls the supply, and they artificially limit the new supply fabricated
each year. No other company can manufacture Chanel handbags. Hence: artificial
scarcity. Many luxury good companies operate on this premise. Hence my
original comment.

~~~
ancap
You are not describing a shortage as defined in economics. Re-read my previous
comment.

You are not even describing a monopoly because there are still alternative
brands, even luxury brands, which people can buy. Otherwise any brand would be
considered a monopoly.

EDIT: used "scarcity" instead of "shortage"

------
neves
When I went to Venezuela years ago, gas was cheaper than water. Now at least
they will have desincentives to use their cars. That's good for the
environment.

------
pluma
Worded differently: fuel is no longer practically free in Venezuela.

~~~
rtkwe
Closer to: fuel is slightly less practically free in Venezuela, but still
unbelievably cheap.

~~~
Turing_Machine
It's not quite so "unbelievably cheap" when the minimum wage is $13/month.

[http://www.bloomberg.com/news/articles/2015-10-16/venezuela-...](http://www.bloomberg.com/news/articles/2015-10-16/venezuela-
raises-minimum-wage-30-it-s-still-only-13-a-month)

The minimum wage in the U.S. is somewhere around $1,200/month, so a rough
comparison (gallon of gas as proportion of income) might be if gas cost
$10.00/gallon here.

~~~
flubert
Anyone know more about Cuba's $20 a month _maximum_ wage?

[https://www.google.com/search?q=cuba+maximum+wage](https://www.google.com/search?q=cuba+maximum+wage)

------
emartinelli
It was (it is?) a common practice to smuggle gas from Venezuela to Brazil,
where the prices are relatively high.

[[http://www.nytimes.com/2006/12/07/world/americas/07brazil.ht...](http://www.nytimes.com/2006/12/07/world/americas/07brazil.html)]
- old article (2006), but the disparity, at least before this annoucement,
persisted.

~~~
mikeash
If the price of gas in Brazil is anywhere close to the global market price
then this price change will barely make a dent in the profitability of
smuggling. From some random internet searching it looks like the price in
Brazil is fairly high, $3/gallon equivalent or more.

~~~
speeder
Brazil is absurd with prices, in the other direction than Venezuela, here
everything is more expensive than in a first world country, except maybe meat.

Brazil is the only country that is rising gas prices while oil price is
falling.

Also, Brazillian gasoline in Argentina is a third of the price of Brazil, this
leads to Brazillians going to Argentina to smuggle Brazillian-made gasoline
back into Brazil.

Yes, this is "efficient" as it sounds.

Also our gas prices are blamed by economists here as one of the biggest
reasons we have a 11% inflation.

And this is all effect of our extremely bizarre and byzantine taxation model
(instead of having a single VAT like in other countries, we have multiple
taxes that apply to transactions, with each one having a complex set of rules,
many of them being mandatory to be included in the price AND be calculated
from the price that include them, thus resulting in recursive calculations).

Here is slighly outdated the list of taxes here, from the final product price
(ie: a product that costs 100 and has tax of 30%, means that 30 go to the
government, and 70 is distributed among the business involved).

    
    
      Gasoline: 53%
      Microwave: 55%
      Playstation 4: 72%
      console-ran software: 72%
      console dev kits: 72%
      Bank Interests: 26% (yep, when you pay interest to the bank
        you pay tax on it too!)
      Lamp: 48%
      Powdered Milk: 28%
      Clock: 53%
      Fishing Rod: 48%
      Toilet Paper: 38%
      Water: 38%
      Fish (to eat): 48%
      Cookies: 37%
      Chocolate: 39%
      Leather coat: 82%
      Beer: 62%
      Matress: 28%
      House: 48% (also, every time... if you buy a house, you pay 
      48% of its value in taxes, if someone buy from you, they 
      will also have to pay 48% in taxes again, leading to a 
      extremely rapid inflation in housing prices, leading to a
      extreme amount of homelessness, people needing to rent, and 
      power concentration in the hands of the actual home 
      owners... for example I once lived in a apartment I rented 
      from a single person that owned 60 entire apartment buildings).
    

Lowest tax I could find: Medicine and chemicals used by cattle ranchers: 13%
(no surprise here, the most powerful politicians here are ranchers).

Highest tax I could find: Vodka (and some other distilled beverages): 83%

------
lucio
percentages used as click-bait...

-How's the business?

-Great! We've had a 100% increase in visitors in a single day!

-Amazing, how many visitors today?

-two!

~~~
harperlee
This is a knee-jerk response and doesn't really apply to the parent. The gas
price raise was certainly not an artifact of having few data points or low
resolution as in your example.

~~~
mikeash
I read it as pointing out that if you take an extremely small number and
increase it by a large percentage, the result is still pretty small.

Here, the price of gas has gone up by 6,000%. That's a lot! Except that in
absolute terms, the price has gone from $0.02/gallon to $0.11/gallon. I can
see larger fluctuations than that just by crossing the street in many places.

~~~
flubert
>Here, the price of gas has gone up by 6,000%. That's a lot! Except that in
absolute terms, the price has gone from $0.02/gallon to $0.11/gallon

...It looks like you are missing a factor of 10. 6000% is 60x, so as near as I
can tell gas was $0.002 per gallon, and now is rising to $0.11 per gallon.

[http://www.bloomberg.com/news/articles/2016-02-17/venezuela-...](http://www.bloomberg.com/news/articles/2016-02-17/venezuela-
raises-gasoline-prices-for-first-time-since-1996-ikrf0ppn)

~~~
mikeash
You're right, temporary brain failure. Looks like it's too late to edit the
original, but let the record show that it was really $0.002/gallon.

------
hathym
It was almost 0 (from 0.097 bolivars to 6 bolivars)

------
rconti
> But even with the rises, Venezuela’s petrol will still be the cheapest in
> the world, allowing Venezuelan’s to fill their tanks with high-octane
> gasoline for the equivalent of the price of three beers.

Whose idea was it to compare gasoline prices (heavily subsidized or taxed,
depending on regime) to beer prices (heavily taxed, depending on regime)? Big
Macs are a much better indicator of PPP.

------
edpichler
Poor Venezuelans! I hope your corrupt and dictatorial government shall fall,
like happened with Argentina.

~~~
kolme
Not sure if you're being ironic, but the "dictatorial" government of Maduro
already lost the election. So it already fell.

~~~
ptaipale
It lost an election, but has entrenched its influence by selecting civil
servants and doing other things to keep power.

As Wikipedia puts it: _A little over a week after the elections on 15 December
2015, the outgoing National Assembly created the "National Communal
Parliament" with President Maduro stating "I'm going to give all the power to
the communal parliament ... This parliament is going to be a legislative
mechanism from the grassroots. All power to the Communal parliament".[67] The
move was described as an attempt "to sideline and leapfrog the incoming
opposition-controlled National Assembly" and that such actions could possibly
lead to more destability and polarization in Venezuela for the future.[68]_

~~~
rafaelm
Yes, he created a parallel assembly. But the "grassroots" and "power to the
people" thing is fake. The true power is in the Tribunal Supremo de Justicia
(Supreme Court). They can now decide on whatever the National Assembly
decides. It's already happened, they have removed opposition members elected
to the NA , approved a law that the NA didn't approve and will repeal new laws
coming out.

After losing the december elections, the old National Assembly (controlled by
the govt back then), quickly elected new members to the Supreme Court that
they control.

Just to give you an idea of how corrupt this is: one guy (from the govt party)
in the NA was running for re-election as a member of the National Assembly.
The guy lost the elections. So then he goes back to the old NA, still in
session, runs to be a member of the new Supreme Court , VOTES for himself and
is now the head of the Constitutional sector of the Supreme Court, which gets
to decide on whether the things the new NA decides are legal or not.

Very democratic.

~~~
ptaipale
Right, Supreme court selection is probably the most influential of the "other
things" I was thinking of.

