On Saturday, Chávez announced another Bs.564 million rescue to try to plug the neverending financial shortfalls facing the Nationalized Guayana industries.
There’s enough candy for everyone in that piñata: Alcasa gets some, Bauxilum gets some, Venalum too, and Ferrominera and Sidor get rather a lot, actually. But it’s not just the big boys; even the bit players in the tragicomedy that is CVG, like Cabelum and Rialca, get a taste.
The good part comes later, though: Chávez followed this shower of petrodollars with a stern admonition to the Guayana SOEs to stop making losses already!
It’s heart-rending, really. Nobody in the government has the intellectual furniture in place to grasp the connection between a soft budget constraint and chronic loss-making on the part of State Owned Enterprises.
They really, really don’t see how extending a virtually explicit guarantee to the Guayana SOEs that they can come back again and again and get one bail-out after another per secula seculorum might put a a dent on managers’ incentives to make a profit. It’s like a brand new thought to them – nobody’s ever walked them through the logic behind it.
La vaina es tierna.
Caracas Chronicles 
You must have overlooked that little bag in Maiquetía for arriving pax, “You will not Need Your Logic Beyond This Point: Please Deposit Here For Safekeeping and Pickup When Leaving” because I see you brazenly (?) used the term in your piece.
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The funny (not haha) part is that there is nothing for the shut down briquette or pipe companies that were at least profitable before nationalization…
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The Rialca bit caught my eye. I love the idea that aluminum wheels are a strategic industry…
Of course, Rualca used to invest on its own, without having to stick its hands in the tax-payer’s pocket. It used to export all on its own. Then it got taken over, turned into Rialca (cuz we know nothing’s more revolutionary than changing a name!) and now it’s just another hole in the bottom of the CVG moneypit…
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If my memory doesn’t play me badly, Rualca used to export 95% of its production by 1998 and it had grand plans.
I know some people who used to work there and left at the right moment. I visited the place in 1995. I wonder what are those buildings used for now.
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“I wonder what are those buildings used for now.”
http://bit.ly/oudT5t
Nothing, it seems.
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Very sad.
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The next Venezuelan-owned SOE will be an insurance company, where claims are always paid in full without verification (because no good socialist would ever lie). Not only that, but there will be no premiums. The only entities eligible for this insurance will be other SOEs and cooperatives receiving government funding.
(Yes, I know this already de facto exists, but they have yet to formalize it and add the bureaucracy, creating lots more useless pork jobs for family members of cronies and dedicated red-shirts.)
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Nothing! nothing! How so? Between those hallowed walls is the Locally-Based Space Programme, full of Locally-Based Space, for heaven’s sake!! Just how many times do you have to be told?
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Now I get it! The whole point of the nationalization drive by the government was to create a huge space program. That is, every industrial facility gets its space totally empty.
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… so space gets increasingly bigger, until is a huge space!
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To the eyes of the government, a company that makes a profit is worth nationalizing! But, it seems to be like mirage in the desert… it looks like a pool of water, but when they jump in, there’s only dry sand!
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The State can enforce monopoly, for itself and for other parties: Meaning it can exclude other players. The State has powers of taxation: Meaning it can forcibly take money that productive parties produce.
As long as the situation is the aforementioned, ANY State-owned enterprise that is supposed to be economically viable and productive, will be in principle able to produce… losses. As the owner always pays, is not worried about profit, and can pick the pockets of others for more money.
Before Socialism, almost everybody understood, at least in theory, that the State had special functions. These did not have to be productive, they had to be necessary, or had to be provided to everyone regardless of how much money they had. Whatever. Political things. Emergency things. Justice. National Defense. Universal education that had to be provided to keep the nation together and speaking the same language.
Enter the BS storm of Socialism and some extreme forms of Social Democracy. Enter the Petrostate. Enter our present and past situation.
Either you separate the State from productive enterprise, like you separate State and Church, or you are subject to this kind of thing. How much? How many and how large are the State enterprises? How much are they bound to the State and politics?
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Well, I don’t think there is anything intrinsically wrong with socialism. I think Insurance is a type of private “socialism” where lots of people pay into it, but only those with a qualified need take money out. That is a good service that intelligent people need to buy to avoid risk. That kind of socialism is also very useful.
Businesses perform services to the public and get paid, but they aren’t suppose to give money away except in taxes. So, I see an appropriate role of government to serve the public where there is need… not exactly like an insurance company, but not like we’re seeing now in Venezuela.
Politicians with philosophical or ideological agendas must be avoided! We need people who get work done for the people, even if they have no personalities!
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