Say bye-bye to all that…
First it was Air Europa. Then Iberia, Lufthansa, Air France, Avianca (Colombia), Tame (Ecuador), Air Canada, Aerolíneas Argentinas, TAP (Portugal), COPA (Panama), American and United. One after the other, the airlines lined up to announce they will no longer sell tickets in bolivars, as the government is now $2.8 billion in arrears in settling its Forex obligations to them.
This write-up in La Voz de Galicia (insert favorite gallego joke here) is eye-opening in all kinds of ways. At this point, bolivar-holders are basically cut off from the rest of the world via air. Even if you have dollars, you can’t get a one way CCS-MIA ticket for less than $1,800. (Bizarrely, MIA-CCS tickets cost a sixth as much.) It’s crazy.
Of course the airlines are only the most literal aspect of our dollar-drought driven disconnect. In a port economy that had already been hollowed out by a generation’s worth of Dutch Disease even before chavismo came to power, it’s no surprise virtually that no sector can really operate without supplier credit from foreign partners.
Even the products that we do produce face dollar bottlenecks somewhere along the supply chain. Take cheese. We certainly do produce that. But we don’t produce the packaging it goes into. No dollars, no package; no package, no cheese.
Take that story, multiply it by a thousand, and you have an idea of what the Venezuelan economy looks like at the start of 2014.
When you just plain stop paying the bankers, everyone screams “default” and freaks out. But, for some reason, when you just plain stop paying the suppliers, it’s a human interest story.
Caracas Chronicles 
Seriously: the most subversive activity the opposition can carry out these days is to distribute flyers with pictures of Colombian supermarkets…if only they had paper to print those pictures in.
OT but never so OT: one of Cilia Flore’s heirs and his bodyguard were unhurt in a car accident but his Toyota 4Runner might require some repairs. The question is: are there repair parts for them? I have heard Venezuelan garages have been cannibalizing cars of some clients for others and that for years. And: will he be able to afford said repair? How many salaries did he need to pay for such a car? Does the Flores family eat cheese from totumas?
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Hmmmm. That’s one grassroots idea that’s bound to be treated as terrorist activity by the government. It could be outright devastating.
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“if only they had paper to print those pictures in.”
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And even if you did that you’d get people saying “ves, ahí es dónde estan todo lo que se llevan los especuladores para revender!”. But seriously, if you had a mix of big supermarkets and little stores (to avoid “sólo la rancia burguesía colombiana tiene comida”) it’d be an interesting exercise. You’d need convey the message that their Colombian counterpart, urban working and middle class Colombians, “no tienen que hacer cola y siempre encuentran todo en su barrio”
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El Cachaco, are you in Colombia? If you can, it would be enormously nice if you could send a couple of such subversive pictures like “medellinense comprando leche Y pollo en abasto” or “bogotano tratando de escoger qué aceite de cocinar va a comprar” or
“persona de Cali ignorando montaña de envases de leche en polvo en supermercado”. I can publish them in my Spanish blog and distribute them to my relatives and friends living in still Chavista regions in Venezuela.
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Unfortunately I’m back in Canada now, though I might be able to convince a friend to help out. I’ll let you know via Twitter if I get anything. But I do like the idea, especially since my first reaction was worrying where to find a mountain of powder milk since pretty much no one in Colombia uses it. And then it hit me: we have fresh milk.
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That would be nice indeed. Venezuela has changed so much, even my ultra-oppo sisters don’t remember.
You will find a lot of Venezuelans prefer now powder milk but it was not like that before. In the nineties, during Caldera II times I remember I went back to Venezuela from Germany and saw lots of things changing: from people imitating Caldera with his “millardos” to many more street vendors than I had ever seen, to higher crime rates and Caldera blowing up jails as supposed “solution” to reduce crime in prison…I found people viewed powder milk as a precious commodity. And back then I was puzzled for I hardly saw powder milk as a child: we had simply Leche Carabobo. I later, around 2000 (with Chávez in power already) told my sisters. They didn’t remember when things changed because they were in the middle of it…and so many things have changed that few living through them remember when what in the maelstrom of things.
The shortages we have now were present and the resulting shifts in usage, started already during Caldera II, albeit at a much lower range.
What’s your twitter account?
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Badges/T-shirts – “My mum went to Colombia and all I got was this lousy T-shirt, some sugar, some coffee, some cheese, some chocolate, car spare parts, airline tickets, Samsung Galaxy etc. etc.”
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$1240 return fare? Get it! Last I saw there was one going for $3000+ and you had to go via Houston-O’Hare-MIA!!!
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Venezuela does look like Hotel California.
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You want to see a real disparity…
Look at 1-Way from MIA to CCS
https://www.google.ca/flights/#search;f=MIA;t=CCS;d=2014-03-26;r=2014-04-15;tt=o;mc=p
Then look at 1-Way from CCS to MIA.
https://www.google.ca/flights/#search;f=CCS;t=MIA;d=2014-03-26;r=2014-04-15;tt=o;mc=p
Try explaining that one away as anything other than an economic distortion.
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Oooh, consider that one stolen. Though maybe it’s not so bizarre: if I’m in Caracas, I’ll do whatever it takes to get the fuck out. If I’m in Miami, the incentive to go the other way is…not as strong.
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I guess the reason is that if an airline wanted to charge Bs.11,000 for a ticket from CCS-MIA, they had to report that at the official rate as being $1,800 rather than the $160 (or so) that Bs.11,000 are really worth. And since GoogleFlights offers up prices only in USD, the fiction shows up there as stratospherically priced one ways out of Caracas. But now that they’re no longer trading in bolivars, the need for this fiction disappears.
What I don’t really understand is whether the government is going to allow people to fly out of Venezuela using roundtrip tickets bought abroad in dollars. Seems like there must be an ílicito cambiario in there somewhere, right?
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Up ’til now, in order to have the right to ask for the CADIVI dollars, you must present an airline ticket that starts and ends the trip in Vzla. Never heard of a prohibition of flying out of the country using tickets bought abroad, but if you don’t have the 6,30/11 BsF dollars, it becomes a pretty expensive trip, doesn’t it?
I haven’t checked out the new “providence”, so I’m not sure if that changed. But I don’t see why it should have.
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The current Ley de ilicitos Cambiarios does not contain a general prohibition on the use of foreign currency in Venezuela . What it provides is that use of foreign currency is forbidden to the extent OTHER laws prohibit such use. Because the general rule under the Ley del Banco Central is that while the Bs is ‘legal’ tender it is not ‘mandatory’ tender then parties in a transaction are free to stipulate the use of foreign currency , in other words that Bs are by default lawful tender to be used and accepted in all transactions but those in which the parties agree otherwise. There are specific laws which provide for mandatory use of Bs ( Real state rentals) but there are (to my knowledge) none which require purchase of plane tickets to be made only in Bs.
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No, there is not. Since 2003 Venezuelan airline ticket agents are not allowed to sell anything in foreign currency. When you buy airline tickets in US dollars, you’ve got to have contacted a foreign ticket office and be using either a foreign credit card or a foreign bank transfer; none of them are under the jurisdiction of the Venezuelan foreign exchange law.
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According to this article: http://www.el-nacional.com/economia/Gobierno-incumple-deuda-combustible-Avianca_0_345565677.html they’re not even honouring Avianca’s agreement to be paid with fuel.
I saw that Avianca was not reducing or limiting its operations (at least to the extent of others) but I assumed it was due to the fact that there is enough demand from Colombians going to Venezuela and how Bogotá has become the hub for Venezuelans. Even if they’re not making money on the flights to Venezuela, they have attracted new customers on their routes. According to Wiki, Avianca is planning to offer flights to Maracaibo and Barquisimeto (currently there flights to CCS and Valencia) but I wouldn’t bet on it given the situation.
For a while I’ve had the thought that some part of the acclaimed economic successes of Colombia must be due to the deterioration of Venezuela’s economic situation, and I think this topic kind of shows it. Caracas had been the traditional hub for the region for decades, not 20 years ago Colombians would connect or stopover in Caracas for many destinations. (A historical reason for this is that older airplanes could not take off from Bogota with a full load of fuel due to altitude) And now it’s completely the other way around, we got a stunning new airport filled with Venezuelans.
A personal aside: Air Canada’s flight to Caracas has a much more convenient schedule than the one to Bogota, and yet I’ve never seen it while reserving because it’s either full or at a ridiculous price. And even if it were available I wouldn’t take the option, and y’all know that I’m a big venecophile, but still, it’s not worth the hassle and the potential risk.
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Francisco, real debt is one thing and expectations to receive subsidized cadivi dollars is another.
Venezuela is not indebted to private companies requesting Cadivi dollars and which have not been granted those dollars, however large the amounts may be. The state, under the exchange ilicits law “reserves the right” to provide currency to whoever requests it.
On the other hand, Venezuela did explicitly borrow and is heavily in debt to the foreign capital markets. The shortage of cadivi dollars I’m sure is precisely the consequence of the nation shoring up assets to honor this debt.
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I disagree. The arrangement with the airlines includes the specific promise that airlines will be allowed to change dollars at BsF 6.3, as far as I understand it. A promise is a promise, just like a promise to a creditor that they will get their money back.
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Could very well be and it would be interesting for discussion purposes if we could refer to this agreement.
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I guess that’s right from a legal point of view. My point was that from a markets-functioning point of view is sort of a distinction-without-a-difference.
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If your Cadivi request was approved and all that’s pending is the transfer of dollars, you do have a credit against the state. The debt amounts to request that were approved by Cadivi but haven’t been paid. They were given an ADD (The administrative act that authorizes the buying of foreign currency at 6.3) but not the ALD (The authorization to the bank to wire the funds) If there were such thing as independent Courts in Venezuela (I know y si mi abuela tuviese manubrio) they could force the government to pau.
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*To pay.
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Hypothetical Scenario.
One day, people will ask how did Venezuela become like Cuba? And the response might simply be, the government racked up enough debt with the airlines until they simply stopped flying. Then they made it impossible to get dollars to travel abroad and eventually over the years people just gave up on the idea of being able to leave the country.
I think Venezuelans need to hire some consultants from Kiev who can teach them the art of protesting.
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Joe, I think this is spot on; after all it’s a coup in ultra slow motion… voy volando.
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The whole problem is the constant stream of lies that we have been fed for the last 15 years.
Lies about the production capabilities of PDVSA after the paro.
Lies about the amount of petroleum exports they were sending even though world monitoring services said that it was much lower.
Lies about the amount of money in FONDENE & where it all went.
Lies about our foreign reserves & where the gold is to support them.
The chickens are coming home to roost.
They obviously are completely broke with no new income coming in.
Typical householder with no job & maxed out credit cards.
DHL just joined the stampede.
Will no longer do foreign deliveries – in or out.
https://sj3g2zql4he1cg5yvxr5.r.worldssl.net/suspende-operaciones-en-venezuela/
The country is collapsing faster than anyone thought.
To me it looks like we won’t even get through February without everything grinding to a halt.
My prediction – super high inflation & a black market double or triple what it is now by summer.
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What I understood from the DHL letter is that people in Venezuela won’t be able to pay for shippings that do not begin or end in Venezuela (say from Colombia to Spain). At the end they say that import and export will carry out as normal. The headline is misleading from what I can see.
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You are right, thanks
Should have read it closer.
Doesn’t change my thoughts on the rest.
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I think airlines have it at fault too. I can’t recall precisely when did they start jacking up prices, I think mid july last year. I paid last year for a trip to miami VEF 21.000 (bought september, travel october), that’s more than 3.000 USD at 6,3. You can travel Lima-Miami for 700 USD or Bog-Miami for 400 USD. When was the last time you could travel ccs-mia for less than 1000$ ? Airlines want to have their cake and eat it too. Government knows it and that is why Ramirez said that airlines cases will be reviewed privately with each airline. Right now government has all the negotiation power. They will pay but it would be less than half of what airlines are asking for.
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Even though I’m an advocate of the “invisible hand” of capitalism, Venezuela is not your regular free-markets country. In this case I totally agree with you.
I think airlines should have played it a little smarter. They are not operating in Switzerland, they are operating in a country that doesn’t abide to modern-world economics. The government can’t care less whether these airlines are global carriers, or are based in the US or in France, Germany or wherever. You operate in Venezuela, you play by the rules imposed by -what is considered- a radical government and that means precisely not allowing your ticket prices to fluctuate according to demand. Or you really think that you are exempt from all the price controls imposed on the rest of the economy?
We all know it’s all the exchange control’s fault and how screwed up the country is. But again, that’s what you have, that’s what you get if you want to do business down there.
Eventually I think airlines will have to negotiate and settle for less.
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And then leave…
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It’s a tough economic world for airlines. Why make a loss when you can cut your losses?
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Reblogged this on Fino Cambur and commented:
Air travel is now getting more and more sketchy. I’m thankful we have tickets purchased through October, but after that? It may be nice to have an excuse to travel domestically for a while.
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