Monthly Archives: February 2014

Carnaval is coming

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The past week at school has gone largely unblogged because we’ve been catching up on Venezuela and La Guajira. And now we’re off to Barranquilla for three days to participate in the world’s second largest Caranaval (second to Rio de Janeiro).

Broadly, Caranaval is a celebration of it not being Lent yet. And therefore of overindulgence in things you might not do during lent: drinking, eating, dancing and such. We’ll tell you about it when we return. In the meantime here’s a selection of masks the kids made in art class. Masks are a key Carnaval ingredient.

 

Chinchorros

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This is a Chincorro. It’s a kind of hammock produced by the Wayuu. But it’s no ordinary hammock. It incorporates extra long sides that flop over the hammock edge when not in use and can be used as a blanket when the night gets cooler. They’re rented out at a premium, as much as 50% more than the price of a normal hammock (maybe $3NZD more). But they’re totally worth it.

We were both really taken with Chinchorros. We investigated purchasing one to keep and send home and even briefly considered a fair trade import business. My focus was determining an appropriate name. I settled on The Hammock District.

Sadly, they’re actually kind of expensive. An entry level Chinchorro will set you back about 400,000 Colombian pesos, or about $230NZD. This makes more sense when you see the Wayuu women crafting things. Very. Slowly. Apparently a Chinchorro takes a month’s work.

Wayuu out the back of nowhere

Crossing the border back from Venezuela felt like coming home. The Colombian border guards were professional, there was less rubbish at the roadside, and, at least statistically, our chance of being murdered dropped significantly.

That’s not to say we headed back to our Santa Marta comfort zone. Instead we spent four days traveling through Colombia’s northern most tip – the remote and rugged province of La Guajira. It’s the most remote place either of us have ever traveled. The furthest settlement we reached was about eight hours drive from any kind of paved road.

A good New Zealand analogy would be traveling round East Cape. The landscapes are amazing and the settlements are few and far between. And there’s a concentration of indigenous Colombians which is much higher than the rest of the country.

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The Wayuu

The local indigenous population are called the Wayuu. Their culture has remained more intact than other groups in Colombia mostly because the lands they live in are so desolate that they’ve not been of much interest to colonists. Most of La Guajira is a desert. Crops grow only in the rainy season, and some years the rainy season doesn’t come. This seems like a problem even Crown Irrigation Investments Limited couldn’t solve.

The Wayuu retain a separate language (though those of us trying to learn Spanish have chosen to ignore this fact). They also have some of their own customs, though others are being lost to integration. For example, polygamy is common, with cousins and occasionally siblings married. But dowries are no longer expected. Male Wayuu seem to have gotten the better of this development. They can still have multiple wives, but no longer have to give up goats to get then.

The Wayuu also have more complex customs that we struggled to decipher. For example, if you want to marry a woman, you need to ask her mother’s brother. Or failing that a male relative on her mother’s side. Historically that relative also got the benefit of the dowries.

By and large Wayuu weren’t wild about having their photos taken, so mostly what you’ll see in our posts about La Guajira are the astounding landscapes that they live in.

A touch of the Dutch

Venezuela has the world’s largest proven oil reserves. Given this, you might reasonably expect that Venezuela would be rich and stable. But it’s neither.

In fact, it’s a much observed economic phenomenon that countries and regions with lots of natural resources, especially point-source resources like minerals and fuels (read: oil), tend to have less economic growth and worse development outcomes than countries with fewer natural resources. This paradox is known as the resource curse, and there are lot of explanations for it, many of which seem to apply to Venezuela:

  • Dutch disease is the idea that when a country has lots of a resource it focuses its effort on that resource to the exclusion of the development of other industries, especially manufacturing and agriculture. This is definitely true of Venezuela. It imports two thirds of its food and has no real agriculture to speak of.
  • Industries like oil produce commodities that are sold on a global market. The price for them can change drastically. This creates boom and bust cycles for countries which rely on these prices, destabilising their economy.
  • This one is especially important: when there’s only really one source of wealth, everyone wants to get in on the action. This encourages rent seeking and corruption. Venezuela ranks as the most corrupt country in South America, and its immediate peers in corruption (Cambodia and Eritrea) are much poorer.

Development economists who study this stuff wouldn’t be surprised by the dysfunction we saw in Venezuela, or the increasing instability there. They’d also tell you that the best way to address the resource curse is through strong government (eg. Norway). But, because they’re economists, they wouldn’t be able to provide a clear explanation of how you’d get this sort of government. In the meantime, Venezuela’s sad situation makes senses, even if it’s nonsensical.

Supermarket not super in Venezuela

We always like to visit supermarkets  and markets wherever we travel. The give great insight into how people live. The Venezuelan supermarkets were among the saddest we have ever seen.

For a start, they’re lacking in stuff. There are plenty of vacant shelves, and others that have a first row of, say, canned goods, but nothing in behind. Nationally, the cupboards are bare. Because inflation is so high in Venezuela at the moment, supermarket owners should be hanging on to as little cash as they can (because its value decreases over time) and converting money into inventory instead. They’re not, because they can’t.

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When essentials are available, supermarkets limit how much you can buy. Here you can see rice and washing powder is limited to one per person (please, don’t insist!). We’re not sure how formal this rationing is. But we know that TV stations play government advertisements that say it is unpatriotic to hoard.

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Finally, though the supply of staples is lacking, the selection of goods, overall, doesn’t imply that the country is poor. Just dysfunctional. There’s an odd juxtaposition of not enough flour, but lots of different flavourings for, we presume, baking or drinks. Even when there’s an abundance though, the products are all one brand, probably a state owned producer.

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Fast food development: Venezuela

This post continues our project to track the fast food development of the nations we travel in, as a proxy for their overall development. You can find more detail about our original framework here.

We only had four days in Venezuela so our assessment may not have the scientific rigor you can expect from us in other countries. But, and this is a big call, we’re prepared to categories Venezuela as stage 3.

Venezuela: Western fast food is available in most towns or cities and is an aspirational brand for the middle classes.

That’s because:

  • We saw a smattering of McDonald’s in Maracaibo (Venezuela’s second largest city) and also some representation from Burger King. This was backed up by McDonald’s in Coro, a small town we visited, backed up by a healthy amount of advertising.
  • The prices, as advertised, show McDonald’s as just slightly more expensive than a meal in a Venezuelan restaurant, of which, admittedly, there aren’t many. The guy who took us sandboarding advised that McDonalds was accessible for ‘normal’ Venezuelans, although of course it’s never clear what normal is. If the definition is up for debate, though, it can’t be stage 4.

Some observations:

  • There’s a rich irony that in a country which is so staunchly anti-American, there’s a healthy appetite for America’s cultural exports.
  • Amidst all its turmoil, it’s remarkable that Venezuela is a stage ahead of Colombia (just a stage 2). We can’t explain why this is, but guess that McDs and others might have settled in in safer, and more prosperous times. We know these existed because an old guide book we read in our Coro hostel said, as of 1999, Venezuela was the safest and most accessible country in Latin America.
  • And finally a hypothesis: Advertising for fast food that prominently displays pricing indicates a country is at stage 3, or at least heading that way. McDonalds in Venezuela advertises prices. McDonalds in Colombia does not. Our hypothesis is basically that McDonalds in Venezuela is inviting price conscious consumers, but Colombia is just selling a brand.

As always we’re grateful for your thoughts, and contributions to our dataset.

Policy wonk digest: Venezuela’s broken edition

This is part of a semi-regular series where we point out government policies in the countries we travel to of interest to policy wonks like ourselves. In this case it’s sort of a what not to do. Here are some snippets of policies that are causing Venezuela to break down right now.

Nationalisation

  • The government nationalised a wide range of businesses. These businesses are inefficient, and corruption is rife. The national oil industry has three times more staff than previously, but produces less oil.
  • The nationalisation of key industries also means the absence of competition in production of key goods. When the government run business is inefficient at producing, say, toilet paper, no toilet paper gets to the shelves of Venezuelan supermarkets.

Currency exchange

  • We’ve already talked about Venezuela’s fixed exchange rate with the USD. To sustain this policy the government needs to keep foreign reserves – basically a big pile of USD that it can use to counterbalance its currency fixing. But it’s running out. And so…
  • Airlines have been told that any money they receive from selling tickets must stay in Venezuela. The government will not allow them to exchange VEF for USD. This is a massive problem because they need to pay for things at the destination of their flight. One by one, airlines are pulling out of Venezuela. This is devastating for Venezuelan travelers and airline geeks alike.
  • You can still technically apply for a Venezuelan passport, but you won’t be issued one any time soon. Waits of a year or more are common. Neither will the government allow you to buy USD. It is a massive indictment of any government to stop their citizens from choosing to leave. If you won’t let your people run away you can’t claim to be governing with consent.

Guns

  • During his fifteen-year reign, Chavez cultivated a bunker mentality among Venezuelans. He scaremongered about invasion from the US, who would come to Venezuela and forcibly take its oil.
  • To back this up, the government facilitated the distribution of arms to citizen militia who would protect against fascist invasion. The groups armed were also fiercely pro-government, and have been allowed to operate with broad impunity.
  • The violent crime rate skyrocketed. It’s not a long bow to draw to suggest causation here: there are more guns about and folk start to consider what to do with them.
  • There have been some attempts to disarm groups, but the government has struggled. They can’t get the toothpaste back in the tube.
  • Until his death Chavez  continued to attribute the country’s lawlessness to the stubborn adherence of some Venezuelans to a capitalist value system, despite his efforts to install “21st-century socialism” throughout the land.
  • The concentration of guns in pro-government hands is a key reason for our prediction that the current protests will turn to civil war.

Business as bad guys

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The government claims that the current economic problems are the fault of local businesses who have greedily been charging too much for everyday goods.  The government is going to investigate, and is planning to fix more prices. The slogan for this investigation is a good one: Guarantee of Power for the People. Of course, government policy could not be creating economic problems in Venezuela.

Three reasons Fiona would go to church in Venezuela

  1. With all the danger and turmoil about there’s increased value from a higher power that is going to do a lot of saving and protecting. The service we half listened to as we ate our lunch had an unusual emphasis on God as a protector.
  2. The singing is good.
  3. There’s nothing else to do on Sundays. People stay home to be with their families. So the streets are empty making them dangerous, and pedestrians vulnerable to attack. So no one goes outside. Seems like a classic collective action problem. But a regulated solution might be difficult.

Black market currency exchange

Black market foreign exchange:  one more thing off the bucket list.

Venezuela’s fixed currency fixes nothing

Venezuela’s currency isn’t floating, like most. Instead the government ‘fixes’ the exchange rate with the US dollar, which means they can decide how much their currency is worth. It’s not surprising that they overvalue their own currency  – that’s sort of the point – but the extent to which they do so is absurd.

At official exchange rates you get 6.3 Venezuelan Bolivars (VEF) for a US Dollar (USD). On the black market we got about ten times that: between 65 and 70 VEFs for a USD. We’ve since heard of people getting as much as 85.

Finding a back alley to change in

We avoided the risk of being ripped off trading at the border because we had some VEFs from a friend, but then struggled to find someone to change with later on. The people we talked to – hotel staff, taxi drivers etc. – acknowledged that you could change on the black market, but didn’t know how to do so. And they advised us to be very careful. It is, after all, illegal.

With a dwindling supply of VEFs, we arrived at a hostel that was more used to dealing with tourists. They hooked us up with a trader. He came and visited. We discussed price then he took our USD away and came back – two hours later – with a large pile of Venezuelan cash.

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The world’s cheapest travel…

Cashed up we set out to investigate our purchasing power. Turns out Venezuela is the single cheapest place we have ever traveled. Cheaper than India. And better quality. For example we paid:

  • About ten New Zealand dollars for a hotel room with air conditioning, TV, hot showers and breakfast included (novelties all).
  • Less than one New Zealand dollar for a plate of spaghetti bolognese.
  • Three New Zealand dollars for a bakery breakfast of two filled rolls, pizza, two orange juices and coffee. This surpassed the value of even the great Concorde Patisserie. Incidentally, the breakfast also featured vastly better bread, cheese and ham than Colombia.

As a rule, it was about eight to ten times cheaper to shop and travel in Venezuela than in New Zealand and three times cheaper than Colombia.

…at the expense of Venezuelans

What explains this massive difference? The fixed exchange rate only gets us so far. If we assume that Colombia has similar labour costs and other economic features to Venezuela, you might expect black market cash would make Venezuela about as cheap to travel in as Colombia. But it’s much cheaper. That’s because:

  • There’s a really short supply of USD. The government doesn’t really have any, there’s limited trade and travelers in the country and USD is hard to get in.
  • Of course Venezuelans still want to travel though the state isn’t wild about them doing so. Citizens have to get USD from the government, and they’re often refused.
  • USD are useful for other reasons too. Many Venezuelans expect that their economy will collapse in the foreseeable future, and take their currency with it. Holding USD is like an insurance policy against that.
  • Inflation is ridiculously high – as much as 50% per year. So saving is basically impossible in Venezuelan currency, and USD is a safer bet.

To put in another way the black market exchange rate doesn’t represent what a floating exchange rate would be. That’s really favorable to travelers but it’s terrible for Venezuelans. It limits their ability to save or invest and suffocates their opportunities to travel. Plus it means the cost of living if you’re paid in VEFs is incredibly high. That’s why Caracas is the most expensive city in the world for ex-pat living. There’s no doubt the absurdity of the currency situation is contributing to the current riots. We expect it will contribute to the downfall of the government too.

So, what’s going on in Venezuela?

CNN can’t tell you about it because their journalists have been kicked out of Venezuela. So, we’re going to do our best to explain what is currently happening in Venezuela. This is based on what we saw, the people we talked to, and the Venezuelan media we read. But the situation is quickly evolving, and it seems to be getting worse.

The briefest of backgrounds

After Venezuela’s economy crashed in the 1980s the International Monetary Fund provided support  that came with strings attached.  Venezuela had to reduce government spending, and that hurt some of its poorest. That set the scene for the rise of Hugo Chavez. He was elected in 1999 and ruled for the next fifteen years. His policies were hard left, and many were popular.  But Venezuela’s economy stuttered, and the crime rate grew. Chavez’s personal charisma held the country together until his death in March last year. His hand picked successor has been ruling since but doesn’t have the same grip on the country.

The current riots

The protests began with student groups in smaller centres. To begin with, they weren’t really ideological. Students were unhappy with how violent  and dangerous Venezuela had become. Their protests called for peace, not regime change. They had, after all, come of age under Chavez and his anti-capitalist rhetoric and weren’t fazed by spending five hours in line for flour.

But groups opposing the government joined in the protests. They grew in size and fervour. And then came clashes between government and protestors. At last official count there have been eight deaths, and many more injured. It’s likely the real count is much higher. It hasn’t been officially reported, but we understand that many of the students who have died were shot by rifles. That means their killers were from pro-government paramilitaries, not the police.

This is the closest we got to the protests themselves, and even that wasn't by design. Our taxi out of Maracaibo took an unusual route to try and avoid the disruption, but we still came across this blockade.
This is the closest we got to the protests themselves, and even that wasn’t by design. Our taxi out of Maracaibo took an unusual route to try and avoid the disruption, but we still came across this abandoned and smouldering blockade. There were also some folk on a nearby rooftop who looked like they were keen to throw some rocks.

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The protests have snowballed, and continue to do so. There’ll be a protest where people die and then another to protest the injustice of their death. There’ll be an anti-government protest and then a pro-government demonstration. By the time we left Venezuela the protests were happening across the country, and pretty much every day. They were disruptive. In Maracaibo, metro stations were closed, and many weren’t going to work for fear their route home would be blocked. (Our hostel also cancelled its tours to a nearby national park because students were blocking the highway. We went sandboarding instead.) Continue reading So, what’s going on in Venezuela?