Category Archives: Venezuela

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?

Our learned friend

We made a really useful friend on our bus ride across the Venezuelan border. He happened to be sitting in front of us and was interested in having a chat. It’s incredibly useful that Fiona can have meaningful conversations with people. Many travelers are more like me, in that our conversations resemble some sort of terrible verbal game of Pictionary.

He shepherded us across the border, was open about black market currency exchange, and was generally interested in what we had to say about New Zealand. It turned out he was both a captain in the military, and a lawyer. Despite this, he encouraged us to give, like him, to the pot of money used to bribe border officials.

Our arrival in Maracaibo was not as planned. We’d had to take a different bus at the last minute and it dropped us somewhere unexpected. It was dark and late and we were on the side of a highway. Taxi drivers are plentiful in Venezuela, but frequently sideline as kidnappers. Walking is not an option.

But our learned friend came to our rescue. He couldn’t find a taxi so took us with him to a kind of urban country club for lawyers which was a few blocks away, while waiting for his wife to come and pick us up. There were pools and a bar. It seems that in Venezuela, as in Colombia, the loudness of the music is considered proportional to the bar’s quality. This bar was very loud.

Not only did our learned friend get us out of a sticky situation, he gave us an interesting insight into how the richer Venezuelans are getting on. Their socialising is in private clubs with private security. And it turns out they can easily sustain opposition to the government, while being in its ranks. Before he and his wife dropped us at our hotel, they offered many complaints with the government. And she recounted that, attending an eight year old’s birthday party that day, the song for the birthday boy had spontaneously morphed into a rousing anti-government chant.

They waited for us to signal that our hotel reservation was fine, and then drove off into the Venezuelan night, leaving us with a list of their phone numbers should we get into any trouble.

Venezuela: The final frontier

Originally we’d planned to break up our volunteering with a two week trip to Venezuela. Its border is just a few hours from Santa Marta, the chance for new passport stamps is hard to ignore, plus, we were looking forward to observing the legacy of Hugo Chavez. Chavez’s image was probably the main one we associated with Venezuela. We wanted to see the quirks of an economy he had run (arguably into the ground).

Deciding to go to Venezuela

What we didn’t understand from afar is that Venezuela isn’t just a kind of quaint socialist experiment that’s managed to keep itself tourist friendly (like, say, Cuba). In fact it’s really dangerous. It ranks number four on the most murderous countries in the world, and on average last year there were four violent protests against the government each day. To add to this, a renewed and widespread protest movement against the government coincided with our planned trip. We’ll write about this specifically soon.

We were lucky to get a much clearer picture after we arrived in Colombia. We talked with other travelers, and we crowdsourced advice from friends-of-friend Venezuelans on facebook which was very useful. Some said not to go. Others said there was nothing to worry about. Everyone told us to be very careful: don’t speak English on the streets, don’t show your camera, and never your dollars…

Our decision was pretty finely balanced, but in the end we decided to go. We count ourselves as reasonably savvy travelers. We scaled down our trip from a planned two week tour to a four day surgical strike to a safe area: enough to get a taste, but only a taste, of how crazy things were over the border.

Crossing the border

We were still feeling nervous as we boarded our direct bus from Santa Marta to Maracaibo, Venezuela’s second biggest city. Our luggage was thoroughly searched by Colombian security before we boarded. Contraband trafficking across the border is a major problem, and is heavily policed. Continue reading Venezuela: The final frontier