The car recipient has just paid around VEB 550,000 in one single payment (USD 87,321.70) for the van to the assembly plant. In turn, he has received a sum of money amounting to between VEB 1,000,000 and VEB 1,200,000 (USD 158,767 and USD 190,520, respectively) from the new buyer. However, it is worth noting that this same vehicle will appear very soon on some selling website with the following price: VEB 1,400,000 (USD 222,273). The employee has earned around VEB 500,000 (USD 79,383.40) which will not be recorded in his annual tax return, except for his modest income totalling three basic wages.
The aforementioned business is perfectly legal and it is among the many ways in which a vehicle price can tremendously rise in a few minutes in a thriving black market. But such market has only one origin: scarcity. And scarcity stems from some other evils born to the governmental policies of controls, resulting in production drop. Additionally, the government control policies have complicated production to such an extent that the long way, from manufacturing a vehicle to its delivery to the end user, makes virtually impossible the purchase of such an indispensable good in modern society. What happens in the automotive industry depicts the plight undergone by some other Venezuelan industries. Because of excessive government controls, they have made products vanish.
In response, the Venezuelan Government warns of speculators, saboteurs, attacks against the Venezuelan currency and finally an “economic war,” concealing in the ideological confrontation the very actions of the Government, which are precisely the ones that trigger its self-created crises.
Production rates
Even up to 2008, any Venezuelan citizen could enter one of the 323 car licensed dealers based in the country and choose a vehicle according to its price, model or color. We could say that the socialism of the XXI century had not been “deepened,” as promised by government authorities every year.
A review of the numbers recorded since 2005 shows that the vehicle demand in the domestic market was around 300,000 units approximately. The needs in the domestic market were perfectly met by the combination of the production rate for that year (154,961 units) and the import of 73,417 units. (Numbers recorded by the Venezuelan Automotive Chamber, Cavenez).
Likewise, such trend continued rising in the following years by reaching a record number in 2007, when 172,418 units were produced and 319,000 units were imported. What happened then? Well, it was the year when Venezuelans could afford vehicles at a low price and of any brand or color. At that time, Venezuela occupied the fourth place as the most important automotive market in the continent. Today, the country ranks ninth.
By the end of 2008, a “protection policy” was enacted. This one controlled the car import licenses. Both elements: production and import controls halved the supply.
In 2009, the production rate fell to 111,554 units, whereas import decreased to 24, 963 units. The consequence of such decreases is that vehicles became a good not only of use but also an investment to get protected against the losing value of the local currency.
A new law on sales and buy of vehicles passed last January 2013 contemplates some sort of a “rationing booklet.” The law binds car dealers to publish the lists of applicants in their premises. This law is like taking away consumers’ right to privacy, and also the freedom and right to acquire goods, which is established in the Constitution of Venezuela.
The production line drops
For a third world country like Venezuela, acquiring imported raw material requires of dozens of legal procedures, completion of forms, seals and even the essential application for the dollar quota to be allocated by the Commission for the Administration of Currency Exchange (Cadivi). The first thing to take into account here is that 60% of the parts of vehicles assembled in Venezuela are imported; that is the main checkpoint that curbs production. The closure of the swap market which allowed citizens to acquire bonds for buying US dollars without resorting to Cadivi, and the recent elimination of the Transaction System for Foreign Currency Denominated Securities (Sitme), have been key elements in the production fall. Year 2012 ended with a production rate of 104,083 vehicles and an import rate as low as of 25,000 units: a deadly equation for a market that counts on 300,000 clients per year.
But the drama does not end here; producers go through the calamity experienced at Venezuelans harbors due to congestion and bribery, from which no one can ever escape.
Additionally, deteriorated public services make an impact on the country, particularly a fitful power supply which causes significant delays in the production line.
Furthermore, the new labor laws, especially the clauses referred to firing freeze have caused work absenteeism, indiscipline, unjustified stops in the production line by trade unions and all the issues related to the quota traffic which draws workers’ attention and interest to this benefit related to something else than production. President of the Venezuelan Chamber of Food Processing Industry (Cavidea), Pablo Baraybar, informed that labor absenteeism, as a consequence of the firing freeze contemplated in the law, has grown from 3%, before the legal reform, to 46%.
Finally, the repatriation of dividends for assembly plants has been on hold for several years, thus affecting parent houses and creating distrust in the country.
twitter: folivares10
Translated by Adrián Valera Villani
Source Article from http://www.eluniversal.com/economia/130302/car-prices-as-high-as-the-clouds
