Sunday, June 08, 2008

No wonder no one buys anything besides oil from Venezuela 

Ever wonder why you buy shirts from Pakistan, flowers from Colombia, cars that are made in Mexico, semi-conductors from Vietnam but nothing from Venezuela save oil?

Probably because if you have to ask, you can't afford it - literally.

Because Venezuela makes so much money from oil, and because it chooses to use a lot of that money to prop up an overvalued currency there really isn't a single other product from that country that could even come close to competing on world markets.

This isn't unique to Venezuela - it is actually a well known phenomena that has happened to many countries and carries the name "The Dutch Disease". Essentially, it is where a huge amount of revenues from one procuct (generally some natural resource such as oil) come into a country rapidly, increase the value of its currency, and make other potential products from that country non-competative price wise.

However, it is one thing to understand this intellectually and it is something else to go to a country like Venezuela and have it smack you in the face.

I first got hit by it in a Subway restaurant. But who cares? Subway sandwiches aren't traded across international borders anyways.

Then I had occasion to purchase something that does get traded internationally - coat hangers (don't ask).

They were easy enough to find and seeing as some want pictures here is what Venezuelan coat hangers look like:

Not thinking about the Dutch Disease I innocently thought I'd buy these for a couple dollars - just like I would if I were in the U.S..

However upon reviewing the receipt from the grocery store where I bought them I discovered that they cost me over $10 dollars!!!!

(btw, I normally don't review store receipts. But given how every time I bought something in Venezuela I felt like I had been mugged I began pouring over them).

Now here is the real kicker - the poor saps who make these things apparently had pretensions of exporting them at some point:

I highly doubt they made the label bi-lingual just in case some gringo in Venezuela stumbled upon them. Clearly they wanted to be able to sell them outside Venezuela.

Unfortunately, given that they are selling them for about 5 times what these things sell for in any other country there is a fat chance of that ever happening (of course, it would also help if they found people that actually spoke English to work on their labels). And given how absurd this price is I shudder to think what they might charge for a toaster.

Now for this price to be out of whack by 500% rather than just 200% shows there is something going on besides just the currency being overvalued. But that Venezuela can't even make a petroleum based product that is even half way price competitive just goes to show why no one buys squat from Venezuela besides oil, why they can't diversify their economy, and why Venezuela is likely to remain a poor country.


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