Thursday, 14 February 2013

Petrol for free for Venezuela's neighbours and for the better-off

Petrol smuggling has been a business for thousands of people in and around Venezuela's border for the last decade. The price of a litre petrol was between 2 and 3 cents of a dollar.

Now, with devaluation of the Bólivar, the incentive for petrol smuggling from Venezuela into Colombia, Brazil, Guyana, Trinidad-Tobago and other Caribbean islands has increased by about 32%. The chart below tries to convey the magnitude of the imbalance: it is the price of a litre petrol in Venezuela and the neighbouring countries.
Price of petrol for Venezuela and neighbouring countries based on World Bank Data

The head of PDVSA, Rafael Ramírez, has said petrol prices will be kept. He even said: "petrol will still be not cheap but for free". He simply said they would just have to avoid "waste".

Most Venezuelans simply do not understand the lunacy of the whole situation. They haven't thought through the simple fact that converting crude oil into petrol takes a lot of time and resources. They haven't thought for a moment that one has to spend money even for bringing water from rivers or reservoirs to your tap at home. No opposition leader is ready to talk about the issue either. Everybody fears there would be a new Caracazo as in 1989.

Other people have already written extensively about how regressive this attitude is. We are talking about hundreds of millions of dollars the government prefers to give to the better off and to the smugglers than to schools, hospitals, research centres and roads.

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