Venezuela: Where Scarcity Becomes Business | Caracas Chronicles

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The news was still fresh when folks with quite the entrepreneurial mindset in Táchira state began “importing” pre-paid DirecTV kits sold across the border in Colombia. It was the answer to the decision by AT&T to cease the operations of its pay-TV provider, DirecTV, in Venezuela on May 19th. The measure affected approximately one-third of the Venezuelan population.

The first week after DirecTV left Venezuela, people from the Andes states of Táchira and Mérida (bordering with Colombia) checked their WhatsApp statuses and noticed that, beside the regular offers of foreign currency and food, black-market traders were now offering Colombian DirecTV prepaid kits. Apart from the equipment, they also offered the possibility to recharge credit with payments in bolivars (through transfers or SMS), or Zelle transfers in dollars.

In just a few days, this new satellite TV option reached Caracas. Dealers have set up shop outside of the Universidad Central de Venezuela and around downtown, selling the prepaid Colombian kits—at a higher price than those sold closer to the border, of course. In Caracas, a kit goes for $90, as opposed to the price in Táchira, which is 150,000 Colombian pesos, or $45. Even with the transport costs, these sellers are making a big profit, since this very kit in Colombia goes for 49,900 pesos, or $15.

The kit is also sold in Maracaibo and Valencia, and the recharge credit is $20. Not everyone can afford this, of course, because the minimum wage in Venezuela is 800,000 bolivars ($4.1). You’d have to work for five months straight without spending a dime in order to afford a month of cable.

Everything Is a Business Opportunity

In February 2003, in an attempt to avoid the flight of capital as a result of the oil strike, Hugo Chávez’s administration announced the implementation of a system of exchange controls and formed the Comisión Nacional de Administración de Divisas (CADIVI), the institution that would be in charge of handling foreign currency and allowing citizens’ access to it, under certain conditions and limitations.

You’d have to work for five months straight without spending a dime in order to afford a month of cable.

Between 2008 and mid-2013, Venezuelans got intimately acquainted with the CADIVI quota, in which the government would give preferential dollars in cash and credit cards, and the price paid for them was a fraction of the black-market value. Some people traveled, others went shopping online, and others sold their quota in Colombia, Panama, Ecuador, and Peru, through payments made to their bank accounts in bolivars. The dollar wasn’t a hot commodity yet; CADIVI turned into the most profitable business in pre-hyperinflation Venezuela.

When CADIVI’s subsidized dollar flickered off and shortages exploded, the “Bachaquero” industry began. On January 24th of 2014, the Organic Law of Fair Prices (Ley Orgánica de Precios Justos) came into effect, under the premise of controlling “costs, profit, and determining a fair price through the analysis of cost framework and establishing a maximum profit percentage, as well as the timely audit of the economic commercial activity.”

Maduro ordered his government agents to supervise supermarket chains, drug stores, and bodegas to make sure they complied with the ridiculously low established prices. The law resulted in a deep shortage of basic goods, since most companies didn’t see a reason to continue production if it wasn’t profitable anymore.

However, there was a group that did see a way to profit from the new regulation. Men and women bought a bag of rice, to name an item, for 450 bolivars, to later sell it at 1,500; milk was bought at 800, sold for 3,000; diapers bought at 100, and later sold for 1,500. That’s why on a daily basis, or as often as their ID number would allow, they’d go to stores at the break of dawn, hoping to buy what little came in. According to polls from Datanálisis, 70% of people that stood in line outside Venezuelan supermarkets in 2016, would do this for a living.

Terms like “bachaquero” or “trusted bachaquero” (words that derive from “bachaco”, the local term for the carpenter ant) became common, in spite of the government threatening these resellers with three to five years of jail time for smuggling.

70% of people that stood in line outside Venezuelan supermarkets in 2016, would do this for a living.

After the exchange crimes regulation was modified and softened in August 2018, and as a consequence of hyperinflation, many Venezuelans began to earn dollars. The flow of the black-market dollar was reversed, and a new type of informal entrepreneur appeared: dollar buyers, who live off buying dollars in cash or by transfer, keeping a percentage. With the transactional dollarization in place, and a truce between the Maduro administration and farmers and businessmen, the prices for food and other basic needs started to come closer to their real value—resellers became just another number in the contact list.

Shortages create needs and incentives to profit from them. For example, everything that’s needed in public and private hospitals (from albumina to needles, from solutions to cancer medicine) is traded in the black market. And now, another illegal business taking flight is reselling gas, due to the shortage that became critical during the COVID-19 quarantine.

Before May 30th, when Maduro announced the two-tier system to sell fuel (5,000 bolivars per liter for subsidized gasoline, and $0.50 per liter without subsidies), some people made a living by reselling fuel charging from $2 to $3 per liter—the official price per liter of 0.00006 bolivars (super premium) and 0.00001 per liter (premium). Before the massive shortage, there was no physical nor digital way to pay for gasoline. Some people would pay gas station workers with crackers, and there are stories of folks taking mangos from trees to fill their gas tanks. When the gas ran out, resellers would make a $60 profit from just 20 liters (5.2 gallons).

These stories, and others, sum up how whenever a candle goes out in Venezuela, someone can come and turn it back on, charging three times the price for that small service. In the face of structural collapse, everything is a business opportunity.

This post was originally posted on Caracas Chronicles – View Original Article

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About the Author

admin
Have lived and invested in Venezuela full time for the last eight years and visited for each of twelve years prior to that. Studied and closely followed developments in Venezuela since 1996.