Reports from Cuba’s Venezuela: ‘Unificación cambiaria’ for dummies

Via Venezuela News & Views:

“Unificación cambiaria” for dummies

I have been meaning for a few days to write up a simple way for people to understand why the country seems to have been frozen the last few weeks, even though Giordani is out, Lopez still in, and Capriles remains deaf mute. You may think that it seems a lot of stuff is going on but this is not the case, no matter what glaring headline stares at you. The reason is quite simple; the country is waiting at three real questions that need answers. The first one is will the regime increase gas prices. The second one is will the regime devaluate at around 15 or at around 25 for the USD. And the third question, maybe the more important one, but that NO ONE dares to touch politically, will the regime amend the labor law of 2012, a regulation that is choking all, ALL business in the country, be they state or private owned.

As long as these questions are not answered neither chavismo can plan for its post Maduro nor the opposition find again some form of political coherence. We are all silenced by the catastrophe about to fall on us.

Fortunately Miguel tonight has criticized an article from the New York Times which I would criticize even more than he does if I were to write about. Then again I am also on record that since Simon Romero left, the NYT coverage of Venezuela this year has been overall deficient, the more so when you compare it to pieces in the WSJ like the ones of Kejal Vyas or pretty much anything from the Washington Post (except in the “World Views” section, unaccountably so). But I digress.

The first question is very simple: increasing the price of gas to semi realistic prices is the best, and maybe only way for the regime to plug its worst glaring budgetary holes. Unfortunately the political price to be paid for 15 years of reckless populism from Chavez who himself said early in his term that as long as if he was president the price of gas would not go up may be too much for a fragile regime to accept. And yet, something has to be done, with all sources of energy, gas for car, gas for cooking and electricity.

The third question is crucial because if the regime does not allow people to fire lousy workers and saboteurs, there is no way that production of food will go up, that unemployment will decrease. To make a long story short, besides the myriad of regulations that are strangling business the worse one is the inability to fire employees. The law certainly previews that if you fire without justification someone you must pay double the severance legal package for workers. The problem is that you also need the permission of the labor ministry and that one is only granted, on occasion, to state business. For private sector employees, only if you catch them red handed in some form of crime you can fire them (and still need to wait for some form of trial anyway).

I cannot describe you about the extortion industry that has surged as soon as Chavez published the new law for electoral purposes in 2012. In some cases the situation has gone so bad that companies prefer to pay repeated fines, pay the worker full salary, but bar that worker from entering the work place. Simply put, the lousy example, the low morale that such crooks create among other employees, the sabotage risks are in the end more expensive than paying the extortion fees that legally the regime can now impose. Needless to say that permanent hiring has disappeared, that the few folks that are hired are done so under contract and that no matter how good they are, they are let go when the time is up.

I can assure you that this labor law has become the major problem of Venezuelan business, far more important for us than dissertations of airline fees, or even access to raw materials. Because if we get the dollars, if we get the raw materials, labor extortion will go further up. Extortion is now a bona fide labor industry.They simply know how much a business can make and they want it all in fines, social benefits and what not, regardless of the needs the business has for investment, modernization, technology and what not. In fact, talks of state named soviets has slowed down only because the regime knows better than put them inside state enterprises at a time where there are so many rivalries inside chavismo. Those workers council could even in theory decide what is produced and to what extent and at what price…

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