Hugo Chavez drives Venezuela to drink

By

Whisky—drinking is an old tradition in Venezuela, so the news that scotch and whiskey sales were up 55% on the year earlier was not that big a surprise. I first heard of Venezuelans' affinity for whiskey in David Atlee Phillips' entertaining CIA memoirs of the 1970s called 'The Night Watch.'

But there's something just a little funny about Venezuela's stellar scotch and whisky sales in this year. Poverty has risen sharply under the Hugo Chavez regime. Investment has tumbled spectacularly. Yet to walk around the streets of Caracas, one doesn't really see beggars, but something a little different — a vast informal sector of people operating outside the law on vast swathes of the major streets, and people buying from them.

Situated economically somewhere between Tijuana's 'Chiclet—sellers,' and New York's Canal Street hawkers, they are known as buhoneros, selling bottled lotion, laundry detergent, construction nails, shell earrings, charcoal, fake Louis Vuitton handbags, cell phone covers, blinking Christmas lights, donuts, patchouli incense, gasoline containers, fireworks, CDs, bogus government IDs, DVDs, gypsy skirts, hot arepas (Venezuelan tacos), baseball hats, toys, key rings, shampoo, popsicles, flipflops, Hello Kitty notebooks, tank tops, leather gun holsters, diapers and hubcaps, sold under flimsy street tents.

They are the poor, living in Venezuela's red—brick hillside shantytowns or worse, and what they do serves the principal economic activity of Venezuela, which is now consumption.  It doesn't pay a lot for them, for they do not have the economies of scale that legal businesses do, but does it does reflect their economic opportunities.

Tons of oil money pouring into the country has created tremendous liquidity and spending money for those who still have jobs, often with the government and even more typically, through one of Chavez's 11 pork—barrel welfare programs that distributes cash to most of the poor instead of provide them with jobs.

Venezuela's spending on whiskey fits in just perfectly with this economic dynamic. Notice that, like the whiskey, most of those items in that long list above are imported, specifically, Made In China.

That's no surprise. Hugo Chavez has driven a huge part of Venezuela's own private manufacturing sector literally out of business, through capital controls, taxes, retroactive regulation, stacked state competition and price controls, forcing at least 7,000 local businesses to shut down (and that's an old figure), putting thousands of people out of work. Meanwhile, nothing except these illegal businesses form because nothing except them can form.

The buhoneros are the recycled employees from these empty factories Chavez has destroyed, just trying to survive on the streets. As Venezuelans, in that confiscatory business climate, they can't make anything, so like their customers, they must buy things. That has created a tremendous opportunity for the Chinese, the Colombians, and other overseas exporters who do make things, (such as the whiskey—making Scots) who are ready to sell. They are all cleaning up.

The irony of this is noted by Venezuelan blogger Francisco Toro who points out that in the midst of all the untold Chavez programs to create 'endogenous,'
or internal, development (by destroying the existing private sector), the country is finding itself more dependent than ever on the outside world for basic as well as luxury goods. Given those conditions, it is not hard to see why Venezuelans are drinking more than ever this year.

A.M. Mora y Leon 01 30 06

Whisky—drinking is an old tradition in Venezuela, so the news that scotch and whiskey sales were up 55% on the year earlier was not that big a surprise. I first heard of Venezuelans' affinity for whiskey in David Atlee Phillips' entertaining CIA memoirs of the 1970s called 'The Night Watch.'

But there's something just a little funny about Venezuela's stellar scotch and whisky sales in this year. Poverty has risen sharply under the Hugo Chavez regime. Investment has tumbled spectacularly. Yet to walk around the streets of Caracas, one doesn't really see beggars, but something a little different — a vast informal sector of people operating outside the law on vast swathes of the major streets, and people buying from them.

Situated economically somewhere between Tijuana's 'Chiclet—sellers,' and New York's Canal Street hawkers, they are known as buhoneros, selling bottled lotion, laundry detergent, construction nails, shell earrings, charcoal, fake Louis Vuitton handbags, cell phone covers, blinking Christmas lights, donuts, patchouli incense, gasoline containers, fireworks, CDs, bogus government IDs, DVDs, gypsy skirts, hot arepas (Venezuelan tacos), baseball hats, toys, key rings, shampoo, popsicles, flipflops, Hello Kitty notebooks, tank tops, leather gun holsters, diapers and hubcaps, sold under flimsy street tents.

They are the poor, living in Venezuela's red—brick hillside shantytowns or worse, and what they do serves the principal economic activity of Venezuela, which is now consumption.  It doesn't pay a lot for them, for they do not have the economies of scale that legal businesses do, but does it does reflect their economic opportunities.

Tons of oil money pouring into the country has created tremendous liquidity and spending money for those who still have jobs, often with the government and even more typically, through one of Chavez's 11 pork—barrel welfare programs that distributes cash to most of the poor instead of provide them with jobs.

Venezuela's spending on whiskey fits in just perfectly with this economic dynamic. Notice that, like the whiskey, most of those items in that long list above are imported, specifically, Made In China.

That's no surprise. Hugo Chavez has driven a huge part of Venezuela's own private manufacturing sector literally out of business, through capital controls, taxes, retroactive regulation, stacked state competition and price controls, forcing at least 7,000 local businesses to shut down (and that's an old figure), putting thousands of people out of work. Meanwhile, nothing except these illegal businesses form because nothing except them can form.

The buhoneros are the recycled employees from these empty factories Chavez has destroyed, just trying to survive on the streets. As Venezuelans, in that confiscatory business climate, they can't make anything, so like their customers, they must buy things. That has created a tremendous opportunity for the Chinese, the Colombians, and other overseas exporters who do make things, (such as the whiskey—making Scots) who are ready to sell. They are all cleaning up.

The irony of this is noted by Venezuelan blogger Francisco Toro who points out that in the midst of all the untold Chavez programs to create 'endogenous,'
or internal, development (by destroying the existing private sector), the country is finding itself more dependent than ever on the outside world for basic as well as luxury goods. Given those conditions, it is not hard to see why Venezuelans are drinking more than ever this year.

A.M. Mora y Leon 01 30 06