Venezuela Driving Used Cars into the Black Market

playaparramitta/foter.comAfter Hugo Chavez died earlier this year, his chavista vice president, Nicolas Maduro, defeated Henrique Capriles, who also ran a close race against Chavez in the latter’s last election, last year. Maduro’s victory was razor-thin and tainted, but it’s not stopping Maduro from trying the same statist chavista policies Chavez implemented. The latest target of chavismo is the used car market. Francisco Toro at the Caracas Chronicles explains:

One thing the government is right about: Venezuela’s car market is bizarrely distorted. With new car prices carefully controlled, import dollars strictly limited, and demand for wheels way outstripping supply, Venezuela must be one of the only places in the world where cars raise in value the second they move off the lot. With people forced to turned to fix assets to protect the value of their savings, waiting lists for new cars have grown notoriously long. These days, new cars are just another arbitrage opportunity; a steel-rubber-and-glass version of a CADIVI dollar.

The government’s plan to deal with it – mandating notary publics to ensure that used cars sell for no more than 90% of their price when new – is the public policy equivalent of swatting a fly off your nose with a sledgehammer.

The outcomes are entirely predictable: the (legal) used car market is going to seize up completely. And you know how the saying goes: if you outlaw used car trading, only outlaws will trade cars.

What grabs me about this is chavismo’s iron-clad commitment to policies that have failed, clearly failed, visibly failed, publicly failed, failed beyond any possibility of arguing that they haven’t failed. Because chavismo has already tried this form of regulation once, in the home rental market, with an outcome that’s out in the open for all to see. In Venezuela, today, there is no legal rental market for houses and apartments. It has simply ceased to exist, because legislation has tipped incentives so wildly against the interests of one of the parties to the transaction as to shove them out of the market altogether.

America’s used car market’s had to deal with the negative consequences of government intervention, too. President Obama’s Cash for Clunkers program has helped fuel a shortage in used cars by removing low-end inventory from the market. In Cuba, meanwhile, an old communist country but a new Venezuelan ally, the used car market is mostly distorted because of the long-standing US embargo by a long standing communist policy that only allows cars built before 1959 to be sold freely. A recent relaxation of the policy means importing new cars now requires a 100 percent import tax and special permission, though the US embargo is also cited as a driver of high prices.

More Reason on black markets.

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  • Pro Libertate||

    Maybe Venezuela will take my tax reform/repo man proposal seriously.

  • Fist of Etiquette||

    At least it's helping them off their dependence on foreign oil. Chavulous!

  • Paul.||

    The government’s plan to deal with it – mandating notary publics to ensure that used cars sell for no more than 90% of their price when new – is the public policy equivalent of swatting a fly off your nose with a sledgehammer.

    This is progressive policy thinking in a nutshell. Because if you say the price shall be so, it shall be so.

  • ||

    That, combined with a total failure to understand human nature, in that people will find ways around mandates like this, always.

  • John||

    Progs are even dumber than the old Marxists. At least the old Marxists understood that you have to change human nature and create a new sort of man to make this shit work. Progs think you can just wave a wand and make it happen.

  • Hyperion||

    Isn't that what Obamas all new Sunstein Nudge Army is for? To change us all into nice and civil folks who respect authoritah?

    I mean, when everyone is wallowing in poverty(except for our noble leaders of course), but they believe in the magic of state to provide rainbows and unicorns, at any moment now, what is the problem? Everyone is happy and fairness has been achieved, right?

  • Hyperion||

    Oh, I left out the part where the ones who refuse to believe in free rainbows and unicorns, are just removed from society and placed in a nice re-education nudge camp.

  • John||

    Yes. Sunstein is a really nasty fuck. His idea is that top men can create incentives that will cause us to voluntarily turn into the kind of people the top men expect us to be. It is called Libertarian paternalism. And if I am not mistaken Reason has actually said a few nice things about Sunstein. One of the more shameful things they have ever done.

  • R C Dean||

    Sunstein exhibits the symptoms of being a Total Statist:

    Everything for the State, nothing without the State, nothing against the State.

    When you read his "nudge" stuff, it becomes clear that he cannot imagine a human activity or encounter that is not mediated by the State.

  • John||

    Absolutely. And it assumes that the top men know which way to nudge us. It completely denies the dignity and autonomy of the individual. The idea that it is a person's right to choose to say trade years of old age in return for the pleasure of eating or drinking now or decide that the pleasure of a dangerous activity is worth risk is totally an anathema to someone like Sunstein. To Sunstein there are certain choices you shouldn't make and he and other top men know what those choices are and every right to penalize you for making them. He is really disgusting.

  • AlexInCT||

    "It completely denies the dignity and autonomy of the individual."

    Progressives think society should be like an insect colony. The elite rule, the others toil and die for the collective. Of course, the probllem is that all collectivists think they will end up as the elite, while the other people they dislike will be the drones. Life then smacks them in the face. Hard.

  • Paul.||

    When you read his "nudge" stuff, it becomes clear that he cannot imagine a human activity or encounter that is not mediated by the State.

    So... Tony who couldn't get it around his precious head that sans government, I could speak freely.

  • robc||

    Didnt he have the "slavery is freedom" quote from the other day, or am I confusing my authoritarian morons?

  • Calidissident||

    "And if I am not mistaken Reason has actually said a few nice things about Sunstein"

    Do you have a link to this? I could only find two articles about him (excluding a 24/7 news report about him going to Harvard), one of which isn't really about him, but a study that he and another guy did that said that people overreact to miniscule risks (which is true, and it would be an ad hominem to reject or criticize the study just because Sunstein was one of the authors). The other was about a bizarre argument he made that the government should infiltrate conspiracy theory groups. It had one positive line about him, "His paper does have some sensible things to say on the subject of political paranoia," but overall is very critical of him and his argument. Another article, about libertarian paternalism, mentions Sunstein and his book, but is very critical of the idea. Is there some other article I haven't found where Reason praised him?

  • John||

    You are right. I am not sure what I am remembering. But I ran a few searches and God even Will Willkerson is bright enough to hate on Sunstein. I must be thinking of the other, bearded, evil Reason.

  • T||

    Wilkerson is one of those guys who is so smart he went full circle and came back around to functionally retarded.

  • DJF||

    """"the used car market is mostly distored because of the long-standing US embargo.""'

    I would say that the Cuban market is mostly distorted by the fact that its a poor communist dictatorship. There are plenty of places to buy new and used cars in the world, the US embargo does not stop that, its Cuba’s poverty and communist economic policies that stop it.

  • John||

    Europe trades with Cuba don't they? China certainly does. I am pretty sure South Korea does too, as well as India. All of those places have pretty large automobile industries. Cubans can't buy new cars because they are horribly poor thanks to communism. Yankee embargoes have nothing to do with it.

  • ||

    No, but with that Embargo in place, the Castro apologists have something to hang their excuses on.

  • Paul.||

    One argument is that they are "encircled by capitalists".

    Which is an awesome opener because my favorite parlor game is to remind the progressive, carefully, in words easy to understand, that socialism/communism were supposed to succeed in spite of capitalism. Because of it, in fact. The few who actually remember or have read their Marx are then forced to deal with this argument head on.

  • Brett L||

    The few who actually remember or have read their Marx

    So, nobody who is actually a socialist.

  • PapayaSF||

    Yes, I've always thought that argument by Castroites amounted to "Cuba is poor because the capitalists won't exploit us via free trade!"

  • Michael Price||

    Ah excuses and deniability... the most valuable things in the world, "more valuable than gold or honour".

  • Hyperion||

    In Brazil a new car that costs 20k here, is like 50-60k, I'm talking dollars. It's chiefly because of huge import tariffs. They have car plants there, but they can't even start to keep up with demand.

  • ||

    Well there's a big difference between importing something from 100 miles away versus thousands of miles away.

  • kinnath||

    Yes, my japanese cars have always been cheaper that US cars.

  • sarcasmic||

    My Japanese car was made in the USA.

  • kinnath||

    Now yes. But not so long ago japanese cars were really japanese

  • John||

    And many of them still are. And South Korean cars still are South Korean. And not every BMW or Merc is made here.

  • sarcasmic||

    In both cases no UAW.

  • John||

    It kind of bums me out they make BMWs in South Carolina. I expect my BMW or Merc to be made in a super clean futuristic factory by German guys in lab coats not red necks talking Neckcar all day while they turn a wrench.

  • Hyperion||

    Even worse could happen. It could be coon season, and none of the workers show up. Then you have to wait longer for your new car.

  • John||

    Coon season is year around. Deer season. The first day of deer season brings the entire redneck economy to a screeching halt. Only real welfare cases can't get off work for the first day of deer season.

  • Hyperion||

    I expect my BMW or Merc to be made

    Obviously, John is not paying his fair share and wants women and children to suffer.

  • John||

    If they didn't suffer, how could I get them to wax my plane for such cheap money?

  • R C Dean||

    Mine was made, I believe, in Japan. At least when I bought it, FJ Cruisers were about the only Toyota that was driven off the ship.

  • kinnath||

    The 350Z/370Z are still manufactured in Japan.

  • Zeb||

    New cars, maybe. But that's sort of an apples to oranges comparison. You can't buy the same car imported from Japan or made in USA.
    I think you will find that it is cheaper to buy a used car that was originally sold in Canada than a comparable car from Japan.

  • Adam330||

    You're saying that the Europeans, Chinese, Japanese and South Koreans have yet to figure out how to put cars on ships to deliver them to Cuba?

  • AlexInCT||

    According to some commerical I saw the Fiat cars don't even need ship delivery! They just ride accross the Altantic... They all seem to want to go toNY though, which is maybe why they don't end up in Cuba.

  • Adam330||

    Those are Italians. Not too bright, those Italians.

  • John||

    No, not really. Transportation is really cheap.

  • Adam330||

    And the most expensive part of sea transport is the loading and unloading. The distance traveled matters, but it's not the major factor.

  • John||

    It is amazing how big container ships are and how little energy they actually use. One of the dumber green memes is the whole buy and eat local thing.

  • Wizard4169||

    Not really. Considering the cost per ton-mile of modern shipping, the cost of transporting a car from Korea or China to Cuba would be a tiny, tiny fraction of the overall cost. It's true that most automobiles are sold within at least the same broad geographical are where they're manufactured (with most of the exceptions being high-end luxury models, where cost isn't a prime consideration), but this has a lot more to do with tariffs, quotas and other trade restrictions than in does with the cost of shipping.

  • ||

    I stand corrected. In that case, our embargo against Cuba is probably even stupider.

  • Hugh Akston||

    What grabs me about this is chavismo’s iron-clad commitment to policies that have failed, clearly failed, visibly failed, publicly failed, failed beyond any possibility of arguing that they haven’t failed.

    The illusion of failure is actually just a sign that you didn't do it hard enough. See: US Stimulus, 2008 to infinity.

  • Pro Libertate||

    In politics, total failure is actually irrelevant, so long as the people buy your bullshit arguments about how it's not your fault.

  • John||

    It is the political corollary to the old George Costanza line about lying. If no one blames you, it is not your fault.

  • R C Dean||

    I suspect they have not failed to (a) enrich cronies and (b) cement a hard core of political support.

    So, how have these policies failed, again?

  • Pro Libertate||

    Failure for us doesn't equal failure for them. Exactly. We reward their bad behavior, so they keep doing it.

  • MJGreen||

    The outcomes are entirely predictable

    But are they intended?

  • John||

    http://www.forbes.com/sites/ji.....economies/

    A bit closer to home and only sightly OT. Forbes explains how Connecticut, despite having the huge natural advantage of its proximity to New York and Boston has managed to become one of the worst economies in America. Amazingly, big government and high taxes drove away the middle class and every business that could flee leaving behind those who are rich enough not to care or avoid the taxes and those too poor to get out.

  • AuH20||

    Don't forget the corruption. The last... 4?... governors have ended up in jail

  • ||

    Jodi Rell didn't go to jail, but she was Rowland's Lt. Governor and he went to jail.

    That was an interesting article. I don't know where CT is headed; things don't change very fast there and there's still all that defense contractor money. I haven't been following Malloy but he sounds way worse than even corrupt governors, as he seems to be pulling an Obama lite on CT. Looks like I moved out at the right time.

  • AlexInCT||

    A lot fo that defense money is gone or moved out of state, Epi. Not even close to what it used to be back when either. Most businesses have packed up and left. The ones that stay ahve deals that keep them and their jobs here, and they will pack up & leave if those deals go away. And government keeps growing because the biggest voter base in CT is the group with their hands out demanding their free shit from government.

  • Cliché Bandit||

    I like it out west here, where the northern part of your state could secede at any moment because they can't stand the smell coming from Boulder (this is a joke that people who have been to Northern CO should understand in its ironic reversal, please inquire for an explanation).

  • Cliché Bandit||

    Fukin Compton looks like Atlantis next to East St. Louis.

  • Cliché Bandit||

    hmmm this belongs below but y'all knew that anyway.

  • Nazdrakke||

    leaving behind those who are rich enough not to care or avoid the taxes and those too poor to get out.

    You've just described the majority of American cities, I think.

  • John||

    Yup. And who runs those cities?

  • ||

    Rich people in CT do not live in the cities. No one but the very poor live in the cities. If you are rich and work in Hartford, you live in West Hartford. If you work in Bridgeport, you might live in Redding or Westport or bunch of other towns. But you would never live in the city. Other than Stamford, cities in CT suck balls.

  • John||

    I always found it funny that one of the biggest progressive Universities in the country, Yale, is in what has to be one of the poorest and worst cities in America. New Haven makes East St Louis seem clean and safe. You would think all of those right thinking genius progressives at Yale would turn their talents towards fixing their own town.

  • Cliché Bandit||

    Dude the East Side is no joke nor a laughing matter nor should it be compared to anything but the worst of Detroit and NOLA.

  • Rhywun||

    I was on a bus that stopped in Hartford once, my god what a dump. I could not believe it. And I come from upstate NY where all the cities are like that.

  • ||

    mandating notary publics to ensure that used cars sell for no more than 90% of their price when new

    No, no, no. It’s not used, it’s pre-owned. I’m doubling the price, here’s your cut. VIVA LA REVOLUCION!

  • John||

    As an aside, notary publics are one of the biggest rackets there is in Latin America. Notarys are required for nearly every financial transaction. And they charge out the nose for their services. Being a notary takes a few years of school and is basically a license to print money in most of Latin America.

  • Fluffy||

    Nobody needs to sell their car for more than 90% of the price when new.

    90% of the new price is a fair price.

    Realizing a profit due to the unintended consequences of a regulation is a windfall profit.

    Did I miss any of the standard prog reasons why the new regulation is entirely justified?

  • John||

    Nope. And just to cause problems, a lot of people who know better make the same sort of arguments regarding paying college athletes. How dare college choose to pay their athletes in kind with college tuition. How dare they make them give up their right to make outside income as a condition of employment.

    If the NFL refuses to do the right thing and set up a minor league, the NCAA has a duty to pay more for its players that it otherwise would.

  • Brett L||

    So, kids on baseball scholarships who play for pay in summer leagues are stealing from the NCAA or the major league organizations?

  • John||

    To play in the NCAA you have to agree not to take any outside compensation. If you don't like that, don't agree to it. If you take compensation, you are not stealing. You are just breaking your agreement.

  • Zeb||

    You are right, John. But for them to claim that it is some sort of noble move on their part, protecting the purity of the sport, or some such bullshit, is pretty slimy.

  • John||

    Everyone likes to claim they are noble. But in the end it is a business transaction. It is a case of the market not being fair in every case. The NFL doesn't owe players a minor league system and is perfectly within its rights to take advantage of the existence of the colleges as a defacto one. And the colleges have no obligation to pay players anymore than they have to. The players have no choice but to come if they want to go to the NFL. Oh well. That is not the NCAA's problem and they are under no obligation to pay extra out of charity.

  • robc||

    I want to see the NCAA declare freshman ineligible (like in the 60s) and see how the NBA reacts.

    I dont blame the NBA for the one-and-done rule, their teams really were incompetent at drafting HS players. But its ruined the college game. The NCAA needs to do something to fight back, and freshman ineligibility (across the board, not just basketball) with 4 years of eligibility left (basically a mandatory red shirt year) would be good for athletes in general, IMO.

  • John||

    I have no sympathy for basketball players. There is big money to be made in Europe. And European teams will take you out of high school. Brandon Jennings went to Europe for a year. If they don't like being in college, they shouldn't go.

    I think the problem with players coming out of high school was that the NBA is just terrible at coaching and developing talent. Also, the money is so big it was just impossible to really motivate some players to get better. There were so many talented players like Gerald Green and Sabastain Telafair who took the money, never worked or listened to their coaches and never amounted to anything. Making them go to college forces them to work and listen for at least a year or so.

  • robc||

    I was hoping Jennings would be a huge star and everyone would emulate him. But alas, he has been decent but not spectacular.

  • John||

    Jennings also got his ass kicked for a year in Europe. He found out the European leagues were not joke and not nearly as fun as he thought they were going to be.

    Most of these guys are jocks and dumb as posts. They are not exactly cultured or big thinkers. It is not like they are going to go to Rome and enjoy the museums and the food. For that reason it is really hard for them to go overseas. Most of them would prefer to stay close to home and pretend to go to college for a year.

  • robc||

    And that is why the NCAA needs to change their rules. It is killing NCAA basketball having 1 year players.

    They need to make a change, whatever it is, that makes players make a choice. Sign players to 4 year contracts with huge buyout clauses, for example. Or, more simply, go back to freshmen ineligible.

    If freshmen arent eligible, I think the NBA starts a better minor league system.

  • John||

    Rob,

    That is what they do in baseball. In baseball you can sign out of high school or go to college. But if you go to college, you are not eligible to be drafted and signed again for three years. I would prefer that setup. Let the four or five really top players go pro every year. But make the rest of them stay in college for three years.

  • Nazdrakke||

    Anyone connecting the NCAA, NFL, MLB, NBA, or NHL and the idea of free markets or uncoerced contracts is fucking deceiving themselves.

  • John||

    Who is being coerced? Do they have the power to draft you? No one says you have to play football or sports. If you don't like the deal, don't take it. Quit. People do it all of the time. I know several people who turned down college sports scholarships because they didn't think it was worth the hassle or they had better options. There is nothing coercive about it.

  • Nazdrakke||

    John the slime of cronyism, protectionism, and the coercive power of government is all over those leagues and everything they touch.

    Apologies, but it's way too nice a day for me to get wound up about this, so I'm just going to have to disagree with you ATM and leave it there.

  • robc||

    I will somewhat agree.

    Between the state financed stadiums and the state school involvement, it isnt a true free market situation.

    But the coercion is less than it could be.

  • John||

    Between the state financed stadiums and the state school involvement, it isnt a true free market situation.

    What does the industry getting welfare have to do with its obligations to pay its employees? One has nothing to do with the other. Just because the NFL gets state financed stadiums doesn't mean they are now obligated to hire 18 year old players or set up an expensive minor league system when the NCAA is already doing that for them.

  • robc||

    What does the industry getting welfare have to do with its obligations to pay its employees?

    Nothing.

    It says it isnt a free market and things would be different if it were.

    It leads to market inefficiencies which reverberates thru the decision making processes at all the levels.

  • John||

    They really wouldn't be different Rob. Professional sports are a very unique market. The entry barriers to setting up a professional sports league are enormous. And the nature of the business means fans are enormously loyal. Whenever a rival league is created it either fails or gets absorbed into the existing league. It is just how the market and the tastes of the customers shakes out.

    They only way to fix that would be to bring an anti-trust action and let DOJ micromanage the league and force them to subsidize their competitors. And that is hardly a free market. The fact is some markets are just strange and produce natural monopolies. Professional sports is one of them.

    That said, it really isn't a monopoly in the truest sense since people are free to spend their dollars on other forms of entertainment. The NFL competes with video games and the NBA instead of competing with a rival league. The market for entertainment dollars is wonderfully competitive even if the market for professional football leagues is not.

  • John||

    John the slime of cronyism, protectionism, and the coercive power of government is all over those leagues and everything they touch.

    Really? So everyone who works in the auto industry is coerced? A industry being full of cronies and welfare queens doesn't mean their employees are being coerced.

    It comes down to this, why does the NFL owe high school players a living in the minor leagues? They don't. And the NCAA doesn't owe players a pay check. Big fucking deal that the NCAA makes millions from those players. Welcome to the real world. If you are an engineer and develop patents that make your employer millions, you don't get to keep that money, unless you manage to get them to give an employment contract that says you do.

  • ||

    An NFL minor league would be sweet.

  • John||

    They have one. But it is better than any other minor league since it gets to use regional and school loyalties to draw viewers in a way no other minor league in the world can.

  • ||

    The fucked upedness comes when the school sells your likeness to EA Sports and makes mint off the gaming rights and what not while not having to pay you shit because that would be "unseemly".

    I'll just leave this here.

  • John||

    It is not fucked up. If the athletes want control of their likeness, don't work for the NCAA.

  • ||

    Externalities!

  • Michael||

    Did I miss any of the standard prog reasons why the new regulation is entirely justified?

    No, I think you nailed them all. Now to seal the argument all you have to do is cap it off with some empty headed proclamation about how we'd be so much better off with subsistence farming and shitting in ditches.

  • OldMexican||

    Re: Fluffy,

    Nobody needs to sell their car for more than 90% of the price when new[...]90% of the new price is a fair price.


    Maybe it's me, but form what I read I took that the article said that the government is to mandate that no used car is sold above 90% of the value of the car when new, which means the controlled price, which is already artificially depressed.

    The Chavista government is realizing that their scheme will unravel fairly quickly as the stock of new cars dry up just like the stock of everything else that suffers under a price control scheme is drying up, including milk and eggs. This is why the demand for good used cars will quickly go up beyond the original sticker price when new.

  • ||

    The US has an Embargo with Venezuela...

    What the fuck for?!?!?

  • Pro Libertate||

    We always do that as a prelude to invasion.

  • Bardas Phocas||

    For Freedom!

  • Acosmist||

    They refused to say who run Barter Town?

  • Agammamon||

    Uncle Sam: Who run Bartertown?
    Maduro: Dammit, I told you, no more embargos.
    Uncle Sam: More, Kerry.
    [Kerry puts all power out]
    Uncle Sam: Who run Bartertown? Who... run... Bartertown?
    Maduro: ...You know who.
    Uncle Sam: Say.
    Maduro: Uncle Sam.
    Uncle Sam: Say loud!
    [the Uncle turns on the town loudspeakers]
    Maduro: Uncle Sam.
    Uncle Sam: Uncle Sam ... what?
    Maduro: Uncle Sam runs Bartertown.
    Uncle Sam: Louder!
    Maduro: Uncle Sam runs Bartertown!
    Uncle Sam: Lift embargo.
    [Kerry turns power back on]

  • Michael Price||

    Why the fuck not? You think the US government needs to JUSTIFY it's actions? What are you some sort of communist?

  • John||

    Some day the embargo with Cuba is going to end and there is going to be a golden age of 50s US restored cars. The Cubans are going to want to sell and a lot of car collectors and restorers are going to want to buy.

  • Redmanfms||

    Dude, I've been to Cuba, the cars are crapped out used up junk.

    Cars in better condition can be found in junk yards in the American South West.

    Hell, there are probably more driveable '50s classic cars in any medium-sized American city than the whole island of Cuba.

  • Wags||

    I had a progtard claim that privatization of government services can't work because the privatization of the Venezuelan water system was an abject failure, therefore capitalism is evil.

    True story.

  • Paul.||

    They don't have to go so geographically far.

    NPR repeatedly told me that Deregulation of the California power system was an abject failure, so deregulation is evil.

    True story.

  • robc||

    Yep, I was going to mention same example.

    How a system in which the power companies cant enter into futures contracts but must by at spot prices counts as deregulation I will never understand.

  • Michael Price||

    That's because you're a doubleplus ungood duckspeaker.

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