Random Notes

Sunday, March 17, 2019

Venezuela sanctions - Fact and fiction

Venezuela's capital Caracas in the recent blackout

There has been a lot of claims circulating lately about US sanctions on Venezuela. Some left-wing groups and individuals claim these sanctions are responsible for the present economic crisis in Venezuela, while others say they are not. Fortunately, this is not a case of 'he said', 'she said', as the facts are easily available to anyone who wants to know. Let's have a look.

In one of my previous jobs, I was responsible for a company's export controls. This meant figuring out whether it was legal to export a certain type of product to any given country. There are certain classes of products for which this process is difficult and opaque - like anything military and nuclear - where you have to ask the government for permission to export and this permission can be denied on political grounds. But for the overwhelming number of products, the process is actually quite easy and transparent - and the whole international trade system depends on it being that way.

This is because companies need to know what they can and cannot export, and they cannot wait for government employees to get back to them on such questions. Unless of course you sell anything military, nuclear, rockets etc., and such products have exorbitant prices where dealing with all the government red tape is included.

This means of course that all details on economic sanctions are available online, for everyone to see. And what you see is what you get. You cannot really have 'hidden' sanctions since people can go to jail for violating them and the US government can be sued if they prevent a company to profit from its exports and imports without publicly available laws and regulations to back them up.

Since we are interested in blame for the current crisis, I will only look at sanctions from 1998 when Chavez took power and until the end of 2018. The current sanction status is a bit unclear to me, and will probably change between the time I write this and by the time you read it, so we will skip that. In any case, the recent round of sanctions after 2018 cannot be held responsible for the economic crisis that has strangled Venezuela for several years already.

So first, let's establish the timeline of events. When did the present economic crisis begin (1)?

The economic turmoil in Venezuela has been ongoing for a while, with an acute crisis in 2007-2008 (2), but the present crisis can be traced back to end of 2012 or beginning 2013 (3). By early 2014 its GDP started to decline year over year.

I would love to add some more data and graphs here to show Venezuela's economic decline, but reliable statistics on Venezuela are hard to come by. During 2015, the economic crisis had become hard to not notice in the news, as the exodus of people fleeing the country began to rival that of war-torn Syria.

Ok, back to where to place the blame. Let's look at the full list of sanctions imposed by the US.

First, there is a list of sanctions that are widely acknowledged to have no bearing on the present situation:

Since 2006, the US has prohibited sale and transfer of military equipment to Venezuela (4).
In 2008, two individuals and two travel agencies were sanctioned for their relations with Hezbollah (4).
Since 2008, a number of named Venezuelan individuals have been sanctioned due to their alleged involvement in drug trafficking and money laundering networks (4).
In 2011, Venezuelan state oil company PDVSA was barred from direct contracts with the US government and certain US government financing. However, since it did not prevent its US subsidiary, Citgo, from the doing these things, this had practically zero effect, and was widely seen at the time as merely a slap on the wrist or a warning shot (5).

From 1998 and until late 2014 there were no economic sanctions worthy of note. Even people who blame the US for all Venezuela's problem generally do not point to these specific sanctions.

In December 2014, US Congress passed the "Venezuela Defense of Human Rights and Civil Society Act of 2014" (6), that prepared the ground for further sanctions. These sanctions were implemented by a US presidential Executive Order in March 2015 called "Blocking Property and Suspending Entry of Certain Persons Contributing to the Situation in Venezuela" (7). You can read the full text of both the Act and the Executive Order online.

These sanctions target a list of individuals later named who are involved in what it cites as human rights abuses, corruption or authoritarian acts. The sanctions involve denial of entry into the US and restricts commercial activity with these individuals, effectively freezing property they might have in the US. This does not prevent general imports or exports. In fact, the Act specifically took this option off the table:

EXCEPTION RELATING TO IMPORTATION OF GOODS. — The requirement to block and prohibit all transactions in all property and interests in property under paragraph (1)(A) shall not include the authority to impose sanctions on the importation of goods

The next round sanctions came two and a half years later in August 2017 in the form of another Executive Order called "Imposing Additional Sanctions with Respect to the Situation in Venezuela". It forbids any US citizen or organization from issuing loans or buying bonds from the Venezuelan government and PDVSA (8). However, Venezuelan government and PDVSA debt was already junk rated by this time, so few were interested in buying it anyway. It did not prevent any other countries or citizen of other countries from buying these junk bonds.

Then, in 2018, followed a series of three Executive Orders to impose further sanctions.

In March 2018, an Executive Order called "Taking Additional Steps to Address the Situation in Venezuela" specifically targets the "Petro" cryptocurrency, bans US citizens from using it, and makes it clear that it cannot be legally used to circumvent sanctions (9). Since the "Petro" managed to flop spectacularly on its own, this sanction likely had zero effect.

In May 2018, an Executive Order called "Prohibiting Certain Additional Transactions with Respect to Venezuela" imposes further restrictions on buying government bonds, and, curiously, bans US citizens and companies from purchasing Venezuelan government properties put up for sale (10). (Curiously, because this would help prevent the kind of privatization and fire-sale of government properties that took place in Eastern Europe and Russia after the fall of the "Iron Curtain".)

In November 2018, an Executive Order called "Blocking Property of Additional Persons Contributing to the Situation in Venezuela", targeted individuals and companies operating in Venezuela's gold sector and companies owned by PDVSA (11). It is extensive and open-ended, and would no doubt have had a chilling effect on exports. It does not affect Venezuelan imports.

And that's it. As we have seen above, there have been no general sanctions on imports, or no general sanctions on any exports until November 2018, when the entire gold sector was hit. The EU also did not initiate any sanctions until November 2018, when it restricted only a few categories of exports to Venezuela, such as weapons (12).

The conclusion is clear: There are no general sanctions on imports or exports, but a series of steadily stricter sanctions on individuals in the Venezuelan government and companies they control. Also, the economic crisis was not caused by the sanctions - this is impossible as the crisis predates the sanctions by several years.

Don't fall for Venezuelan government propaganda.

Postscript (March 18th): Francisco Rodríguez writes wrote an insightful article at https://venezuelablog.org/crude-realities-understanding-venezuelas-economic-collapse/ about the Venezuelan economic crisis, which is definitely worth reading in full, where also says the follow on the sanctions:

It is striking that the second change in trend in Venezuela’s production numbers occurs at the time at which the United States decided to impose financial sanctions on Venezuela. Executive Order 13.808, issued on August 25 of 2017, barred U.S. persons from providing new financing to the Venezuelan government or PDVSA. Although the order carved out allowances for commercial credit of less than 90 days, it stopped the country from issuing new debt or selling previously issued debt currently in its possession.

and

... claiming that Maduro’s economic policies have caused a deterioration of living standards in Venezuela is not at odds with accepting the possibility that economic sanctions may have made things even worse. ... While the evidence presented in this piece should not be taken as decisive proof of such a link, it is suggestive enough to indicate the need for extreme caution in the design of international policy initiatives that may further worsen the lot of Venezuelans

And I fully agree with that.

Sources:

Tuesday, December 18, 2018

A look at the global gender gap

From the World Economic Forum this year comes the annual Global Gender Gap Report (read it here) which compares the world's countries in terms of gender parity in economic, political and educational participation, as well as health and empowerment.
The short version is a list of the top 10 countries in the world. Let's look at the very top first:

This is what any Scandinavian like me would expect, and yes we should be proud of it. Not everything here is perfect in terms of gender equality, of course, and much is left to do, but compared to the rest of the world, it might look damn close to perfect.
The global average is 68%, and the Western Europe average is 72.%, while the Middle East (the worst region) averages at 60%.
Let's continue down the list:

This is the point where things get interesting, and people go "What...?". How come an African country ranks higher than France or Germany, and what is Nicaragua doing there, a country that totally bans abortion? Nicaragua does have one of the world's highest shares of women in parliament, and in Rwanda an incredible 61% of its members of parliament are women.
It is worth noting that the index looks at very data points for health and political empowerment. For health, it only looks at birth ratios and life expectancy, and for empowerment, it only looks at political positions of parliamentary level and above. These are the two scores that pull Nicaragua and Rwanda up toward the top of the ranking, whereas their scores for economic parity (rank 69 for Nicaragua and rank 30 for Rwanda) and educational parity (36 for Nicaragua and 109 for Rwanda) or much lower.
Let's look at the next two:

New Zealand is not much of a surprise - it is kind of a like a southern hemisphere Scandinavia, led by a kick-ass female prime minister to boot. But the Philippines, a country that not only totally outlaws abortion, but also forbids divorce? It is however one of the few countries in the world where women are as likely as men to have managerial positions in business, and ranked just slightly below Norway in economic parity.
Finally, the last two of the top 10:

Ireland may be a small surprise, having just recently got of their abortion law (yay!), but Namibia is a perhaps one people would not expect. But Namibia is in fact the country with the fifth highest share of female law makers in their national parliament, and also scores relatively high in each other category.

The indicators chosen does have a huge impact on the rankings produced, and such an index does have its obvious imitations.

However, while economic pay parity is what we are focusing on here in the rich north of Europe, it is worth remember how bad it actually is in some countries:

Women have as much access to financial services as men in just 60% of the countries and to land ownership in just 42% of the countries assessed

And also when it comes to female participation in politics, this is the exception, not the norm:

Across the 149 countries assessed, there are just 17 that currently have women as heads of state, while, on average, just 18% of ministers and 24% of parliamentarians globally are women

These are things that this index tells us something about, and it is worth celebrating that there are countries in the world that are not Scandinavian or wannabe-Scandinavia (hello, New Zealand!) that are doing well in these areas.

Sunday, August 19, 2018

Life in plastic, it's fantastic

I remember one song by Aqua from six years ago, and it is "Barbie Girl", where they sang about what it was like to be a plastic toy.

Jokes aside, plastic really is a fantastic product. With all the recent focus on plastic as a problem when it ends up in the ocean - which is a real and urgent problem - it is easy to forget how much our lives are improved and enriched by plastics. And that plastic in itself is clean, highly energy-efficient, and plentiful - it is in practice a renewable resource.

Plastic is replaces many other materials that consumes a lot more energy and non-renewable raw materials to produce. Since it is incredibly cheap, it increases overall global wealth. It helps greatly increase the longevity of food and reduce food waste.

The problem with plastic in the ocean is vast, and comes from multiple sources. However, for the most part, it is a problem of garbage collection and disposal. It is a problem we urgently need to address, because most plastics produced today break down in nature at a glacial speed, and we keep producing more of it:

An investigation into the 'Great Pacific Garbage Patch' shows that nearly half of it is composed of discarded fishing gear. Another investigation into microplastic particles concluded that the "largest proportion of these particles stem from the laundering of synthetic textiles and from the abrasion of tyres while driving".

Another problem is that much of the plastics we produce today also contains pollutants that can bleed into both the environment and whatever is contained within the plastic. Landfills can leak these pollutants into ground water, which is why recycling and incinerators is far better ways to handle plastic waste.

Plastic in itself is just polymers of carbon with some oxygen, nitrogen and sulfur - all plentiful, non-toxic chemical elements on Earth. High temperature burning of clean plastic, as done in modern garbage disposal facilities, reduces plastic to its constituent chemical elements and cleanly and efficiently eliminates the problem of plastic waste.

If we can get sufficient renewable energy, then one day we can manufacture plastics from carbon capture from emission sources or simply the atmosphere, which will reduce CO² levels as a byproduct.

The problem of biodegradability is especially important for any plastics that may be left behind by accident in the ocean, such as fishing nets and lines. Different types of plastic have different biodegradability, with fishing equipment unfortunately being among the worst, although estimates are usually not very reliable.

So what should be done to deal with the problems of oceanic plastic waste?

Encourage the use of and research into biodegradable plastics through financial incentives
Invest heavily in carbon capture research
Invest in garbage collection and incineration facilities in third world countries that have the biggest waste problems
Negotiate treaties to make it economically advantageous to use recycling and incinerators rather than landfills
Strict financial penalties for any garbage waste not properly disposed of, and separate police force to enforce it (which can be paid for by the collected penalties)
In particular, strict financial penalties for fishing boats that do not return with their fishing nets

Plastic pollution is a problem that it is solvable with current technology and will only be easier to solve with future advances in technology, but requires political will and international cooperation. According to must-read report and set of recommendations from the Ocean Conservancy, we can reduce plastic waste leakage into the ocean by 65% annually within 2025 by focused efforts on only five countries.

Random Notes

Sunday, March 17, 2019

Venezuela sanctions - Fact and fiction

Tuesday, December 18, 2018

A look at the global gender gap

Sunday, August 19, 2018

Life in plastic, it's fantastic

Life in plastic, it's fantastic

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