Friday, September 30, 2005

Life in the land where filling up an SUV costs $3 :: CSM

"It's good for us, and it's good for the people so they can buy luxury cars with big engines," Mr. Caicedo said.

But critics say Venezuela's highly subsidized gasoline, which retails for between 10 and 15 cents per gallon, and 7 cents for a gallon of diesel, is bad for the country.

Besides feeding perpetual traffic jams and worsening air pollution, they say the subsidy is a multibillion-dollar drain on the national budget, sapping money that could help schools, hospitals, or public transit, and transferring it to the wealthier classes, who own the cars. And they wonder how long leftist President Hugo Chavez can defy economic gravity.

But few public policies here are as popular as is almost-free gasoline. Wealthy Venezuelans, who generally despise Mr. Chavez, say that if the government stopped subsidizing gas it would only waste the money on corruption. The poor fear a bus-fare hike.

Caracas pollster Luis Vicente Leon said Venezuelans consider almost-free gasoline a birthright. "Venezuelans believe that they live in an oil field," he said. "They feel they own the oil, and therefore should not pay for it."
Consider the substitution possibilities. Quoting:

"Here, gasoline is cheaper than water," Felix Mancilla, who sells pirated CDs and DVDs, says happily. He uses his generator to run a television and speakers, which customers use to test his products. Running the generator all day long costs him only $2 per week.
And consider the arbitrage possibilities. Quoting:

Along Venezuela's borders the subsidy also fuels a huge smuggling industry, which multiplies government losses and finances Colombia's outlawed right-wing paramilitaries, who tax the trade. In border areas of Colombia, where gas retails for 20 times the Venezuelan price, hawkers line highways offering jugs of cheap Venezuelan gas. Venezuelan authorities have tried to staunch losses by rationing deliveries to gas stations and requiring drivers to show proof of Venezuelan residence in order to fill up.
And the benefits of the subsidy to the wealthy. Quoting:

the gasoline subsidy also contradicts Chavez's philosophy of spending the nation's great petroleum wealth on the poor. [A 2002] National Assembly study found that the richest 20 percent of Venezuelans received 6.5 times as much of the gasoline subsidy as did the poorest 20 percent, who rarely own cars.
Emphasis added. Thanks to The Eclectic Econoclast who sent along this tip from a former student.


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