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Bahrain: Tourism, Investment, And The Arab Spring

Eurasia Review

By Geopolitical Monitor

By Nicolai Due-Gundersen

The Kingdom of Bahrain is a small island-nation in the Middle East, located in between the Persian Gulf and the Gulf of Bahrain. Bahrain’s closest neighbors include the dominant Kingdom of Saudi Arabia and the smaller nation of Qatar. Bahrain’s main investment sectors are characterized by booming financial and banking services. Hence, despite earlier hydrocarbon discovery than most Gulf States, it has attempted to minimize hydrocarbon dependence. In addition to the aforementioned sectors, Bahrain is also seeking to further diversify its economy through tourism.

BahrainTo that end, Bahrain has focused on hosting and further developing the Formula One World Championship events. In 2002, agreements were signed between the Kingdom of Bahrain and Bernie Ecclestone, current manager of F1, to host the 2004 round of the F1 Championships. Shortly after the contract was signed, Bahrain invested 150 million USD in the construction of the Bahrain Racing Circuit. The F1 investment quickly paid off, allowing Bahrain to enjoy the second highest growth in tourism within the Middle East by 2006.

However, the events of the Arab Spring spilled over into Bahrain, leading to widespread protests that were met with harsh responses from the Bahrain government in 2011. While protests became more fragmented in early 2012, in part due to King Hamad bin Isa Al Khalifa’s agreement to consider democratic reforms, violence returned less than a month later, in February 2012.

Overview of Investment Sectors

Despite a desire to diversify its economy, the hydrocarbon sector continues to be a persisting revenue source. Bahrain’s proven reserves are estimated to be at 125 million barrels, as of January 2011, with a 46,000 barrel per day output. In addition, Bahrain shares an offshore field, Abu Safah, with Saudi Arabia. With production shares equally divided between the two states, Bahrain’s Abu Safah output stands at 150,000 barrels a day. A key aspect of Bahrain’s hydrocarbon sector is its refining capacity. Unlike most (pan) Arab states, which export crude oil to Western and Asian markets, Bahrain refines its petroleum products prior to exportation to main clients, which also includes the Asian region, especially India. Refining capacities are an important indication of well-developed infrastructure, lowering required investments from foreign (oil) companies and also illustrating a country’s extent of overall advanced (technological) development. Such development factors can serve as indications of a country’s economic stability and hence the potential security of long-term investments.

In addition to its hydrocarbon sector, Bahrain has encouraged further growth of its banking and financial institutions through increasing economic reforms, with the aim of creating ever more liberal markets and diversified private investments. The Bahraini government has targeted five industries for expansion for the purpose of achieving overall stability. These areas include business and financial services, tourism, information technology, telecommunications and healthcare.

Bahrain’s strategy is to maintain and increase its image not simply as another Gulf (oil) State but as the business hub of the Arab world, attracting both international and regional firms. Bahrain’s economic reforms, along with simplifying the process of investment and business establishment within the country for outside firms, has attracted regional financial institutions such as Arab Chartered Legal Accountants, a global (but Arab-focused) auditing firm. In addition, the Kuwaiti-based intellectual copyright law firm, Talal Abu-Ghazaleh Organization, chose Bahrain as its headquarters location in 2010.

The recent expansion of such Arab-based firms into Bahrain, along with Bahrain’s already existent state-run Central Bank of Bahrain, may indicate that the Bahraini government has placed more emphasis on forming closer regional business ties and thus wishes to sell its financial sector to proximate Arab states. However, the establishment of the Abu-Ghazaleh Organization was closely followed by the opening of the Abu Ghazaleh Institute for Chinese Language and Culture in 2010. Furthermore, Bahrain and India signed a Memorandum of Understanding (MoU) as recently as early summer 2012. The agreement has the core goal of promoting economic and joint investment between the two states. The agreement will be further bolstered by the formation of the Bahraini-Indian Business Council, which will serve as a concrete structural platform for mutual, foreign direct investment.

India’s business rival, China has also been fostering closer relations with Bahrain. In 2011, China was the third largest non-Gulf export market for Bahraini trade, with China itself being the second largest importer of Bahraini goods. While some critics may argue that Sino-Bahraini trade is on the rise, it is important to consider how relations between China and Bahrain are structured and filtered. Unlike Bahraini-Indian relations, which are to be further developed through the platform of the Bahraini-Indian Business Council, Chinese business with Bahrain must go through the Gulf Cooperation Council, a regional organization that represents the collective economic and security interests of Bahrain, Kuwait, Oman, Qatar and Saudi Arabia. Though there has been discussion on the creation of a Bahrain-China Business Council since 2009, this has yet to materialize. Indeed, Bahrain appears to view itself as China’s gateway into the larger Gulf market, rather than a central target market itself. Bahrain’s relations with India, on the other hand, have seen a recent mutual investment surge. Furthermore, Bahraini-Indian relations span a history of close to 300 years, with up to 350,000 Indians currently residing in Bahrain.

Although Bahrain is known as an international business hub of the Arab world, it is clear that its main economic focus has prioritized its Arab neighbors and the Asian region, with a greater business emphasis on India. This emphasis is further bolstered by the fact that India serves as the main export market in Asia for Bahraini oil. Despite its Asian focus, Bahrain has attempted to create further incentive for more international investment. Such attempts have included providing economic privileges to corporate and small-scale investors, including no income tax and, significantly, total ownership of businesses established in Bahrain by foreigners.

Such incentives have recently earned Bahrain the title of ‘Host of Three of the World’s Top Twenty Economic Zones.’ This title, earned in 2012, earmarks Bahrain as a top twenty location for internal investment, economic development and global business expansion. Bahrain’s economic status has, of course, been further assisted by its location within the Gulf, which allows access to other Arab states, including the world’s largest oil producer, Saudi Arabia. The King Fahd causeway serves as a physical connection between the two states, which has encouraged closer relations between Bahrain and Saudi Arabia.

Access to Arab states has attracted certain Western firms to Bahrain, including American firms Citicorp and American Express. Despite Bahrain’s Asian focus, American ties remain strong, with the U.S. a close trading ally and military client; a significant portion of the US Navy’s Middle Eastern fleet has enjoyed Bahrain’s strategic location for around 50 years.

Formula One and Tourism

Bahrain’s winning bid to host the Formula One Championships came amid fierce competition from other Arab states, especially Egypt, Lebanon and the United Arab Emirates. By 2004, there was significant interest in Bahrain’s Grand Prix, and it is likely safe to say that ‘F1 tourism’ started with the interest of tourists from surrounding Gulf States. The F1 races, which Bahrain attempts to host on an annual basis, have played a significantly increasing role in tourist revenue. They have become the definitive event of the tourist sector, earning the state up to 600 million USD in revenues. Interestingly enough, the majority of F1 tourists continue to come from the Arab world, with less than a quarter of fans from the West, mainly the U.K. The significance of the F1 Championships expands into various subsectors of tourism and hospitality, especially for hotels, which often see total occupancy and are subsequently able to charge up to double their normal rates. In addition, the race generates up to 600 jobs, both directly and indirectly linked to the event, and often earns an additional 7.7 million USD in T.V. rights, sponsorship, catering and commissions, along with facility rental.

However, the success of Bahrain’s F1 events, along with its other investment sectors, has not been immune from the effects of the Arab Spring. Unrest in Bahrain began on February 14th, 2011. Influenced by protests in Egypt and Tunisia, protestors took to the streets of Manama, Bahrain’s capital. From February to June 2011, tensions increased and it became clear that a main source of conflict was the power of the ruling Sunni minority in a country of Shia majority Muslims. Although there have been moments of respite, including the King’s pledge to consider democratic reforms and granting Parliament greater powers of scrutiny, protests and violence increased from February 2012 onward. Worryingly, April 18th 2012 saw F1 drivers exposed to a petrol bomb attack during a practice run, although there are signs that F1 teams were not intended targets.

Although the 2011 F1 Championships were hosted in Australia, Bahrain was keen to welcome back F1 for 2012. Bahrain’s eagerness was no doubt due to the significant revenue losses for the tourist sector due to its cancellation of the 2011 event. While protests in Bahrain have somewhat mellowed, tension continues to exist, with allegations of Bahraini police and soldiers using excessive force on protestors. The alleged arrest and jailing of an 11-year old boy for protest involvement also re-sparked international and domestic outrage.

Economic Stagnation?

In addition to the loss of F1 prestige and tourism, many critics have pointed out that Bahrain’s economic growth stood at only 1.3% in the final quarter of 2011. In addition, many construction projects, which no doubt could contribute to tourist attraction, have been abandoned or halted due to lack of continuing investment. Another worrying trend has been the effects of popular unrest on the financial sector, Bahrain’s pearl in the Gulf, especially the bankruptcy of a major Bahraini bank. Indeed, the conspicuous lack of expatriates serves as an appropriate symbol for what some claim is the decreasing involvement of international firms and investors. Furthermore, the events of the protests have directly cost Bahrain up to 2 billion USD, including up to 200 million USD worth of damages to small and medium-size businesses. Such effects of the Arab Spring will no doubt further make potential external investors wary of establishing businesses within Bahrain or investing in its institutions and portfolios.

Despite such recent downturns, however, there are certain positive (or at least mitigating) indications. Bahrain recently increased its crude oil production and government spending, leading speculators to estimate Bahrain’s 2012 economic growth to be at 4-5 %. Furthermore, some economists have argued that the slowing down of construction growth can be at least partially attributed to recent oversupply of business properties, rather than a sign that businesses are abandoning interest in Bahrain’s strategic location and investment opportunities. While such arguments may be taken as positive signs of (re)development, it must be remembered that Bahrain’s oil sector is distinguished for its exportation of refined rather than crude oil. Hence, Bahrain should resume refined exportation as soon as possible in order to convince potential investors that its infrastructural stability and capacity has returned to acceptable levels. In turn, such resumption may be taken as a sign by non-hydrocarbon investors that stability has begun to return to the overall outlook of Bahrain’s economic performance, encouraging further investment in non-hydrocarbon sectors such as tourism and banking.

Bahrain’s Unrest Versus Saudi Arabian Potential

Bahrain’s strategic location serves as a gateway to the Gulf region. At the same time, Saudi Arabia boasts the status of number one global petroleum producer and exporter. Hence, there is much interest in Saudi Arabia from international oil firms. However, Saudi Arabia’s conservative culture, with its strict Muslim codes, which some Westerners may struggle to embrace, may curb the number of Westerners willing to be active in the country. Hence, Bahrain, with its already established links to Saudi Arabia, has the potential to serve as a more Western-friendly ‘safe-house’ for Western investors, business individuals and company representatives seeking to broker deals in the Saudi Arabian hydrocarbon sector.

However, the business potential of Saudi Arabian-Bahraini unity may be threatened by political considerations. Bahrain’s officially announced desire to share unity with Saudi Arabia and surrounding Gulf states (an Arab equivalent of the European Union) has been interpreted by most Bahrainis and outside critics as having the sole aim of strengthening the Bahraini government’s crackdown of protestors by gaining closer access to Saudi security forces. This suspicion is heightened by Bahrain’s earlier use of Saudi troops to quell uprisings. In addition, demonstrations in Tehran supporting the Bahraini people’s denouncement of such a union have heightened tensions between the Bahraini and Iranian governments.

One possible alternative to formal (political and federal) unity would be the creation of a Bahrain-Saudi Arabia Business Council. Such a platform could strengthen business cooperation between the two states and serve as a framework for Bahrain becoming Saudi Arabia’s ‘business stopover’ for Westerners. In order to dispel suspicion and the prospect of increasing tension, both internally and with Iran, it would be best if such a council were to feature minimal government involvement and instead be a council composed of private businesses. However, as the state is deeply involved in the hydrocarbon sector on both sides (with said sector defining Saudi Arabian economics), such minimization may prove difficult. Thus, state involvement may still be balanced by the participation of international firms. Furthermore, such participation may act as an additional bolster of confidence for potential external investors to return to Bahrain if it allows greater access to Saudi Arabia than via the Gulf Cooperation Council, which certain external investors such as China have had to go through in the past, including for dialogue with Bahrain itself.

Coon

Bahrain stands out from its fellow Gulf States due to its heretofore successful attempts to diversify its economy and minimize the status of being an oil state. Its diversification efforts have earned it the status of being a financial business hub within the Arab region, and the more recent success of the Formula One events has created a most profitable tourist sector. These two elements have rounded out Bahrain’s strategic location as an access point to other Gulf States.

Although the Arab Spring has not had the same sweeping effect in Bahrain as in other Arab nations such as Libya and Egypt, its influence on Bahrain’s investment sectors should not be ignored. Notably, the unrest in Bahrain has been strong enough to have led to the cancellation of the 2011 Formula One event, affecting Bahrain’s image amid government resistance to protestors and taking from the Kingdom a total potential revenue of up to 600 million USD in that year. In addition, the cancellation has had strong repercussions on the hotel and catering sector due to the decrease of tourists. The financial sector too appears to have been hit by a slowdown of economic growth in late 2011 and the withdrawal of expatriate workers and investors from certain industries.

However, Bahrain’s economy still retains promise. In addition to being the host of three of the world’s top twenty economic free zones, economic growth for 2012 was projected to enjoy a modest rebound. Bahrain continues to be ranked as the top business and economic hub of the Arab world, and the government’s recent increase in spending and focus on encouraging internal entrepreneurism is testimony to its determination in growing as an investment hub.

The return of international investment flows into Bahrain will likely hinge on the government’s treatment of ongoing protests. While such protests have lacked the perpetual motion of other Arab Spring movements, the government’s suppressive response to most protests has been met with harsh criticism and pressure, including from business allies such as the United States. Such pressure, in addition to long-made promises from King Al Khalifa, must give way to open dialogue for the first seeds of stability to be sown. Such dialogue can be assisted by diffusing suspicions of Bahraini-Saudi Arabian unity through the creation of a Bahrain-Saudi Arabia Business Council. Such a council can be established in lieu of a formal union between the two countries, with minimal state involvement and the open participation of Bahraini, Saudi Arabian and international businesses. Through business councils, other trading partners such as China can have a more direct link with Bahrain, allowing Bahrain to both defuse political suspicions and increase its status as a gateway to the rest of the Arab world.

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Nicolai Due-Gundersen is a contributor to Geopoliticalmonitor.com and is associated with the Arab Institute for Security Studies (ACSIS).

Bitcoin’s real-world problem: Virtual currency facing bank backlash in Canada

Financial Post

John Greenwood

Joseph David has overcome a lot of challenges since starting up Canada’s first Bitcoin exchange two years ago but his latest hurdle is proving tougher that all the others.

Terence Corcoran: Gold versus bitcoin

Over the last few days two of the pretenders to the world currency throne — bitcoin, the new high-profile digital currency, and gold, the centuries-old commodity currency — have fallen into a tailspin.

Virtex, based in Calgary, is an online market that matches Bitcoin buyers with sellers, with about $13-million of trades under its belt.

But earlier this month Royal Bank of Canada quietly informed Mr. David that it would no longer do business with his company.

“They shut down our account without any reason,” said Mr. David, an ebullient entrepreneur with a background in technology companies. “They just said we have the right to refuse service to whomever we wish.”

For whatever reason, many in Canada’s small but fast growing Bitcoin community are suddenly dealing with the same problem: The banks have decided they don’t like the cryptocurrency and they’re shutting down some of the accounts of businesses that deal in it.

They shut down our account without any reason

That the closing of conventional bank accounts could be a problem may sound counter-intuitive, since Bitcoin is supposed to be an alternative currency designed to operate outside of the conventional banking system. But in practice Bitcoin holders are constantly swapping back and forth into real dollars — partly because of volatile nature of the currency, which soared as high as $260 for a single Bitcoin after trading for years at less than $10, and partly because there’s not that much you can buy with it.

As a result, this latest move by the banks has thrown a monkey wrench into the nascent system.

“Only in Canada do you get a situation where a bank can shut down your account and you’re out of business,” said Melvin Ng, an engineering student at the University of Waterloo and the founder of what is likely the country’s newest bitcoin exchange, Cadbitcoin.

“Banks should certainly feel threatened by this new virtual currency, as Bitcoins will soon replace the need for banks to transfer money across borders,” Mr. Ng declared in a press release. “Bitcoin will revolutionize the banking industry, just like Bittorrent changed the video and music industry,” said Mr. Ng, comparing the currency to the super-fast and legally problematic peer-to-peer media downloading service.

A spokeswoman for RBC declined to comment on the matter, saying that the bank does not comment on individual clients.

Meanwhile the Canadian Bankers Association said it has no position since Bitcoin “is essentially an electronic currency that operates outside of the traditional national currency system.”

The Bank of Canada also has yet to take an official position, said Dale Alexander, a spokesman for the central bank. But in an emailed statement he went on to quote the Currency Act which defines legal tender as any bills or coins issued under the auspices of the Bank of Canada or the Royal Canadian Mint. The note also included a link to a European Central Bank study warning that virtual currencies such as Bitcoin are “inherently unstable,” “not regulated or closely supervised,” and “could have a negative impact on the reputation of central banks.”

As critics point out the currency has been extraordinarily volatile, with the value of a single Bitcoin ranging from less than $1 back in 2008 when it was first created to as much as $260 earlier this month. There have been several major corrections but each time it has recovered. That’s because enthusiasts refused to give up on the market, and the faithful will likely rush to buttress their virtual tender again if there’s another correction.

Bitcoin has no shortage of proponents.

“Bitcoin and similar electronic currencies have great advantages,” said Finn Poschmann, vice president of research at the C.D. Howe Institute. “First is that they are electronic — they can be easily exchanged, at low cost. Moreover, they can be exchanged among people and between people and businesses without the infrastructure associated with debit and credit cards, or wire transfers.”
Such currencies also come with “potentially great risks,” Mr. Poshmann cautions, adding that it is the job of regulators and monetary authorities to address those risks.

George Frey/Bloomberg

As critics point out the currency has been extraordinarily volatile, with the value of a single Bitcoin ranging from less than $1 back in 2008 when it was first created to as much as $260 earlier this month.

Bitcoin is only the latest in a string of virtual currencies, from the Linden Dollars used in the on-line game Second Life, to mobile phone air time units used as money by a large part of the population in Kenya and Tanzania.

The brainchild of a possibly fictitious Japanese software engineer, Bitcoin first emerged in 2009, just as the global financial system was being pushed to the brink. Unlike conventional money, it’s not controlled by any central bank or any other central authority and it exists only electronically. Instead it’s controlled by peer-to-peer software, like Bittorrent and other media file-sharing systems.

The whole thing is run by powerful computer systems owned by people called “miners.” They keep the ledgers, recording every transaction that takes place and as a reward, they get periodic payments of Bitcoin.

One of the big advantages is that it’s resistant to the kind of tampering that happened in the aftermath of the financial crisis that saw central banks pumping out huge quantities of new money as a way to revive ailing banks. Critics charge that such moves will ultimately result in inflation, devaluing the holdings of countless individual savers.

Another advantage is that the cost of doing transactions is a lot less than, say, with a credit card where the issuer charges around 3% each time the card is swiped. Such fees are the lifeblood of the banking system but they are significantly reduced because Bitcoin purchases don’t require a middleman.

To get Bitcoin you need to go to an exchange like Mr. David’s Virtex, or maybe you will opt for Mt. Gox, the world’s biggest Bitcoin exchange. There you can use Canadian dollars to buy Bitcoin which is sent electronically and stored on your laptop hard drive.

And over the past few months, a lot of people have been doing that, rapidly driving up the value of Bitcoin. But as a true currency it’s got a ways to go as there’s not a lot of retailers that accept it, at least not yet.

But the supporters are a determined lot, and the lack of stuff to buy doesn’t appear to be a problem. Most appear happy to sit on their hoards until the value goes up and then swap back into dollars to lock in their gains. Owing to white-knuckle volatility, that strategy hasn’t worked for everyone but clearly some are doing very well by it.

Paul Chavady, a real estate agent in Saskatoon, said he began offering services in Bitcoin after getting calls from potential customers who want to buy some bricks and mortar for their virtual spoils.

Tomohiro Ohsumi/BloombergCritics say the rise of bitcoin is also being helped by secrecy.

“We were getting all these inquiries from people who made a lot of money in bitcoin and they were enquiring about buying a house,” said Mr. Chavady. “It’s something that’s picking up. “

So far support for Bitcoin has come from a small community of tech-savvy evangelists and hipsters, but it’s rapidly growing thanks to the sharp rise in value.

Mike Caldwell, a 35-year-old software developer from Utah, is part of the unusual breed of Bitcoin entrepreneurs.

Mr. Caldwell manufactures physical Bitcoins, churning out thousands of the gold-coloured tokens which he claims cannot be counterfeited due to his tamper-proof holographic technology. The notion of a physical manifestation of a virtual currency may seem a bit odd, but he claims demand is so high that he’s created 17,000 coins since launching the business a year and a half ago and he’s only taking on new customers by invitation.

Critics say the rise of Bitcoin is also being helped by secrecy. The fact that transactions are anonymous makes Bitcoin the perfect system for drug dealers and other criminals, they say. Indeed, that’s become one of the major arguments against the currency.

James Grant, owner of the Ottawa-based Bitcoin brokerage Canadian Bitcoins, scoffs at that. Transactions with physical cash are just as anonymous, he argues.

He too has had his bank account shut down and he’s furious about it. The bank “didn’t give us a reason, but I could see them being worried about money laundering. If they had asked, we have invoices and receipts [for all our transactions]. We could have given them all those things… I believe in Bitcoin for the long term.”

Obama's Debt Per Household Greater than Median Household Income

breitbart
By William Bigelow 

How exponentially has the national debt grown under Barack Obama? Since he took office, the annual amount of debt per household in the United States is greater than the annual median household income.

Since Obama took office, the federal debt has climbed $6,167,472,778,984.22 (at the time of this writing). Divided by the 115,031,000 households in the country, that means Obama has borrowed $53,616 for each household, compared to the latest recorded median household income of $50,502 (for 2011).

The federal debt on Jan. 20, 2009, was $10,626,877,048,913.08. On April 25, 2013, it was $16,794,349,827,897.30.

Political Calculations: The Incomes of Women Without Wages

Political Calculations

Who is the median woman who doesn't earn a wage or a salary?
The question arises because of something we did last year. Specifically, when we extracted data for this demographic category of American income earner from other data published by the U.S. Census Bureau.
What makes this particular demographic category so interesting is that U.S. women who do not earn wages or salaries make up what is perhaps the lowest income earning group within the United States. To see what we mean, >our chart below shows the inflation-adjusted median incomes earned by women from 1947 through 2010 in terms of constant 2010 U.S. dollars:

So just who is the median woman who doesn't earn a wage or a salary, who is part of the lowest ranks of income earners in the United States?
The answer came to us when we were looking at the history of average Social Security retirement and survivors benefits paid out over time, for which the Social Security Administration provides data for selected years going back to 1956. Our chart below shows what we found:

What we find is that the income earned by the median U.S. woman without a job paying a wage or salary for the years from 1956 through 2010 is largely consistent with benefits paid by Social Security, which means the median U.S. woman who doesn't earn a wage or salary is of retirement age - typically Age 62 (for those taking a reduced benefit) or older (for those taking non-reduced benefits).
We note that for much of the data, the median income is less than the average income. This is a characteristic of the lognormal distribution of income. However, we do observe an upward shift in the data over time, which we believe corresponds to the increasing number of women with wage and salary income in the United States, whose incomes reflect their growing share among Social Security recipients.
The variation in the median income data would also appear to be somewhat consistent with having an increasing portion of income derived from investments, such as those that might be earned through an Individual Retirement Account or 401(k)-type retirement investment programs, which we recognize in the surges for median income earned in 1986-1989, 1997-1999 and later in 2005-2006, which coincide with booming periods for the U.S. stock market.
Once again, that would be very consistent with the kind of income that would be earned by a woman of retirement age in the United States, who it would seem collectively make up the lowest income earning demographic group within the United States!

La economía que agobia a los venezolanos espera por rescate

lapatilla

Los 10 años de regulación de precios, sin un sistema claro que permita la revisión y ajuste de los montos de acuerdo con los costos de producción, hizo que se acentuara la escasez y falla de alimentos básicos. Según el Banco Central de Venezuela, la escasez general en marzo fue de 20% y la de alimentos más de 17%. Hay productos que tienen 25 meses sin revisión de precios, mientras que la materia prima nacional e importada, además de envases, mano de obra y otros gastos se han incrementado.

Las empresas afirman que producen a máxima capacidad, pero no cuentan con suficientes divisas para comprar más materia prima importada. La producción agrícola nacional es deficitaria y tampoco pueden distribuir los alimentos con libertad. Recuerdan que hay guías de movilización emitidas por el Ministerio de Alimentación que redireccionan el envío de los productos a determinadas ciudades y regiones, dejando otras con poco o casi nada de inventarios.

“Hay muchas bodegas y clientes en la frontera que no pueden ser abastecidos porque no dan permiso para llevar mercancía a esas zonas en las cantidades que el consumidor necesita”, señala el presidente de Cavidea, Pablo Baraybar.

Al incremento de la escasez se suma la pérdida de variedad en el mercado. Un estudio de Datanálisis muestra que de 10 marcas, por ejemplo, de leche en polvo que había en el mercado ahora sólo se consiguen 3. Igual sucede con la crema dental que no se encuentra en algunas zonas del país.

2. Inflación, el impuesto al bolsillo
Los precios de los bienes y servicios en Venezuela varían mes a mes. Los controles sobre alimentos, medicamentos, artículos de aseo personal y bienes de construcción no han podido contenerlos. El Banco Central de Venezuela informó que el índice nacional de precios al consumidor cerró en 25,1% entre marzo 2012 y marzo 2013, y en los primeros tres meses del año acumula 7,9% de inflación.

El BCV señala que en marzo la inflación llegó a 2,8% impulsada por el alza en los precios al consumidor en restaurantes y hoteles que se ubicó en 3,7%, seguido de esparcimiento y cultura, en la que fue de 3,3% y en alimentos 3,3%. También se aceleró en el sector salud con un índice de precios de 3%. La inflación afecta a los habitantes de todas las ciudades, pero donde más impactó en marzo fue en Maturín, con 3,9%; Ciudad Guayana, 3,6%; Maracaibo, 3,5%; Valencia, 3,5% y Maracay, 3,3%.

Más información en El Nacional >>

Venezuela: perspectivas si el precio del petróleo desciende

cubanalisis

Dr. Antonio Morales Pita

La dependencia económica de un país a un solo producto exportable, específicamente si se refiere a una materia prima, es altamente peligrosa. Según datos del Pocket World in Figures, publicado por The Economist, edición del 2013, las exportaciones de petróleo de Venezuela ascendieron a US $63.5 billones, y representaron el 97% del total de exportaciones.

Dada la tendencia al alza en el precio del petróleo desde inicios del siglo XXI, Venezuela debería estar experimentando un período de crecimiento económico, cuyos indicadores fundamentales se detallan en la tabla # 1.

TABLA # 1 - Principales indicadores económicos venezolanos desde inicios del siglo y proyección del 2013

Fuente: Economist Intelligence Unit

El precio del petróleo durante este mismo período ha tenido el comportamiento mostrado en la tabla siguiente:

Tabla # 2 – Precio promedio interno anual de petróleo crudo

Año	Nominal US$/bbt	Ajustado por inflación US$/bbt
2000	$27.39	$36.54
2001	$23.00	$29.86
2002	$22.81	$29.12
2003	$27.69	$34.60
2004	$37.66	$45.78
2005	$50.04	$58.83
2006	$58.30	$66.45
2007	$64.20	$71.03
2008	$91.48	$97.33
2009	$53.48	$57.18
2010	$71.21	$75.05
2011	$87.04	$88.93
2012	$93.02	$93.47

                                                                            Fuente: Inflationdata.com

De acuerdo con los datos de la tabla # 2, desde el 2000 hasta el 2005, el promedio aritmético del precio del petróleo,  calculado por mí, fue de $39.12, mientras que el período 2006 - 2012, el promedio aritmético arrojó una cifra de $78.49, es decir se ha duplicado. Sería de esperar que la economía venezolana, si hubiera utilizado adecuadamente sus recursos, hubiese mejorado. Sin embargo, en el último septenio empeoraron considerablemente el déficit presupuestario (hasta niveles superiores al 10%), la inflación (rebasando el 20% y llegando hasta el 30% - uno de los más altos del mundo), el crecimiento del Producto Bruto Interno (PBI) y el PBI per cápita, que alcanzaron niveles negativos en el 2009 y el 2010 coincidentes con una reducción en el precio del petróleo.

La pobre situación presupuestaria y la carencia de dólares han provocado la devaluación del bolívar, según ilustra ampliamente el artículo “Venezuela Devalues Its Currency” publicado electrónicamente por Matthew Boesler el 8 de febrero del 2013 en “Business insider.com”, del cual destaco los párrafos centrales:

• “Venezuela ha realizado una masiva devaluación de la moneda, modificando la paridad del bolívar de 4.3 a 6.3 por dólar”

• “En el mercado negro, el bolívar se ha debilitado en un 53% hasta 18.39 por dólar el pasado año, de acuerdo a Lechuga Verde, una “website” que sigue la pista de la tasa de cambio.”

• “El presidente de Venezuela gastó una gran cantidad de dinero gubernamental en la campaña de re-elección presidencial, lo cual ha dejado al gobierno con una sustancioso déficit fiscal.”

La política de desfalco financiero de Venezuela por parte del difunto presidente venezolano, según se atestigua en numerosa literatura internacional y nacional, se debe entre otros factores al subsidio en las ventas de petróleo al gobierno de Cuba, Nicaragua, y otros gobiernos de corriente anti-norteamericana. Asimismo, es notable el lanzamiento de una política expansiva, tanto fiscal como monetaria, encaminada a ganar votos electorales para facilitar la constante re-elección del presidente, y apoyo a los cambios de la constitución.

Uno de los aspectos más notables de este déficit presupuestario (que se pretende cubrir con el ingreso adicional de exportaciones de petróleo) es que Venezuela, desde el 2000, ha mantenido un sistemático balance positivo en el balance comercial y en la cuenta corriente (primeras fuentes creadoras de divisa extranjera), lo cual ha sido contrarrestado por la constante reducción de inversiones extranjeras que -dadas la política de intervención y nacionalización de empresas extranjeras seguidas por el ahora difunto Presidente Chávez-  han llegado a tener valores inferiores al 1% del PBI y representan valores inferiores al 4% del total de inversiones. 

La política del “Socialismo del Siglo XXI” seguida por el gobierno de Venezuela no ha seguido la política de Keynesianismo Duro, que consiste en ahorros gubernamentales durante los tiempos de auge económico para atenuar dificultades económicas en tiempos de crisis financiera. El gobierno de Venezuela no ha utilizado la afluencia de dinero extranjero debido al alto precio del petróleo, y experimenta déficits presupuestarios a pesar de tener balances comerciales positivos. Sus políticas de ataques al capital nacional y abandono de infraestructura y falta de mantenimiento, incluso en la industria petrolera, le han hecho desaprovechar la favorable coyuntura internacional.

Entonces, ¿cuál sería la situación económica de Venezuela si desciende el precio del petróleo?  El gráfico siguiente ilustra la situación del precio del petróleo desde 1948 hasta el 2012, que ha sido actualizada por Tim McMahon el 14 de junio del 2012.

Fuente: Inflationdata.com

El análisis del gráfico permite hacer las siguientes conclusiones:

• El precio del petróleo se mantuvo relativamente estable desde el 1948 hasta inicios de la década del 70, en cuyos años experimentó un crecimiento debido fundamentalmente a las guerras del Golfo Pérsico.  Este violento incremento del precio del petróleo desató una fuerte inflación en la década de los ochenta que contribuyó a producir recesión económica en los Estados Unidos durante el primer quinquenio de los ochenta y en la América Latina en toda la década perdida de endeudamiento y bancarrota, en la cual el precio de las materias primas y del petróleo se precipitaron en picada. 

• A partir de la década de los noventa se pudo controlar la inflación a nivel mundial, mejorar la economía mundial. Los precios del petróleo se mantuvieron estables hasta la primera década de este siglo en que experimentan una tendencia creciente desde los $40 hasta $120 debida al surgimiento de las economías emergentes (fundamentalmente las conocidas como BRIC -Brasil, Rusia, India y China- que comienzan a crecer y a demandar petróleo).

• En el 2008 ocurre la recesión en los Estados Unidos, la cual afecta a toda la economía mundial y ocurre un profundo descenso en el precio hasta situarlo por debajo de los $40, y posteriormente vuelve al subir debido fundamentalmente  a las recuperaciones de China y la economía norteamericana. 

Depender del petróleo como base del desarrollo económico y convertirlo en el primer rubro exportable requiere de una economía fuerte y estable (como es el caso de Noruega), que sea capaz de aplicar una política austera en casos de auge económico para no tener que pedir prestado, o devaluar la moneda.

El Dr. Ruchir Sharma ha publicado un extraordinario libro de Política Económica Internacional, titulado Breakout Nations, en el cual analiza el desarrollo de todos los países emergentes. Venezuela no está incluida, fundamentalmente porque viola varias de las reglas fundamentales emprendidas por los países que pueden romper el subdesarrollo y alcanzar niveles medios de ingreso per cápita. Entre los principios formulados como premisas para considerar  un país como “breakout nation” se encuentran, entre los más relevantes (en mi criterio) los siguientes:

1-     Un país exportador de materias primas debe diversificar sus exportaciones para no depender de un solo producto.

2-     Un país debe estar alerta al momento en que los líderes han pasado el período de su utilidad. Cuando los líderes extienden su poder más allá de ese límite, tienden a convertirse en autoritarios y se enfocan en proteger sus propios intereses personales, o simplemente se quedan sin ideas progresistas.

3-     En el último capítulo del libro, el Dr. Sharma establece relaciones entre el crecimiento del PBI y el ingreso per cápita. De acuerdo con The Economist Intelligence Unit, el ingreso per cápita de Venezuela, desde el 2000 hasta el 2005 fluctuó alrededor de los $5,000, desde el 2006 hasta el 2009 ascendió desde cerca de $7,000 hasta $11,700; y desde el 2010 al 2012 ha oscilado alrededor de los $11,000; la proyección para el 2013 (según The World in 2013, de The Economist) es de aproximadamente $13,000. Para ese nivel de ingreso el país debería crecer establemente alrededor del 4%.  Del 2010 al 2012, el crecimiento del PBI fue del 2.1% y la proyección para el 2013 es del 1.4%. Por lo tanto Venezuela no está registrando niveles de crecimiento económico consecuentes con su nivel de ingreso per cápita.

Como punto final en este artículo que sometemos a los lectores es interesante analizar que el Dr. Sharma analiza que el precio del petróleo debe reducirse en los próximos años, como tendencia general de los precios de las materias primas, por las siguientes razones:

(a) el consumo del petróleo está siendo sustituido en forma creciente por  combustibles renovables;

(b) ha crecido el nivel de concientización en cuanto al calentamiento global  y el efecto negativo del petróleo;

(c) la demanda de los países emergentes se está reduciendo por la reducción experimentada desde el 2011 en China, la India y Brasil; y

(d) la producción de alimentos, sobre todo en China, debe experimentar una reducción relativa por el envejecimiento de la población y su menor demanda alimenticia, por lo que se reducirán los gastos de transporte.

En definitiva, si el gobierno de Venezuela no ha sido capaz de crecer económicamente ni de mantener disciplina fiscal a pesar del alto precio experimentado por el petróleo en la primera década de este siglo, es de esperar que si el precio de esta materia prima comienza a descender, la situación financiera de Venezuela, que ya experimenta manifestaciones concretas de deficiencia, deberá desestabilizar la situación política impuesta por el chavismo.

Cualquiera que sean los resultados finales de la elección presidencial del 14 de abril en Venezuela, el nuevo gobierno tendrá que enfrentar una posible situación de austeridad que sería de difícil implementación en las condiciones de alta inflación (que afecta fundamentalmente a los sectores pobres y medios de la población) y alto nivel de criminalidad.

El difícil panorama económico que le espera al nuevo presidente venezolano

lapatilla

Por Eyanir Chinea/Reuters

Durante los 14 años de Gobierno del presidente Hugo Chávez, la economía de la nación petrolera sufrió grandes transformaciones en su camino a un socialismo con firma propia.

En el país con las mayores reservas de crudo del mundo conviven un Estado con alto control de la economía y una empresa privada que se ha ido replegando ante la avanzada de las nacionalizaciones y la dependencia de las importaciones.

A continuación algunos de los retos económicos que deberá enfrentar el sucesor de Chávez:

Inflación

El nuevo mandatario deberá frenar una inflación de dos dígitos que el país soporta desde hace más de 26 años y que se ha mantenido tanto en épocas de crecimiento como en recesión.

El Gobierno intentó contener la inflación con estrictas regulaciones, que aunque lograron reducir la velocidad de los precios momentáneamente, se han convertido en una camisa de fuerza para la producción interna, generando brotes de escasez.

La devaluación de un 32 por ciento en febrero impulsó nuevamente los precios, que en algunos casos se duplicaron de un plumazo, iniciando un nuevo círculo inflacionario que en algún momento creará la necesidad de otra devaluación.

Mercados de divisas y controles 

Venezuela sufre de frecuentes sequías de dólares en medio del control de cambio vigente desde 2003, lo que reduce la disponibilidad de bienes en una economía dependiente de las importaciones e impide a las trasnacionales repatriar capitales.

Del lado de los consumidores, los venezolanos carecen de fórmulas para ahorrar o invertir en moneda extranjera y cuentan con montos limitados para estudiar y viajar al exterior.

El nuevo Gobierno deberá idear una nueva fuente de divisas constante para los demandantes y rentable para el Gobierno.

Durante su gestión interina, Maduro lanzó un sistema de subasta de divisas que en su estreno vendió dólares a un promedio de 14 bolívares, mayor al oficial de 6,3 bolívares. Aunque se espera que esto atizará la inflación, es menos pesado de mantener en términos fiscales que el dólar fijo.

Además, el mandatario entrante deberá lidiar con la escalada del dólar en el mercado paralelo, que es ilegal y ha trastocado la economía al casi cuadruplicar el precio del dólar oficial.

El Gobierno también deberá vigilar los controles de precios que fallan en la revisión constante de los costos de producción en una economía inflacionaria, lo que a menudo deriva en desabastecimiento de bienes controlados.

El tejido industrial venezolano ha perdido grosor en los últimos años y según los privados esto se debe a los controles de precio, la escasez de divisas y la inseguridad jurídica.

Si Venezuela quiere remontar su costosa dependencia de los puertos, debe crear condiciones para fundar nuevas empresas.

Petróleo

La nueva administración deberá encontrar fórmulas para que el flujo de los petrodólares a las “misiones” gubernamentales, que ambos candidatos han dicho mantendrán, no vulnere la capacidad de inversión de Pdvsa, en momentos en que le urge elevar la estancada producción de crudo.

La cuna de las mayores reservas de crudo del mundo también requiere de multimillonarias inversiones en ingeniería e infraestructura que mejoren el bombeo y la refinación para disminuir las costosas importaciones de combustibles, que han subido tras la explosión en la mayor refinería del país, Amuay, que dejó más 40 muertos y cuantiosos daños.

Petróleos de Venezuela (Pdvsa) también debe disminuir su pesada deuda con sus proveedores de servicios, mientras cumple acuerdos para vender crudo a países como China.

Eficiencia gubernamental

Chávez hizo de las nacionalizaciones una marca de su gestión, lo que pasó a manos del Estado una lista de firmas petroleras, eléctricas, siderúrgicas, bancos y telefónicas, así como industrias medianas alimenticias, papeleras y de textiles.

La ola de expropiaciones dejó una estela de más de 20 arbitrajes internacionales por montos multimillonarios que deberán ser enfrentados por el Gobierno, que además deberá velar por la eficiencia de las empresas estatales, cuestionada incluso por el propio Chávez y su candidato Maduro.

Las industrias mineras y transformadoras de minerales requieren de millonarias inversiones que las saquen de su avanzado deterioro, que las hace inviables económicamente.

Deterioro fiscal y subsidios 

Aunque la devaluación le generó al Estado unos 48.000 millones de bolívares para subsanar su déficit fiscal, Venezuela sigue arrastrando el lastre de onerosos subsidios que distorsionan sus cuentas públicas.

Pdvsa  vende la gasolina más barata del mundo y no ha revisado el precio en casi 16 años, además la electricidad y el agua están fuertemente subsidiados.

La infraestructura del país también debe ser remozada, tanto para el tránsito vehicular como en la creación y ampliación de nuevos métodos de transporte que alivien los pesados embotellamientos, especialmente en las ciudades principales.

Las millonarias transferencias de la estatal PDVSA a los proyectos sociales del Gobierno, que abarcan desde la compra de alimentos hasta la construcción de casas, también han vulnerado el flujo de caja de la petrolera, fuente de 96 de cada 100 dólares que entran al país.

* Dinamización del mercado inmobiliario 

El déficit habitacional venezolano llegó a superar 2 millones de viviendas. El Gobierno de Chávez logró reducir la brecha mediante un gran proyecto gubernamental de construcción de casas a precios subsidiados.

No obstante, el mercado inmobiliario adolece de nuevas construcciones privadas y el mercado de renta es prácticamente inexistente. Chávez intentó abordar el problema a través de la regulación de precios de venta y alquiler, así como tasas de interés hipotecarias.

Pero la cartera hipotecaria aún es insuficiente para satisfacer la demanda y los precios de las viviendas se mantienen inalcanzables para el grueso de la población.

Economic Policies of Margaret Thatcher's administration

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thatcheritescot

Behavioral economics at work

PBS

US-Mexico: A reversal of fortune

MercatusCenter

Romer and Hennessey on the Economics of Healthcare

ForaTv

Christina Romer and Keith Hennessey, former leading economists for the Obama and Bush Administrations, respectively, debate the economic impacts of healthcare reform and the sources of increasingly higher medical costs.

An Economist on the Oscars

Dave Berri

Photo: pop culture geek

The “best” picture of 2012 was Argo. 

At least that’s the film that won the Oscar for best picture.  According to the Oscars, the decision to give this award to Argo was made by the nearly 6,000 voting members of the Academy of Motion Picture Arts and Sciences. As Oscars.org notes, “the Academy numbers among its members the most gifted and skilled artists and craftsmen in the motion picture world.”

In other words, this choice is made by the “experts.”

There is, though, another group that we could have listened to on Sunday night.  That group would be the people who actually spend money to go to the movies.  According to that group, Marvel’s the Avengers was the “best” picture in 2012. With domestic revenues in excess of $600 million, this filmed earned nearly $200 million more than any other picture. And when we look at world-wide revenues, this film brought in more than $1.5 billion.

Marvel’s the Avengers, though, wasn’t even nominated for an Oscar. Instead, the following nine films were chosen as the “best” films in 2012 (current world-wide revenues reported after each film). 

• Life of Pi ($583 million)
• Les Miserables ($395 million)
• Django Unchained ($380 million)
• Lincoln ($245 million)
• Argo ($207 million)
• Silver Linings Playbook ($160 million)
• Zero Dark Thirty ($104 million)
• Amour ($18 million)
• Beast of the Southern Wild ($12 million)

After Life of Pi, the combined revenue of the remaining eight films – a list that includes the “best” picture Argo – is still not quite what Marvel’s the Avengers earned.

Despite what seems like a clear endorsement by the customers of this industry, the Avengers was ignored by the Oscars.  Perhaps this is just because I am an economist, but this strikes me as odd.

Movies are not a product made just for the members the academy.  These ventures are primarily made for the general public.  And yet, when it comes time to decide which picture is “best,” the opinion of the general public seems to be ignored.  Essentially the Oscars are an industry statement to their customers that says: “We don’t think our customers are smart enough to tell us which of our products are good. So we created a ceremony to correct our customers.”

The Oscars are hardly alone in the entertainment industry.   We see something similar in the sports industry.  The fans are not generally asked to choose the “best” player in each sport.  Instead, experts (i.e. sports writers) often tell us who is the “Most Valuable Player,” who is an “All-Star,” or who is worthy of the Hall of Fame.

However, what if we asked the customers?

Consider the NBA (a league I often write about). The fans vote for the starters to the NBA All-Star game.  And if we are to believe the fans, the “best” player in the NBA – or the player who received the most votes – was Kobe Bryant. Kobe is also currently the NBA’s highest paid player. So it looks like Kobe is the “best.”

Before we jump to this conclusion, we need to revisit the argument about “best” picture.  This argument focused on the revenue the films generated.  And although Kobe is clearly popular with fans and with the Lakers, it is not clear from this that he generates the most revenue.

A published study I conducted with Martin Schmidt and Stacey Brook indicated that the primary driver of gate revenue in the NBA is wins (not a player’s “star power” and not scoring totals).  Given this research, if we want to identify the player who produces the most revenue we need to first look at wins.

TheNBAGeek, put together by Patrick Minton, reports each player’s Wins Produced (calculation details at the Wages of Wins Journal).  As of the games played on Saturday night, here are the top 5 players with respect to Wins Produced in the NBA in 2012-13.

• Kevin Durant (Oklahoma City): 14.2 Wins Produced
• LeBron James (Miami): 13.2 Wins Produced
• Tyson Chandler (New York): 11.4 Wins Produced
• Chris Paul (LA Clippers): 10.9 Wins Produced
• James Harden (Houston): 9.8 Wins Produced

Keep reading on freakonomics >> 

The Natural Rate of Unemployment in 2013

politicalcalculations

Last March, we estimated what the natural unemployment rate for the United States was given the number of employed and unemployed Americans as well as the job turnover rates for which Americans were being hired into new jobs or let go from their old ones. Here's what we found:

In the tool, the labor market is considered to be overheating when the official rate of unemployment is below the natural rate of unemployment. That's definitely not the case for January 2012, with a natural rate of unemployment of 7.87% and an official rate of unemployment of 8.26%.
The natural unemployment rate of 7.87% also suggests that the current pace of job creation as given by the JOLTS data will not be sufficient to significantly lower the official rate of unemployment, which we've already seen with the February 2012 employment situation report, where the official rate of unemployment came in at 8.27%, up slightly from the previous month.

Let's do the math again, this time with the data available through the end of 2012:

BLS Employment Situation Table A-1 Data
Input Data	Values
Total, Civilian Labor Force, Employed (thousands)
Total, Civilian Labor Force, Unemployed (thousands)
BLS Job Overview and Labor Turnover Table A Data
Total Hires (thousands)
Total Job Separations (thousands)

Natural Rate of Unemployment Results
Calculated Results	Values
Ratio of New Hires to Number of Unemployed (%)
Ratio of Job Separations to Number of Employed (%)
Natural Rate of Unemployment (%)
Official Unemployment Rate (%)
How much slack is there in the labor market?

Running the numbers for December 2012, we find that the unemployment rate at the end of 2012 was 7.85% - just a hair below the 7.87% natural rate of unemployment that we estimated with the January 2012 data we used in our previous calculation. Or rather, the pace of job creation throughout 2012 was not sufficient to significantly lower the official rate of unemployment, just as we expected.
But then, we also find that natural rate of unemployment through December 2012 is 7.63%. When compared to December 2012's official unemployment rate of 7.85%, that suggests that the pace of job creation as given by the JOLTS new hire and new separation data will not be sufficient to significantly lower the official rate of unemployment, which we've already seen with the January 2013 employment situation report, where the official rate of unemployment came in at 7.9%, up slightly from the previous month.
That outcome agrees with our tool's finding for the data of December 2012: there's not a lot of slack in the U.S. job market, so there will be little prospect of significantly altering the official unemployment rate data in the short term.
With that being the case, we can expect little improvement in the official unemployment rate this year, which unless something happens to upset the economy, should slowly converge with the natural unemployment rate. Believe it or not, that's consistent with what President Obama's economic forecasters have predicted for 2013, who foresaw back in July 2012 that the U.S. would have a 7.6% unemployment rate by the end of 2013.

Want to Run Other Numbers for Yourself?

You can get the most recently reported data through the links below!

Employment Situation (EMPSIT)

This report is produced monthly and contains the number of employed and the number of unemployed for the total U.S. civilian workforce. The appropriate data is found in Table A-1 in the data section of the report.

Job Openings and Labor Turnover (JOLTS)

This report is produced quarterly and provides the numbers of those newly hired or who have recently separated from their previous employment in the civilian workforce. This data is found in Table A of the main body of the report.

Just remember not to mix and match the data for different months!