CARACAS // Owners of the 1970s-era fuel-guzzling trucks and sedans that have long reigned over Caracas’ smog-filled roadways will soon have to pay a bit more to keep flaunting their energy-inefficient monsters.
As an economic crisis drains government coffers, President Nicolas Maduro is putting motorists on notice and taking on one of the nation’s biggest sacred cows: nearly free petrol. With cut-rate prices for fuel, Venezuelans have never felt compelled to buy smaller, more environment-friendly vehicles like motorists in many other countries.
Venezuelan fuel prices have been frozen for almost 20 years, with politicians hesitant to repeat the mistake of raising prices in 1989 that triggered days of deadly rioting. The late president Hugo Chavez once confessed it pained him to practically give away fuel to luxury-car owners, but during 14 years of rule he never dared to touch the subsidy that consumes upward of Dh46 billion a year in government income.
But all good things must come to an end. For Venezuelan motorists, to whom cheap gas is something of a birthright and fuel efficiency a foreign concept, that means having to pay more than the 18 fils a gallon (3.8 litres) that petrol currently costs.
For now, motorists seemed unfazed by the idea of paying more at the pump because it is not known how much prices will rise. Mr Maduro, meanwhile, is testing the political waters to see if Venezuelans already squeezed by 54 per cent inflation and a collapsing currency are willing to pay more to fill up.
Mr Maduro said last week he favoured raising prices gradually over three years, making sure it did not add to inflation.
“As an oil nation, Venezuelans should have a special price advantage for hydrocarbons compared to the international market,” the former bus driver said. “But it has to be an advantage, not a disadvantage. ”
Politically, it is now or never on raising fuel prices. Venezuelans are not scheduled to go to the polls again until late 2015, which gives Mr Maduro a rare opening to push unpopular reforms that analysts say are long overdue. Coupled with a devaluation of Venezuela’s currency, the bolivar, eliminating the fuel subsidy will help close a budget deficit estimated at 11.5 per cent of gross domestic product, among the world’s largest.
Unlike the well-maintained 1950s-era American automobiles gracing the streets of Communist Cuba, Mr Maduro’s staunchest ally, there is nothing majestic about Venezuelans’ beloved steel behemoths.
Most of their cars are clunkers, Dodge Chargers and Chevy Malibus from a bygone era. Some are held together with wire and rope, and driven as unregulated taxis that take the place of public transport in major cities.
Ruben Ruiz, 47, is the proud owner of one: a battered 1975 Ford LTD station wagon that keeps him gainfully employed transporting everything from eight passengers at a time to crates of fresh fruit.
Mr Ruiz bought the car new during the height of the oil boom known as Venezuela Saudita, or Saudi Venezuela, when a super-strong currency spurred frequent foreign travel and frenzied consumption.
He said modern cars do not afford the same heft or baggage space and, having paid for his initial investment several times over with the cheap price of petrol, he could easily afford to pay a little more to fill his 60-litre tank every two days.
Despite the mounting economic troubles and deep political divisions, it is hard to imagine a repeat of the deadly looting triggered in 1989 when the then president, Carlos Andres Perez, raised fuel prices as part of an austerity package pushed by the International Monetary Fund. The unrest, in which at least 300 people died, remains a powerful deterrent against policies affecting people’s wallets.
Mr Maduro himself has taken care to dismiss any parallels. “We don’t come from the neoliberal school,” he said, referring to free-market policies that Chavez rallied Latin American leaders to oppose.
Indeed, Mr Maduro is selling the price hike by promising to reinvest the savings to build schools and homes. It is a path pioneered by Indonesia, which cushioned the effects of a 44 per cent fuel increase in June with Dh3.3bn in cash transfers to the poor. In 1998, an IMF-mandated fuel increase sparked protests that toppled the three-decade Suharto regime.
But in Indonesia, prices at the pump are 50 times higher than what Venezuelans currently pay. Even if the government raises prices to the level it says is needed to cover production costs, a litre will still cost only about 2.50 bolivars, compared with 12 bolivars for a litre bottle of water
The distortions created by such a low price are easy to spot. Lines at petrol stations get longer every year as more cars come on the road, pushing up per capita gas consumption that is 40 per cent higher than in any other country in Latin America, according to Lucas Davis, an energy specialist at University of California-Berkeley.
The subsidies also contribute to pollution, encourage the smuggling of oil to neighbouring nations with much higher prices and handicap the state petroleum company’s efforts to develop the world’s largest oil reserves.
* Associated Press
UAE and Russia in numbers
UAE-Russia ties stretch back 48 years
Trade between the UAE and Russia reached Dh12.5 bn in 2018
More than 3,000 Russian companies are registered in the UAE
Around 40,000 Russians live in the UAE
The number of Russian tourists travelling to the UAE will increase to 12 percent to reach 1.6 million in 2023
Real estate tokenisation project
Dubai launched the pilot phase of its real estate tokenisation project last month.
The initiative focuses on converting real estate assets into digital tokens recorded on blockchain technology and helps in streamlining the process of buying, selling and investing, the Dubai Land Department said.
Dubai’s real estate tokenisation market is projected to reach Dh60 billion ($16.33 billion) by 2033, representing 7 per cent of the emirate’s total property transactions, according to the DLD.
THE SPECS
Engine: 6.75-litre twin-turbocharged V12 petrol engine
Power: 420kW
Torque: 780Nm
Transmission: 8-speed automatic
Price: From Dh1,350,000
On sale: Available for preorder now
NO OTHER LAND
Director: Basel Adra, Yuval Abraham, Rachel Szor, Hamdan Ballal
Stars: Basel Adra, Yuval Abraham
Rating: 3.5/5
Globalization and its Discontents Revisited
Joseph E. Stiglitz
W. W. Norton & Company
A MINECRAFT MOVIE
Director: Jared Hess
Starring: Jack Black, Jennifer Coolidge, Jason Momoa
Rating: 3/5
The National's picks
4.35pm: Tilal Al Khalediah
5.10pm: Continous
5.45pm: Raging Torrent
6.20pm: West Acre
7pm: Flood Zone
7.40pm: Straight No Chaser
8.15pm: Romantic Warrior
8.50pm: Calandogan
9.30pm: Forever Young
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Ms Yang's top tips for parents new to the UAE
- Join parent networks
- Look beyond school fees
- Keep an open mind
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Send “thenational” to the following numbers or call the hotline on: 0502955999
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Killing of Qassem Suleimani
Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
UAE v Gibraltar
What: International friendly
When: 7pm kick off
Where: Rugby Park, Dubai Sports City
Admission: Free
Online: The match will be broadcast live on Dubai Exiles’ Facebook page
UAE squad: Lucas Waddington (Dubai Exiles), Gio Fourie (Exiles), Craig Nutt (Abu Dhabi Harlequins), Phil Brady (Harlequins), Daniel Perry (Dubai Hurricanes), Esekaia Dranibota (Harlequins), Matt Mills (Exiles), Jaen Botes (Exiles), Kristian Stinson (Exiles), Murray Reason (Abu Dhabi Saracens), Dave Knight (Hurricanes), Ross Samson (Jebel Ali Dragons), DuRandt Gerber (Exiles), Saki Naisau (Dragons), Andrew Powell (Hurricanes), Emosi Vacanau (Harlequins), Niko Volavola (Dragons), Matt Richards (Dragons), Luke Stevenson (Harlequins), Josh Ives (Dubai Sports City Eagles), Sean Stevens (Saracens), Thinus Steyn (Exiles)
