Venezuela’s Meltdown Creates a Nation of Desperate Capitalists

(Bloomberg) -- “The lightbulb lady is here!”

Yessica Vaamonde spends weekends climbing the narrow stairs of Caracas’s biggest slum, Petare, calling out for damaged light bulbs. She offers 30 bolivars each—in cash—which she collects by selling avocados on one of the Venezuelan city’s busiest avenues.

Nestling the bulbs in newspaper, Vaamonde brings them to a windowless, closet-sized room in the Gloria al Bravo Pueblo market, where her husband hunches over them. Jose Ramirez pops the base, unfurls tiny copper wires and mends the intricate innards with the ease of someone who repairs as many as 50 in a day. He resells them for 100 bolivars apiece, a sizable markup, but still well below the 400 bolivars that stores charge for a new one.

Hyperinflation and scarcity have the Bolivarian revolution’s socialist heart pulsing with entrepreneurship. Desperate citizens are eking out a living with ventures such as digging home water wells, bartering bananas for haircuts and transporting commuters in animal-cargo trucks. The economy’s erosion has created markets and market players where none existed.

“I had to improvise in this crisis,” said Ramirez, 31, who always had a knack for fixing things, tinkering with television remotes and microwaves. “Many people today have to pick food over buying things like lightbulbs. I do things well, and I help them afford a good product that will last.”

In Venezuela, products of any quality are ever scarcer as the nation’s leaders have vowed “country, socialism or death.” The oil revenue that allowed late President Hugo Chavez to nationalize thousands of companies has evaporated. Venezuela’s government has expanded its control over most of the economy, from food distribution to foreign-currency exchanges.

Food shortages are rampant and oil production in the former petro giant is half what is was in early 2016. President Nicolas Maduro’s attempts to stop the tailspin have been ineffective.

“This Draconian effort to expand the state’s influence over any and every circle of life and business has created a black market for everything it touches,” said Omar Zambrano, a Caracas economist who offers consulting services.

The call to capitalism is primal. As soon as humankind graduated from hunting and gathering, markets emerged. The first formal institutions seem to have begun in the Fertile Crescent. On the Micronesian island of Yap, seafaring explorers brought massive limestone discs from afar to serve as stationary, monumental currency. Today, markets are ubiquitous for everything from sports tickets to Wall Street deals conducted in milliseconds. But in Venezuela, commerce is returning to an earlier era of experimentation and invention.

“When you think of cases such as the Soviet Union or China, both economies were characterized by scarcities and, despite significant state ownership, a very large amount of the economy was supported by entrepreneurial activity,” said Geoffrey Jones, professor of business history at Harvard Business School. “In some cases, it’s actually what has kept the places going. You see regimes tending to tolerate them, because they know the consequences for them if they don’t.”

With few Venezuelans able to buy anything new, entire markets are filled with booths where one can get mobile phones or microwaves fixed. Seamstresses and cobblers have moved into shops that once sold new clothes and shoes. As thousands flee the country, street ads offer to buy gold and silver or melt it into something new. A cryptocurrency craze has people running computers day and night, taking advantage of practically free electricity to “mine” the tokens. Some live entirely by procuring impossible appointments at government agencies or by turning bolivars into dollars through black-market arbitrage.

The ubiquitous street vendors look different nowadays: They don’t hold out peanut bags stuck to cardboard or trays of cigarettes. People have little money for such small luxuries. Instead, they holler “bleach!” while carting non-branded bottles, trading items for cooking oil and protecting stacks of toilet paper from the rain under plastic sheets.

Near Petare, the Gloria al Bravo Pueblo market is a dark, concrete maze of small rooms, like a giant storage facility buzzing with artisans of every kind. Amid shouts, hammering and the clatter of metal shutters, they fix old sewing machines, mend wedding dresses and rewire water heaters all under the same roof.

Yhoan Guerrero, 33, worked as a paramedic in Caracas until he couldn’t live on the salary. Then, noticing the rising price of car tires, the father of one learned to sew, patch, fill and shape busted tires and now makes almost four times as much. He calls the process “complete tire surgery.”

“We save people around here,” said Guerrero, his hands darkened with grease and rubber, while using his weight to pry a tire from its rim. “With the country being how it is, no one can afford a new tire. I’ve built a loyal clientele in the past seven months. They want no one else touching their tires.”

With a colleague, he performs about seven tire surgeries a day in a garage-sized shop in western Caracas, all while juggling simpler repairs. An average surgery will cost about 1,000 bolivars, or about $7.70, he said. New tires start at about $60 at shops around the city —while the monthly minimum wage is worth about $15.

Often people will come in begging for a cheap fix, he said. In those cases, he’ll fill their tires with plastic foam and melt it with gasoline; other times he’ll use sawdust and liquid soap. “It gets them moving again.”

“Most Venezuelans didn’t have to struggle to make it because they lived off of oil for a very long time,” said historian Tomas Straka, a professor at Andres Bello Catholic University in Caracas. “We’re seeing a new phenomenon under the worst of circumstances.”

To contact the editor responsible for this story: Daniel Cancel at dcancel@bloomberg.net, Stephen MerelmanMelinda Grenier

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