Amid the political turmoil of Washington’s attempted coup, Venezuela’s socialist utopia has sparked an entrepreneurial spirit among its repressed citizens who are making 1000% returns, taking advantage of the distorted centrally-planned economy’s prices for goods, by crossing the Colombian border with gasoline, flour, rice, and cheese spread.
While the west attempts to send truckloads of ‘humanitarian aid’ into Venezuela – currently blocked by President Maduro – enterprising smugglers are flooding ‘cheap, subsidized’ goods out of Venezuela to sell at dramatic markups on the side-streets of Colombian border towns.
As Bloomberg reports, market shelves in the scruffy Colombian town of Puerto Santander are loaded with Venezuelan maize flour, rice, cheese spread and more, heavily subsidized consumer goods smuggled by government officials and ordinary citizens alike and sold at big mark-ups.
Commerce is brisk at the market stalls in Puerto Santander, where packets of Venezuelan maize flour that are used to make arepas, a staple in both countries, go for 2,500 pesos, or about 80 cents. That’s some 30 percent less than what Colombian groceries selling licit products charge. And in Venezuela? The subsidized price for the flour is about 7 cents.
Additionally, gasoline is ferried from Venezuela too, as people cash in on the arbitrage opportunities created by extreme price distortions.
Venezuelan gasoline is the cheapest in the world…selling for the equivalent of $0.01 per gallon.
But, as Bloomberg notes, along a nearby highway in Colombia, dozens of makeshift gasoline stations openly sell Venezuelan fuel. The going rate: $10.60 for a six-gallon jug, compared to $14 at a local regulated Colombian pump. And there were none of those anywhere in sight on the highway.
That’s quite a return, but as Bloomberg points out, armed gangs that control the commerce charge a tax of 4,000 pesos, the equivalent of $1.30, for every container. Since gasoline in Venezuela is virtually free, the biggest costs are bribing officials in that country and paying off the mafia in Colombia. The mark-up on the contraband petrol can dwarf what cocaine traffickers make.
In the past, the two governments have worked together to crack down on this greatest arbitrage in the world, but since the political turmoil has exploded, no more.
“There’s no communication now,” said Colonel Carlos Giron, head of the customs police in the Colombian province of Norte de Santander, even “with a border as turbulent as this one.”
However, while gasoline is still plentiful in Venezuela, the latest U.S. sanctions – imposed last month on the state-owned oil company – could lead to supply disruptions, and ruin the greatest arbitrage trade in the world.