Henry Hazlitt wrote the classic economics primer Economics in One Lesson, originally published in 1946. The short February 9 news story “Toyota to leave Venezuela” could form the basis of a chapter applying “the lesson” (as Hazlitt does in Part Two of the book):
Venezuela’s President Nicolas Maduro says he wants to speak to Toyota’s top official for Latin America after the carmaker said it would stop production in the South American nation.
Toyota said on Friday it would soon halt production at its only assembly plant in Venezuela because the world’s largest automaker lacks hard currency to import parts due to government controls.
The temporary shutdown of the Japanese car maker’s operations in the western city of Cumana is due to begin February 13 and last at least six weeks.
“I have already directed Industry Minister (Wilmer Barrientos) to call in the head of Toyota for Latin America, or have somebody come from Japan,” Maduro said in an address on state television.
The plant produced nearly 9,500 vehicles in 2013.
Companies such as Toyota must go through a complex bureaucratic process to obtain dollars.
Venezuela is only providing dollars at the official rate of 6.3 bolivars to the dollar to importers of designated priority goods such as food and medical supplies.
Others who need dollars to pay overseas bills have to buy them at a higher rate at government-run auctions. Many companies have complained Caracas is not providing them with enough hard currency.
The currency controls have led to shortages of a wide range of basic necessities, and fuelled an inflation rate that reached 56.2 per cent last year.
Last year, 72,000 vehicles were made in Venezuela, down more than 30 per cent from 2012.
USA Today picked up and elaborated on the story last week in “Venezuela car industry slips into idle.”
Reviewing “the lesson” after thirty years, Hazlitt wrote: “The main problem we face today is not economic, but political.” As in the story above, Venezuela provides a perfect case study.
The latest news from Venezuela adds this: “Venezuela leader expels US officials amid protests.” The story quotes Secretary of State John Kerry making another contribution to climate change: “Secretary of State John Kerry said Saturday that [opposition leader Leopoldo] Lopez’s arrest would have a ‘chilling effect’ on Venezuelans’ right to free expression.”