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In Venezuela, no toilet paper and now lousy phone service

Things in Venezuela keep finding ways to get worse. Because of acute shortages, people can’t find basics like toilet paper. Now, it will be harder to make overseas calls or watch pay TV. The problem is this: the global drop in oil prices has made dollars much more scarce in Venezuela – which is dependent almost totally on petroleum for hard currency. So local telecoms companies don’t have greenbacks to pay international suppliers.

President Nicolas Maduro’s leftist government controls the currency market, and distributes dollars to private companies as it sees fit. The government owes local companies around 700 million dollars, which these firms need to honor obligations with foreign providers, according to the Chamber of Telecommunications Services Companies.

So as a result, for instance, the Spanish telecoms giant Telefonica will temporarily suspend this week long distance phone service for calls to countries such as the United States, Spain, Mexico, Italy, Brazil, Colombia and Panama. Mobile phone company Digitel, which is privately owned, has halted long distance calling services and international roaming since April 9 because it cannot reach agreement with providers on new payment timetables.

But it is not just telephone service that is affected. State-run television company Cantv, which provides cable service says it is reviewing contracts with providers of local and international content. That means there is less to watch on TV in Venezuelan living rooms. “For two weeks now, I have lost six of my favourite channels,” complained Isael Gonzalez, a 46-year-old motorcycle taxi driver and Cantv subscriber. “They were the ones showing movies and cartoons – so I decided to unplug the whole thing. What use is it if the channels I like are off air?”

Drisley Petaquero, 36, also said several channels had been cut from her father’s Directv pay-TV service. “Especially the ones showing comics – there used to be five and now there are just two,” she said. “He complained to the company and they told him they were performing maintenance work.”

The state regulator, the National Telecommunications Commission, admits there is a problem and blames the lack of dollars. The government says Venezuela’s oil revenue went from 37.2 billion dollars in 2014 to 12.6 billion dollars last year. And the country is saddled with commercial debts of 12.5 billion dollars. Companies are desperate to raise rates.

Industry sources say that Telefonica’s mobile branch Movistar was given permission in 2014 to raise its rates by 35 percent, while inflation was running at 68 percent; in 2015 it won a 35 percent rise, with inflation at 181 percent. A basic home bundle – cable TV, a land line and wireless Internet is cheap in Venezuela: around 1,100 Bolivares, which is equivalent to 3.54 dollars or even less than a dollar, depending on which of several exchange rates you use. Still, regulators denied local operators permission to rate their rates in February and March.

The operators say they need a rate hike badly because foreign providers’ costs are rising in the wake of a 37 percent devaluation of the Bolivar in February and because of rampant inflation. All the debt and the delays in gaining rate hikes also mean the sector cannot make the investments it needs – an estimated billion dollars a year. With prices so low, Venezuelans are tripping over each other to sign up for cell phone and mobile Internet packages. But the industry cannot keep up because of the lack of investment, the chamber of commerce said.

So networks will become saturated and service will decline, the chamber said in a recent report. Venezuela is one of Latin America’s biggest consumers of mobile data. The country has 65 percent penetration in cable and satellite TV, and 99 percent cell phone penetration, regulators say. All this comes on top of the day to day problems Venezuelans face just trying to buy basic necessities like food and medicine. This also stems from the shortage of dollars. The economy contracted 5.7 percent in 2015.

Ernesto Tovar Alexander Martinez, "In Venezuela, no toilet paper and now lousy phone service," Business recorder. 2016-04-17.
Keywords: Economics , Export sales contracts , Operator theory , Investments--Effect of inflation , Devaluation of currency , Growth regulators , Dollar , American (Coin) , United States , Spain , Mexico , Italy , Brazil , Colombia , Panama , Venezuela