Rent Control in Barcelona, and Caso Koldo Returns – random thoughts #14

October 12, 2024

Today is October 12th.

When I was a kid, back in the US, we celebrated Columbus Day on this day.

That’s not a popular thing to do anymore.

But when I moved to Madrid, back in 2004, I found that Columbus Day was alive and well in Spain, as Día de la Hispanidad.

There’s a big military parade on La Castellana, complete with fighter jet flyovers and representatives from the armed forces in many Latin American countries. It’s quite a scene.

Plaza de Colón in Madrid.

Here in Catalonia nobody’s celebrating, of course, because they have certain objections to the concept of “Spain”. A few years ago I heard they were even letting government employees work on both October 12th and December 6th (for Constitution Day).

Whether a lot of funcionarios ever decided to show up at the office because they felt unrepresented by the Spanish holidays is not clear.

Today the big news is about Caso Koldo. More about that later.

In the meantime, the public TV, Televisión Española, is going to be showing a documentary in which – after more than 20 years of DNA testing – they finally reveal whether Columbus was Spanish, Italian, or… something else.

I’m not holding my breath on that one, and anyway, I don’t own a TV. I guess I’ll find out via push notification tomorrow. Or I’ll completely forget about it.

In any case, and without further ado, it’s time for some random thoughts.

The real effects of Barcelona’s rent control

I’m reading Basic Economics by Thomas Sowell.

It’s a book I wish I had read 20 years ago – it makes a lot of things happening in the world much clearer.

For example, most people have a vague notion that supply and demand effect price.

In my article about the olive oil crisis, it’s pretty obvious. A drought in Andalucía reduces supply, and prices go up. Some people move to substitute goods – I personally started buying more butter. That’s how price affects demand.

Less obvious is the fact that price affects also affects supply. And if price is manipulated by the government, that will have an impact on both supply and demand for goods.

In Spain, these days, almost every day there’s a new article about the housing crisis. And it’s interesting that Basic Economics explains so much of what’s going on.

A good example is rent control. Here in Barcelona, the government is implementing a complex rent-control scheme. And not coincidentally, the supply of flats available to rent dropped immediately.

Also near Plaza Colón.

According to a recent article, in fact, the number of leases signed dropped 17% in the second quarter of 2024. Because if the government lowers the price, supply will decrease.

Sowell explains in various chapters that it’s not necessarily that politicians are unable to solve supply and demand problems. It’s just that their incentives are different: they need to get re-elected, and rent control sounds great to a large segment of the population. By the time its full effects are being felt, they’ll be doing something else.

In this case, landlords can just take flats off the market, or put them on the temporary rental market where price controls don’t exist. It’s a controversial-sounding statement, but Sowell argues it pretty well: that rent control reduces supply, and therefore eliminates options for those who most need cheap rentals.

Pirate hostels and shantytown rentals

On the other hand, if the price goes up, new supply will be created. People see high prices, and want to get some of that money.

This explains a couple of other stories I’ve seen recently: the unlicensed hostels in Madrid, where people sleep on inflatable mattresses with no amenities at all, and a story out of Ibiza about someone who’s renting out tents in a shantytown on AirBnb.

(Apparently, in Ibiza, a room in a shared flat costs 1000€ a month these days. And at that price, people are willing to create new supply to meet the high demand.)

Another thing that affects supply is government subsidies: if the government has a lot of money available for some project, a supply will be created even though nobody wants or needs it.

Perhaps you remember the construction boom previous to the Great Recession, when suddenly almost every provincial capital had an international airport and high-speed train stations were popping up in the middle of vineyards: that’s because artificially high prices (more demand) creates supply seemingly out of nowhere.

In this case, it was the European Union that had lots of money to spend on infrastructure. Artificial demand is still demand, and so, the infrastructure was created.

Spain now has 11 “ghost airports” in areas with little need for them, and a network of high speed trains rivaling the one in Japan (despite about a third of the population).

The Revenge of Caso Koldo

In other news, Caso Koldo is back.

I wrote about this months ago: something about members of the Socialist party earning millions by selling surgical masks through anonymous shell companies during the pandemic.

The details are pretty boring, but this week we learned that members of the alleged plot were using secret phones to speak in code about the deals they were making.

Nobody’s on trial yet, but a couple people have been arrested.

And I can only think of two reasons why you’d need a secret phone: one is adultery, and the other is criminality.

By the time you’ve got a group of people together, using secret phones to talk about your anonymous shell company, you’ve left the appearance of innocence long behind.

At the center of the scandal is José Luis Ábalos, who was for a time Minister of Transport – and who was allegedly receiving money and / or gifts in exchange for influencing the government’s decisions. He was pretty close to Pedro Sánchez for a time, and he and his friends may have had some influence on the 435 million euro bailout received by Air Europa during the pandemic.

But he also, for example, had a girlfriend who was in her early 20s and who was living in a luxury flat paid for by one of the supposed members of the plot. The newspaper La Razón goes so far as to suggest that this girl was also receiving up to 1500€ a day to “accompany” Ábalos on his trips to Dubai.

Oh my! The scandal…

Here in Spain, a member of government exchanging money for female companionship isn’t really a scandal in itself. If the money comes from shady sources, then it’s an issue.

In this case, the shady source is businessman Victor de Aldama, who was arrested a few days ago in a seemingly-unrelated case involving 182 million euros in tax fraud.

But I don’t know. Paying 2700€ a month so that someone else’s girlfriend can live in a skyscraper sounds like a totally normal thing that guys do for their bros. And making sure she has spending money on vacation in Dubai? We can’t all have a government minister’s salary, can we?

I could be totally wrong here: maybe people all over Spain are starting shell companies on the off chance they’ll receive millions of euros in government funds in totally legitimate ways.

(In case you weren’t aware, a shell company is a corporation that doesn’t do any regular business, or have employees, but stays dormant in case someone needs to move large amounts of funds discreetly.)

In this case, the shell company associated with Koldo García, who gives his name to the whole shady business, is in Zaragoza and apparently only exists as a small office with nobody to answer the door or the phone.

I believe the whole scandal started when the dust from the pandemic settled and someone in the government looked around and asked “Why exactly did we spend 20 million euros on surgical masks from a company with no previous billing history?”

A visit from Delcy Rodríguez

Possibly related to all this, an early-2020 visit to Spain by Delcy Rodríguez, Vice President of Venezuela.

Despite EU sanctions preventing Rodríguez from entering Europe, she organized with Ábalos to land her plane at Barajas airport in Madrid. According to El Mundo, Ábalos got on the plane, along with Koldo García. The rest is unclear, but apparently involved an exchange of briefcases.

Is this the same story as Prime Minister Sanchez’s wife being investigated for corruption?

I can’t really tell… it at least appears to overlap, in the sense that she also had ties to Air Europa (which was bailed out by her husband’s government).

And guess what?

The Venezuelan government owed more than 100 million euros to Air Europa as well. And Aldama (the guy paying rent for the Minister’s girlfriend) had a contract to try to get that money back. All this might explain why the Vice President of Venezuela dropped in just to unload some briefcases…

I guess we’ll find out. Or we won’t.

Corruption, corruption everywhere

Like I’ve said many times, these corruption cases tend to be pretty boring. They also take a long time to develop, and we could have 12 new scandals involving other politicians before the judges get around to bringing this to trial.

There’s a possibility that Caso Koldo will just disappear – and I guess there’s also a possibility that they’ll implicate Pedro Sánchez in something big before it’s over. We’ll see.

free speech in spain
Lion outside Spain’s parliament building.

To be fair, the previous Prime Minister was also involved in some corruption.

Remember Mariano Rajoy?

He lost a vote of no confidence when judges found his party had been passing around envelopes full of undeclared money for years. That was called Caso Gürtel, you can google it. And although Rajoy himself wasn’t convicted of anything, it seems more than probable that he knew all about it.

So it’s not just the Socialists who do shady things from time to time. It’s (probably) all the parties – or at least the more successful ones.

Party in the USA – the 2024 election

Finally, the 2024 presidential election in the US is right around the corner.

I’m not the kind of person who sits around thinking that the government is going to solve all my problems. Hopefully you aren’t either.

(They could very well cause me some new problems – that seems much more likely, to me.)

Anyway, the other day I logged in to the website to vote from abroad, looked at the candidates on the ballot, and just couldn’t do it. I couldn’t bring myself to vote for either of them. Sigh.

I guess I will, eventually, vote for someone.

(“Eventually” meaning before November 5th.)

But for now, I’m exhausted by the idea of choosing between two people – and two parties – I don’t actually like.

Maybe I’ll go start a shell company, while I procrastinate here. Or text my bros on my secret phone, to see if any of their girlfriends’ rent needs paying.

That’s all I’ve got for today.

Have a good one.

Yours,

Daniel AKA Mr Chorizo.

P.S. Recently I wrote about social class in Spain also, and I kind of wish I’d read what Thomas Sowell had to say before doing so. Anyway, check that one out. And you might also enjoy my article about paying for female companionship, AKA prostitution in Spain. Have fun!

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About the Author Daniel

How did I end up in Spain? Why am I still here almost 20 years later? Excellent questions. With no good answer... Anyway, at some point I became a blogger, bestselling author and contributor to Lonely Planet. So there's that. Drop me a line, I'm happy to hear from you.

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  1. Amazing stories with a little bit of everything (spice) I can totally relate to your writings. For is also my 20 th anniversary in Spain, Barcelona, Sant Cugat, and couldn't help to feel at ease and happy to have discovered the Chorizo Chronicles.
    Would keep on reading you !
    Thanks for sharing
    Flo

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