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In Defense Of Bachaqueros

August 30, 2015

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In the beginning, there were arbitrageurs, those that perform a risk free operation, whereby you take advantage of differences in prices, to buy a good cheaper that you can sell it somewhere else and make a profit. These types of arbitrage opportunities may arise because of geographical differences, or due to the presence of borders or even long distances. Arbitrage is as old as markets have existed, people are always looking for profit opportunities and if they involve no risk, they become very attractive. In general, arbitrage reduces the difference in price between the two items, making markets more efficient. If prices are more expensive in Caracas for say lettuce, those that produce lettuce will take their product to Caracas, as long as transportation costs are less than the difference and local prices will drop.

Arbitrage is at least as old as Rome, one of the first few markets that had some level of organization. Since then, arbitrage became common in finance, when numerous ways to arbitrage markets were implemented. Of course, the more these arbitrage opportunities, the smaller the differences become, but sometimes arbitrage is possible only if you have capital, a technological advantage or some legal advantage. As examples, people do arbitrage in minute and temporary differences in currencies, but they do with such large capitals that the profit is significant. Others arbitrage, for example, the price of shares that trade in local exchanges and those that trade abroad; local brokers have the advantage of direct access to local trading, while having accounts abroad to sell or buy the shares they buy or sell locally. There are costs involved, but sometimes those opportunities arise. As another example, organizations arbitrage the price of the stocks that are part of a stock index, against the purchase (or sale) of the individual stocks, whenever this is possible.

And then, there are bachaqueros…

Bachaqueo is an activity that, until recently, was nothing more than the geographical arbitrage of gasoline. Over the years, Colombia has always had higher gasoline prices, not only because its price has always been at international levels, but also because it imposed higher taxes than Venezuela on it. Meanwhile, on this side of the border, gasoline has always been cheaper at the wholesale level, because Venezuelan politicians have always set the price below international prices. There has always been a feeling that this was some form of “birth right”.

While many people think that the origin of the term bachaquero is somehow due to the town of Bachaquero in Zulia State, the truth is that the term arises from the large ants near the border, called “bachacos”, which cut leaves from plants and bring the pieces back to their nests, mostly at night, forming a long caravan. These bachacos can carry more than their weight, are very strong and can remove  all leaves from a plant in one night.

And the origin of the term bachaqueo and bachaquero for gasoline smuggling arose because when price differences were small, bachaqueros, mostly in the border between Zulia State and Venezuela, would cross the border at night, each person carrying a drum of gasoline on their back, heavier than each of them, all in a single caravan, either to bypass the authorities, or to go precisely using the path where the authorities had been bribed.

Of course, as the difference in price between the two sides became wider, the business became more organized. As chips were introduced to control traffic even more, the bachaquero caravan was replaced with long lines of drums, long lines of 350 trucks and more modernly, long lines of gasoline trucks, controlled by Mafias on both sides of the border. I posted this picture a year ago:

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However, as shortages became more prevalent and the Bolivar depreciated even further, the term bachaquero and bachaqueo was extended. It became a fully conjugated verb, as more and more people at all levels of society saw the opportunity for arbitrage, not only between Venezuela and Colombia, but also within Venezuela with those items that are hard to get.

Venezuelans at all levels, have become the ultimate arbitrageurs, finding that arbitrage is very profitable in the presence of widespread distortions and shortages, with gasoline, food, pharmaceuticals, you name it.

And as the Government began demonizing bachaqueros and bachaqueo, very successfully I must say, people have started buying the story of how bachaqueo is the source of our problems.

But not only has the Government created the distortions that gave rise to these arbitrage opportunities, whether legal or illegal, but it has been doing it ever since it began controls in 2003:

-It was arbitrage (Bachaqueo?) when the Government began selling bonds in US dollars in order to relieve the pressure  in the parallel market in 2004. People would sometimes buy these bonds, turn around and sell them and immediately sell the dollars in the then legal permuta market, making a profit. There was some risk, but it was minimal. And the Government did it over and over again.

-It was arbitrage (Bachaqueo?) when people asked for their CADIVI dollars and immediately turned around and sold part of their dollars in the parallel market in order to pay for their trip or part of it. And this certainly was not legal.

-And it was arbitrage (Bachaqueo?) when people asked for foreign currency to study abroad and as they received the money, immediately turning around, sell the dollars and with a fraction of them, pay for the whole education.

-And my imaginary friend Oligarco Burguesito was a bachaquero, as were raspa-cupos (credit card scratchers), importers who over billed, my “Buhonero del Aire” (Airborne street vendor) friend who would go to Miami, come back with a suitcase full of veterinary pharmaceuticals, which he would sell at exorbitant prices because of shortages.

-And, of course, the ultimate crooked arbitrageours and bachaqueros, were those “insiders” that in 2012 alone requested dollars for imports that never arrived and made US$ 22 billion in profit, importing nothing, according to former Minister Giordani.

And I could go on…

But you get the point, few Venezuelans have not participated in some form of bachaquerismo and now is not the time to get outraged over it. The Government is now demonizing them and carefully chose the Barrio “La Invasión” in the border between Tachira State and Colombia to make the point and blame these poor Colombians for the shortages created by the Government’s stupid economic policies. Promoting hate and xenophobia in the process, all in the name of obtaining votes.

And it wants to make believe that closing the border between ten Tachira municipalities and Colombia will solve the problem, as if the organized bachaqueros used the Simon Bolivar bridge or formal roads to take their stuff to Colombia.

Or for that matter, to Guyana, Brazil or the Caribbean islands. (Take a Peñero full of rice sacks which cost Bs. 400 in Venezuela to Aruba and sell them each at Bs. 8,000 and you make more than the salary of a high Executive in bank in Venezuela, in just one trip)

In fact, it is well known that the large volume traffic, where millions (or billions) of dollars are made, goes through dozens of dirt roads mostly between the Venezuelan and Colombia’s Guajiras, through Zulia, not Tachira State. And those roads, or well developed “trochas” are controlled by the Venezuelan military, the Colombian military, the indians, the paramilitary, etc, but if you pay a bribe at each stop, you can get your trucks through.

It takes a few trucks to take the estimated 70,000 to 80,000 barrels of gasoline through the Colombian border.

And individual bachaqueros move only a fraction of that.

And I have yet to hear the Government jail or charge a single military officer for allowing these large scale bachaqueo to go through the border. And Maduro totally avoided this question in his “press conference” with the international press last week.

In the end bachaqueros are economic agents. If economics is about the allocation of scarce resources to satisfy the unlimited needs of the people, bachaqueros have become the ultimate agents of arbitrage, allocation and distribution of goods in Venezuela.

In one of the few finance courses I ever took, the first slide said: “When Governments create or change rules there is an opportunity for arbitrage or profit”. Bachaqueo and Bachaqueros are just the result of an absurd and infinite number of rules and controls imposed by Chavismo on the Venezuelan economy since 2002.

Blame Chavismo, not them.

And certainly don’t blame the poor Colombians from La Invasion, who have been cheated, abused, denied due process and pushed into rivers like animals, like the picture above, forced to leave what they called home for the last ten years. All under the supervision of the “Bolivarian” Armed Forces and Police. Símón Bolivar would be ashamed of the both the name and the actions.

And so am I.

The Devil Meets Forces Beyond His Control

August 28, 2015

A couple of days ago, I wanted to do a post about the current crisis in the Venezuela-Colombia border and when I tried to go to the Editor, this is what I found:

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You can imagine my surprise. Over the years I have encountered threats and suits, but I had never had trouble posting over such a vague “concern” and obviously worried about what it was that WordPress had concerns about.

I wrote back and I got a message that said something like:

After the receipt of a valid report regarding the publication of private/personal information forbidden by our Terms of Service, posting access to your WordPress.com site has been disabled. If you would like to delete the information in question from the above posts or pages, the site may be returned to normal. If you feel otherwise, you are free to export your content and move it to a more appropriate WordPress host

Thus, it was move or die…

The post in question was a 2009 post containing information that is widely available on the web, so it seemed more important for me to continue posting and I offered to remove the material, thinking they would do it. I also noted that the material is widely available, inclusively in other wordpress blogs. I also told them that I disagreed with the procedure of stopping me from posting first and later asking me to remove the material. They were basically blocking me from posting without me having any alternative.

At this point I got this response:
I have temporarily lifted the suspension, but will have to suspend the site indefinitely if you are unable to comply with the request.”

Of course, the problem is that I still did not know what the “request” was, since the precise “information” that was forbidden in the Terms of Service was never specified. Since I did not know the specific material, I went ahead and deleted the post, which was from 2009.

I am, of course, deeply disturbed by all this. I have simply met forces beyond my control. Someone can go to WordPress and complain and without any context, my site can be blocked if I don’t agree to remove the material. It seems I have few rights, unless I want to get into  a long-winded fight, while I am unable to post, at a time that it seems very important to post about what is going on in Venezuela.

And being able to post seems to be what is important at this time…

Even more ominous, it seems as if bloggers have little power to fight this, as blog sites are more concerned with not incurring in costs associated with defending the right to say things, than allowing for the truth to be told.

The case involved, as I said, is irrelevant to current Venezuela, but this leaves a very bitter taste in my mouth. because there are forces out there that are more powerful than those that speak and defend the truth, and it is difficult for us to defend ourselves.

And wordpress is just taking the easy way out, which makes me mad and certainly will push me into considering an alternative. If my blog could simply be suspended overnight without me having even the possibility of defending myself, I certainly don’t want to live in this neighborhood ans feel defrauded by the “wonderful” WordPress platform that was supposed to “grow” with me…

NOTE ADDED: Out of the blue wordpress reached out to me apologizing for not being specific and pointing out the material which violated the Terms of Service and letting me know that I can keep the rest of the post up. I will do so as soon I can reconstruct it as I am traveling. The post was made on Dec. 17th. 2009 for those interested. 

Venezuela And Colombia: A Joint Future

August 17, 2015

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I was in Colombia last week. As the price of oil hit its lower level in five years, the Colombian peso was reaching a five year bottom, Bogota’s real state prices were dropping, the economy was slowing, but most people in Bogota seemed to be thinking, real state can not get lower than this and the price for the US$ is simply speculation, so why should I pay more for it?

Few seemed to see what I saw, that the peso will keep devaluing as oil drops and that the twenty year boom in real state prices is over. But sometimes changes are hard to see if you are a local.

Which made me think about the impact of what is going on in both Venezuela and Colombia in the future. And it is simply very bleak…

Think about it, at a time that Colombia is having a hard time with its finances and the peso devaluing, more than one million Colombian/Venezuelans or Venezuelan/Colombians are thinking of going back to Colombia, as jobs are ever more scarce in that country. And the Santos administration  is not even looking at the problem: What are these people going to do? Where will they work? Who will employ them?

Because Colombians are more concerned with other problems, like increasing taxes to cover the deficit, or the FARC negotiations. Meanwhile, the economy seems to be running away from them.

But, without being a doomsday predictor, imagine some likely scenarios: Oil keeps dropping, the deficit keeps widening in Colombia, which only exacerbates the problem. What happens at $ 30 per barrel, how about $20, and don’t even think about $10.

But that is precisely the scenario we should be thinking about. At US$ 30 per barrel, which technically seems to be quite feasible, things would get so bad in Venezuela, which not only it would drive many Colombians out of Venezuela, but may force the Government of Venezuela, current or future, to equilibrate prices. And in such an equilibrium, not only will there be another million of Colombians be driven out of Venezuela, but there will be the destruction of thousands of jobs for Colombians, currently involved in the arbitrage of prices between the two countries.

To begin, he elimination or reduction of the arbitrage will be a severe blow to the Colombian economy. Not only will 25% of the oil sold in Colombia (local estimates of what is extracted from Venezuela) go back up to international prices, but thousands of items from food, to medicines, to every day items will no longer be available at much lower prices. And even worse, those currently employed in Colombia in the bachaquero/arbitrage industries, will lose their jobs. Just like that…

And we are talking of thousands of jobs, as evidenced by a friend of mine who went to the Guajira region and found that after a certain point, “formal” gas stations disappear, as “bachaqueros” take over from them, selling gasoline in containers and sophisticated pumping systems at a 30%-40% discount to Colombian prices.

Which implies that the humanitarian crisis will not be exclusive to Venezuela, but a joint problem. A problem that makes Venezuela’s future closely linked to Colombia’s. We face a joint future, which politician’s seem to be ignoring. But if oil truly goes down to the low 30’s as many expect it, it is a joint future for the two countries.

And is not a pretty one.

 

 

 

 

 

 

 

Hypeinflated Arepa Index (HAI) Part VII: Inflation Accelerates

July 26, 2015

ArepaJulyI arrived to Caracas thinking that after the big jump in the price of my favorite arepa, the arepa de queso de mano (hand cheese, a uniquely Venezuelan cheese) in the last two months, there would be a lull and the pace of increase would slow down.

But it was not to be, the price actually jumped 46.7% since five weeks ago, a jump actually quite similar to that of the April to May change. At this pace (average so far in seven plus months), we would be at Bs. 675 by November 17, the first year anniversary of the index, which would be a 337% increase in the HAI (Hyperinflated Arepa Index) for 12 months, but since it is clearly accelerating (46.7% in 35 days is close to 5,000% per year!), we should see a higher number.

Since some people have asked, I eat this arepa, which is delicious and my favorite, at the same arepera close to where I stay in Caracas, in order to be consistent in the measurements.I will not say which one, to protect my source of these delicious arepas.

That prices are accelerating is very clear to anyone coming here. I always keep a few Bills  to buy stuff on Sundays at the Mercado Libre where I like to shop. I only buy three or four identical things. Well, lately, I have begun paying with credit cards, so as not to run out of cash.

A second observation is that I went to buy bread and there was none in my usual bakery, due to the lack of flour. And at a drugstore, full of empty shelves, I was told the “sought out” item of the moment is toothpaste, either because there are shortages, or because there are rumors that the price is going to jump up. I was also told that when this particular drugstore receives locally made toothpaste, a swarm of “bachaqueros” (the name given these days to anyone that lives off the arbitrage of regulated or scarce products) shows up, mostly in motorcycles, soon afterwards and buys the whole inventory.

Exponential Growth Of The Unmentionable Parallel Exchange Rate

July 10, 2015

Since people are so scandalized by the recent surge in the unmentionable parallel rate, I decided to look at it on a logarithmic scale to see if the recent movement was out of the ordinary. Thus, I simply plotted that rate of how many Bolivars you need to buy a dollar if you can find one for sale and I must say I was truly surprised at what I found: Bs$2 The first thing that is surprising is how from August 2012 to February 2014 the process was simply exponential: It took about 16-17 months for the rate to change by one order of magnitude and I could draw the straight red dashed line quite easily through the rate for that period. Then, it turns out that the rate of growth slowed down for a period and then from about August 2014 to a month ago, the rate became, once again, exponential, you can see the green dashed line (which is also hand drawn) has roughly (even if it is less regular) the same slope as the red line. Then, recently, there was this increase, which is really small in the scale of things, and which simply wold be catching up to where it should be if there had not been a pause last year (Which was caused by expectations that the Government was ready to “do something” about the multiple exchange rate system)

What does it mean that it grows exponentially? Nothing profound, simply that the rate of growth (in this case 177%) is a constant. That is, for example, if you have $1000 and you get 7% interest, your money will more or less double in ten years, then double again in ten more and so on. Which implies that in ten years you have $2000, in twenty $4000 and in thirty $8000, grow exponentially, if you plot it logarithmically it will give you a straight line.  Thus the rate of growth above just says that the rate is a constant when the line has the same slope. Since so many factors drive this, it’s hard to say what is the main driver. If one looks at the growth in M2 in a linear scale for the same period as the graph above: sg2015071051314 you can see that the growth of M2 is like 65% per year in 2013 and 2014, with jumps in November every year (which gives you a one year rate of about 71% for M2). However, as you can see the slope has actually increased lately, but not above 100%, so that you would have to factor other things like scarcity of goods and foreign currency to explain the 177% “natural” rate of growth of the parallel rate.

What all of this does mean, is that if nothing changes in the way the economy is run, any absurd number someone may throw at you for the end of the year, may actually be quite “natural” and that recent changes are nothing out of the ordinary, even if scary.

Elections Are Coming! Elections are Coming!

June 22, 2015

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Elections are coming, but don’t get too excited yet. The ever affable and joyful Tibisay Lucena came on TV today and revealed to the country and the world, the closely held secret of when Venezuela’s Parliamentary elections would be. And then she, bitterly and acidly, proceeded to blast all of the critics of the Electoral Board, whose pristine record, from not having yet revealed the final vote of the 2007 referendum, to gerrymandering, to rushing to swear in Maduro the day after the questionable election in April 2013, she proceeded to defend. Deep in her troubled mind there must be an excuse for keeping the date secret for so long. For leaking and telling friends of the Government any date from September to December, before letting the “people” know when the elections will finally be. (Hopefully)

So democratic, it makes her democratic soul tremble with joy to make the announcement.

And then we are supposed to believe now that Obama and Shannon had something to do with this. Because somehow, Shannon agreed with the Capo to let elections proceed, in exchange for some mysterious concession. Because equally somehow we are now expected to see Leopoldo Lopez give up his hunger strike, as if holding elections was the only thing he was asking for. Maybe he will, but the reason Lopez is in jail, is because he is a dangerous organizer and leader, who in 2013 put in danger the Government’s phantom vote factor with his use of a strategy to have witnesses in over 90% of all precincts.

Of course, there are other theories, like Diosdado was negotiating for himself, undermining Maduro, who simply sent Delcy Rodriguez, his Foreign Minister, to spy on Diosdado during the meetings.  A sort of Agente 007 a la Maxwell Smart and nobody noticed that she was there in order to weave a proper conspiracy theory.

But jeez, nobody seems to find it strange that Shannon would meet with Diosdado (and have pictures taken) if he is being investigated. Yes, there is separation of powers in the US, but there is no lobotomy for thinking strategically. If in a few months an indictment was brought forward against Diosdado, the anti-Hillary, anti-Obama, over half of US politicians, if not more, will raise hell and Shannon would be forced to resign.

All of that for mostly ignored Venezuela, on the third year of a US Presidential term, with an unpopular President?

I find that hard to believe…

But Venezuelans seem to believe everything they are fed these days, particularly those in the opposition, even if Chavistas appear to be quite gullible too. One must look at the way people reacted when some Brazilian newspaper suggested Dilma has called her Foreign Minister to find out about what happened to the Brazilain Senators in Venezuela. Until Itamarati issued the a rather bland press release which was followed by Marco Aurelio Garcia’s statement calling the visit an intromission into Venezuela’s affairs, which was finally crowned by Dilma’s own statement that the visit was “shameful”. and an intromission into, bla, bla, bla. It seemed both statements were written by Maduro’s handlers.

But yes, the elections are coming!

And to guarantee their integrity and the reputation of the Electoral Board, Tibisay will only allow the pure, technical and unbiased observers of Unasur!

What a joy!

Unasur will be here!

The same people that backed the results of the 2013 election and called for an audit that was never fully implemented. For their good job in 2013, they get the exclusive in 2015. They can send as many “observers” as they want. Please no experts, just observers. Just like Chavismo runs things in Venezuela, Unasur is not expected to send anyone with too much knowledge of voting processes, computers, cheating and the like. No, Unasur will send true Foro de Sao Paolo sympathizers, for a taste of revolutionary traveling, as well as arepas and cachapas. If they have time, they can visit some of the revolution’s success projects, wherever they may be ,now that most Barrio Adentro’s modules are shut down.

I mean, it was an exquisite way of proving exactly what Tibisay was blasting her supposed enemies for. Venezuela could have invited the OAS, of which it is a member. Too many “come mierdas” there for Maduro. Or it could have asked Disodado’s best new friends from the US to send four people to observe. But no, in the same announcement of the closely kept secret, she gave exclusivity to an organization that has no record, experience or competence on Electoral matters, other than the infamous 2013 Venezuelan Presidential elections.

Truly, you can’t make stuff like this up. The revolution can always rewrite history any way it wants.

But Tibisay better hope that things go well and the revolution stays in power by whatever means necessary. Because if one day the Electoral registry can be examined or somebody sings to tell us how exactly elections were rigged, Tibisay will have to visit The Hague for violating the rights of most Venezuelans.

She will have to get in line to be tried, but she will be there…But I digress.

And now the strategies begin. I must say I thought that the elections were going to be held sooner (September/October) rather than later (December). Because things are deteriorating fast, very fast. Because right now, there isn´t much of anything to buy or its very expensive. While in Caracas last week, I heard all sort of conspiracy theories about the Government stashing money away to import things ahead of the elections and flood the country with “stuff”.

Really? If the “stuff” will be imported by the Government, you have to be truly gullible to think there will be all sorts of stuff around. They will steal half the money, rob half the stuff and in the end there will be too much of many things and little of a whole bunch of others. And I am not counting what will go to Colombia.

And can the “stuff” I arrive in time for December 6th? Call me skeptical of Chavista “planning”, an oxymoron, if I ever saw one.

Maduro’s plan, according to some sources, is to make the election about the “people”. The “people” are PSUV, and of course, the memory of Chávez, who happened to be elected for the first time on …you guessed it, Dec. 6th.

It will not be about Maduro, the economy, Diosdado or anything like that It will be about “Ustedes”, “el pueblo” and “El Comandante”.

Of course, inflation could screw it all up. I hope it does.

A Post Dedicated To Your Dani

June 11, 2015

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Your Dani explaining how he listens to the opposition in his “democratic” world

I think that there are few people as despicable as Jorge Giordani in the destruction of Venezuela by Chavismo. The guy has no shame and comes out to speak up and criticize the chosen one, Nicolas Maduro, as if Maduro got there on his own. I was making a commented translation of the interview with Giordani (His words in bold, my comments in italics, not bold), when I saw the great article by that brilliant genius, Laureano Marquez, in which he defends Maduro against “Your Dany’s” attacks. I had to copy that name…

Here is the interview in English (bold) and my instant comments (italics) on everything Your Dany said or was said about him. With my comments, the interview becomes the truth. And, as we all known, the truth shall make you free! Enjoy!

Some call him “The Monk”, perhaps because of its austere and simple life, without extravagance and lack of luxuries. (He vigorously defended buying a luxurious Airbus for Chávez, to be “comfortable”) Tall, thin and reddish, at 75, he confesses to being a scholar (Can he list his publications that have had any scholarly impact? I think there are none, like in zero. He thinks he is a scholar because he reads a lot) and reader at the moment he is re-reading “Don Quixote”. He arrives on time for our appointment, on Wednesday, May 28, accompanied by one of his great friends, Professor Hector Navarro (Another scholarly fake! He brought us the half an hour time change, a costly and useless whim with little redeeming value).


Jorge Giordani, of Dominican origin
(He should have stayed in his birth place of San Pedro de Macoriz and become a ball player, just as his idol Chávez should have), with characteristic gestures of a real Caraqueño (Born in San Pedro de Macoriz?), he talks like a typical Venezuelan. Born June 30, 1940 in San Francisco de Macoris, Giordani, begins to recall events from his own story, he moved to a trip to the past, “a flashback,” starting with the lives of his parents, Primo Giordani, his father, an Italian Communist (How did he inherit his empty and failed ideology?) who was part of the Garibaldi Brigade  (always a loser) during the Spanish Civil War (1936-1939) and his mother, a young Spanish  music and pharmacy student. The Giordani’s  were forced out of Spain (Our loss! They were right, their gain!) through the Pyrenees, which was a painful and long journey in winter, with a child (Not Your Dany)  in her arms, his older brother, to reach a concentration camp in France, where housed refugees from the war in the neighboring country. At the time, they managed to embark to America, the Dominican Republic, from where they emigrated to Venezuela in the 40s (Which means he was like ten years old when he got here, so much for a real caraqueño, no?), the country in which they settled since (Unfortunately!).


He studied in the Escuela Experimental Venezuela and the Liceo Andres Bello, then goes to Italy to study electrical engineering at the University of Bologna.
(A tough and hard life in democratic Venezuela before Chávez). A graduate degree (After he was fired from CANTV, another accident of history, which he fails to mention!) in Development Planning at the Centre for Development Studies (CENDES) of UCV and obtained a doctorate (paid by the State!) at Sussex University (on Urban Planning!) in England. (Note he never studied Economics in his life, but he ran the Venezuelan Economy for 14 years!). He is retired professor of the Central University of Venezuela (He made sure to stop Caldera’s pension reform so that his pension would always be that of a Full Professor. Of course, it was all a waste of time, as the inflation he created has made that pension peanuts). He has written 24 books (How many people have read them? * BTW: He wrote most of them as he was Minister, he had nothing better to do) Planning as a social process; Planning, Ideology and State; The case of Venezuela, the proposal of MAS; Transition Venezuelan and search his own way; The Venezuelan transition to socialism; Gramsci, Italy and Venezuela; Marx was not dead was Clubbing; Impressions of everyday life; among others, and here he presents his latest, Matches and Mismatches in a Bolivarian Construction work. (Even the titles are insufferable)


A student of Marx, Gramsci and Mezaroş
(Pure ideological BS), and identified with the character of “Don Quixote” in solidarity with the struggle of Hugo Chavez, whom he met when the commander was detained in Yare, marking a friendship and working that would last until his physical disappearance. In this period he has served as Minister of Planning and Finance on four occasions, becoming the best-known minister in this area (He was trained in Urban Planning, but that’s it, other than that he has no studies in Economics, nor a track record in the field). Although sometimes he had differences with President Chavez (Particularly when Chávez fired him in 2003 and Giordani held weekly meetings on Saturdays with friends at his home to tell everyone what a disaster Chávez’ Government was) he said that their relationships was always based on the grounds of mutual respect. He is regarded as the architect of the humanist economy (How the Hell do you eat that? As another former Chavista would say?) in that period and one of the indispensable men of Commander Chavez when taking decisions in the economic area. (Few of them any good or based on economic known principles, since he knew little about them)


On June 17, 2014 he was separated
(Read: Fired!) from the cabinet of President Nicolas Maduro, and from there a series of disputes, which he unleashed when he published his famous open letter to the Venezuelan people: Testimony and responsibility to history, whose appearance falls like a bomb in the areas of power and national public opinion. Since then he is considered by some as an authentic revolutionary who had the courage to stop, criticize and warn about the poor economic situation of the country (After he left the Government, while in Government he never said a word); while for others, he is a traitor to the revolutionary process that acts in spite of his departure from power and some more, in not doing so in time, when he was still in power.


This interview has been divided into three parts, in which he talks about his friendship with Chavez, his admiration and affection for the son of Sabaneta, who he says, was a gifted statesman, scholar
(How easy Dany says someone is a scholar) and responsible (Did he mean irresponsible?) to the critical situations that presented themselves (Really?) and whom he had seen, he (Chávez) immolated himself up in building a better country. (No, he ignored knowledge like most of his life and sought the most backwards doctors in the world)


He is critical of the economic model and disruptions of the current power structure.
(Simply a continuation of what he started with Chávez and presided by the man that Chávez designated as his successor. Wasn’t Chavez “gifted”? What a “gift” Maduro has turned out to be!) He warns about the economic and political situation of the nation (Something he failed he failed to do in the 14 years in which he initiated most of the policies continued by Maduro). Analyzes the problem of relative prices that distort economic reality and the serious consequences of dolarization.(Dany is the father of that distortion and the initiation of dolarization. He stopped the Permuta market out of spite and revenge, a witch hunt with vile and malice) He warns of the urgent need to tidy up the economy (Which he never did as Minister!), honestly (your are shitting me), because there is no more time. (He never seemed in a rush when he was Minister). He states that “the Venezuelan economy is a time bomb” continues its analysis (A bomb which he helped build from scratch) “There are three basic elements, structural crisis of capital (Marx and Mészáro) is a global, general, permanent and creeping crisis, it does not solve four basic contradictions, the environment (What did Chávez do about it except allow it to be screwed up?), the nation state and transnational, the problem of substantive equality and the problem of structural unemployment (Of which Venezuela continues to be an example, after 16 years of the “revolution”), that element is there, that touches us all 7 1300 million human beings we are on earth (Say big numbers, so that the BS overwhelms the real discussion), first element . Second particular element to Venezuela: the collapse of the Venezuelan rentist capital, “later adding” we are in a crisis of hegemony, which is not resolved if the means of production are not controlled (Control and destroy, repeat after me, control and destroy). “


Giordani talked about the collapse of the oil rentist capitalism. “The “given away” free time is over, should have been finished long ago
(Did you try when you had a chance?), but we are used to saying “give me mine, with don’t screw with what is mine” (like his pension). Venezuelans did not produce that, it was there. (Like Cadivi, Sicad, Simadi, Sitme and all other of those screwed up things he and Chávez invented) Suppose that oil just ends, what are we going to eat?, ” he said. (And what did you do about it, except give away the oil income?)


For the Professor, it is “a political mistake” to hide the inflation rate, which currently must be breaking thermometers. “With Chavez we always published, and if it was bad we had to explain it.”
(Did Chávez publish the final referendum results of 2007? Or the nutrition or epidemiological data? …Just asking) He explained it or we did.”


In this sense he presents his latest book “Matches and Mismatches in a Bolivarian Construction”, foreword by Professor Hector Navarro and edited by Vadell Brothers as a guide and study material to work on the current crisis.


We also present these proposals for measures to be taken as a contribution to emerge from the pit in which we find ourselves
(And Dany was responsible for):

  • Taking on the crisis as it did in 2009 Comandante Chavez, speaking clearly to the country and the Venezuelan people. (Maduro speaks every night, or twice a day. Chávez always said we were “shielded”, just like Maduro. Like Father, like Son)
    • Nationalization of the financial sector and foreign trade.
    (Good Move, you have intervened, nationalized and screwed up every sector except this one, time to destroy it, in order to complete the job)
    • Immediate restructuring of the state apparatus in terms of state enterprises such as PDVSA, the basic industries of Guayana, the Company of Electricity, Telecommunications, and those dedicated to food.
    (All of the things Dany helped screw up and destroy. As usual, no suggestion or road map of how this will be done, he has no clue)
    • Unify exchange policy.
    (Just like he never did for 11 years)
    • Enact a progressive tax reform.
    (Tax the State?)
    • Freeze the bureaucratic apparatus of the State making effective and efficient.
    (Just like Dany did not try in 14 years)
    • To stimulate domestic food production
    (Which Dany just realized needs to be done) through the protection of small and medium producers in the country and the city.
    • Build an emergency economic team
    (Dany, Hector and Merentes, as usual) that is accountable to the country permanently. (You were never accountable to anyone or anything, remember Fonden? Was it US$ 30 billion that is missing, or am I wrong?)
    • Start a special period of economic adjustment safeguarding the progress of the revolution
    (???????) in the social field and encouraging the creation of productive jobs. (No clue about this, but he will figure it out in a decade or two)

At the end of the interview says he is 24 hours in the service of the Revolution (Fortunately, the revolution is dead) and ends with a message to the Venezuelan people “must be organized. Democracy (Does Dany even know what that is anymore?) has to come out from the bottom. You have to grow and we must speak clearly to the country (Which Dany never did). Assuming the crisis (Which he created)

Way to go Your Dani, it is hard to believe you even exist. Unfortunately, you do and you did.

*(My friend the reporter Andres Rojas has read some of them. Kudos to him that could even finish them!)

 

Venezuela Marches, People Show Frustration

May 31, 2015

Lilian-Tintori-Lopez-encabezo-venezolana_MILIMA20150531_0018_11Lilian Tintori, Lopez’ wife addresses marchers

Yesterday, Venezuelans marched all over the country, and also abroad, to protest against the Government, in favor of political prisoners and asking for more democracy. The marches were peaceful and attendance was quite nice, given the fear that people have of a repeat of last year’s repression by the Maduro Government. The success of the protest was a tribute to Leopoldo Lopez, who seems more attuned in ail with the opposition than most of the opposition leadership. In fact, it was remarkable that from his cell and using a video, Lepoldo Lopez could accomplish what he did, thousands of people going and protesting, knowing the dangers that they were exposed to.

But what it showed is that people are fed up and ready to protest and Leopoldo has understood that quite well ever since last year. In contrast, the leadership of the opposition unity group, the MUD, really blew it, rejecting the march openly, rather than staying quietly on the sidelines.

What the MUD does not seem to understand is that at this point in time, there is need for many different ways to express opposition. Elections are a nice goal, but here we are May 31st. and there is no scheduled election to take place in 2015. Oh yeah, there should be parliamentary elections before the end of 2015, but what if the CNE does not call for them? Does the MUD have a plan B?

In fact, I find it very hard to understand why the MUD did what it did. To me, it really had only two choices: One to simply shut up, the other to back the march and incorporate demands for an immediate announcement of when the elections will take place into the protest.

It is as if 16 years of dirty tricks and subterfuges have not convinced the MUD that this is not a fair game, this is a game which is loaded with radioactive dice that do whatever the revolution wants and needs. And at every step, the revolution has had weapons, plans and tricks, while the opposition has always had a naive plan A, but no Plan B, or let alone any possible dirty tricks.

But dirty tricks is all the opposition will get from here on, from gerrymandering (here is a simple explanation from today’s twitter): CGP2yuiUgAIofyt

to faking census data, to fielding fake opposition candidates, to cheating on the elections, Chavismo is, as always, ready to pull all of the dirty tricks in the Universe. Including changing laws so that an opposition victory becomes meaningless.

And in the middle of this, the MUD can not even back a protest promoted by one of its leading members who happens to have a very vested interest in all this, given by the fact that he has been in jail 14 months for his strong stance against the Maduro Government.

And the MUD strategy was not to support the march? Gimme a break!

Well, in my humble opinion, they did more to damage their reputation with the rank and file with this decision than with any previous one, at a time that they are trying to promote the vote among the member of the opposition. In the end, it may not matter, Leopoldo will call for people to go and vote and they will follow his wishes. But why waste so much energy in non-existing problems?

What yesterday showed is that the people want leadership. They want to do things, but they do not want to sit passively until the CNE or Maduro or Cuba, whomever calls for elections in Venezuela decides to. They want to put pressure. They have many issues, from democracy, to Human Rights, to crime, to lines, to shortages, but they are being told to stay home till whenever some hypothetical elections take place.But they want action now, and they know now that Leopoldo and Capriles, who smartly backed the march, are the leaders. The rest are just living room politicians taking the supposedly safe road.

But that road does not include the people’s frustration and one day, the people may simply overcome the leadership and act on their own, unless somebody, whether in jail or not, is capable of leading them they way they want.

Elections and Protests are not two different strategies. They are part of an array of weapons that the opposition needs to use. In fact, marches and protests are the way to motivate and promote the vote, when and if, the Government decides that it will finally take place.

The Hyperinflated Arepa Index Part IV

May 26, 2015

arepaIt has been a while since I reported on my Hyperinflated Arepa Index. In April I had one while in Caracas, but the variation in price was so small (see graph) that I did not think it was worth boring you with the small increase.

Then I went back last week, before the unmentionable parallel rate of exchange had soared, and as you can see in the graph above, the Hyperinflated Arepa Index seems to be a leading indicator of what the abominable website reports, as in one month, there was an increase of 53.3%. This is above what the parallel rate rose in the same period.

You be the judge…

The summary of the increases so far are then:

Nov. 17th. Bs 120

Dec. 7th. Bs. 156 Increase of 30% in three weeks

Jan. 21st. Bs. 178.6 increase of 14.7% in six weeks

April 15th. Bs. 187.5 increase of 5% in 11 weeks

May 15th. Bs 275 an increase of 53.9% in four weeks

Since it was almost precisely six months since my first delicious arepa for this experiment, we can quote the half a year inflation of 129.16%.

I could do a fit to the slope, but really, it is only five points, we dont not need such sophistication. .

I guess I will have to continue being a glutton and eat those delicious arepas in the name of data collection and science every time I go there. Will have to bike more too…

Parallel Rate Soars: Whose Fault Is It?

May 24, 2015

Venezuelans love a conspiracy theory. Sometimes it seems it is easier to embrace such theories than to analyze what is going on. Least of all, look at numbers to seek a possible explanation. This week was a clear example of that. As the parallel exchange rate soared, the most common explanation was that a webpage was manipulating the price of the dollar for some obscure or maybe not so obscure purpose.

That webpage claims to obtain its price from whatever its happening at the border of Venezuela with Colombia. These are real transactions. The exchange houses in Cucuta open in the morning and begin trying to make a market adjusting the price according to what they see. I have no clue as to the volume traded in Cucuta every day, but the border has a very active trade and there has to be a way of going back and forth between Bolívars and US$ or Pesos. This is what that webpage supposedly reports.

Of course, that particular webpage has a lot of influence, as it seems to be the one most people check. But let’s look at the variables that affect the exchange rate and what’s been happening in the last few months.

At the origin of everything, is oil. The Venezuelan oil basket determines how any dollars come in every day to the country, whether you believe the country’s production is X or Y, variations in the price of oil affect the cash flow the Government sees. And that determines everything. When the Government had savings and cash lots of cash flow, it would divert some money to the parallel exchange, whether before it became illegal in 2010, after that or in the last few months. The problem is that savings are gone, the Government owes everyone money and it has so little foreign currency that in March it created  a new and newfangled foreign exchange system with three official rates (Bs. 6.3 per US$, Sicad and Simadi) and the second one, Sicad, has yet to have an auction. It is only used as a reference according to the last value it had prior to the new system being announced.

That’s how little money the Government has.

This is what the Venezuelan oil basket has done in the last six months: oilbasketAs you can see, the price hit bottom at $38.82 per barrel the week of January 31st and has recovered to US$ 56.28 per barrel by now. However, most oil sold by Venezuelan is sold on a 90 day basis, so that the Government is receiving today is that of 90 days ago, or roughly February 20th., which was around US$ 47 per barrel.  Thus, cash flow has improved in the last three weeks (In theory the minimum was around April 30th), however, the lower cash flow has taken a huge toll on the savings (International reserves): reserves Reserves began the year at US$ 22 billion, grew to over US$ 24 billion in March and since then, they have dropped to barely US$ 17 billion. That’s a 22.7% drop since January, thanks to the Dominican Republic buying out its Petrocaribe debt and down 29.16% since the beginning of March.

Not a pretty picture.

At that level, liquid international reserves are likely around US$ 500 million at most, which is peanuts for a country the size of Venezuela. And with shortages all over the place and the Government owing money to everyone (A Brazilian delegation of food exporters came to Venezuela a week ago, they left empty handed) there is simply little money for the parallel market.

Thus, as demand soars (companies have to function), supply collapses.

Guess what happens then?

Moreover, some of the supply disappeared as the jailing of a couple of Venezuelans in the US has apparently scared some suppliers of the market.

If goods are scarce in Venezuela, then the greenback seems to be the the toughest good to find.

And if you think that the dollar market price is artificial and there is little volume in that market, let me show you a graph of another market: The Caracas Stock Exchange. Volume in this market is very low, some $50k-$100k per day. Why? Because there are very few shares to be had. Well, this week, as the parallel exchange rate soared 31%, the Caracas Stock Index soared even more, jumping up 42% for the same reason: ibvc Simply put, there are very few stocks sold and people were looking to protect their savings, just like those seeking to buy foreign currency are trying to either protect their savings or keep their enterprises going.

And you can’t blame any webpage for the fact that stocks soared even more (close to 25% more!) than the actual rate of exchange. And there is some real trading in that market…

The point is that what is going on is simply the effect of scarcity. The Government has fewer dollars at a time that it has run down its savings.

And to make matters even worse, the Venezuelan Central Bank keeps printing Bolívars like there is no tomorrow, as shown by this plot of how M2, the Money Supply, has increased since last year:

m2

As you can see, as the price of oil collapsed (fewer dollars), the Money Supply, the number of Bolívars in circulation (which can buy dollars) almost doubled and the savings are practically gone. This means that there are almost twice as many Bolívars chasing those very scarce dollars, local stocks and/or goods.

Simply, a recipe for disaster… So, don’t blame a webpage or a conspiracy…blame reality.

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