Archive for the 'Venezuela' Category

Santero Economics Will Not End In Venezuela With The Upcoming Elections

July 5, 2015


The Venezuelan Economy has been run in the last few years with a limited, random and incoherent set of principles, that reminds me a lot of Santería, which is composed of a set of beliefs taken from various religions, which are some times incoherent and even contradictory and which are based on hope, spiritual beliefs and ideas with little fundamentals. Thus, we can characterize the current policies as Santero Economics, as the policies are equally incoherent, based on hope and many times go against each other, with no relation to known economic principles and fundamentals.

By the end of last year, the typical narrative (including mine) was that in January Santero Economics would be set aside, as inflation and scarcity would force Maduro to do so, but as we know, nothing happened. By February, I was convinced nothing would change this year.

The current narrative in most analysis abut Venezuela is very similar: Maduro is afraid that adjusting the exchange rate, increasing prices and the like would create a backlash and he is simply waiting for the upcoming Parliamentary elections before making any changes in his Government’s policies.

Well, I now believe that this is simply wrong, as Santero Economics is here to stay, as long as Nicolas Maduro is President of Venezuela, as he has been convinced by by both local and foreign advisers that the problems of the Venezuelan economy are caused by the oligarchy and the opposition and economic indicators such as inflation have little to do with the Government’s policies.

The ideas of these pseudo-gurus, who are close to Maduro, have now taken over, overcoming the opinions of those in charge of the economy, whose proposals get rejected time and time again.

At the core of Santero Economics beliefs is that deficit spending, salary increases and increases in the monetary supply have little to do with inflation, which is a political phenomenon. Thus, at the core of the problem is the economic war being waged by the oligarchs. The solution is simply to import more stuff, control more of the economy and try to bypass the current private sector. It makes no sense to change the Bs. 6.3 per US$ exchange rate, because all of those imported products would have increased prices.

According to the Santero Economics Mythology, it makes no sense to continue giving foreign currency to a private sector that has half a trillion (??) dollars abroad . If they want to produce, let them bring the dollars back and invest them in Venezuela.

Similarly, the Santero lore states that the bachaqueo of Venezuelan products into neighboring countries is an essential part of the Economic War, set up by the oligarchy, which uses the proceeds from this activity (As if the Venezuelan military did not exist) to bring back the money and continue its attack against the Venezuelan currency. Thus, the only rationale for increasing the price of gasoline, for example, is to remove a weapon from the arsenal of the enemy in the economic war. substituting that subsidy by a direct subsidy to the people.

The final part of the plan is to use the communal power to supervise, oversee and denounce unfair prices as a way of controlling inflation.

Everything else is apparently perfect in the world of Santero Economics. There is no answer to the question as to why if deficit spending does not matter why not n-tuple spending without limit. And if the monetary supply is irrelevant, why not increase the money supply without limit and make everyone really wealthy.

Maybe they could visit Greece and solve their problems too.

Meanwhile, Maduro is happy, everything is going well and he can devote his time to other things:

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Hyperinflated Arepa Index V

June 30, 2015

I was in Caracas a week ago and went to eat an arepa. It was not research, it was gluttony, as I did not expect any change from the sharp increase I had observed in May. But lo and behold, my arepa de queso de mano had gone up another Bs. 45 in that time to close at Bs. 320, almost tripling the price of an arepa in the six months since I started the index.

Here is the chart now:


As has been reported elsewhere, inflation does indeed seem to be accelerating.

At least the size of the arepa is the same…


A Rant For Democracy In Venezuela

June 25, 2015

Give or take a vowel or a consonant, this rant (post) preceded the existence of this blog, which was created in 2002. In fact, in 1998, writing for a private publication, I noted that in the 1998 election, not a single one of the candidates had been selected by a primary election: They had all self-appointed themselves. In fact, even Hugo Chávez did that, and he could have had a primary and won it without a single vote against him. In that same note, I also pointed out that in the previous election in 1994, only one candidate had been elected in a primary (He lost!), despite the country having undergone a fairly undemocratic impeachment of a President, because some politicians wanted to get rid of the democratically elected President of Venezuela.

And 20 years later, things are not too different. Yes, we ask for democracy, but it seems that the opposition leadership has a particular conception of democracy, including “dedocracy”, choosing the candidates you want using your finger in a smoked filled room, if things get uncomfortable. “Dedocracy” works quite well when you have to satisfy the egos of leaders from the Paleolitic age, even if there is no literature that can explain to us exactly how they became leaders at the time.

And that is exactly what the “MUD” did yesterday (We all knew it was coming!) when they announced the 60% of the candidates chosen by the magic “consensus” formula. Here is one guy from MUD looking at it on the Board to figure out who was the candidate for District 3 in Caracas. Anyone that knows any math can tell what it says:


Since it is so incomprehensible, it has to mean Henry Ramos Allup is the candidate for the El Recreo District of Caracas, because it is obscenely incomprehensible that this man can be the consensus candidate there.

And yes, I know all of the arguments about the difficulties of holding primaries everywhere: It is complex, expensive, bla, bla, bla, but in the end, if the alternative is to have such a candidate in District 3 of Caracas, then the system is not only undemocratic, but it stinks.

It would have been better to ask anyone who wants to be a candidate to provide the volunteers to manage the voting polls on primary day. At least, the ability of a candidate to mobilize people would have told us about his popularity and ability to win an election.

Because Mr. Allup was always a candidate for Carabobo, until the 2000 election where he was hand picked for Caracas, maybe because he is not as well liked anymore in his home State, but vaguely rang a bell in Caracas.

And this shows how screwed up the system is. In Distric 3, Jose Guerra, who at least has been more politically active against the Government than Mr. Ramos Allup under Chávez and Maduro, had to go out and win the Primary, while Ramos Allup watched from the seats of the MUD stadium, doing nothing.

Let the candidacy come to him!

And that is the problem, we complain about the neo-Dictatorship that Venezuela has become, but the opposition does not offer a truly democratic platform. I am not inventing anything, this just so happens to be the law in Venezuela, as Art. 67 of the Constitution clearly says:

“…sus candidatos o candidatas a cargos de elección popular serán seleccionados o seleccionadas en elecciones internas con la participación de sus integrantes.”

“Its candidates for popular election will be selected in internal elections with the participation of its members”

Nobody can convince me that the MUD held “internal elections”

To me the only possible solution the MUD had was to have full primaries with the participation of anyone. I was in Caracas the day of the primaries for the opposition and since the part of the city where I was had no primary, nobody was even aware that a primary was taking place in 40% of the electoral districts of Venezuela.

Not the best way to get the electorate involved, says the Devil!

I wrote this same rant when talking about the Coordinadora Democratica (Remember them?), who had even fewer primaries. And there are other rants in this blog (Another one here) about this same subject: I truly believe until people don’t feel there is full democracy in Venezuela, people will continue to put down politicians and political parties will continue to be as “caudillistas”, inbred and gerontocratic as they are today.

And the strategy could eventually backfire, as I am told that part of the Government’s strategy is to “back” alternative opposition candidates against candidates like Ramos Allup, hoping to divide the opposition vote. I can imagine thousands of El Recreo voters, casting their vote for an unknown before  doing it for Mr. Ramos Allup. Yes, I dont like Mr Ramos for too many reasons, but the chief one is that he has no place in Venezuela’s politics, because he stopped doing anything about it, except continue being part of this self-appointed leadership boards. But he has also made accusations against people I respect, like Alek Boyd and Thor Havolrssen, which were not only false, but self-serving.

But I am just using him as an example everyone can understan,  I haven’t gone through the whole list, but I am sure there are many more “Allups” among the candidates of the opposition selected by the dedocracy of the MUD: Permanent members of the self-appointed leadership, “living room” politicians who know theory but don’t get their hands dirty, except when it comes time for self-promotion.

Until the opposition starts advocating the need to comply with the basic principles of democracy stated in the Venezuelan Constitution, there will be no progress. Democracy is what it is, not like what someone wants to say it is at some point in time. It is time for at least the opposition’s selection of all candidates and its party’s leaders to become fully democratic.

End of rant! Thank you!

P.S. Just after I posted this, our magnanimous Electoral Board announced that at least 40% of the candidates have to be women. If the MUD had held primaries, this argument would not hold water, as it would not be democratic. But given that they hand-picked their allupses and ramoses, they can go back and chose again and make some of them female. The tricks have just begun! And the MUD ain’t ready, who would have thought, Tibi is a feminist!




Some Music Brought To You by PSUV

June 24, 2015

As people get in lines for shopping, show their cedulas to be able to buy and Venezuela bickers with Colombia and Guyana over borders, the people from PSUV send this message of happiness, patriotism, socialism and whatever…

What do you think?

Elections Are Coming! Elections are Coming!

June 22, 2015


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.

The Maduro Government Has Become Totally Insensitive And Cynical

February 27, 2015


When I began this blog, my objective was to show to those abroad how Chavismo’s claims were always exaggerated and inaccurate, how history was being changed and how Chavismo twisted the truth and the law just enough to get its own way to kidnap the State and its institutions. This objective of this message was achieved long ago, thanks to many people, blogs and institutions.

What Venezuela faces today is quite different. All institutions of Government, checks, balances and the rule of law are in the hands of the same ideological party and Government. Media is mostly controlled by Chavismo, and what little is not, is either being asphyxiated by the Government (Tal Cual is shutting down its daily edition today due to the lack of newsprint) or uses self-censorship in order to avoid confrontations with the Government.

But the level of paranoia and indolence exhibited by Government and PSUV officials has now reached levels of insensitivity that even after observing Chavismo for sixteen years simply flabbergast me.

Upon the death of a 14 year old school boy this week in the hands of a member of the national police, the Government machinery immediately began spinning the murder . The facts are clear, the kid was leaving school and was caught in the middle of a demonstration, he hid under car and a policeman pulled him out of  from under it. As the kid started telling the cop not to repress them, the cop simply shot at his head, with whatever type of gun he was using, killing him. As if this was not sufficient, the cops then tried to drag the body away with their motorcycle, but they were stopped by the friends of the kid and the protesters who simply could not believe what was happening.

Before any specific facts were known, Maduro, who was in Trinidad, made statements suggesting that Colombian paramilitary groups had infiltrated the country into San Cristobal (where the murder occurred) and that the kid belonged to a right wing sect…Yes, he was the member of a Boy Scout troop. Maduro also spewed out all his usual vile about the US wanting to overthrow him, the right wing opposition and the like.

Soon after that, the General Prosecutor said the cop had been detained and would be charged, among other things, with using an illegal weapon in the control of protests. This was clearly denied by both the “People’s'” Ombudsman and the investigative police, both of which said that the kid was killed with a gun that “only” shot plastic pellets. Witnesses said that the wounds the kid had in his head were not consistent with plastic pellets, as there were deep gashes and burn marks around them.

By now the Government in its cynicism, is portraying (The Prosecutor dixit) the cop and the kid both as “victims” of the right wing. Yes, the young cop is also a victim, but it is a victim of the hatred and indoctrination of the police corps, where human rights and respect are not promoted. Instead, it is a culture of repression and hate which is promoted daily in these organizations filled with loyal members of Chavismo.

And the Governor of Tachira State, gets all worked up because people are calling for the abrogation of Decree 8610, the same one that allowed the use of guns by the armed forces in the control of protests, because the murder of the 14 year old kid “had nothing to do with that decree”. Of course it does, when the Minister of Defense calls a decree which violates Human Rights agreements “beautiful”, the murder of this kid has everything to do with the culture and the atmosphere of repression created by Chavismo in Venezuela.

And to prove this point, in the last week, six young kids, all under 23, all near protests or protesting or detained during protests, were either shot dead in the head or found later shot in the head. All were students. none ever detained before.

By now,  the Government is giving, in some cases, “alternative” explanations to these deaths…

Meanwhile, the new media purchased by unknown foreign investors (not allowed by law, but who pays attention?) does not even report the death until hours later, suggesting the students were all attacking the cops or part of the demonstrations. Meanwhile, the “Dean” of Venezuelan Journalism, who presides over one of these, Ultimas Noticias, says he does not even know who purchased the newspaper, but they want to have a “different medium” and defends the concept that some sort of weird coup was indeed staged against Nicolas Maduro.

What a sad and cynical role this supposed “Dean” of Journalism and freedom of expression is playing in the Venezuelan tragedy.

And just as you think you have heard enough, Maduro tells the world (if it was listening) that the world’s powers have to “rationalize” the use of  oil. Funny point to make, from the leader of a country which has doubled daily gasoline consumption since 2001, by giving it away for almost free. But as if this was not enough, he called for the use of clean energies and techniques. I guess he is so concerned with the environment, that this is why he eliminated the Ministry of the Environment last year.

But the beat goes on for Chavismo. The lines at supermarkets are invisible, non-existent and just part of the economic war. The protests are led by USA trained and backed 20 year old students, inflation is not a problem and God will provide. They hope.

And as the family of the 14 year old that was murdered buries him, there are no words of condolences, no expressions of compassion. Just a warning that if the opposition gets pesky and the protests over the deaths, or shortages, or inflation continue, the Government may be forced to ban the opposition, so that it can proceed to have elections in democracy and peace later this year.

Such is the cynical logic of Chavismo/Madurismo today. There is no gray area anymore, just cynicism and insensitivity for all …



Venezuelan Government Flip Flops Between Pragmatism And Radicalism, But…

February 8, 2015

biceLines at a Government owned supermarket in the middle of Caracas, almost daily now

Some people have written to me, asking why I have been so quiet, when so much has been going on in Venezuela with the takeover of Farmatodo and Dia Dia and the jailing of its owners.The reason is simple, yes, there is a lot going on, but to me what happened to Farmatodo and Dia Dia is more of the same, going back to the takeover of the Coca Cola warehouse way back in 2003 and going thru the nationalization (and destruction) of Agroisleña, or the Dakazo, or so many takeovers, nationalizations and jailings that have taken place under the Chavismo Dictatorship.

After all, Chavismo took over Dia Dia, a company founded in 2005 only to serve the lower strata of the population, the sort of project the Government should back and promote and not destroy, which is all it is doing by taking it over. After all, it is merging it with the Abastos Bicentenario (and stealing its inventory) , which was created when the Government forcefully took a majority stake in Cativen and its Exito hypermarkets.

They have not been the same since and have lines as long or longer than those of the private sector.

Thus, there is really nothing much different happening with the events of the last few days or weeks. What is puzzling, and I don’t have the answer for it, is why Chavismo (or Maduro) takes this self-destruction route. If I knew, I would have written a post about it.

Because what the Government is doing is sending very mixed signals. On the one hand, it dollarizes airline tickets, airline cargo and talks about a new “market” (I doubt it!) for foreign currency at a higher price than Sicad 2, but on the other, Maduro keeps confronting, threatening and acting like a Dictator, despite the fact that his popularity is in the low teens, according to the latest polls.

So, what gives?

I don’t know. The Comandante Eterno used to do the same thing when things got tough, but he was Chávez and Maduro ain’t. So, either Maduro is getting bad advice or he is full of himself. Personally, I don’t think Maduro can last this way until the Parliamentary elections. He can last, but he will have to repress a lot of people in order to survive.

But we don’t even know whether Maduro is completely in charge or whether others are telling him what to do, including his wife Cilia.

But I am sorry to tell you, the Government is not acting as stupidly as many lead you to believe. To start, they got US 1.9 billion from the Dominican Republic, which purchased  its Petrocaribe debt at less than half price. Then Citgo sold US$ 1.5 billion in a 2022 bond at a yield to maturity with a coupon of 11.5% and borrowed an additional US$1 billion from banks by pledging terminals and its shares. Not bad, US$ 4.5 billion at the blink of an eye in Maduro’s coffers. Jamaica could do the same and then Maduro may decide to close his eyes and send the gold to London and problem solved for 2015. Yeap, just like that, we are thinking 2016 and not 2015.

Oil is a many splendored thing indeed! Except Venezuelans are in charge…

My guess is that Maduro is betting (hoping?) that oil bounces from here and PSUV can keep control of the National Assembly. A tough and balancing act, given that the country will only feel the under-50 oil prices in March and April. Lines could indeed be long by the time Easter week comes around.

Yes, they are likely to become longer…

But things are really paralyzed right now, as the private sector awaits a foreign exchange system that I don’t believe will be functioning before Easter. Yeap! Think about it. You need to change the Illicit Controls Bill to allow the new market to function. This is at least two weeks from the time of he proposal, since it has to be approved by the National Assembly. Then, you need to issue the new foreign exchange agreement between the Government and the Central Bank, which is just a decree, but it has to follow the the Bill approved by the Assembly. After that, you need to issue the regulations for the market to function. Given that in one week Venezuela and its Government will be paralyzed by the Carnival holidays, even Easter may seem optimistic for this indecisive Government.

Which in the end is the biggest handicap of the Maduro administration. It is not only indecisive, but it has no clear view that a really free floating fx system will be any better. Except someone has told them to stick with it. And they want to try it out, but not everyone agrees.

So, we enter a very uncertain period, with many surprises possible. It is truly uncertain territory with a very indecisive and flip flopping Government. But it is clear there is a short term strategy in place, hoping for the best in the long term. And it will likely fail, leading to uncertainty, chaos and social unrest.

Not a pretty picture…



Maduro’s New Script

December 9, 2014


PDVSA 2022 bond in the last three months. It was losing 14% of its value today, with a yield to maturity of 31.4%

As Venezuela and PDVSA bonds were tumbling today (see graph above) on their worst day in memory, people were taking Maduro’s words about the country’s inability to borrow in jest. But think again.

For the past four or five days, Maduro has been following what is clearly a new script. He began by attacking the US Embassy, saying he would reconsider the relations between the two countries, as the local Embassy was a constant source of conspiracies against Venezuela. He followed up by insulting the Head of the IMF, Christine Largarde, saying she had spaghetti in her head and finished with saying rating agencies were conspiring to push Venezuela into default by giving the country a credit rating below what it deserved.

Last night, Maduro went back to the narrative, blaming credit agencies and saying that Venezuela was suffering from an economic blockade for political reasons that made it such that the country no longer had access to international loans or financing.

You may laugh all you want at what he says, but I don’t. He is making a very specific narrative out of all this and I am not sure where it is heading. It may be that he just wants to blame  the US for the intensification of the crisis in the next few months or simply, that he is preparing the ground in case there is no money to pay international investors. There is a one billion Euro payment in March, which looks doable, but there are much larger maturities in October 2015. But investors have so far believed that Venezuela had a “willingness” to pay, and the action in the markets today indicated some people were losing faith.

It did not help that Bloomberg reported today on a meeting with investors at a New York law firm, which actually took place like ten days ago. This meeting actually ended in a somewhat positive note, as many suggested that Venezuela and PDVSA could not get away with a restructuring below current prices for most bonds, as the oil cash flow would not justify it.

Meanwhile, the adjustment continues, very few things are being imported and long lines have begun appearing at gas stations, a suggestion that PDVSA may be importing less and gasoline is being selectively distributed.


But I would take Maduro’s words seriously, he is following the script, wherever he wants to take it…



Say What? Venezuela Sold What To Goldman Sachs?

December 2, 2014


Most people ended up looking like the guy above when they read this morning the headline in the Herald : “Venezuela sells to Goldman Sachs part of its oil debt”, an article that is actually not that well written, as it says that Goldman Sachs “earned” 59%, which is incorrect, Goldman Sachs would only “earn” that if it waited 20 years for the Dominican Republic to pay the loans. Time is money and money earns money over time.

What the report claims is that Venezuela sold Goldman Sachs the debt that the Dominican Republic has with Venezuela, because PDVSA has been selling oil for years to this country, whereby, the Dominican Republic pays 50% upfront (which varies) and the remainder for 20 years at 2% interest rate (which also varies, but let’s keep it simple). After all these years, that country has a debt of about US$ 4 billion with Venezuela, which it will have to pay interest of 2% per year and eventually pay all of the US$ 4 billion. What the article claims is that Venezuela sold this debt for US$ 1.7 billion, or a 59% discount.

My understanding is that this is not a done deal, but it is close to being completed and that in the end the buyer is none other than the Dominican Republic itself. Let’s assume it is true and explain it.

Suppose you lend $1,000 to your buddy, you trust him, like him, much like Petrocaribe and Chavismo likes to have the votes of Caribbean countries. Thus, I tell you let’s do this: You pay me 2% (all of twenty dollars) per year and twenty five years from now, you pay me my $1,000. This means that at the end of the 20 years, I will get $500 in interest and my $1,000.

Except that in five years, I am in trouble, lost my job, but you can’t pay me when I ask and you have only paid me $100, still have to give me $400 in interest in the next 20 years as well as my original $1,000. So, I go to another buddy and ask him at what price he would buy this debt from me and you pay him the interest. My buddy says: “Well, I don’t know him, so, for me to be interested, I would have to buy it from you at 40% of its value, so that I get paid 5% per year (the same $20 per year) and in the end he gives me $1,000 for the $400 I paid you, that means I get $600 additional dollars at the end, or about 30 dollars per year additional in interest. I don’t know the math involved, but that is about $30 more per year, so that I got paid in this simple math I use, about $50 per year on my money, which is 12.5% in my dumb and simple math”

We close the deal.

This is what reportedly is happening. Dominican Republic owes Venezuelan US$ 4 billion. Goldman buys it for US$ 1.7 billion and now the Dominican Republic pays Goldman or whomever Goldman sells this debt to eventually. Well, 2% per year is US$ 80 million, so that Goldman will get US$ 80 million a year or 4.25% per year in interest, but at the end of the twenty years, Goldman receives US$ 4 billion or US$ 2.3 billion more, which comes out to US$ 115 million per year the debt was held. That’s another 6.7% per year, or a total of 11.95% (The actual numbers is 11.38% when you do the math properly).

Well, that is about what the Dominican Republic would pay for a twenty year bond. Except that, I am told that it is the Dominican Republic that is behind the whole operation (Your buddy sneaked around and asked the other guy to buy the debt from you). Goldman buys it, it issues a new bond for the Dominican Republic, and voila, the Dominican Republic has reduced its debt by US$ 2.3 billion and Goldman made commissions at every step.

Why would the Dominican Republic want to do this? Well, easy, the Dominican Republic has debt of about US$ 12 billion between bonds and its Petrocaribe debt and other international loans. But its GDP is around US$ 60 billion, that means its debt is 20% of GDP.  By doing this, they chop off US$ 2.3 billion off the total debt, so that it will be easier for that country to make payments in the future. In fact, investors may even decide that they can buy Dominican Republic debt at lower interest rates, since it has improved ts finances. It is win-win for the Dominican Republic.

What does Venezuela gain? It gets US$ 1.7 billion today in cash, and nothing down the line, it buys time without adjusting the economy and maybe losing an election.

This proves how idiotic the whole Petrocaribe thing was, except to buy votes at international venues. Venezuela, which has been issuing debt at yields to maturity of 10-15%, was lending money to countries at 2%, when most of these countries pay less than Venezuela in the international markets.

Think about it this way: we sold that could be sold at $100 at $50 (50% upfront) plus the remainder we only got  40% for or $20, i.e. we gave them a $30 discount per US$ 100 barrel.

Not great business.

In fact, of the top three Petrocaribe debtors, Dominican Republic pays the highest interest of the three. Jamaica and Bahamas actually pay much less. Jamaica pays 6.5% for its 10 year bonds and Bahamas pays 4.6% for its 2024 bonds. Bahamas is “investment grade”, a country with “adequate capacity to pay debt”, versus Venezuela’s “vulnerable position”. Thus, we are giving very easy terms to country’s in much better shape than we are. (In fact, Bahamas’ GDP per capita is close to US$ 22,000 per inhabitant, while Venezuela’s is US$ 14,000 at the official rate of exchange)

There could be additional operations like this with these or other countries, but remember, nothing has been confirmed yet, I just thought I would explain since people have asked so many questions. In fact, others like Jamaica and Bahamas, could yield higher percentages of their debt for Venezuela, as they represent much better risks.

Oligarco Works The Fascist Phone Line

November 20, 2014


Last we heard from our friend Oligarco Burguesito, he was doing well, deep in arbitrage of all sorts, even if profits were down from the heydays of bond and travel money arbitrage in Venezuela. However, things have not gone well with Oligarco since then, travel quotas were sharply reduced, bond sales eliminated, so that his life has been reduced to arbitrage of all the basic products that are controlled by the Government. But even this has been limited, because many of the street vendors he sold the stuff to have moved to doing other things, mostly contraband. Thus, Oligarco moved to Valencia, where he does a bit of everything. Lately with inflation at 70%, even this is not enough and he has lost lots of money playing the horses and even betting on baseball games, thus he jumped at the chance to work as a supervisor at the call center for denouncing the traitors to the PSUV party, the so called fascist phone line. Is his first salaried job since before Chávez was elected.

This was Oligarco’s experience the first day:

First Call: Caller #1: Hello, is this the line to denounce traitors?

OB: yes

Caller #1: I wanted to denounce the traitors to the revolution and socialism that have authorized the import of natural Christmas trees at the Sicad  exchange rate. This is clearly another battle of the economic war. Someone has infiltrated the party and the Central Bank, authorizing dollars for this at a time that we don’t even have money for medicines due to the CIA conspiracy to bring oil prices down. This is clearly a boycott of our economy, to further weaken us with the promotion of something foreign to our country and a tradition that is not part of our heritage. This is a capitalistic tradition, promoted by the US, Obama and the Republicans and the other Marco, the one from Florida, as a way of undermining our own identity. I want this to be investigated and the person responsible for authorizing dollars at the Sicad rate should be jailed in Ramo Verde and sentenced to life in prison.

OB: Well, Sir, but this was actually a decision by the Board of the Venezuelan Central Bank, presided by Nelson Merentes, a loyal friend follower and supporter of Hugo Chávez and supported by the whole Board appointed by President Maduro, who allocated foreign currency specifically for this purpose.

Caller #1: Oh! Really! Never mind. (Hangs up)

Second Call: Caller #2: Alo! Can you her me! Can you hear me! Is this Nicolas?

OB: No, this is the PSUV line to denounce traitors.

Caller #2: I want to talk to Nicolas. I have something important to denounce

OB: Well, the President set up this line, but he has no time to answer it himself. You can tell me and I will make sure that he gets the information you will provide with total confidentiality.

Caller #2: I don’t know, this could be very dangerous to me. Because I want to denounce someone very close to this line, how do I know you will not tell the President or he will find out who I am and they will come get me.

OB: don’t worry, I assure you this is confidential and we have no caller ID, so I will never know who you are.

Caller #2: Umm, I don’t know. Well, umm, ok. I want to denounce that an extraterrestrial has infiltrated the traitor hotline

OB: What do you mean an extraterrestrial?

Caller #2: Well, many years ago I saw a movie about extraterrestrial beings that had invaded the earth and the same guy was the one that was on TV announcing and promoting the line. Clearly, this space invaders want to boycott the revolution and like Chavez said, capitalism destroyed life in Mars, now they are trying to destroy Venezuela and this guy has infiltrated us.

OB: I still dont get what you are talking about. Who do you mean?

Caller#2: I don’t know the name, but I saw him on TV and I am sure that it is the same guy i saw on the movie, but older. Do you have a cell phone? I could send you the picture of the guy in the movie and the one I saw on TV, so you can see what I mean.

OB: Ok, my cel is 0412-OLIGARCO, you can message me there.

Caller #2: Ok, here it goes, first the picture of the extra-terrestial, then the picture I took on my TV when they announced the hot line


See, it’s the same guy, just older, see the similarity?

OB: Excuse me Sir, but this is Francisco Ameliach, he is not only an important and loyal member of PSUV, but he is also Governor of Carabobo and President Maduro has trusted him with this project.

Caller #2: Oh. He is not a conehead? Are you sure? I was sure he was. “&%$* I am glad you don’t know who I am, but now you know my cell phone, I must seem really stupid. (Hangs up)

Third Call: Caller #3: Hello, this is Yamijuli Maria Garcia from the Comuna for toy manufacturing Isidora Dolores Ibárruri Gómez in Altagracia de Orituco. Is this where I denounce capitalist infiltration into PSUV?

OB: Yes Yamijuli, what have you detected?

Caller #3: Well, I wanted to denounce the fact that someone has regulated the price of Barbie dolls at US$ 2.5 per doll. Even at the capitalist pigs exchange rate, it is impossible for us to compete with this here in my comuna, where we make true Venezuelan dolls We make dolls that are white, brown, black, any color, just like people in Venezuela, but we can not compete with this price, our dolls cost Bs. 400, which is much more than the new regulated price for Barbies. But this is not all, the Barbie dolls are all blond, so that whomever approved this, wants to promote gringo looking women and make the average Venezuelan women look different. Not only that, but it also promotes women dying their hair which is clearly not a very revolutionary activity. Mi Comandante spoke against this, but now someone is trying to undermine the Bolivarian revolution and sell capitalistic blond Barbie dolls, destroying revolutionary values and undermining the work we are doing at the Isidora Dolores Ibárruri Gómez comuna. This should be investigated immediately!

OB: Well Yamijuli, it was President Maduro himself that ordered the price of Barbie dolls regulate, so I don’t think there is really much to investigate.

Caller #3: I disagree, we should investigate Maduro then, because he is not being faithful to the Supreme Commander and Father of the revolution. Do you know if Marea Roja has a hotline to denounce deviations from revolutionary principles? Can you give me that number?

At this point Oligarco hung up, got his jacket and left the job that he thought would be so great…He lasted 5 minutes.


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