Hyperinflated Arepa Index IX: Index Resumes Rise

October 5, 2015


We knew it would not last, and the Hyperinflated Arepa Index (HAI)  resumed its rise, jumping from Bs. 440 to Bs. 580 in the last month, for a 31.8% rise. With this rise, the HAI is up 283% since last November 17 2014, indicating that it will likely hit the 300% rise in its anniversary.

This is likely assured, given that in the next two months, monetary liquidity (M2) will rise somewhere between 15% and 20% as has been traditional when the Government pays its end of the year bonuses. This will put even more pressure on prices, including that of the parallel rate of exchange.


I inquired again about the drop last time with the owner, but he sort of evaded the question, saying again that they changed their invoices (???) but there was no real drop. The drop will remain a mystery for the time being.

Human Rights and Chavismo/Madurismo

September 22, 2015


I am sure that I am not the only one offended by the picture above. Chavismo not only blatantly violates Human Rights, but on top of it, has the audacity to hold an event to promote the content of its 2015-2019 National Plan for Human rights, under the heading: “Venezuela a country guarantor of Human Rights”

The plan itself ignores the country’s Human Rights reality. In Geneva, the UN found the Venezual’s homicide rate to be one of the most profound violations in Human Rights, there have been 231 thousand homicides under Chavismo, but the document presented by the Maduro Government fails to mention  homicides at all and the “consultation” period for the plan ends in only a week.

And while this plan is being built up, written and delivered, the Maduro Government created out of the blue, a series of violations of Human Rights at the Colombia/Venezuela border, which are not mentioned either. To say nothing of the infamous OLP’s, police and military operations, which come into barrios and kill people, like on the Cota 905 in Caracas in July, when around 18 people were killed in these “operation”, without the People’s Ombudsman, ironically called the People’s Defender in Venezuela, saying anything about it.

To someone like me, who was born under the Perez Jimenez Dictatorship in the 50’s and witnessed the horrors of the South American Dictatorships in the 60’s and 70’s, the ability of Chavismo to ignore and disrespect Human Rights is quite difficult to understand, let alone the deafening silence by those Governing Chile, Argentina, Brasil and other countries, whose Presidents and Government officials and their families were victims of the same Dictatorships.

But while those that followed the Dictatorships in the 70’s and 80’s made sure to guarantee Human Rights in the future by creating legal instruments that bound all countries by commonly accepted Human Rights principles, those that followed them in Government, all “left wing”,  seemed to have forgotten the past and decided to simply ignore Human Rights.

And while the Government holds these bombastic  Human Rights events, officials screw up at every turn in clear demonstration that Human Rights is not even discussed extensively within the Government.

Take Jacqueline Faria, for example, a PSUV member who dared say “All of those that are legally in our territory have their Human Rights guaranteed”

How cynic can you get? If you are illegal, you simply have no Human Rights, as has been clearly demonstrated by the treatment of Colombians along the border, which has actually caught some legal Colombians in the process, but nobody is around to defend them anyway.

And the People’s Defender had the gull to say that student Marcos Coello’s accusations of torture had no validity, because he had become a fugitive of Justice, as if Coello was supposed to stay and suffer more torture, as a way of promoting his cause. The truth is that Coello had denounced repeatedly how he was tortured in Mr. Saab’s office, before Mr. Saab became Ombudsman, but the case was simply shelved. Coellos’ mother wrote a wonderful letter to Mr. Saab, noting that on March 17th. 2014, Coello’s case was presented to his office and the Prosecutor’s office, which were followed up later in March and once again in June, but to the date, as Mr. Coello decided to leave the country and become a “fugitive” with no Human Rights, according to Saab, the Prosecutor’s office has not moved a finger to investigate the student’s torture or his tortures.

And let’s not forget Ines Gonzales, “Inesita La Terrible“, a Ph.D. in Chemistry, who was jailed 18 months ago for taunting the intelligence police in her tweets. Today we hear that Saab will “mediate” so that the Judge can allow her to leave jail and  have a complete hysterectomy. But Saab should mediate to have her freed, because tweeting your opinions is a right guaranteed by the Constitution.

But what does he know?

But Saab, much like his predecessors in the position, could care less about Human Rights. Human Rights are Human Rights, they do not depend on whether you are free, in jail, a fugitive or “legally” in Venezuela or not. They have to be respected and those in charge of enforcing them are supposed to do just that. In fact, I am sure that Farias and Saab are careful enough not to say that Human Rights are guaranteed only to those legally in Venezuela and those that support the Government. Because in the end, Chavistas seem to have more “rights” than others, or opposition members seem to have fewer rights than Chavistas. But in the end, Chavismo could care less about Human Rights. Those that are victims of homicides are more likely to have been or be Government supporters than opposition and the rate of homicides has never been a priority since Chávez arrived in 1998. And neither are many of the rights guaranteed by the Venezuelan Constitution.

But maybe I am just an innocent flower child of the 60’s and 70’s.

But wait, so were Bachelet, Roussef and many of those that today ignore the Human Rights gains of the 80’s and 90’s and place their commercial interests above Human Rights and Democratic (With a capital D) rights in Venezuela…

And yes, I may have been an innocent, naive, flower child of the 60’s and 70’s, but I will not forget. If we ever get rid of these people, I will be around to write about the barbaric acts and statements by Saab, Farias and their cohorts. I will use my blog and records to emphasize that I will only reconcile with those that were not involved in Human Rights violations and that crimes against humanity never expire.

Maybe nobody will listen, but I will be there…




Miserable Decision Against Leopoldo Lopez No Surprise

September 12, 2015


I have been traveling and ever since I heard about the miserable thirteen years and nine months sentence against Leopoldo López, I have been trying to put together my thoughts on the matter, but it is not easy.

Not that I did not expect it, I did. Leopoldo López was identified early by Chavismo as someone that needed to be neutralized. When he was Mayor of Chacao he was barred from running for office for seven years using a procedure via the Comptroller which had no legality, but which stopped him at the time from running for office. The excuse was that López used some funds to pay salaries earmarked for something else. Of course, no equivalent decision was made against Nelson Merentes who used billions of dollars, not millions of Bolívars for the same purpose as López. But, of course, Merentes has never been interested in being elected, he prefers being named to positions he is not qualified for. But I digress….

Rather than being deterred by his ban from running, López began forming a party and took his case to the OAS’s CIDH, which ruled in his favor. He then ran in the opposition’s primary in 2012, withdrawing and supporting  Capriles who was clearly leading the polls. He was an invaluable asset to Capriles, developing the strategy to have witnesses at polling stations, which limited phantom votes by Chavismo. He helped Capriles end up in a virtual tie with Maduro in 2013, but we all know how that was untied.

Then in 2014, Leopoldo embraced the controversial “La Salida” strategy, in the understanding that if you don’t poke a Dictatorship in the eye, the monster does not leave power. After some demonstrations ended up in deaths, most provoked directly by Government agents, the Maduro Government charged Leopoldo with “subliminally” inducing the violence leading to these deaths, initiating the travesty of the judicial process that just ended. Lopez was not allowed to present as evidence videos that demonstrated that the charges by the Government were false. The trial was closed to the public and López was sentenced to more yeas than Chavismo will remain in power, proving once again the stupidity and shortsightedness of autocrats. Curious that the Judge sentencing Lopez was the same that quietly freed some prominent Chavista boliburgeois on December 31st 2012, who had accumulated fortunes in a short time and were jailed during the 2009 mini-banking crisis.

And Leopoldo has been poking at the regime like no other politician, even from jail. First, he refused to leave the country opting instead to go to jail. Then he went on a hunger strike which he stopped when he wanted to, not when the regime wanted. And he has been communicating from jail, embarrassing the regime over and over.

And his wife Lilian has taken over a role that I am not sure she ever planned to. She has been impressive an relentless, helping to convince the world that Venezuela is far from being a democracy or be a country in which justice or due process exist.

But one has to feel for Leopoldo and his family. I don’t know Inesita La Terrible, a scientist who was jailed for her tweets, but I feel for her, because she got her Ph.D. at IVIC and I would have known her if I had not left science.

But I do know Leopoldo and his wife. Not closely, but I have had some serious conversations with him and I was always impressed at his commitment and his willingess to listen and understand. Even if he is committed, even if he sees this as a necessary step, he must be having a very rough time. And I can not even begin to imagine what he is going through.

But the fatal mistake by the regime is, like many other repressive regimes before them, that they have managed to lift Leopoldo to another level. A level that one day will take him very far in Venezuela. And by fighting and poking the regime in the eye, he wold have deserved it. No other politician has come that close to staking everything on removing Chavismo like Leopoldo. If they had, maybe we would not be where we are. I am in the radical camp, you need to poke and stir as often as possible, make the regime react. If not, we will be in the same spot decades from now.

To me, the miserable decision against Leopoldo, does little for the Government, except in that it removes him as an organizer in the upcoming election. But few Chavistas will be encouraged to go and vote because he has been sentenced. On the contrary, at a time that so many former pro-Chavismo and even Chavismo supporters are questioning the Government, jailing Leopoldo, who is very popular in all levels of society, only adds to the doubts.

And the MUD should take the jailing as a warning. A warning that Chavismo will not play fair in December. And that with Leopoldo absent, our ability to stop fraud is reduced. And the decisiveness to act on Dec. 6th. and 7th. when Chavismo decides to manipulate results, will not be there, but in the Ramo Verde jail.


Hyperinflated Arepa Index VIII: A Surprising Drop!

September 6, 2015


On the eight time to get a data point, Miguel gets all cocky and invites a buddy, the same guy that wrote the Wall Street Journal article and we went and had some pretty nice arepas. I had my usual, while Kejal had a caraotas and yellow cheese arepa, as he has become Venezolanized in his five years here. This one did not count, the same as the delicious mango juices that I had. We went for the data point on the arepas, but the conversation was so good, that it became an afterthought, it was just intriguing to find out how much the HAI went up.

Except it went down.

As I sat there trying to comprehend the Bs.389 number for my queso de mano arepa, I could not help but call the waiter and ask: What happened, how come prices have dropped?

I was, of course, expecting a tale of pressure, visiting agents or whatever, but instead, the apparently clueless waiter started going on a tale about how they now separate the VAT from the price and the 389.75 was without the VAT.

So he brings over a menu to prove it and it says my arepa con queso de mano is Bolivars 440 with VAT, except ther is no way that 389.75 plus VAT adds up to Bs. 440. But he claims it is that number. (It would have to be 391.1 and that was not the number in the receipt)

So, I have to use the menu number Bs. 440, a Bs. 30 drop from the last time. And even if the waiter seemed clueless, I have to think that something happened, but can’t confirm it.

And it makes little sense that it dropped, unless there was some pressure to drop prices, as I had visited the Mercado Libre de Chacao and found that cheeses, the delicious un-pasteurized Venezuelan white cheeses, went up sharply since my last visit. About 40% if I remember correctly.

But a data point is a data point and the first drop in the HAI occurs nine and a half months after it was started. This is a 6.3% drop in five weeks, a 166% rise in nine and a half months.

I had actually expected a 20% rise, but I have been wrong every single time about my expectations. I stick to the data and we now wait till the next number in one more month…

(The arepa was still delicious and only 59 cents and the last exchange rate of the unmentionable rate. But, of course, Venezuelans earn Bolivars, not dollars. This is very expensive for them.)

In Defense Of Bachaqueros

August 30, 2015


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:

phoca_thumb_l_img00467-20130119-0827 2

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:



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. 

Maduro Declares State of Emergency In Parts of Tachira State

August 23, 2015


I can only worry about the decision by Venezuela’s President Nicolas Maduro to declare a State of Emergency in five municipalities of Tachira State, a state that borders with Colombia.

To begin with, the action that originated it, the non-deadly shooting of some military personnel carrying out an anti-smuggling operation in that State, is certainly not the most serious incident either near the border, nor in Venezuela, to justify decreeing a State of Emergency.

But the extent of the terms of the State of Emergency, seems a little exaggerated and certainly prone to abuse. While we do not know the terms of the decree, which has yet to be published, according to the Governor of Aragua State (Why him?) who made the announcement in the name of the Government, Articles 47, 48, 50, 53, 68 and 112 of the Constitution have been suspended in those municipalities. So that you don’t have to go read the Constitution if you don’t want to, these articles deal with:

-Neither home nor your private communications can be intervened without a judicial order to do so.

-You can move freely and with your property around the country and leave the country as you wish.

-You can gather publicly and privately for legal purposes.

-You have the right to protest peacefully.

-You have the freedom to devote yourself to the private economic activity of your choice.

Now, while Governor El Aissami said that Human Rights would be preserved, suspending all of these article of the Constitution constitutes a violation of democratic principles and it is hard to imagine how these articles can be suspended and any action taken without the violation of Human Rights. If your home is invaded, if your communications are violated, if you can not gather with others or protest and if you are not allowed to carry out your daily business, your human rights are being abused and violated. No democracy can afford to suspend all or any of these rights guaranteed by the Venezuelan Constitution.

But even more importantly, how is it that an incident like the one that caused this leads the Government to suspend all of these guarantees, but, for example, the death of 30-40 people, including cops in clashes in Caracas’ Cota 905 do not require the same reaction?

The answer is simple: Maduro could care less about the incident, he was just looking for an excuse to create an incident with Colombia, given that the clash with Guyana did little or nothing to increase his popularity. In fact, Maduro made some very incendiary statements about the Colombians that are coming to Venezuela, at a time that such a flow is minimal, given that economic conditions on this side of the border are so unattractive. In fact, as I described in my previous post, the reverse is true, for the first time in a long time, the flow is in the opposite direction, as Colombians with Venezuelan papers are flooding the border area as they flee scarcity and hyperinflation.

And as you an see in the following video, even if the border is closed, it is not closed for expelling Colombians that live in Venezuela (Nobody knows if legally or not, nobody asked), as they were not only bused out of the country, but badly treated:

In the video you can even see kids being expelled without due process and one of the guys, who lives in Venezuela states they were treated like dogs and denied food for two days. And there are reports of the National Guard searching homes in these counties, painting a very fascist R in red or blue on each house to signify that the house has been checked (Registrada) (More here)

And the worry is why Maduro has decided to create this artificial crisis at this time. It is obvious that he is doing it for electoral purposes, Chávez did it in his time. But how far is he willing to take the conflict with his former new best friend Santos?

And even more worrisome, if Maduro is willing to do this 100 days before the parliamentary election, does he have a plan to extend this State of emergency as he wishes in order to gain popularity or limit the ability of the opposition to mobilize?

The Government’s popularity is down, they can probably limit the number of Deputies of the opposition to a simple majority, but with inflation accelerating, Maduro may be ready to step over the line if his popularity falls further. Chávez used to say that it was only in the Fourth Republic that rights were suspended, but here is his anointed successor doing precisely that, a clear sign that all bets are off going forward.

Meanwhile the opposition is incredibly quiet, as if Tachira was a far away place, rather than an opposition stronghold. Why aren’t opposition leaders present in Tachira provoking the Government or helping to protect Venezuelans and Colombians and Colombian/Venezuelans whose rights are being abused? Is the MUD going to limit itself to issuing bland statements that no media broadcasts? Is anybody going to question what it is that provoked the State of Emergency which state media justifies rather easily as paramilitary attacks on Venezuela’s Armed Forces?

I have no answers for the MUD’s passivity. This is a golden opportunity to show the country and the world the fascism and abuses of the Maduro Government. If nothing is done to slow down the Government in its attempt to escalate the conflict with Colombia, the Maduro administration may create a conflict that would give it an excuse to postpone the election if they deem it necessary.

And as usual its equally undemocratic friends around Latin America will blame the opposition and/or Colombia for it.

Venezuela And Colombia: A Joint Future

August 17, 2015


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.








The Uncertain Outcome Of The Venezuelan Parliamentary Election

August 10, 2015


On Dec, 6th. Venezuela will elect its new National Assembly. Clearly, the opposition will get the most votes, likely by a large margin. But will the opposition “win”. That I am not so sure. Yes, the odds are in its favor and Chavismo seems to be screwing up the economy sufficiently that there is no way Chavismo can win.

But I worry.

I worry, because Chavismo will pull out the 1001 tricks, from gerrymandering, to banning candidates, to cheating. And it is clear that today, Chavismo thinks that it will win. But I think they should be worried too. The trend is so bad for them, that they may need twice as many dirty tricks to win by the time December comes around. As I noted in my last post, the acceleration of inflation, discontent, protests and scarcity is such, that in four months, very few of the hard core Chavistas will give Maduro the benefit of the doubt.

But this does not mean they will vote for the opposition. And the opposition will need all the votes it can get. In fact, the opposition le by the MUD called for a march last weekend. And so few people went, that there were no marches. Some political parties did not even show up. In the end, the “leaders” addressed the militants, but most people that went, left early, disappointed at the non-event.

So, let me show you why I worry.

First, let’s try to remember the last Parliamentary elections. In the last Parliamentary election, Chavismo got 48.1% of the vote and the opposition got 50.2% of the vote. But Chavismo got 59.4% of the Deputies (98 of them) and the opposition only got 40.6% of them (67 Deputies).

Now, most people think that this was mostly due to gerrymandering, the effect of redistricting to favor Chavismo. However, estimates are that the opposition should have obtained 84 Deputies if the system was exactly proportional or a difference of only 17 Deputies (84 for the opposition and 81 for Chavismo). But only 5 of them would be explained by gerrymandering.

The second origin of the difference is that the “opposition” that got 50.2% of the votes, was composed of two parties: The MUD, which got 47.1% and PPT which got 3.2%. Thus, even in the strict sense of the word, Chavismo would have had a majority, as that division between MUD and PPT implied in a “proportional system” that Chavismo would get 84 Deputies and the MUD 76, while PPT would have obtained 4. Add three Deputies that were simply due to this “division”.  Remember this factor later in the post.

A more important factor is the over representation of less populated states. When the Constitution was changed and the Senate was eliminated, each State got three Deputies first then however many their population  would imply. Thus, humble Delta Amacuro with 100,000 voters has 4 Deputies, one for its population and 3 for being a State. Zulia, in contrast, has 15 Deputies, only five times more than Delta Amacuro, despite having a population that is twenty times more.

Similarly, up to 1997, each circuit could not vary by more than a certain amount. This was eliminated and the CNE can decide how few or how many people elect one Deputy in each district. The CNE has wrecked havoc with this.

Other effects, for example, is that PPT got 28% of the vote in Lara State and got no Deputies.

My whole point here is that Chavismo will do anything to manipulate and obtain an edge in the upcoming election.

So, when I hear that Ramos Allup is a candidate in Caracas and Marquina in Lara, I have to worry, because by choosing people arbitrarily and not by primaries, the MUD may be playing into unintended consequences.

And I worry even more when I hear that Claudio Fermín (Yes, he is alive) has decided to run candidates in 16 States, which will run against both the opposition candidates and Chavista candidates. Now, I have no reasons to question Mr. Fermín’s allegiances, integrity and/or beliefs, but after being a no-show in Venezuelan politics for so long, all of a sudden Mr. Fermín has found the resources (read: money) and the people (where?) to run candidacies in 16 States?

Really? Who is paying for this? Pardon me if I am being cynical.

And these candidates will run as “opposition candidates”, against Chavista candidates, managing to do exactly what we don’t want: divide opposition votes. They would help more if they ran like Chavistas. But that is not what they are being paid for.

But the MUD set up itself for a maneuver like this (No doubt promoted and financed by Chavismo) by not holding primaries, by cornering power within the MUD by people that have no constituency and believing that their manipulation will not impact the final number of Deputies.

In one sentence: For being stupid and arrogant.

So, now go back to the thought that PPT subtracted Deputies from the opposition’s total in the 2010 election just by running separately and you will know where I am coming from.  I would not be surprised if Fermín’s candidates are sprinkled selectively in precisely the districts where the opposition may be running into competition.

A carefully placed (and well funded) candidate in ten or fifteen districts, could switch the election to the other side.

Add to that banning people like Maria Corina, cheating, electoral centers with no opposition witnesses, good organizers like Ledezma and Leopoldo being in jail, and it all adds up. You could turn the election on a dime.

And thus, I am worried. Non-marches like last Saturday’s worry me. Movements to have people not vote worry me. The after effect of a loss on Dec. 6th. worries me. Marquina being a candidate in Lara worries me  and the fact that Ramus Allup could get another four years in Venezuelan’s political life, gives me nightmares.

Which is not to say that Chavismo should not be worried. Given the trends, people may be so mad by the time election time comes around that there is no amount of tricks that can help Chavismo. In fact, Chavistas may just stay home and the opposition may surprise the tricksters.

But it is not a predictable outcome and the MUD has not done, in my opinion, the required “smart” job to insure victory. In fact, I think it has done the opposite: It has created the possibility that Chavismo could win, by being so narcissistic and selfish. Legislative elections are won on regional factors, not on playing favorites on parties that have little popularity and constituencies.

You’ve been warned…

A Not So Subtle Change In Venezuela

August 4, 2015

I just came back to Caracas and my conclusion is simple: Things changed so much in five weeks, that everything seems to be happening at a faster pace, prices going up, scarcity at all-time high levels, people fed up, conflicts growing within the Government, violence increasing and Maduro focused on his war on the “Economic War” which all it does is make him the most popular Chavista, but not necessarily very popular.

But the two most significant factors are the rate at which prices are moving up (previous post) and the ease with which angry mobs  (above) have decided to loot and riot at the smallest excuse. Yes, the problem is the Government controls the media and few people see what is going on, but the looting is taking place in traditional Chavista strongholds. And they don’t occur because people are fed up of lining up to get something, they take place because people are fed up of standing in line and getting nothing: Neither bread, nor Harina Pan, nor diapers, nor contraceptives. It used to be a moment of triumph to find something, now the moments of victory are few and far between.

And every day, there is a new item that can´t be found, last week, as I came back it was bread and toothpaste. Great for my diet, no sandwiches for the Devil! Nor Cachitos, nor bombas, nor palmeras.

We are talking serious scarcity here!

Like there are also no Bills to pay things for. Despite an 80% increase in monetary liquidity (M2), the largest Bill is still Bs. 100, US$ 15.9 at the official rate, 50 cents at the Simadi official rate, but a scant 14 cents at the parallel rate.

To say nothing of the fact that when you call abroad you have to choose your carrier, as most have stopped carrying calls to less “popular”countries, in order to make it less noticeable that they are not paying their counterparts. That is why with a carrier I use, Switzerland is unreachable, while Spain and the US are still connected.

And people know who to blame, from Barinas to Apure. Oh yes, Maduro is popular among the 17% of the population that thinks of itself as Chavista. But the rest? They are looking for a leader and the prize is there to be taken.

Because inflation is not going to subside at a time that M2 and scarcity are accelerating. So, for the first time, I think the probability of “something” happening this year is not small. In fact it is quite significant. (30%?)

And what I mean by “something” is some form of Chavista cabal deciding to ask Maduro to step aside, get sick, move away and let someone save Chavismo. The “Patria” is another matter, for  now, it is only Chavismo that requires to be saved.

In fact, doing something like that may be exactly what Chavismo needs to spice up the Parliamentary elections. Otherwise, they act, but the elections  get postponed in the name of stability and peace.

What evidence do I have for this? The fact that a General was removed for killing some leaders of the “Colectivos”a few months ago, but these days the Government regularly carries out “Peace campaigns” in which 20 or 30 members of the Colectivos are simply killed by police or military.

Or the fact that military officers resent some of the recent promotions to Generals for the new (BoliGenerals 2.0) even richer Government officials, which have stepped down to enjoy their riches while controlling the purses of their former positions.

And you may ask: Why hasn’t something happened yet? Easy, no single group within the military feels they have control or they will be backed in their actions…yet. So, they wait in the shadows ready to save the revolutionaries, if not the revolution.

And perhaps the biggest signal of how bad things are, is that that the payroll in many companies is a couple of thousand dollars a month for many small and medium sized companies. Why close then if you are losing money? Wait it out, keep your employees fed and hope for the best. It is only ten grand a year and the reward could be big.

And that is why on the thirteenth anniversary of this blog I can stick my head out and suggest that there is some light at the end of the tunnel before the end of 2015, even if that light is still looks very red to me. The pace of change is just too fast. And if I am allowed to extrapolate even further after thirteen years, those that may force the change may find out that their own actions  may accelerate change in a direction different than the one where they want to go. You see, if people think there is going to be change, they will probably ask for more than those forcing the change may be thinking of.

A not so subtle change is taking place and things are sure to accelerate in the months ahead…




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