The Devil's Excrement

As we await for the CNE to approve the procedures for the ratification process of the signatures, the Government continues the process to control everything:

-The National Assembly continues to push for the approval of the new Supreme Court Bill, which would add 10 or 12 Justices to the Court with a simple majority of the assembly. Thus, as if the Court were not already controlled, the Chavismo would have ironclad control.

-Meanwhile the Chavistas continue attempting to change the rules of order in the assembly so that next time they need a law approved expeditiously (A new Central Bank law?), it will happen in a very short time.

-And there are rumors (This is the only country where three Justices can’t keep a decision secret) that the Constitutional Hall will declare that there is no conflict between its activities and those of the Electoral Hall, and that the decision by that Hall is illegal.  As we say in Spanish the Constitutional Hall is paying itself and making change for itself at the same time.

Essentially, we all have lost our ability to be amazed or surprised by anything. Whether it is human rights violations, disrespect for the law or abuse of power, we have essentially seen everything as we wait to be abused once again.

Two interesting articles on the economy today, both interviews with well known left-wing economists. One with Central Bank Director Domingo Maza Zavala in el Universal (free) and the other in Tal Cual, page 8,  (by subscription) with the former Head of the Economic Office of the National Assembly Francisco Rodriguez. Both are highly critical of the Government’s economic policies.

Maza Zavala is quite drastic saying “we live in the worst of all possible worlds”. First, he says that what is happening is an economic recovery but not growth, because he says we are coming from two years of string contraction, we would need much more. He calls the productive system “stagnant”, saying that construction is still stalled at a time that lending rates are negative. Despite this, there is no credit demand.

Maza Zavala says CADIVI; the exchange control office is still not efficient enough with US$ 5 trillion in approvals that have yet to reach to materialize due to procedures. He says this induces people to go to the parallel market, which influences in 40% the CPI. Maza says “the most expensive item is that which you can’t buy”.

He calls the worst of all possible worlds because there is high inflation, unemployment and insufficient purchasing power on the part of the population.

Maza calls public expenditures unproductive, saying that devaluation and bureaucratization are reducing the effectiveness of public expenditures. He says “More social expenditures do not lead necessarily to better attention. Most of those expenditures are lost or wasted”

Francisco Rodriguez’ interview may actually be more interesting. Rodriguez says he was very sympathetic to Chavez’ Government, thinking that he thought the Government would emphasize social policies. However, he found a radical Government which he believes may turn into a dictatorship with little respect for human rights. This created huge conflicts in him.

To my surprise he says his conflicts began as early as one month into his job at the economic office, when pro-Chavez forces had expected his reports to be totally favorable to the Government.  He points to his analysis of the 2000 budget as one case where his criticism gained him enemies and conflicts.

He calls macroeconomic management so deficient that it leads to a fiscal crisis in 2002. At that point social expenditures had to be reduced to increase debt servicing.

Rodriguez calls the “Misiones” a parallel state that is very ineffective because it attempts to solve problems in isolated fashion. He calls this an alternative structure of state. He says these are going to be difficult to remove because they represent a power structure that Chavismo will like to maintain. He says we are having a colossal economic crisis with real salaries dropping to a quarter of what they used to be. In on of his most interesting comments he says that Chavez has retained support because in some sense economic management has always been so bad that people are used to it being deficient and the economic issue is not prominent in politics. He also suggests that Chavez has managed to convince his supporters that the Government is not responsible for economic performance and the opposition is. Rodriguez says that while the strike in 2002 had an impact on the economy, economic policy has made matters much worse than they had to be.

Rodriguez says jokingly that if he woke up and found himself in Charge of the Government’s policy, the first thing he would do is resign. He believes that with adequate expansive fiscal and monetary policies and multilateral financing one could achieve 8% economic growth for two or three years. He would eliminate exchange controls gradually by officializing the parallel market and would reduce the deficit to 1-2% of GDP. 

Rodriguez resigned from his academic position at the University of Maryland to come back and join the Government, he will now go back to academic life but locally.

The report on human rights in Venezuela by the US State Department is out and it is not pretty. It is extremely long as it deals with all aspects of human rights, from free speech to women rights. It is quite disturbing to read it, Venezuela has become a country in which not only there are routine violations of human rights, but even worse they are not investigated and those responsible are not found. Total impunity is the name of the game if you are a victim in Venezuela. It is actually indifferent which side you are on, forget about justice or someone defending your rights.

Here are some of the highlights:

—Arbitrary or unlawful deprivation of life

-There were a dozen politically motivated killings in 2003.

-Opposition members received death threats or were intimidated by Government supporters.

-There were 130 extrajudicial killings from October 2002 to September 2003. Some of these were summary executions of criminal suspects while in custody.

-Killing of Government supporters in Apure state were blamed on Colombian guerillas which was denied by national leaders of the same party.

-Eight ranchers were kidnapped and killed. Ransom demands were beyond the ability of those kidnapped or no demand was made.

-A human rights worker in Zulia working for the U.N. Commission on refugees was shot and killed. He received eleven bullets.

-The Government rarely prosecutes cases of extrajudicial killings and characterizes them as “confrontations”

-Death squads composed of police members killed hundreds in the last year. The press registered 854 such cases, only a small number got to the Courts, members of security forces if convicted received light sentences.

-The Chief Prosecutor reported 1541 people killed since 1999 by the police. Death squad cases increased exponentially in 2002.

-Demonstrators from both sides were killed during marches.

—Disappearance

-116 ranchers were kidnapped in 2003. 22 remained captive at the end of the year. While these cases used to involve mostly Colombian guerrillas, common criminals have become involved.

—Torture

-Most victims of torture were poor and torture took place during interrogation.

-PROVEA documented 137 cases affecting 567 victims. Very few cases resulted in convictions.

-There were five bombings during the year, against foreign embassies, the house of one pro-Government Deputy and one with no clear target.

-Prison conditions are terrible, the report callas them inhuman. 48% of prisoners are awaiting trial. Most prisoners have to pay to even eat

—Arbitrary Arrest

-There were arbitrary detentions by the Caracas Metropolitan Police, the political police DISP, municipal forces and the investigative police CICPC. Provea documents 3627 such cases in the year.

—Denial of fair or public trial

-There are only 619 public defenders in the country, which have 150 cases on average but as many as 520 per defender.

– The Supreme Court ordered the replacement of the First Court on administrative matters by two Courts but has failed to name these Courts.

-There were no reports of political prisoners.

—Freedom of Speech

-There were reprisals against those that publicly criticized the Government.

-There were 93 aggressions against reporters in 2003.

-There were six attacks against reporters with explosive devices.

-There were sixty attacks on media installations.

-The Government has failed to investigate any of these attacks.

-The Government has pressured the media with administrative procedures. 15 such cases were reported in 2003.

-There are no restrictions on the Internet (If you are reading this, there are none!)

—Freedom of Association and Assembly

-Opposition figures and marches were attacked by alleged Government supporters.

-The Government claimed the metropolitan Police used excessive force against demonstrations, but failed to bring charges.

-Non Government associations that receive foreign funding were denied the right to represent citizens in Court or bring their own legal action. The Court also ruled the Government had the right to oversee democracy within these institutions and therefore the elections of their leadership can be regulated by the Electoral Board.

–Freedom of Religion

-There were verbal attacks on religious institutions by the President.

-There were fie attacks on the church and its symbols.

—Freedom of Movement

–There were 9533 deportation, most of which did not follow the thirty day period required by law.

—Respect for political rights

-The Interamerican Human Rights Court ordered the Government to compensate victims of the 1989 Caracazo, while the President said the decision was not binding, since then the Government has complied.

—Discrimination

-Violence against women is a severe problem.

-Sexual harassment in the workplace is not a criminal offense. (Note: I did not know this!)

-Women are underrepresented in general, but are 50% of the student body of universities.

-1.6 million children work illegally. mostly in the informal sector.

-240,000 abandoned children roam the streets.

The report on human rights in Venezuela by the US State Department is out and it is not pretty. It is extremely long as it deals with all aspects of human rights, from free speech to women rights. It is quite disturbing to read it, Venezuela has become a country in which not only there are routine violations of human rights, but even worse they are not investigated and those responsible are not found. Total impunity is the name of the game if you are a victim in Venezuela. It is actually indifferent which side you are on, forget about justice or someone defending your rights.

Here are some of the highlights:

—Arbitrary or unlawful deprivation of life

-There were a dozen politically motivated killings in 2003.

-Opposition members received death threats or were intimidated by Government supporters.

-There were 130 extrajudicial killings from October 2002 to September 2003. Some of these were summary executions of criminal suspects while in custody.

-Killing of Government supporters in Apure state were blamed on Colombian guerillas which was denied by national leaders of the same party.

-Eight ranchers were kidnapped and killed. Ransom demands were beyond the ability of those kidnapped or no demand was made.

-A human rights worker in Zulia working for the U.N. Commission on refugees was shot and killed. He received eleven bullets.

-The Government rarely prosecutes cases of extrajudicial killings and characterizes them as “confrontations”

-Death squads composed of police members killed hundreds in the last year. The press registered 854 such cases, only a small number got to the Courts, members of security forces if convicted received light sentences.

-The Chief Prosecutor reported 1541 people killed since 1999 by the police. Death squad cases increased exponentially in 2002.

-Demonstrators from both sides were killed during marches.

—Disappearance

-116 ranchers were kidnapped in 2003. 22 remained captive at the end of the year. While these cases used to involve mostly Colombian guerrillas, common criminals have become involved.

—Torture

-Most victims of torture were poor and torture took place during interrogation.

-PROVEA documented 137 cases affecting 567 victims. Very few cases resulted in convictions.

-There were five bombings during the year, against foreign embassies, the house of one pro-Government Deputy and one with no clear target.

-Prison conditions are terrible, the report callas them inhuman. 48% of prisoners are awaiting trial. Most prisoners have to pay to even eat

—Arbitrary Arrest

-There were arbitrary detentions by the Caracas Metropolitan Police, the political police DISP, municipal forces and the investigative police CICPC. Provea documents 3627 such cases in the year.

—Denial of fair or public trial

-There are only 619 public defenders in the country, which have 150 cases on average but as many as 520 per defender.

– The Supreme Court ordered the replacement of the First Court on administrative matters by two Courts but has failed to name these Courts.

-There were no reports of political prisoners.

—Freedom of Speech

-There were reprisals against those that publicly criticized the Government.

-There were 93 aggressions against reporters in 2003.

-There were six attacks against reporters with explosive devices.

-There were sixty attacks on media installations.

-The Government has failed to investigate any of these attacks.

-The Government has pressured the media with administrative procedures. 15 such cases were reported in 2003.

-There are no restrictions on the Internet (If you are reading this, there are none!)

—Freedom of Association and Assembly

-Opposition figures and marches were attacked by alleged Government supporters.

-The Government claimed the metropolitan Police used excessive force against demonstrations, but failed to bring charges.

-Non Government associations that receive foreign funding were denied the right to represent citizens in Court or bring their own legal action. The Court also ruled the Government had the right to oversee democracy within these institutions and therefore the elections of their leadership can be regulated by the Electoral Board.

–Freedom of Religion

-There were verbal attacks on religious institutions by the President.

-There were fie attacks on the church and its symbols.

—Freedom of Movement

–There were 9533 deportation, most of which did not follow the thirty day period required by law.

—Respect for political rights

-The Interamerican Human Rights Court ordered the Government to compensate victims of the 1989 Caracazo, while the President said the decision was not binding, since then the Government has complied.

—Discrimination

-Violence against women is a severe problem.

-Sexual harassment in the workplace is not a criminal offense. (Note: I did not know this!)

-Women are underrepresented in general, but are 50% of the student body of universities.

-1.6 million children work illegally. mostly in the informal sector.

-240,000 abandoned children roam the streets.

-Scott sends this link from a tech web page with a fairly good article about the Venezuelan situation.

–There was a march today, it was a holiday here but I could not go because I had to work. The march was not allowed to go until the Los Proceres monument because the Government argued this is a security zone. The march only went as far as the Solicitor’s office building nearby. A group was supposed to be allowed to go forward to the monument with a floral arrangement, but the National Guard refused to let the private media thru which prompted the organizers to refuse the offer. The Los Proceres monument is a public monument.

-Meanwhile, the Government was highly critical of the statements made by Democratic Senator Bill Nelson to the Miami Herald, while the Vice-President said that all that Nelson said was false, the Minister of Foreign Relations said that the intelligence data that Nelson claimed to have seen had the same quality of that used to detect the attack on the Twin Towers or decide that there were WMD in Iraq. Thus, our illustrious Minister of Foreign Relations turns an argument against a Democratic Senator into an argument with the US Government. Bolivarian diplomacy at work!

-Scott sends this link from a tech web page with a fairly good article about the Venezuelan situation.

–There was a march today, it was a holiday here but I could not go because I had to work. The march was not allowed to go until the Los Proceres monument because the Government argued this is a security zone. The march only went as far as the Solicitor’s office building nearby. A group was supposed to be allowed to go forward to the monument with a floral arrangement, but the National Guard refused to let the private media thru which prompted the organizers to refuse the offer. The Los Proceres monument is a public monument.

-Meanwhile, the Government was highly critical of the statements made by Democratic Senator Bill Nelson to the Miami Herald, while the Vice-President said that all that Nelson said was false, the Minister of Foreign Relations said that the intelligence data that Nelson claimed to have seen had the same quality of that used to detect the attack on the Twin Towers or decide that there were WMD in Iraq. Thus, our illustrious Minister of Foreign Relations turns an argument against a Democratic Senator into an argument with the US Government. Bolivarian diplomacy at work!

The Venezuelan Government announced last week that it would issue a new bond with maturity in 2011 and a yield of 3 month-Libor plus 1%. The issue will be US$ 1 billion in size but was initially sold only to local investors in local currency.

This is the third issue with similar characteristics sold by the Government since last August, essentially taking advantage of the exchange controls in place to sell low coupon, dollar-denominated bonds to local investors, which later trade in the international markets at a discount. The Government has also sold investments units which contained a dollar denominated six month Treasury Bill as well as two Bolivar-denominated Vebonos. Besides the favorable conditions for the Government, issuing them also has the added advantage of removing excess liquidity from the local financial system.

Local investors find these issues interesting because they are not only a way to purchase foreign currency below the implicit CANTV exchange rate (currently at Bs. 3080 per US$), but also  represents a legal mechanism for corporations to purchase foreign currency.

Previous issues, the 2010 and 2018 bonds, turned out to be quite successful for investors, as not only was the implicit exchange rate cheaper at the time of placement, but in all cases, the bonds enjoyed strong rallies after their initial sale. In this case, the new issue has the added attractiveness of being a floating rate bond, at a time of expectations of higher interest rates.

Orders for the bonds were received until Thursday morning and assignments were made yesterday. Orders could be place in competitive and non-competitive fashion in a modified Dutch auction. the issue was oversubscribed and the bonds to be sold at the non-competitive price of 109%.

Assignment of the bonds was done in layers, with each level getting filled until a layer was found for which demand could not be satisfied. That last layer was then be prorated. The bond has traded all week in the range of 72-74% giving an implied exchange rate of between Bs. 2906 and Bs. 2828, without commission to the final buyer. The Ministry of Finance announced that it had assigned at a price of 109%, 100% to all orders up to US$100,000 and 87.5% to orders between $101,000 and $500,000. Those above $501,000 received nothing. Of all the similar issues this is the one that in our opinion has had the fairest process for assigning the bonds, truly emphasizing small orders. It would have been fairer to give everyone a base amount, rather than nothing to those that ordered above $500,000

With this bond, the Ministry of Finance continues its strategy of taking advantage of the exchange controls and reducing liquidity as well as building a yield curve for the country’s sovereign issues. This is the first time the country has enjoyed such a wide filling of the sovereign yield curve in its history. Technically, there is little one can fault in the strategy designed by the Ministry of Finance with these bonds.

This appears to be the last such issue this year. In fact, Minister of Finance Nóbrega indicated that the Government is considering buying back the country’s Brady bonds, as well as the Global 2018 issues. He suggested that this would imply a pause in new issuing until such a repurchase is completed. This should reduce expectations of a new issue and push the implicit parallel exchange rate higher.

In another bizarre act for the process for signature ratification, the legal counsel to the Board of the Consejo Nacional Electoral (CNE) presented a draft of regulations which diverged significantly from what had been negotiated in the last two weeks with the opposition.

I guess I continue to be naïve enough about these people, to be surprised at their lack of ethics and scruples. The lawyer who is the chief legal counsel of the CNE seems to at times to have more power than any of the CNE Directors themselves. This is the third or fourth time that he has done exactly the same thing: present an outrageous proposal for regulations that differs from what everyone has been discussing or negotiating, This not only deteriorates the atmosphere for negotiations, but always has so far forced the opposition to negotiate for an agreement at the last minute which is not optimal.

This time around the main problems are two article not considered, discussed or included in any part of the negotiations before:

Artículo 22: Muestra. El Consejo Nacional Electoral tomará una muestra de las huellas dactilares equivalentes al cincuenta por ciento (50%) de los electores que concurrieron a reparar en cada evento y la cotejará con Las huellas estampadas en las planillas de recolección e firmas del evento correspondiente.

This article basically says that 50% of the fingerprints of those ratifying their signature will have to be checked. This not only has never been discussed, but there is no database or technology to do this on time.

And then there this article:

Artículo 23. Dudas y Vacíos. Los supuestos no previstos en las presentes normas, así como las dudas que se generen en su aplicación, serán resueltos por el Consejo Nacional Electoral.

Which says that anything not considered in these regulations will be decided by the CNE. This had in fact been considered and the agreement reached was that of a “sudden death”: People go and ratify according to the regulations, totals are added up and the same night as the process is closed an announcement is made of the totals, much like it is done in regular elections.

As if this were not enough, CNE Director Jorge Rodriguez gives a press conference saying that they had corrected “the noise generated by some initial writing”. With this statement Mr. Rodriguez demonstrates how hypocritical and cynical he is. The problems with the two articles quoted above are not with the writing, but with their content. In any serious institutions, where negotiations had been carried out to reach an agreement, the proposal written by the legal counsel of the CNE would have entitled him to being fired on the spot.

Of course, right after Mr. Rodríguez’ announcement one of the chief Ayacucho clowns William Lara came out asking for guarantees against fraud, talking about some proof of fraud during the Reafirmazo by the opposition. But Lara’s statements to me are simply an indication that the events of the last twenty four hours are not coincidental and now the pro-Chavez forces will make some “noise” tomorrow.  Such is life in the Vth. Republic!