The Devil's Excrement

City Councilman Carlos Herrera, who was Danilo Anderson’s best friend, immediately came out publicly arfter the murder of his friend and accused none other than Vice-President Jose Vicente Rangel of being involved in the killing. According to Herrera, Rangel had been pressuring Anderson to drop some names from the list of those accused of those that went to the Presidential palace to Carmona’s swearing in ceremony.

Today, the Attorney General/Prosecutor says and I quote: “these statements together with other ones have guided us in finding the intellectual authors of this crime”. Am I reading too much in this statement? Is he suggesting the VP might be involved? Or his friends?

Hold on to your seats! Get ready! I am about to say that the Government is proposing to do something which I think is good, maybe I think it is very good! Basically, it is one of the few proposals in the last five years that really attempts to tackle a structural problem in the Venezuelan economy. But let’s start at the beginning:

Currently, when the Government sends funds to any Government institution, office or Ministry, it orders the Venezuelan Central Bank to deposit the funds on behalf of that Government organization at a private bank. The Central Banks deposits typically a month or more of the institutions budget.

These Government’s organizations, typically deposit those funds in interest bearing accounts. Now, what is perverse about this is that 60% of the amount in deposits of the Venezuelan private banking system is invested in Government bonds and Treasury bills. Thus, the Government pays banks interest so that banks can pay a lower interest to Government organizations that have funds idle in the private banking system.

This is obviously quite perverse and inefficient. Perverse, because the Government is financing banks, so that banks can pay these Government institutions. While this had always happened in Venezuela, the difference is that these funds represented 4-5% of all deposits in the Venezuelan financial system five years ago, but represents 37.5% of deposits today! This is simply huge!

But it gets worse, since Government officials have discretionary power over which banks these funds are deposited in, this ahs become one of the largest sources of corruption in Venezuela today. Many banks, I will not mention names, actually pay commissions to Government officials, treasurers and administrators to divert deposits their way, whether they pay the highest interest or not. So, this is a huge business for private banks, which coincidentally have been making obscenely huge profits in the last few years. Now, not all banks play this game, but there is a large group of banks whose deposits have grown rapidly in the last few years.

To give you an idea of orders of magnitude, deposits in the banking system are like US$ 17 billion of which about 40% receives interest. However, man time Government institutions do not deposit directly but do a repo (Repo= Repurchase agreement. A financial institution “sells” a financial instrument to someone with an agreement to repurchase it at a future date) with the bank, some that the bank does not have to reserve in the Central Bank. So, rough numbers, we are probably talking about a total of US$ 30 billion with 40% owned by Government institutions or some US$ 12 billion. Now, spreads are typically 8-9% in the banking system, so we are talking about roughly a billion US$ I n revenues for the banks, A very nice piece of change, worth fight for…and paying for.

What the Government proposes to do is to create the Bank of the Treasury that would replace the Central Bank in these activities. Thus, institutions will not get their money until they need to use it. This will reduce the financing needs of the Government as it will be able to reduce the amount of debt issued in local currency and will allow for the more efficient use of Government resources.

This is a great idea if it is implemented efficiently and correctly and I applaud laud and clear the initiative. There are some negatives to it, but they are minor compared to what is at stake:

-Banks that have large Government deposits will suffer and have problems short term as these deposits are withdrawn from it. The Government should have a transition period in order to prevent a crisis at some financial institutions.

-Some Government institutions have actually used these deposits as a way of generating additional income to fund their activities. In particular, some institutions use this interest income to pay salaries the first few months of the year, since the Government takes time to approve and fund the budget every year. Most institutions doe not get any money until March each year. These institutions will have to learn how to live without these extra funds.

This is not the first time the idea of a bank of the Treasury has been floated. Let’s hope it gets beyond the idea stage and it works. To me the savings in financing, the elimination of the associated corruption and the efficiencies introduced would make this a giant step towards improving Government finances.

Hold on to your seats! Get ready! I am about to say that the Government is proposing to do something which I think is good, maybe I think it is very good! Basically, it is one of the few proposals in the last five years that really attempts to tackle a structural problem in the Venezuelan economy. But let’s start at the beginning:

Currently, when the Government sends funds to any Government institution, office or Ministry, it orders the Venezuelan Central Bank to deposit the funds on behalf of that Government organization at a private bank. The Central Banks deposits typically a month or more of the institutions budget.

These Government’s organizations, typically deposit those funds in interest bearing accounts. Now, what is perverse about this is that 60% of the amount in deposits of the Venezuelan private banking system is invested in Government bonds and Treasury bills. Thus, the Government pays banks interest so that banks can pay a lower interest to Government organizations that have funds idle in the private banking system.

This is obviously quite perverse and inefficient. Perverse, because the Government is financing banks, so that banks can pay these Government institutions. While this had always happened in Venezuela, the difference is that these funds represented 4-5% of all deposits in the Venezuelan financial system five years ago, but represents 37.5% of deposits today! This is simply huge!

But it gets worse, since Government officials have discretionary power over which banks these funds are deposited in, this ahs become one of the largest sources of corruption in Venezuela today. Many banks, I will not mention names, actually pay commissions to Government officials, treasurers and administrators to divert deposits their way, whether they pay the highest interest or not. So, this is a huge business for private banks, which coincidentally have been making obscenely huge profits in the last few years. Now, not all banks play this game, but there is a large group of banks whose deposits have grown rapidly in the last few years.

To give you an idea of orders of magnitude, deposits in the banking system are like US$ 17 billion of which about 40% receives interest. However, man time Government institutions do not deposit directly but do a repo (Repo= Repurchase agreement. A financial institution “sells” a financial instrument to someone with an agreement to repurchase it at a future date) with the bank, some that the bank does not have to reserve in the Central Bank. So, rough numbers, we are probably talking about a total of US$ 30 billion with 40% owned by Government institutions or some US$ 12 billion. Now, spreads are typically 8-9% in the banking system, so we are talking about roughly a billion US$ I n revenues for the banks, A very nice piece of change, worth fight for…and paying for.

What the Government proposes to do is to create the Bank of the Treasury that would replace the Central Bank in these activities. Thus, institutions will not get their money until they need to use it. This will reduce the financing needs of the Government as it will be able to reduce the amount of debt issued in local currency and will allow for the more efficient use of Government resources.

This is a great idea if it is implemented efficiently and correctly and I applaud laud and clear the initiative. There are some negatives to it, but they are minor compared to what is at stake:

-Banks that have large Government deposits will suffer and have problems short term as these deposits are withdrawn from it. The Government should have a transition period in order to prevent a crisis at some financial institutions.

-Some Government institutions have actually used these deposits as a way of generating additional income to fund their activities. In particular, some institutions use this interest income to pay salaries the first few months of the year, since the Government takes time to approve and fund the budget every year. Most institutions doe not get any money until March each year. These institutions will have to learn how to live without these extra funds.

This is not the first time the idea of a bank of the Treasury has been floated. Let’s hope it gets beyond the idea stage and it works. To me the savings in financing, the elimination of the associated corruption and the efficiencies introduced would make this a giant step towards improving Government finances.

Hold on to your seats! Get ready! I am about to say that the Government is proposing to do something which I think is good, maybe I think it is very good! Basically, it is one of the few proposals in the last five years that really attempts to tackle a structural problem in the Venezuelan economy. But let’s start at the beginning:

Currently, when the Government sends funds to any Government institution, office or Ministry, it orders the Venezuelan Central Bank to deposit the funds on behalf of that Government organization at a private bank. The Central Banks deposits typically a month or more of the institutions budget.

These Government’s organizations, typically deposit those funds in interest bearing accounts. Now, what is perverse about this is that 60% of the amount in deposits of the Venezuelan private banking system is invested in Government bonds and Treasury bills. Thus, the Government pays banks interest so that banks can pay a lower interest to Government organizations that have funds idle in the private banking system.

This is obviously quite perverse and inefficient. Perverse, because the Government is financing banks, so that banks can pay these Government institutions. While this had always happened in Venezuela, the difference is that these funds represented 4-5% of all deposits in the Venezuelan financial system five years ago, but represents 37.5% of deposits today! This is simply huge!

But it gets worse, since Government officials have discretionary power over which banks these funds are deposited in, this ahs become one of the largest sources of corruption in Venezuela today. Many banks, I will not mention names, actually pay commissions to Government officials, treasurers and administrators to divert deposits their way, whether they pay the highest interest or not. So, this is a huge business for private banks, which coincidentally have been making obscenely huge profits in the last few years. Now, not all banks play this game, but there is a large group of banks whose deposits have grown rapidly in the last few years.

To give you an idea of orders of magnitude, deposits in the banking system are like US$ 17 billion of which about 40% receives interest. However, man time Government institutions do not deposit directly but do a repo (Repo= Repurchase agreement. A financial institution “sells” a financial instrument to someone with an agreement to repurchase it at a future date) with the bank, some that the bank does not have to reserve in the Central Bank. So, rough numbers, we are probably talking about a total of US$ 30 billion with 40% owned by Government institutions or some US$ 12 billion. Now, spreads are typically 8-9% in the banking system, so we are talking about roughly a billion US$ I n revenues for the banks, A very nice piece of change, worth fight for…and paying for.

What the Government proposes to do is to create the Bank of the Treasury that would replace the Central Bank in these activities. Thus, institutions will not get their money until they need to use it. This will reduce the financing needs of the Government as it will be able to reduce the amount of debt issued in local currency and will allow for the more efficient use of Government resources.

This is a great idea if it is implemented efficiently and correctly and I applaud laud and clear the initiative. There are some negatives to it, but they are minor compared to what is at stake:

-Banks that have large Government deposits will suffer and have problems short term as these deposits are withdrawn from it. The Government should have a transition period in order to prevent a crisis at some financial institutions.

-Some Government institutions have actually used these deposits as a way of generating additional income to fund their activities. In particular, some institutions use this interest income to pay salaries the first few months of the year, since the Government takes time to approve and fund the budget every year. Most institutions doe not get any money until March each year. These institutions will have to learn how to live without these extra funds.

This is not the first time the idea of a bank of the Treasury has been floated. Let’s hope it gets beyond the idea stage and it works. To me the savings in financing, the elimination of the associated corruption and the efficiencies introduced would make this a giant step towards improving Government finances.

Carlos Alberto Montaner hits on Chavez with this byline in his article “Chavez and Fear” (thanks M):

Hugo Chavez has begun to kill and repress selectively
Until now, the murders — and they add up to about 100 — have been random.

I love the shot at the Carter Center at the end:

By validating that monstrous swindle, the Carter Center and the OAS demoralized and disarticulated the opposition, placing all of the nation’s reins in Chavez’s hands. Then they washed their hands and left. But that’s not even the worst part. The worst part is that Chavez, arrogant and willing to kill, will metastasize throughout Latin America. We’ll see.

Carlos Alberto Montaner hits on Chavez with this byline in his article “Chavez and Fear” (thanks M):

Hugo Chavez has begun to kill and repress selectively
Until now, the murders — and they add up to about 100 — have been random.

I love the shot at the Carter Center at the end:

By validating that monstrous swindle, the Carter Center and the OAS demoralized and disarticulated the opposition, placing all of the nation’s reins in Chavez’s hands. Then they washed their hands and left. But that’s not even the worst part. The worst part is that Chavez, arrogant and willing to kill, will metastasize throughout Latin America. We’ll see.

Carlos Alberto Montaner hits on Chavez with this byline in his article “Chavez and Fear” (thanks M):

Hugo Chavez has begun to kill and repress selectively
Until now, the murders — and they add up to about 100 — have been random.

I love the shot at the Carter Center at the end:

By validating that monstrous swindle, the Carter Center and the OAS demoralized and disarticulated the opposition, placing all of the nation’s reins in Chavez’s hands. Then they washed their hands and left. But that’s not even the worst part. The worst part is that Chavez, arrogant and willing to kill, will metastasize throughout Latin America. We’ll see.

Just a note to explain that I had not understood quite well the implications of the case against Tulio Alvarez. It turns put that when Alvarez went to the Supreme Court to request that William Lara’s immunity be removed, he was not acting on his own behalf. Instead, he had been hired by the workers of the National Assembly who claim Bs. 2 billion in their funds had disappeared from the contributions the Assembly makes to their savings plan, when Lara was President. Only Bs. 300 million has been recovered by the savings plan.

Thus, the case represents an intimidation to all lawyers against taking on a case against any Government officials. Another milestone in revolutionary justice!

I would like to welcome a new blog Reason over Might written by a South African, who lives in Germany and is married to a Venezuelan. How is that for an unusual combination? One may think unbiased, except for the wife. In any case, John is spending Christmas in Venezuela, eating hallacas and seeing the Bolivarian revolution first hand. Hope he enjoys his vacation and leaves most of the blogging for his return to Germany. Enjoy! Any blog that uses a Sting quote for its byline:

“Without the voice of reason, every faith is its own curse”

It’s allright in my book.

Even before the Government named the new members of the Venezuelan Supreme Court, the effects of the new totalitarian Chavista justice of the country are being felt.

A couple of years ago, lawyer Tulio Alvarez, the same one that investigated the fraud of the August referendum, went to the Supreme Court to ask that the Court removed the Parliamentary immunity that the former President of the Court enjoyed, in order to try him for corruption and misappropriation of funds while in that position.

The Venezuelan Supreme Court did not accept Alvarez’ petition and then Lara sued Alvarez for defamation. Today, a Court ordered that Alvarez can not leave the country, until he is tried. He could spend 30 months in jail.

Lara claims that Alvarez “attempted to murder him morally” (hah!). Of course, the money is still missing, nobody is investigating and the accuser is now the accused. This is called revolutionary justice in this sad revolution.

Will anyone dare denounce anything against a Government official with the new loaded and revolutionary Supreme Court? You be the judge (pun intended). It is called a license to steal, all courtesy of the robolution.