Archive for March, 2005

March 26, 2005

Last week
I was once again in Spain,
a country dear to my heart, because I spent five years of my youth living
there. It is indeed a very special country. Forty years ago Spain and Venezuela found each other in exactly
the opposite positions they find themselves in today. Venezuela was
then a rich country, just out of a dictatorship, trying to make sense of how a
democracy worked. The country had a strong economy, a strong currency and the
private sector was thriving. Spain
on the other hand was a fairly poor country, under the Franco Dictatorship
which dictated how things should be done. Tourism was the main industry in Spain, as the
state tried to push into various areas, ovreregulating the private sector.

Today, the
two countries have taken very different paths and the results are diametrically
the opposite. Spain
is prosperous, the private sector is thriving and they enjoy unprecedented
levels of freedom and democracy. Venezuela on the other hand has
become a relatively poor country, as the standard of living has gone down
significantly in the last twenty five years.

there were complex cultural and educational variables involved in the different
paths taken by the two countries. But in the end, the difference boils down to
one country (Spain) choosing the private sector as its main driver, while the
other one (Venezuela) has been bogged down for forty years in the belief that
this weird form of state capitalism is the solution, even if our current
President claims now to be a socialist.

Chavez is
right when he says that the forty years of democracy were a failure. But the
path he is following is precisely the one that led to the errors of the last
forty years. He has magnified and emphasized the mistakes of the past, taking
the country in the same path that so obviously failed in the 70’s and 80’s. There
is simply one difference: During the forty years of democracy that preceded
Chavez, there were checks and balances that showed the mistakes that were being
made. Currently Chavez controls everything and any criticism or challenge to
his authority leads nowhere.

In the 60’s
had no oil companies, a state telecom company, little science and an overly
regulated banking system. Venezuela
on the other hand had oil concessions and a Government owned Oil Company, a
state telecom company, a small but world class scientific community and a
banking system that was overly regulated.

By the
time the seventies came around, the two countries took very different directions.
nationalized the whole oil industry, imposed further regulations on the banking
system and did not let go of the telecom company until 1991. Oil prices went up
and the Government created myriads of new Government enterprise,s thinking that
was the way to grow the economy.

Spain followed a different road.
Telefonica was completely privatized and the Government did not get too
involved in running new enterprises. After Franco’s death in 1975 the “socialists”
took over and actually gave the private sector even more of a free hand, the
economy grew, Spain joined the European community and the rest is simply

Venezuela on the other hand was late in
privatizing. Late in closing most of these money losing Government enterprises
and has continues to this day to overregulated the private sector, including
three separate episodes of exchange and export controls in the last twenty

While I am
obviously oversimplifying, let’s look at a few economic areas and what has been
different between these two countries:

Agriculture: Spain was strong in certain areas
of agriculture, particularly orchards, olives, olive oil and wines. Not much has
changed in the last forty years except the emphasis on these same areas of
strength and not self-sufficiency. Yesterday’s olive and wine cooperatives have
led to luxury brands run by the kids of the members of the cooperatives and
mechanization has increased yields. Fewer people live in rural areas, but
production is up.

contrast, Venezuela
has been repeatedly pushed into a dream of self-sufficiency which is no more than
a chimera. Meanwhile areas like cocoa and coffee were overregulated,
deregulated and subsequently regulated again for too long and the country has
failed to develop its strengths. Only in some areas of tropical fruits have
there been improvements. Fewer people also live in rural areas, but production
is way down.

Oil: Spain had no oil and no oil
companies in the 60’s and has become somewhat of an oil powerhouse. Repsol and
Cepsa, to name just a couple, have expanded and grown by simply looking
outwards in Africa and America.
A few years after the Argentinean Government privatized YPF, Repsol took over
YPF, while PDVSA stood idly on the sidelines.

Venezuela meanwhile has continued to lose
production capabilities. When Carlos Andres Perez nationalized the oil industry
in 1974, the country produced over a million barrels of oil a day, today OPEC
and the AEI say the country produces only 2.6 million barrels a day, while
PDVSA claims it is producing 3.1 million. PDVSA did expand internationally for strategic
reasons, a policy that was widely opposed by many of today’s Government and
opposition figures. They all claimed the money should be spent in Venezuela and
not abroad. Spain
would have nothing with thinking like that, but our current Government is
actually proposing to sell assets abroad. Go figure!

Telecom: Venezuela’s telecom company is
majority owned by US’ Verizon which inherited it from GTE. It is also the second
largest mobile carrier. The largest is Telcel, majority owned by none other
than Telefonica of Spain, which bought all of Bellsouth’s cell phone concessions
in Latin America last year and owns operating companies in Peru, Chile,
Argentina and Brazil (And 5% of CANTV!)

Banking: In the 70’s the Venezuelan
Government limited the percentage that foreign banks could own in local banks,
essentially creating a strong local financial system. However, lack of adequate
regulation created a financial crisis in the mid-90’s and laws were changed to
allow foreign banks back in. Today foreign banks own over 60% of the local
banks, with two Spanish owned banks in the top four in size. Spanish banks have
become so aggressive that they have expanded all over Europe.
Only last week BBVA announced a takeover of Italy’s number 6 bank Banca
Nazioanle del Lavoro.

the European community created a scientific system in Spain in the last
twenty years. Twenty years ago, Venezuela’s
science was of higher quality and productivity than Spanish science. This is no
longer the case. Twenty years ago, good Spanish scientists went abroad,
Venezuelans came home. Today, it is exactly the opposite.

examples may give an oversimplified view of what has happened in the two
countries, but I believe that we took one path dominated by a mindset of
ideology and a lack of economic culture on the part of our politicians. Spain, on the
other hand, was blessed by the ascension to power of a strong academic and professional
class, which had been relegated to the sidelines during Franco’s Dictatorship. These
capable men became politicians and helped created what it is to me certainly an
economic and development miracle.

here in Venezuela
we continue to follow on the same path of errors and improvisation. Venezuela
Inc. is back, PDVSA is being reduced to its minimal expression and the private sector
is overregulated with exchange, financial and export controls. Ideology
continues to dominate action and ignorance rules. Only yesterday a pro-Chavez
Deputy said in reference to an economic concept “the fact that such a concept
does not exist, does not mean that we can not invent it”. It is ignorance and
ideology like that that has taken these two countries, Spain and Venezuela, in such diverging paths
in the last forty years. Nothing in the horizon indicates there is any change
in the near or medium term future.

(Don’t miss the pictures from the World Orchid Show I posted today)


World Orchid Conference pictures

March 26, 2005

As I mentioned, I went to the World Orchid Conference in Dijon on March 9th. below some of the pictures from the exhibit. As usual, I found the exhibit to be almost overwhelming. So many flowers! It was simply spectacular as you can see below. There were two problems. First of all, the amount of people seeing the exhibit was simply staggering. At any given time, there were four or five people deep trying to see the plants and they would not move! This made it hard to ee the plants, let alone take pictures.

The good part was that most people like the “showy” stuff, like Cymbidiums and I tend to like rare species more, so where species pevailed there would be fewer people. Unfortunately lighting was not very good and most of my pictures did not come out very well. I did not bring a tripod (It may not have helped given the crowds!) so I used my wife’s shoulder for many of the pictures below. (Thanks!)

Spectacular Coelogyne Specimen plant                      Field of Miltonias

Field of Paphios

Spectacular Aerangis Citrata plant. I will post my little plant of this species tomorrow.

Some thoughts on the Government’s confiscation of large farm states

March 25, 2005

While I
was away the Government finally took over the two largest farms it had
threatened to expropriate ever since the land grab began in December. This
culminates a process that began in November 2001 when the Chávez administration
passed the land bill under the enabling bill which Chavez used to approve 45
different bills at that time.

was, the original and bill called for some form of efficiency on the part of
the authorities and the Supreme Court declared a couple of articles
unconstitutional, which simply delayed the implementation of Chavez’ original
land grab dream. Essentially, the original land bill mandated a national land
inventory before the Land institute could begin evaluating the expropriation of
land. Three years went by and despite the resources and time spent, the
inventory was far from being completed and Chavez was getting impatient.

At the
November meeting the President told his followers to act immediately and they
did. Rather than follow the orderly process mandated by the Land bill,
Governors, led by the Governor of Cojedes state began “intervening” large land
states or latifundia, which forced the Land Institute to act. As it has become
customary with the revolution, it was all made “legal” within the illegality of
the whole process. Besides sidestepping the requirement of completing the
inventory or proving the large farm states were not productive, two farms,
British owned El Charcote and Venezuelan owned Hato Piñero were finally expropriated while I was away in
the last two weeks. (There are others, but these two are good examples)

It was not
easy to find the justification for taking the farms over. They were both
productive and the owners had land titles going back as far as 1850. Thus, the
legal justification became that neither could prove ownership as far back as
1840. Using this excuse, not only does the Government take over the land, but
rather than expropriate it simply confiscates it. You see, if they never
“legally” owned it, the Government does not need to pay for either the land or
any facilities on it.

Why 1840?
You might as well have said 1491. Basically, few people can prove ownership of
land going that far back in Venezuela.
Ownership of land in Venezuela
is certified via registrars. Each time land ownership is transferred you have
to go to the registry where land is transferred via hand written documents that
refer to the previous owners. Moreover, reference points for boundaries can be
as clear as “twenty paces to the East of the large mango tree”.

But the
larger problem was that from 1858 to 1862, Venezuela had the Federation war,
during which most land records were destroyed. In fact, this has been such a
long standing problem in the history of Venezuela, that the law says that
if you occupy land for twenty years without anyone challenging you, you are the
rightful owner.

All of
these details have been ignored by the Chavez administration, giving as usual
an image of legality while acting in blatant violation of Venezuelan law. And
it seems to play real well in Paris and Peoria.

problem besides the illegalities involved for those living here, is that the
same rules applied to most of the city of Caracas
would simply say that the land where my building stands is also owned by the
Government. It is simply a matter of waiting for the right time, much like it
has been done with these farms and many other of the Chavez ideas that have
been shelved in the past waiting for a more appropriate time to implement them.

end, the sad thing is that the Government will likely destroy the
properties it has confiscated. After all, the Government is the biggest
landowner in the country
and does little with it. Mercal imports rather than promote local
This Government has done very little to protect the environment. But it
not matter, the end justifies the means and the end is the
“revolution”, cattle
production is down significantly already at Hato El Charcote, it will
go down
to zero in a few years. Environmental projects at Hato Piñero will be
the species that have been protected by private efforts will suffer,
but the
Government will not care. The question is: will anyone remember?

Carter and his wife resign from Carter Center leadership roles

March 24, 2005

The news is out that Jimmy Carter has just resigned
from leading the Carter Center, giving out many excuses about helping
the transition for when he and his wife are no longer active in the Center’s
activities. I guess we may never know exactly why he and his wife quit,
but I sure hope it had something to do with the bad job done by the
Center in Venezuela. It certainly sounds strange for both Carter and
his wife to quit at the same time their respective positions at the
Board of Trustees of the Center. I am sure this was forced by other
trustees. Ever since Carter won the Nobel Peace prize the Center’s image has been damaged by its actions.

My feeling is that this is neither good nor bad for the Center itself. It was
Carter’s presence that supposedly gave it its prestige, so I don’t see
how his departure helps. But at the same time, Carter’s leadership in
the eyes of Venezuelans like me left a lot to be desired and the Center
made superficial decisions on Venezuela and the whole process that led
to the recall vote, which hurt the Center’s image. They would have to
find an extermely powerful leader to make up for both these problems.

Venezuela Inc. is back, under revolutionary management

March 23, 2005

In the 1970’s, with the first wave of oil price
increases, another leftist populist Carlos Andres Perez, was President of
Venezuela. Perez nationalized the oil and iron ore industries and with the money
from the oil windfall, created the Venezuelan Investment Fund and the Venezuelan
Corporation for Guayana (CVG). Hundreds of companies ended up under these two
umbrellas, with few of them ever showing a profit or even producing anything. Venezuela Inc. was a
gigantic failure, as most enterprises had no business plan, were inefficiently
run and corruption was rampant. Few of them had anything going for them other than desire
or wishful thinking by some Government official that the state should participate in those particular areas.

Venezuela Inc. is back, and much like the first time
around, the decisions are being made at the top, without any serious studies and
most will once again become huge sinkholes for public funds. So far, President
Chavez and his Cabinet have had the state become newly involved in:

-The expropriation of the assets of bankrupt paper company
Venepal. It could not survive with private management; can anyone expect it to
survive under the Government’s supervision? US$ 7 million have been invested in it already.

-Government airline Conviasa, which so far has one
plane and will try to get the Government in what Warren Buffet considers the
most difficult business to be in.

-Venezuelan-Iranian joint tractor venture Veneiran. In
only ten days in existence the company has already faced its first general
strike, when management tried to fire Venezuelan workers because they did not
meet their standards. The most curious aspect is that the Iranian management wants
workers to be under thirty, but all of them are above fifty. Truly a fundamentalist

-Mercal, the food import company which has quickly
become the largest importer of foodstuffs in
So much for endogenous developments!

-Farmal is the pharmaceutical distribution company the
Government is now setting up to imitate the Mercal model in this area.

-CVG Telecom is the Government’s new entry into the
telecom field, after the country’s telephone company was privatized in 1991 and
few invested in
after the 2001 Chavez “telecom opening” bill. It will compete with companies managed
Telefonica and Verizon.

-Yesterday the Government created four new
enterprises: CVA Azucar, CVA Cereales y Oleaginosas, CVA Lacteos and CVA
Empresa Comercializadora de Insumos y Servicios Agricolas. These companies will
be in charge of sugar production, processing and commercialization, corn flour,
pasta, rice and oil, milk and agricultural supplies and services respectively.

more things change, the more they stay the same, but “revolutionary”
management will not change the final outcome this time around either.

A clear path to default

March 22, 2005

people tend to minimize Chavez’ ability to think and plan long term. Politically, Chavez
has always stuck to his long term plans and continues to do so. Thus, one needs
to analyze all of the following events in its proper context:

buys back its debt last summer in an operation that had no financial
justification: It left the company with practically no debt and the price paid
was too high. The only possible explanation was that it was being done to
protect the company’s Board from prosecution, since it had been unable to file
its financials (Is it impossible?) under US

also repurchased its debt. The possibility of this being done to protect its
Board was not feasible, as the company has filed and continues to file
financials due to the partnerships it has.

announces that the country will sell CITGO because the company makes little or no money. This
despite the fact that the company is making record profits and according to one
of its partners, Lyondell, receiving up to US$ 5 per barrel of oil above
market price, under the terms of its contract.

threatens to not export more oil to the US. This could only happen if CITGO
is sold, as the Venezuelan oil company PDVSA, has long terms agreements with

None of
the above events makes sense, unless the plan is to have the country eventually default on
its foreign debt, the moment oil prices drop. The excuse? Easy: The revolution needs
the funds. With no debt in the US,
no property in the US and no
exports to the US, the
effect on Venezuela
will be minimal.

If not,
look at Argentina.
It not only defaulted, but restructured its debt under terms extremely negative
for debt holders who had no recourse but accept. If Argentina
can do it, why can’t revolutionary Venezuela do it too?


Two thoughts hanging in there

March 22, 2005

For the last two weeks, I have been wondering about two statements made by Venezuelan Government officials:

-Attorney General Rodriguez on the amount of C4 found at the beach
apartment of Antonio Lopez’ parents, three months after his death:
There was enough C4 to blow up all of Venezuela.

Interesting. Who has enough C4 to blow up all of Venezuela? The
Military? Has it been investigated? Isn’t C4 made in such a way that
there are different traces of elements to allow the identification of
its origin? Where did it come from? Which military fort? Which lot? Who
was in charge of it? Hello Isaias! Are you looking into this?

– Miranda Governor Diosdado Cabello on the cost of an alterante
transporation system that would help the half a million people that
commute daily from the Altos Mirandinos: “It’s too expensive, it would
cost US$ 500 million”

Too expensive? Isn’t that the same amount that will be invested in
Argentina’s bonds? But of course, if the Venezuelan Government buys US$
500 million in Argentina’s bonds, the Argentinains will never see the
money, it will go to the seller, most likely a US or European fund.
These are not NEW bonds, this is secondary market of existing bonds.
Thus, the Chavez administration is helping the specualtors, while US$
500 million is too much money to solve an important problem of 2%
of the Venezuelan population. Go figure!

A statement of principle: We can not be intimidated

March 22, 2005

The nice
thing about traveling is you can relax and think. While I did not have the
privilege of having a room which cost 2,670 euros a night (The Raphael), like the President of
the people did in Paris,
the trip was fun and relaxed. Perhaps being away allowed me to step back a bit
from what is going on in Venezuela, but as I read the news once in a while, I
could not help the feeling I get that, despite what is going on here, people
are simply too complacent. While I was away the new penal code was approved,
land was illegally taken away from their owners and the Minister of Defense
justified the death of two people in the name of better military discipline.
And nothing happens, nobody reacts.

Yes, the
new penal code is in effect. In its article 147 it says:

“Anyone who offends with his words
or in writing or in any other way disrespects the President of the Republic or
whomever is fulfilling his duties will be punished with prison of 6 to 30
months if the offense is serious and half of that if it is light. The term will
be increased by a third if the offense is made publicly.”

From a
legal point of view, this article is so screwed up, that those that wrote it
should simply proclaim their stupidity. By the way, by calling them stupid, I
am violating another article.

First of
all, what is an offense? Does it need to be false to be offensive? If I say
Chavez is ignorant on economic matters, am I offending him? If I say he is a
murderer too, am I being offensive? If I say he allows rampant corruption
around him, is that offensive? Or what about if I say that he is a proven liar?
I am sure he would be offended by being called a liar, but it is true. From his
“poor” background, to why he went to the military academy, or why he could not
go to college, to his campaign promises, lies, lies, lies…

Then comes
serious and light (“grave” and “leve” in the Spanish original). Who decides one
or the other? A judge? Is calling Chavez a murderer in the 1992 “light” or
“serious”. Or accusing him of premeditated murder on April 11th.
2002, “light” or grave”. I simply don’t know.

And then
comes the public versus private debate. It says that the term will be increased
by one third if the offense is made publicly. What that does exactly mean? If I
tell my wife Chavez may be gay in the sanctity of my home, could I be offending
him? If I say in my blog that Chavez has allowed his family to get rich, is
that private or public?

wrote and approved this, should be ashamed of what a bad job was done. The
problem is that Article 222 of the same Penal Code says:

“Anyone who by his words or acts
offends in any way the honor, reputation or decorum of a member of the National
Assembly or any other civil servant, will be punished in the following way, if
the action is made in his presence and is motivated by his responsibilities…”

Clearly, Article
147 was written by the National Assembly. Thus, I may be getting into trouble
if I call them dumb and dumber for writing Art. 147, but this article may be
just as bad. Who is a civil servant in Venezuela? Can I say the Assembly’s
doorman is stupid? Or the guy that denied me a new passport is corrupt? Or the
Vice-President a cynic? Or the Minister of Information a liar? Or unethical
(both of them)? I just don’t know.

Then there
is wonderful Art. 442 of the new Penal Code that says:

“Anyone who communicating with
various people, together or separate, would have charged any individual with a responsibility
which may expose him to public scorn or hate, or an offense to his honor or
reputation, will be punished with prison of one to three years…if the crime
were committed in a public document or writings (blogs?), drawings or exposed
to the public, the penalty will be from two to four years…”

You have
to love this one. You only need to accuse someone of something that may cause
public scorn, let’s say corruption, but the article says nothing about whether
it is true or not. Whether you have to prove it or not. Just that if you expose
someone to public scorn, bingo! Go to jail, do not collect 200, who cares if
its is true or not.

All of
this takes me back to the beginning. We are being overrun by this outlaw
Government and people are just sitting there, letting the Government abuse
them, take advantage of them and intimidate them. The Venezuelan press is saying
little, being extremely careful of not violating the media law or the new penal
code. The truth is not getting out. We are losing my friends. That is the stark
reality. Reporters are fired for fear of losing Government advertising. Events
are not reported by the press for fear of violating one of the innumerate new
articles of these two new bills.

comes to the point of this article. I am no hero. I don’t pretend or want to be
one. But I will simply not back down. I will continue to call murderers,
murderers. Idiots, idiots. Thieves, thieves. Thugs, thugs. This is my country
and my life we are talking about, not some abstract concept of freedom and democracy.
This is my freedom, this is the democracy I have lived in and fought for most
of my life. All Venezuelans that are against this autocratic regime should
fight everyday in everyway they can. We can not be intimidated by militaristic
and Stalinist practices of this Government.

If allow them to push us back, we lose. I will not step back. As simple as that.

The Bolivarians come to Boston

March 21, 2005

Note: This was posted last week by Jorge, but never went on because of technical problems. I will leave it for the record.

The Bolivarians come to Boston

Some important personalities of the Bolivarian Revolution will visit
Boston to give the Bostonians their perspectives on Venezuelan
matters. Several events have been organized by the Bostonian
Bolivarian Circles as well as by the Venezuelan Embassy and CITGO (yes
the same CITGO that the government wants to sell). Here are the

Presentation by Juan Barreto (mayor of Caracas)

4:00—6:30 p.m.
Architects of the Bolivarian circles will explain the advances of the
61 Kirkland Street. Cambridge

MIT, MARCH 17, 6:30-10:00 p.m.
Exchanges with Juan Barreto (mayor of Caracas)and Aristobulo Isturiz
(minister of education)
Walker Memorial Hall-142, Memorial Drive, Cambridge

Public Breakfast

3 p.m.
Presentation by Maria Pilar Hernandez.

The url to get the whole information are and
Jorge Arena.

The two burned soldiers just died

March 14, 2005

The two young soldiers that were burned last week in a military cell confinement, just died. Globovision confirms
that Roman Lujan (20 years old) and Roger Gutierrez (19 years old) died
today. I am personally disgusted and appaled that this would happen
anywhere in the world. According to a special program that I watched
yesterday in Globovision, this is the third incident of this type that
takes place in Venezuela in four years, the second in only a year.
Where are the human rights organizations now? How can this happen in a
supposedly democratic country where the individual rights are
respected? How could this happen at all, not once, but three times?
What are the results of the previous investigations? Why nothing was
done to correct the situation? Who is responsible for the deaths? So
far, there are no answers. All I have read is that the doctors that
were in charge of the burned soldiers last year in Furte Mara were the
only ones charged for negligence.
Jorge Arena