The Devil's Excrement

Somehow,
outright fascism is now all right with Chavistas, no more doublespeak, no more
gray areas, to wit:

—Libertador Mayor Bernal
says the workers in his office will not be pressured into voting for Chavez.
Why? Let’s hear his own words:

“These
actions will be unnecessary because the workers of the Mayors office of
Libertador are committed in a personal way with the revolutionary process, we
all know of the election there was at the referendum, in which side each of us is
located, that was public and evident. Don’t you remember that famous
list that we decided to bury?

Can
fascist, illegal and discriminatory behavior be clearer than this? But there
was more…

–Besides
the ability to be reelected forever, Hugo Chavez announces
that he does not want multiple ideas; he wants a single party, a unified party,
a unique party. (This was quickly accepted by his party and the
Communist party is ready
to sacrifice itself) “A single party to represent the Republic! Let’s turn Venezuela into an
impregnable fortress, nobody or nothing should be able to come here and alter
the course of the revolution”

I wonder
what all the other parties that still support Chavez think of this narrow
thinking and a way for Chavez to control and manipulate them. I guess from now
on, they will have to be absolutely servile to the autocrat. No dissention, no
competition, no discussion.

Do I hear
death to democracy and long live fascism from the crowd? Heil Hugo or Heil Huguito?
Whatever happened to “sovereignty resides on the people”? Will it now be “sovereignty
resides on the party”?

–The
Secretary General of Accion Democratica, Henry Ramos Allup, a politician I do
not like very much, has been a leader of the abstention movement, saying that
conditions are not conducive to a fair election. In fact, he is slowly becoming
isolated because of this position after the Rosales candidacy has basically
unified the opposition.

Last week
the General Prosecutor’s office served Ramos Allup with a notice to go and
testify in a “case”. Today he found out
that he is being investigated for “defending” a crime. You see Ramos Allup
defended the escape from jail by union leader Carlos Ortega, arguing that Ortega
could not get a fair trial in Venezuela,
because the judicial system is controlled by Chavismo.

Thus anyone that expresses dissent can be jailed in Venezuela, you could jail half of Venezuela, including the Chavistas that defend
the purchase of Argentinean bonds that are simply the most corrupt racket in the
country’ history or mandatory loans by commercial banks, that are enriching
many Chavistas, after all, they are defending the existence of “crimes”

In the
end, this is simply a fascist way to get rid of your political enemies, Ramos
Allup simply has to get in line behind Uson, General Martinez, Ortega, 18,000
oil workers, the victims of Tascon’s list, Sumate leaders, Henrique Capriles,
Leopoldo Lopez, Brewer Carias and still counting…

Anyone reading this, who thinks he or she is a democrat, and still defends this
fascist Government should have their brain examined…

And here is video of the skimpy crowd as Chavez continued to speak yesterday late in the afternoon, note how the girl looks bored until she notices the camera and cheers at that point.

Analyst Argelia
Rios has never been very optimistic about getting rid of the autocrat, thus I was
surprised to read this in El Universal

The Inverted Equation by Argelia Rios in El
Universal

The winds
are not blowing in favor of the leader. He is no longer the man capable of
connecting instantly with the humble people. The zeal to transform himself in a
new reference for the international counter powers has distanced him from
domestic problems.

His
grandiloquent speech has turned incomprehensible for the popular sectors, where
the new Chavez promises sound hollow, buried in the pit of his endless “blah-blah-blah”

What the
powerful chief has found upon his return is an atmosphere of indifference.

World
geopolitics ended up producing a growing uninterest on the part of the masses,
that do not understand even the glossary used by the one they believed to be
their best interpreter

The vanishing
of the magic with which a mystical relation between the poor and the President
had been created, has opened the way to disenchantment. The ears of the poor
are no longer a monopoly of the unique leader that is seeing how his people put
a surprising degree of attention on the new offerer.

In the middle of the most spectacular bonanza experienced by Venezuela, the
most humble sectors are weighing in, more each day, the smallness of what
Chavez has given them…

The inefficiency that the President has failed to resolve-because everything
ends in rotations and cosmetic changes to his team- has progressively planted
the idea that the leader has an important quota of responsibility in the
disastrous execution by his Government  and
that there is no solid compromise with the poor: only a utilitarian
relationship, in which the vote encounters a retribution which is barely
symbolic and basically residual.

“To try out” a new leader is no longer a possibility denied outright. Those who
have little to lose-the little that Chavez has given them-begin to accept “that
a change may not be bad”: an exemplary punishment, whose expression could be,
either indifference, materialized by the abstention of the clientele, or
perhaps its decided jump towards the territory of the novelty…

The fact  that the President not even considers poverty
a deplorable condition for human beings (because to be rich is bad or to wear
something for the first time at Christmas, or to aspire to an improvement in
the standard of living), is a sentence tattooed in the subconscious of those
humble beings that now observe with curiosity the other face. 

Certainly,
the decision is not there yet, but there is a sort of prowling around the
alternative. As Oscar Schemel from pollster Hinterlaces says, the people already
recognize that the President, while being a “good man”, may result “inconvenient”
for the interests of Venezuela, because he has not been able to assemble a
competent team (not even in an electoral year, which is revealing of his
incapacity to do it), because he does not listen to the people and has involved
Venezuela in an external machination that deviates, towards other nations,
resources that the poor need to reach a dignified standard of living.

In short, the roles have been inverted. It is now Chavez who has problems to
reconnect with the popular sectors. It is now him that is showing an erratic
and repetitive speech. It is now him that is undergoing a division
within his alliance and the threat that many of his allies, facing the decisive
ideological debate and the “forever”, will play to cheat on him in order to weaken
him. Chavez knows that the times for treason and rearrangements are coming, in
the social, civil as well as the military world. Money will not be sufficient
this time.

With pictures at 2:00, 3:30 and 6:00 PM looking both ways on Avenida Bolivar (concentration was at 11 AM to be at Avenida Bolivar by 2 PM), Megaresistencia shows us how few people went to the Chavista marxh today, the one in which Chavez would swear in 300,000 members of its campaign and would be attended by 1.5 million people. This was 35,000 people tops despite the buses, the resources and the presence of the autocratic leader. He was not pleased.

(Sorry for the length, could not help it)

The term
Devil’s Excrement, was created by Juan Pablo Perez Alfonso to dramatize the
difficulties that a country may have in implementing the necessary economic
measures for its development when a natural resource exists which strengthens
the currency and allows policy makers to postpone unpopular measures because
their urgency can be hidden by the wealth itself. In The Netherlands it is
referred to as the Dutch Disease, because of the effect that natural gas prices
had in that country’s economy in the 60’s.

But it may
more properly be named the Politician’s Trap, because it allows them to
postpone important decisions in order to boost their short term popularity, but
somehow it always ends up blowing up on their faces, with dire consequences
which are always paid first by the people via devaluations, unemployment and
inflation.

Venezuela’s case is one of the best examples
of this. Politicians past and present, have always believed that they could
innovate on economic matters and that the surge in prices and/or steady stream
of income from oil could support their ignorant creativity on the economy.
Somehow they knew the day of reckoning would come, but by then they would
likely not be around and somebody else would be blamed.

Any
Venezuelan who was an adult in 1982 likely remembers the calls by the then
President of the Venezuelan Central Bank Diaz Bruzual for people to take their
money abroad, as that would reduce the pressure on inflation. Six months later,
the country lived through its first maxi-devaluation. (The same policies are
being encouraged today) It was no different when Jaime Lusinchi was President.
He imposed exchange controls and Venezuelans began importing cars (remember the
Ford Sierra?) as Lusinchi’s popularity remained above 60% up to the last day of
his Presidency, except that the incoming administration found liquid
international reserves of less than US$ 300 million and the economic adjustment
that followed was one of the worst in our country’s history.

Rafael
Caldera in his second Government was no different. He thought he could impose
his ignorant economic policies and his will on the country. He began by firing
a well respected Central Bank President, which drove the currency down, created
a financial crisis and within months, Caldera imposed exchange controls and
price controls which eventually began blowing up. When Caldera realized that inflation
was running at a 100% clip if you annualized it, in December 1995, he got rid
of his economic team full of friends with little economic knowledge and
appointed Teodoro Petkoff as Minister of Planning. Petkoff imposed the second
economic adjustment in the three years of the Caldera administration and things
began to improve until oil prices went down, derailing any attempt at changes.

In each
and everyone of these cases, the imposition of exchange controls, price
controls or creation of economic rules which are simply outside the realm of
economic theory, created distortions which eventually led to a big adjustment,
as they could not be sustained. In each and every case, it is the poor that
pays for these adjustments and devaluation is typically the simplest solution
to solve most of the problems, remove the distortions and deflate the pressures
that have been built into the system. It is a the Politician’s Trap.

The laws
of economics are not too different than the laws of other sciences, except that
in those one can isolate a system, do an experiment and reduce the problem to a
couple of variables that you can use to prove these laws. In economics, there
are so many variables and the system takes time to react in such a way, that
the distortions and causes may take some time to manifest themselves.

The Chavez
Government has not been any different. We can divide its economic policy in two
stages, before the devaluation in 2002 and afterwards. Before the large devaluation
in 2002, the Government ran contradictory and distortionary policies that were
trying to contain inflation, save excess funds into the Macroeconomic
Stabilization Fund (FIEM) and borrow money internally while holding the
currency stable to reduce inflation, It did not work. The moment oil prices
dropped, the FIEM was used, rather than saved and then discarded and the weight
of the ballooning local debt was too much for the Government to sustain its
constant exchange rate policy. In February of 2002, Chavez was forced to allow
for a maxi-devaluation which together with the strike in 2003, induced a crisis
which was once again paid by the poor via inflation and devaluation.

The second
stage began in February 2003 with the imposition of exchange controls which
combined with high oil prices has allowed the Chavez administration to
introduce what is likely to be the biggest distortions in the country’s economy
ever and which eventually will lead to a huge crisis which will be once again
paid by the poor via inflation and devaluation. Up to now, these distortions
have been covered up by the sharp increase in oil prices, but are now beginning
to be felt as a sharp increase in consumer prices. The seams are beginning to
show some rips, and they are ugly.

Let’s look
at some of the major distortions on the Venezuelan economy today:

—Exchange Controls: Exchange controls
have always proven to be damaging in the long run. They create numerous
problems from corruption surrounding approvals, to all sorts of gimmicks to buy
dollars at the official rate. When first imposed, the Government claimed it
would stop any possibility of a black market, but then it took two and half
years to approve the law punishing it. By then, the Government had not only
realized that it needed a escape valve, but it had become the biggest supplier
of dollars to the parallel market via the Argentinean bonds, another one of the
biggest corruption scams in the Chavez administration. By now, CADIVI, the
exchange control office, has become a bureaucratic office, which approves
anything from foodstuffs to luxury cars, as few things are actually banned. But
at the same time the criteria for approval are somewhat mysterious. Individuals
get an allotment to travel, which also began with lots of controls, but by now,
they have realized how difficult it is to monitor it. Thus, you only need to
prove you are traveling once, after that you can request your $4,000 annually
without proving you are going abroad. But the mian problem is the corruption it
generates and the burecracy imposed on everyone.

—Price Controls: A number of basic
staples have had their prices controlled. Periodically producers have a battle
with the Government and the controlled price is increased. Controlled items are
typically the ones that you can’t find at the markets, with chronic shortages
in many staples, with sugar being the predominant one, since its retail price
is below production price. The solution? The Government imports some of these
products when shortages intensify. But the consequences are clear, producers,
when they can, migrate to other unregulated crops or simply don’t produce. Add
to these controls the threat of expropriation of farms under the Land Bill and
what you have is less local production and higher prices. Consider the case of
meat. Between price controls and the actual confiscation of farms (few cattle
ranch owners were paid, but they don’t have their land) the number of heads of
cattle is down by two million since Chavez took over. Just last week, the price
of meat went up by 10% (yes, in one week).

—Interest rate controls: The Government
is regulating the minimum amount you can be paid and the maximum amount you can
be charged. It has also created multiple subsidies to various sectors like
agriculture, mortgages, tourism and micro credits. Some are not Government
sponsored subsidies but rates are fixed and it is banks that have to make up
the difference, which is obviously paid by the rest of the depositors and/or creditors.
It reaches the point that this week the Government lowered, for no reason, subsidized
mortgage rates to 4.9% and 9.7% for the two lowest levels of loans, while it increased
the minimum amount that banks can pay on either savings rates or CD’s for
banks. How can it justify interest rates moving in two different directions?

–Gasoline subsidy: Gasoline is sold at 4.46 US$
cents per liter or 17 US$ cents per gallon, with the total subsidy at 14.5% of
the National Budget as proposed last Fall or three times what is spent on the
“Misiones”. This is a very unfair subsidy as those that have cars
receive the largest share. My share of the subsidy as one that is in the top
25% of the population by income is ten times larger than that of those in the
bottom quartile. In fact, while I strongly disagree with Rosales’ proposed “Mi
Negra” card to distribute people money, if the oil subsidy were to be removed, the
card would certainly be more just and cost about the same.

–Removal of Central Bank excess
reserves: The
Government has decided that there is an “optimum” amount of international
reserves at the Central Bank and any amount over it is periodically removed and
given to thee Development Bank Fonden. This idea is simply nuts and would one
day come to haunt the Government. If you don’t consider the liability side of
the Central Bank (It’s debts!), there can be no “optimum” level and if the
Central Bank creates liquidity every time they get dollars from PDVSA and give
it Bolivars, when you remove those dollars from the Central Bank, those Bolivars
have less backing that they did before.

All of
these distortions can last a while, as long as the price of oil continues to go
up, but behaving like a good Devil’s Excrement, as time goes by each of them
becomes harder to remove from the system and the different combinations of them
will eventually lead to the economic system coming apart at the seams. The
entrapment begins and nothings is done about it. And it is beginning to happen
again.

Effects of the distortions:
Inflation

The most
important effect that can already be seen is inflation. Particularly rapidly rising
prices on essential items that are produced in Venezuela. During the last four
months inflation, only in those months,
for foodstuffs has been 19.9% (4.7%,
5.5%, 5.1% and 4.3%). This is not
annualized, this is what the official level of inflation has been for food
prices, including controlled prices and all of the tricks the Government uses
to convince us that inflation is not as high as we feel it on a day to day
basis. Given that people in the C and D levels of the population spend 70% of
their income on food, this means that the impact on their daily lives since May
of this year has been huge! So huge, that it has eaten
away 14% of the other 30% that they had to spend on other things.

The
problem is that this increase in inflation will be really hard to fight. First
of all, it is simply a result of the laws of economics: The Government has
increased liquidity by 100% in 12 momths and its own spending by 85% so far in 2006, but local production
of food is barely up and imports by the Government can not be planned
sufficiently ahead of time to compensate. Thus, by the time a shortage occurs
and prices go up, it takes at least two months for the Government to approve
the foreign currency and import the foodstuffs to have an impact. Thus, prices
will continue to go up at similar levels and inflation for the year for foodstuffs
could reach unmanageable levels. (Add to this the fact that the minimum salary
was increased this week by 10% and that September tends to be the worst month
of the year for the CPI and you get the picture). If the rate of inflation for
food stays constant between now and the end of the year, prices will go up
another 20% by Xmas time.

The
problem is that there is no short term or simple solutions to this. This week
we heard supposed experts on economic matters from the National Assembly blame
CADIVI for the jump in prices. Their logic went something like this: CADIVI has
been reducing foreign currency outflows by some US$ 500 million in the last
three months. What he means is that by not removing US$ 500 million in Bolivars
from the system, inflationary pressures were unleashed. Well, not in their
wildest dreams can a 10% reduction in foreign currency approvals create such a
problem. They are trapped in their own inconsistencies by now.

What all
these “experts” refuse to accept and admit is that it is the excess liquidity and
85% increase in Government spending this year which is responsible for the inflationary
pressures. It is a textbook case of too much money going after too few goods,
the laws of the markets at work!

Even worse
is how short term solutions are searched for: Three months ago Chavez told
CADIVI to reduce outflows because too many luxury goods were being imported
with CADIVI dollars. This week, exactly the opposite was told to CADIVI: Please
give out foreign currency more efficiently so that inflationary pressures are
removed.

The Central Bank distortion: There is
no optimum level of international reserves, just their management

At the
same time that the Government was pushing CADIVI to increase outflows to reduce
monetary liquidity, the Central Bank changed conditions on its CD’s this week such
that it will promote excess monetary liquidity in the system, because it
reduced the interest it pays on excess liquidity to the banks.

In plain
terms, the Central Bank issues CD’s so that there are fewer Bolivars in the
economy, going after more goods, which helps reduce inflation. But all its
decisions this week go in the opposite direction. Why?

Simple,
the Central Bank is worried about the Central Bank’s balance sheet, which has its
own distortions, mostly created by the removal of its own reserves.

When the
Central Bank makes operations in order to absorb excess monetary liquidity, it
pays banks interest on these funds. Where does the Central Bank get the money
to pay the interest? Easy, from the interest it gets from the international
reserves. A few years ago, these operations did not amount to more than one or
two billion dollars and the Central Bank could easily pay for the interest. But
as more and more money was created, the Central Bank issued more CD’s so that
today there are more than US$ 18 billion of them! Unfortunately, the Central
Bank does not get that type of interest on its current international reserves
which amount to US$ 35 billion. So, the Central Bank is actually losing money
now and it has to restrict these absorption operations, so it can not help
fight the Government’s inflation battle, it has to do exactly the opposite of
what is required!

This is a
good point to look at the magic “optimum” level of reserves. The Government is
quite proud of the current level of international reserves which are near US$
35 billion. Reportedly Chavez wants them really high. But what good are they if
the Central Bank has liabilities of US$ 18 billion? Moreover, what good are they
if the country’s debt has also increased sharply as it has gone from US$ 22
billion in 1998 to US$ 45 billion in 2006?

The
difficulty is the same as with other distortions, it is not easy to solve the
Central Bank’s problem. Either you let reserves go up soon, or you reduce spending
or the price of oil doubles. In fact, this will get worse, the Government is
already talking of taking away US$ 6 billion in reserves in early 2007.

Of course,
there is always the magic solution: Devalue, you reduce the Central Bank’s debt
by that amount and the problem eases. Until the next time.

Financial Distortions: Something has
to give!

There are
so many of these that I don’t even know where to start. Let’s simply make a
list:

–Banks
mostly make money on commissions they charge clients and their investment on
Government bonds, not spreads.

–It is
possible to borrow money at rates lower than inflation.

–Despite
high oil prices, the Government is running a deficit.

–If
exchange controls are removed, banks would lose half their deposits

–Interest
rates are negative, that is, people lose by having money in the bank. Thus,
they spend.

–If interest
rates ever become positive, going to the current levels of inflation, all banks
but maybe two or three, would lose all their equity. Will the shareholders
replace it?

–Banks
have so much excess money that they are giving people credit without checking
any credit history, salary or record. It is better to lend it with risk, that
not have it doing anything. Just today
someone told me that getting such a loan was so easy, that she got it within a
day and would be unable to pay it based on her cash flow except that her
insurance company owes her the money. Perhaps the funniest gimmick is the “Surgery with your plastic” campaign.
Yes, it is simple, get an instant loan to have your plastic surgery done. Billboards
even show which part of your body you may want fixed, sort of obvious, no?

–People
who can get an agricultural loan, borrow from a “good” bank at the preferential
rate and deposit it at another “bad” bank at a higher rate.

–Others
borrow Bolivars, buy dollars in the parallel market, invest the dollars and
wait for the devaluation to come. Pay 10-12% per year for an upcoming 100-200%
devaluation, not bad, no?

–Imports
will likely reach US$ 30 billion this year. (Whatever happened to endogenous
development?)

–Foreign
investment was US$ 65 million (no
typo) in the fist six months of the year (From the US all of $200, yes two hundred
dollars, no typo)

–Growth
in the first half was 9%, but Government spending was up by 85%, not very efficient,
no?

I could go
on and on, but you get the picture. If the price of oil stays constant or drops even a
little this will all come apart at the seams. Only higher prices can sustain
this. Unfortunately, in the lower oil prices scenario, the easiest solution to
patch things up will be the usual one: Devalue and you know who gets hurt the
most with that, simply the poor.

And that
is why the Devil’s Excrement becomes the Politician’s Trap. Nothing will be done
on any of these distortions until it is too late. In fact, this Government has
created most of them, even if some are simply exaggerated replicas of things we
have seen before.

Unfortunately,
if the price of oil drops by a significant amount, the consequences will be
simply catastrophic. We will see a financial crisis, the largest devaluation in
history and poverty levels never seen before in the country’s history.

Makes you wonder
why anyone would want to be President, let Chavez get out of his own trap
first! No?

Roles seem to have reversed as the supposed leader of a revolution, Hugo Chavez, below left, virtually “inaugurated” 108 modules of the Barrio Adentro program from the Miraflores Palace, wearing a suit and tie and telling the people about his visits to Belarus and Malasya and their imporatnce. Menawhile the supposedly “oligarchic” candidate of the opposition Manuel Rosales, below right, went deep into the barrios of Petare and Carrizales to campaign and talk to people about crime, inflation and jobs.Who is in touch with the people now?

The Ambush
by Teodoro Petkoff in Tal Cual

One does
not know what can be more outrageous, if the attack, backed by shouts of “Viva
Chavez” of the rally of Manuel Rosales and his companions, on the part of a
bunch of people that since much earlier had congregated with their motorcycles at
the location where the rally was supposed to get started, or to listen to, much later,
to Minister of the Interior and Justice Chacon, “explaining” the events and almost
justifying them, with his two “hypotheses” about what may have happened.

After a pathetic
and laughable rambling, with a dictionary of the Royal Academy of the Language
in hand, about the meaning of the word “ambush”, to ltell us of the stoning that
never was, Chacon went fully into his two “hypotheses”. The first one which was
phrased in a low and soft tone, was that some neighbors, upset perhaps with the presence
of the “coup plotter” Rosales, “spontaneously” had expressed their lack of
conformity using bottles and stones. Which is not right, he admitted, just in
case, but, nevertheless, the Minister implied with an innocent face, is it the
fault of the stick if the frog jumps and impales itself? The second one, and
here Chacon used a tougher tone, was that Rosales, given his lack of notoriety and
how squalid the rally was, had provoked the events to manufacture the “news”. Thus,
the Minister announced, the facts are going to be investigated in order to “determine
responsibilities”. Obviously, the diligent Prosecutor General must already be acting
on it and he will surely discover that Rosales self-stoned himself. That is, no
matter how you look at it, in the end, according to Chacon, Manuel Rosales is
the person responsible for the row. If nor for one, for the other. Either he penetrated
imprudently, given his “criminal record” in “Chavista territory” and, in some
fashion got what he deserved, because he was then responsible for starting the ruckus.

In another
part of his talk, Jesse allowed himself some racist comments, when he pointed
to two or three people on a picture, that because of their physiognomy,
according to him, they could not be inhabitants of Catia. “I was born in Catia”
assured us Jesses, “and I know its people”. Thus, according to Jesse, the color
of the skin or your hair is what identifies the inhabitants of Catia. Not happy
with the lesson in philology that he had perpetrated on the matter of the meaning
of the term “ambush”, Jesse now transformed himslef into a racist anthropologist and ethnologist,
and informed us that there is a human type specific to the popular parish and that no
whites or blonds live there.

But now,
you see the problem, Rosales’ rallies were attacked on two consecutive days.

Coincidence,
or is this the tone that Chavez and his people are thinking of imposing on the electoral
campaign?

When one
sees these things it immediately comes to mind Jose Vicente Rangel relating how when he entered politics and concretely joined the URD party, he saw “adecos”
ending a rally by Jovito Villalba in Barquisimeto in ’46 or ’47 of the last
century. Perhaps in that long gone era, someone surely said that who had informed
Jovito that he could enter “adeco territory” or that perhaps he himself had
provoked the events to become the news. As the world turns!

Things are getting interesting. Rosales had a rally today in what
used to be a traditional hardcore Chavista area of Caracas
and he is attacked with rocks, bottles and bullets by a bunch of intolerant people wearing
red t-shirts and distributing pamphlets with a picture of Rosales at the Miraflores Palace on April 11^th. 2002, asking that the law (??) be enforced in that case. The march continues and Rosales calls this
an ambush by Chavistas and says (audio here)
that Chavez and the Government are responsible for any attack. Rosales even accuses the
National Guard for defending the shooters and even suggests that a Russian
rifle was used. Rosales is not scared away and continues his rally successfully.

Immediately, the Minister of the Interior and Justice Jesse
Chacon holds
a press conference and actually accuses people from the Rosales camp for
being responsible for the shootings and shows pictures of one person with a weapon.
But even a Chavista Director of a Hospital in Catia says
the aggression was “spontaneous” because Rosales is a coup plotter and the guy
was there and should not come and visit Catia! How sweet and democratic these Government officials are!

Even funnier, the Prosecutor’s Office, opens an investigation
basing it only on the news and calls publicly for Rosales to “formalize” his accusations,
something they never did with Chavez’ dozens of accusations that Bush or the opposition
was trying to kill him. We are still waiting fir the evidence or the
investigation if the bazooka shown was always the same or not.

Later, Rosales says
that the Government is getting scared too early and that Chavez is hiding
behind the pants of the military, rather than trying to match him “vote by vote”
and that he
is sure he will win the popular vote in Catia in December. Continuing his
recent collection of great one liners, Rosales called Chavez’ statement that a
recall vote should be held against Rosales in Zulia “a great stupidity, he can’t
fill the bullfighting arena, how is he going to even get the signatures to call
for the recall?”

As Rosales said, the Government is certainly getting
nervous. I am not sure I believe Bocaranda’s
report of a poll giving him a 72% lead in some popular areas of Venezuela,
but the quickness with which the Government is reacting to anything that Rosales
says or is involved with, shows that the numbers are changing and they are
trying to contain the ternd.

The more the intolerant and fascist nature of the Government
comes out in these reactions, the better and the more it shows the lack of
coordination and the incoherence of the Government like what happened today and
the better Rosales will look to the voters. Unfortunately for Chavez, Rosales
is not campaigning to get the middle class vote; he is campaigning to take
votes away from Chavez constituency among the popular classes where he has always
been so successful.

Clearly, their quick irritation with anything Rosales shows they are concerned. To me that is a better indication that the dynamics changing that the results o any poll that may be publsihed.

On Sunday,
President Hugo Chavez said in his variety show Alo Presidente that poverty
under his Government had dropped by 30%, leaving speechless both opposition as
well as Government analysts. Where did the President get that number? Is it
possible? Who told him that?

In order
to explore the President illusory number we decided to look at poverty numbers
as accounted for by both the Government, via the National Institute for Statistics
(INE), as well as the Institute for Social Studies of the Catholic University
(UCAB):

As you can
see, no matter which numbers you take it is impossible for a 30% difference to
have occurred at anytime during the
almost eight years Chavez has been in power, since the level of poverty never
went above 60.2% in the Government statistics and 55.6% in the UCAB numbers. Moreover,
changes in the poverty numbers of both INE and UCAB were quite similar until
2005

Even if
you use today’s
numbers of 33.9% by INE, the 30% figure used by Chavez never materializes. This
is much like the myth created by Chavez in his 1998 Presidential campaign that
80% of Venezuelans lived in poverty, a number never measured by any internal,
external, official or private institution, but which Chavez popularized to such
an extent that it is regularly quoted, as shown in an
earlier post. A lie told a thousand times does indeed become the truth.

But what
makes it intriguing is how the INE and UCAB numbers have begun to deviate from
each other, showing today the biggest difference in the last eight years. The
differences have always been methodological and it is difficult to prove or
show that one methodology is better than the other, the only questions is then
whether they are both honest or not. In 1999, the National Institute for Statistics
(INE) began using its own CPI measure, while UCAB has continued to use the numbers
given by the Venezuelan Central Bank. INE on the other hand, calculates its CPI
by multiplying by a factor of two the increase in the price of foodstuffs according to their poll, thus
imposing a very different measure from the Central Bank CPI which includes all goods. Given
that the Central Bank numbers are not exactly “independent” then the same
trends should be seen in both sets of data even if the absolute numbers differ.

But none
of this explains the “miracle in 2005”, when poverty went miraculously down by
14.6%, according to INE, while remaining essentially the same in the UCAB
numbers.

But we can
look back at the origins of this magical improvement. The current head of INE,
Elias Eljuri, was named to his position by Hugo Chavez when his predecessor was
fired for giving out “bad” numbers for poverty. Chavez, in his usual
know-it-all style, said something like what follows, during one of his Alo
Presidentes in early 2005:

“I have no doubts that the methods
used by INE to measure poverty are not right. They measure our reality using
neo-liberal ideas, as if no revolution was taking place” (or something very similar)

The order
was quite clear: Reduce poverty using revolutionary methodology or else!

Now, given
that the INE number is based on only the increase of the price of foodstuffs, it is
essentially impossible for that number to have dropped so fast, while the UCAB
number has stayed flat. You see, the overall inflation measured by the Central
Bank in the last twelve months, which is what UCAB uses, or any other time period in the last year and a
half, has
been lower and even much lower than that of foodstuffs for essentially any
period you may choose. For example, so far this year, inflation for foodstuffs is
up 17.4% and for the last twelve months it is up a whooping 26.7%, while the CPI
is up only 10.4% and 14.9% for the same two periods. Thus, if anything, the INE
numbers should be running higher than those of UCAB’s which is very far from
what is being reported. In fact, in the last four months, inflation for foodstuffs
has been up a scary 4.7%, 5.5%, 5.1% and 4.3%, which is twice what has been
seen in the overall CPI of 1.6%, 1.9%, 2.4% and 2.2%. So, guess who should be
showing worse numbers according to their methodology? You guessed it, INE
should be, but who knows how their numbers are being manipulated.

In fact,
you should have it clear that even if the absolute numbers in the last eight years
have been different, the trends have always been the same up to 2005. This
makes sense, because both the INE numbers and the UCAB numbers measure poverty
on the basis of comparing income to inflation and the ability to purchase a
basic basket of stuff and services with that income. Thus, the current INE
numbers do not make any sense. But in any case, there is no 30% difference to
any previous number reported by either group.

Like much
of what Chavez says or does, it is simply an illusion, in this case a 30%
illusion, with no basis or reality other than the wishful thinking of Chavez
and his administration.

Last Sunday, Hugo Chavez blasted the Mayors of the country for allowing people to drink openly on the streets, even going as far as praising Muslim countries for banning drinking. But somehow he failed to say anything at all during the rally welcoming him back last Friday, where drinks were not only widely distributed by the Chavista organizers to those in attendance, but we also saw the spectacle of this drunk cavorting around the fountains of Plaza O’Leary where the rally was held and entertaining the crowd. Maybe he is the leader of Mision “Borrachos con Chavez” (Drunks with Chavez) and the autocrat did not want to upset or annoy him! What a BS artist Chavez is!

Thanks M. and Yahoo for the pics!