Archive for November 16th, 2006

The sad image Ignacio Lula Da Silva left in Venezuela, as seen by a cartoonist

November 16, 2006

Sad when local cartoons portray President Lula this way, such is the image of the progressive left in L.A., when they are willing to back a militaristic autocrat who cares little for his people.

“And what do you want me to say? He is leaving? He is leaving? He is leaving?”

No, we Venezuelans expected you to shut up on our internal matters, no matter how much money yoru country may get from the robolution

Good article in the Financial Times by Andy Webb

November 16, 2006

I was going to post Andy Webb’s article from the Financial Times, but Daniel already used his storage space to post it, so I will just link to it. Some reporters do their homework!

Some ignorant Chavista wisdom on finance

November 16, 2006

There are
so many ignorant fools in this Government; sometimes I just don’t have the time to write
about all of their stupidity. They are not only foolish, but they seem to want
to proclaim it and do it very, very loudly.

Two of
them have really said stupid things today about economics and finance. That
would be all right in a country where financial culture is so low, but these
guys are supposed to be among the best Chavista “experts” on such matters.

The first
one was Deputy Elvis Amoroso, whose name literally translates as Elvis Loving. You
see, Mr., Amoroso was criticizing
that banks purchased bonds in the Bono del Sur offering at the
official exchange rate and were selling them in the parallel market at a much
higher exchange rate, making them a lot of money. He thought this should be
penalized. Maybe he did not get as much of the bond as he wanted, like everyone  else.

You see
this is ironic because Mr. Amoroso has in his short list of revolutionary credits,
being the father, author and promoter of the “Illicit Exchange Law” which
penalized foreign exchange transactions. The problem is that either Mr. Amoroso
does not remember what he put in it, or he simply never understood it well. The
Bill prohibited all foreign exchange transactions, BUT it also exempted securities transactions from it. And all
the Government is doing is selling securities, which can be purchased in local
currency and traded, sold, swapped or exchanged for other securities or in
foreign currency. It’s perfectly legal. It was Mr. Amoroso that put it in his
now infamous Bill, allowing the swap market and the CANTV ADR market.

Amoroso, the reincarnate, goes even further, and questions the officials of the
Ministry of Finance who “cowardly or as accomplices” lend themselves to these

Maybe he
means, they lend themselves to these deals, the same way he promoted a Bill he
never understood just to be in the limelight? Maybe these “officials” are as
ignorant as he is in these matters. But are they?

have to wonder where this revolutionary fool was in the last 14 months while
the Ministry of Finance purchased US$ 3.8 billion in Argentinean bonds, which
it quickly turned around and sold to the banks at Bs. 2300-2400 per US$, well
below the parallel exchange rate, sans
commission, in a very non-transparent, discretionary and private way, which the
banks then turned around and sold in the same parallel market during the last
year and since the Bill he promoted was approved by the “Roja, Rojita…”
National Assembly. Did he not know what was happening? Was he aware of the
numerous public charges about the multimillion (hundred million at that!)
corruption surrounding the distribution and allocation of these bonds? He
should read Tal Cual once in a while, the Financial Times or this blog, where
all the details have been exposed in all their glory. Many people have actually become millionaires
from this, dear Elvis!

If he is
not stupid, then it had to be out of ignorance, which simply shows this country
is being run by a bunch of fools, even
if they have
a Bachelor’s degree in Economics.

But even
Mr. Amoroso’s statements demonstrate ignorance or maybe he did not go to class
the day securities were defined, the
by the Head of the Finance Committee of the National Assembly Rodrigo
Cabeza are worse. Much worse, because he is not simply an Economist, he is a Professor of Economics at the University of Zulia,
where the laws of Economics are as valid as they are in Austria or let’s say Washington D.C.
Even if the revolution wants to suspend them.

And what
Cabeza, who should have his last name examined, said
was equally preposterous: “The increase in the price of the dollar
should not generate fear; it will not hurt the economy in the rest of this year
or in 2007”. I guess he means, unless it keeps going up. Which you can be sure
it will.

given that total imports will be US$ 30 billion in 2006 and that the exchange
control office only approved US$ 24 billion, I think there is certainly something
to worry about if the parallel market jumps up by 20-30%. Cabeza also said that
the Government was issuing debt to reduce debt. Hello? The recent issuing of
US$ 1 billion was not used to reduce debt at all and it was the failure of that
issue that drove the parallel rate up sharply last week, settling around US$
3200 per US$ today. For now… to use a very well known and revolutionary phrase.

Cabeza is
not worried, maybe because he does not know (or care?) that the Government
spent, only in the first three weeks of November, the incredible amount of US$ 6.8 billion. That
is mostly new money that will continue flooding the financial system and
pressuring the “artificial exchange rate” that Cabeza thinks is not a problem.

But as I explained
the other night, this is simply a time bomb, a crisis waiting to happen and if
those in charge are such fools, the big bang will certainly occur sooner rather
than later.

only one that seems to “get it”
is Central Bank Director Domingo Maza
Zabala, considered to be the “father of
modern Venezuelan economics
” thanks to a book he wrote in the 50’s and
educating a number of generations of the country’s economists. Maza said the
Bono del Sur created frustration from people trying to get a higher return in
this inflationary environment and that there is a significant increase in
monetary liquidity due to end of the year factors.

I guess he
has had little competition from other economists since the 50’s, at least among
those that support President Chavez, and his “modern” economics of that era,
seem to be more up to date than the ignorant and foolish statements by those in
charge of the economy in the stupid and certainly very foolish revolution.