The Devil's Excrement

Somehow it seems wrong to find something positive about someone’ death, but I can’t help but feel that the world is better place because Augusto Pinochet is no longer with us. Remarkable to see both people mourning him and celebrating his death at the same time. The world will be an even better place if these two groups switch sides soon when the Dictator in Havana joins the Chilean Dictator in the only place he can be.

It did not take long for Hugo Chavez to start spreading Venezuela’s wealth around after being reelected. Upon his arrival in a “private” trip to Argentina, he announced that development Bank Bandes was ready to lend or capitalize US$ 80 million into milk cooperative Sancor, in a somewhat strange deal. I guess Bandes’ bylaws did not specify that it was meant to develop only Venezuela and it continues helping richer countries develop.

The details are still somewhat sketchy. Sancor was a milk cooperative which has been criticized in Argentina for acting like a coop when it is convenient and like a company most of the time. Sancor has been unable to repay some US$ 150-200 million in debt and a company partially owned by George Soros, Adecoagro, had reached an agreement to obtain control (62.5%) of Sancor by paying US$ 70 million in debt and capitalizing the rest. The rest of the shareholders of Adecoagro are from Argentina. An Argentinean group, the Petersen group, led by Enrique Eskenazi, also made an offer which was rejected by Sancor. Eskenazi, a strong supporter of President Kirchner, owns a number of banks in that country and was reportedly pressuring the Argentinian President to stop the sale to Adecoagro. There have been charges that one of Eskenazi’s banks forced the sale of Sancor by not lending it more money.

What is unclear at this time is if Chavez is siding with Eskenazi or wants to save Sancor by himself. Some people believe that Sancor would have a hard time getting out of its agreement witn Adecoagro. Others think that Chavez is siding with the Argentinean oligarchs in their confrontation with international capital. What makes the story so strange is that Sancor was badly managed by its current administrators and if it could not repay its old loans, it seems difficult that it can repay the loan to Bandes. Curiously, Soros has more affinity politically with Chavez than Eskenazi, other than their support for and friendship with Kirchner.

Newspaper reports from Argentina say that Sancor is asking Chavez for US$ 120 million, which suggests they want to go at it alone. This would make the deal a bad one for Venezuela, as Sancor clearly needs different management if the loan is ever to be repaid.

It has now been a week since the election. Hugo Chavez won; a majority of Venezuelans chose him. People want to believe that he did not, a problem here, another there, but even with all this there is no question he won and by quite a bit. Yes, he used Government resources in obscene fashion, people were threatened, paid to go vote and the like, but we knew that even before the election. The same with the REP, we knew it has problems and they were not fixed before the vote, but even with those problems Chavez would have won.

So, it is not time to look back too much, but to try to see what is in store for Venezuela and its citizens. First a little bit about the past, then a glimpse at the future.

Many people are now mad at Manuel Rosales, besides silly rumors about him being threatened and giving in to the threats, I think there is little to be mad about. Rosales was, without question, the best candidate the opposition could field. In early August it was different to envision any of the candidates getting close to 40% of the vote and Rosales did. And he did it in an election that left a trail of dead political bodies, from Petkoff, to Roberto Smith, to Julio Borges; this electorate snubbed and buried a few politicians that will likely never return. Er Conde was a different matter, the dreadful end to his campaign confirmed in my mind that he was simply another Arias Cardenas conceived by the Government as a back up plan to make the election legitimate.

Rosales on the other hand had the people and campaign skills that are required to run for President. For many years, Venezuelan politics has been full of what I call living room politicians, who sit around talking about how they will solve the problems of the country without ever getting out and talking to people about them and without even being prepared to solve them. Some, like Carlos Andres Perez and Hugo Chavez, had the instinct of how to campaign and get in touch with the people. They know how to campaign at the grassroots, get people excited.

Rosales knows that part too, that is how he went from political activist in the Wild West area of Santa Barbara del Zulia to Governor. That is how he rose among hundreds of other activists in Zulia state. Unfortunately he did not have the charisma of Perez or Chavez, or their pico e’ loro ability to charm audiences. But he went out and did an incredible job. In my mind, he lacked a very important variable: time. Rosales was a regional leader almost unknown in some parts of Venezuela. It’s not easy to become well known in one year, least of all in four months. The only smart thing Julio Borges ever did was to decide to start running over a year before the election, except that he had little going for him.

Rosales was at his best at the press conference on Monday, humorous, compassionate, a unifying force among the opposition. Unfortunately, I think that last Sunday’s result will leave little room for any form of opposition to develop in the next few years.

The first thing that Chavez will do is propose his Constitutional reform that will allow for his indefinite reelection. The reform will also include a redefinition of the country’s economic system. According to Deputy Rodrigo Cabezas, who is he head of the finance committee of the National Assembly, the Constitution will redefine the country’s economic model so as to have a model of “social production with a continuously expansive monetary policy…the size of spending does not matter, is its quality”. I guess we are talking bad quality jobs with Adam Smith on steroids.

Thus a government that has yet to issue most of the regulations and laws mandated by the 2000 Constitution, despite the National Assembly having 22 employees per Deputy, is now ready to reform, rewrite and reinvent the young Constitution. This will certainly tarp the country into a waste of a lot of time, and the opposition is likely to be trapped into thinking it can get one article into the new Constitution. They may, but I am certain it will be an irrelevant one.

The only positive thing is that Chavez is likely to resume his international campaigning as he already has, to become Fidel’s replacement as leader of the international extreme left. This week, Chavez returned to his traveling, scheduling two trips, as well as restarting his redistribution of the country’s wealth to other country, where wealthier or not. The more Chavez is away, the less attention will be paid to pushing the revolution forward, as Chavez promised from the “People’s balcony” last Sunday.

And it is already being pushed as a bunch of regulation as decrees were issued this week and expect more coming in the next few months. What this means is less investment, less job creation and increasing dependence on the state for most Venezuelans. Which will certainly preserve Chavez in power, as the correlation between those in the informal economy and his votes last Sunday was simply uncanny.

Universities are also likely to be the focus of Chavez’ revolution. He has made little headway in them in his last eight years, as the once pro-Chavez leftwing academic circles are now part of the hard-core opposition. He will either change the law to take them over or simply strangle them via the budget, while using his well-known model of creating a parallel university system to replace the old one. And it will be a mediocre one.

The Government is likely to define new areas as its exclusive domain, such as health, utilities and telecom, which will set back the country’s infrastructure significantly. Private education will also be the focus of regulation and intervention in Chavez’ second term. The financial system will be first squeezed, then absorbed or replaced. Chavez will allow the opposition to exist, but will find a way of stamp out anyone that is considered a threat, just look at how easy it was to block Leopoldo Lopez from running for office until 2020. The military will buy more toys, start new factories, guns, helicopters, planes and the like. Military spending will top any other sector of the budget. Housing shortages will continue under the inefficient eye of the Government, crime will continue to rise, inflation will not subside and there will be more shortages of basic products.

The ability of Chavez to maintain his popularity will clearly depend on oil prices. If prices do not increase this “sustained spending” model will only be manageable with continued devaluations and inflation, which will reduce the President’s popularity. But it will be too late for this opposition, or any other one, for that matter. By that time, control over the social, moral and economic fiber of the country will be almost complete. Nobody will be able to mount even half of the campaign Rosales undertook. Chavez will stay for as long as he wants, whether people want him or not.

No sooner were the electoral results over that the Government introduced a bunch of new controls and regulations on the economy with decrees on Thursday:

–The Government regulated the prices of 47 items used in construction, including sand, doors, steel rod and others. Most of the “new” prices are below those in the marketplace before the decree was issued.

–The Government introduce a customs surcharge of 15% on luxury such as scotch, hard licquor, yachts, boats, candles and toilet paper.

–The Government introduce a new requirement for the import of goods and receiving foreign currency from the foreign exchange office for some 5,500 products. This is the “Certificate of non-production” A certification that the item being imported is not produced in Venezuela. It pubished a list of 5,500 items which will require it and 3,500 that will not. Sounds like a new source of business for the boli burgeois, since those products needing this before were in a short list.

–It also introduced a decree, which I haven’t read yet, but it seems like it reserves the import of certain things to cooperatives, small business and social companies