Archive for February 11th, 2007

Quote of the day

February 11, 2007

On a proposal by then Minister of Finance Guicaipuro Lameda to eradicate poverty, Minister of Planning, then and now, Jorge Giordani replied:

“You have not understood Guicaipuro. The revolution can not survive without the poor”


It’s the economy silly!

February 11, 2007

—Wow! I am for once going to agree with a Government announcement. The Vice-President just announced that the Value Added Tax (VAT) will be removed for a large number of essential foodstuffs, including most meats. How can I possibly disagree with the removal of a tax? Having said that, I would have done it differently. By doing it this way, the Government burns all the bridges at once. Inflation may drop with the measure temporarily, but the underlying forces and distortions that cause it are still out there. The proper thing to do would have been to lower the rate of the VAT for all items. The VAT is not only a tax, but also a control mechanism, since you can follow the chain of payment from the source to the merchant. Thus, you know revenues of the whole chain and you use that knowledge to enforce the payment of all taxes. By dropping all taxes on these items, that’s it, no room for maneuver in the future. But again, good move.

—A more puzzling one is the increase of the money allocation given to travelers or to use on the Internet. The $4,000 dollars a year per person for travel is increased to $5,000 and the Internet allocation is increased from $2,500 to $3,000. I am not sure what the rationale is for this. If they think this will relieve the pressure in the parallel market, it will make no difference. This is simply a larger subsidy to the well off, who are the only ones that can afford over 16 million Bolivars a year in these expenses. Thus, I can not agree with it. Of course, I believe in removing all controls, but dream on!

Moreover, the current difference between the official rate and the parallel rate is so huge (close to 100%) that a whole industry has sprung up around helping people use their allocation or convert it in cash. Just look for example at this website, which not only sells you the stuff but brings it to Venezuela.

—And speaking of puzzles, after the Government paying top dollar for Electricidad de Caracas, logic suggests that it will have to do the same for CANTV, but the stock barely moved on Friday staying around US$ 16 per ADR. From any angle you look at it, in this case the Government will have to go higher. Why? Because Telmex had offered to pay US$ 21 per ADR for the company, thus establishing a reference price. Moreover, the company has accumulated more cash since Telmex first offered that amount in April of last year. In Electricidad there was no such similar reference price and the Government paid more than the stock has been in the local stock market in the last year. CANTV was near $21 quite a few times in the last twelve months. Makes sense, no? The Government could even be sued in the US if it did not at least match that offer.

—Finally, there seem to be too many contradictory announcements by the Government in the last few days. Yesterday we were told that there will be a new luxury tax on cell phones, soft drinks, internet use and other items and today the Minister of Finance says there will be no new taxes for the middle class. One Minister says one day there are shortages, the next day a different one says there are. It happens daily, sometimes both in the same day.

—And how about the mystery of no Alo Presidente today….

Enabling an autocratic charade

February 11, 2007

The approval of the Enabling Bill has been such a charade, which could be considered almost funny, if it were not such a serious matter. What the process shows is simply the total disregard for the rule of law Chavismo has, as well as the fact the National Assembly Deputies are totally servile to the wishes and desires of the Autocrat/Dictator.

On the way to the approval of the Bill, the following irregularities occurred, which make the whole process absurd and ridiculous and prove the autocratic nature of the regime as well as the willingness of the members of the National Assembly to bypass the democratic process, not only refusing to discuss the content of Bills, even among themselves, but going as far as not revealing their contents until the last minute:

1) The text of the Enabling Bill used in the first discussion was spurious. While the Deputies to the National Assembly were discussing thirteen areas for the Bill, described by single lines, the Procuradoria, the equivalent of the Attorney General, was working on a very detailed text which the Deputies did not know and was leaked to the press that day.

2) The day of the second discussion of the Bill, the text to be approved was not available to the Deputies for discussion and even after the approval no text was available to the press and the public. It was only the next day in Plaza Bolivar, when a ceremony celebrating the approval of this grotesque Bill was held, that the full text was released.

3) The text presented that day in Plaza Bolivar was changed on it’s way to the Official Gazette, where all Bills become law when published in it. This is simply illegal, it is false as indicated by the President of the National Assembly Cilia Flores that the text was changed to improve the text and make it more coherent. This is simply illegal. According to the law, what comes out of Parliament can only be changed within ten days by having the Executive branch request it and having the National assembly discuss the changes. This was never done. Moreover, the changes did violate the spirit and the essence of the enabling Bill, allowing it to legislate in areas that were not originally included.

By approving the Enabling Bill, the National Assembly Deputies have practically delegated the legislative power on the President, a contradiction in itself, given the separation of powers. But there are many more violations of the law. Among them:

—The Enabling Bill allows Chavez to legislate by decree under the current Constitution. The President has said that he will change the Constitution and then approve some of the Bills so that they can be adapted to the new text. This can’t be done, once the Constitution is changed, the Enabling Bill is no longer valid as it was approved under the old text.

—It allows for Chavez to legislate limits or and restrictions to constitutional rights and guarantees, which can only be done by issuing a “Law” and not a decree. What a law is, is clearly defined in Art. 202 of the Constitution, as “an act sanctioned by the National Assembly”. Chavez decreeing on this would also violate the Interamerican Convention on Human Rights.

—The National assembly can’t modify the Constitution by Law. Thus, neither can Chavez by decree and some matters on which Chavez has been enabled cover Constitutional areas, such as how the state is organized or the territorial organization of the State.

—The 2000 Constitution establishes that whenever a new law is being considered, other state institutions, the citizens and organized society need to be consulted (Art. 211). Moreover, State legislatures have to be consulted on matters that affect them (Art. 206). This process applies to both when the Law is being formed, to once the Law has been approved. Neither will be done under the new Enabling Bill according to the document from the Attorney General that even promotes “that as few people as possible and nobody outside the Government” participate.

—The Enabling Bill does not specify which Laws will be approved under it.

—To prove the abuse of power under the Enabling Bill, this week President Chavez passed a decree under it creating a new medal of honor called February 4th. to celebrate “acts of heroism” as if that bloody day was such an act. Chavez used the Enabling Bill to issue this decree, not a single word in the Bill even remotely considers this possibility.

Thus, all that has been enabled is an autocratic charade and a blatant violation of the rule of law in Venezuela.