Apparently the robolution of Hugo Chavez has decided that it is better to destroy the country for the sake of ideology than to reverse course on the failed policies of the last nine years as Hugo Chavez has ruled Venezuela as if it were his private farm, using his naive beliefs as to how things should work but, despite failure after failure, the decision is to stay the course, the country be damned.
Long gone are the days of hailing revolutionary “self-sufficiency”� as every single sector the revolution has tried to fix or adapt to its ideology is now broken by failure.
Large farm estate were expropriated, mostly without compensation of any kind and distributed in small lots to farmers that have long gone abandoned them, as the absence of know-how, advise and more importantly, financing, doomed them to failure from day one. Not only were the sizes of the plots of land too small, but since farmers were not given ownership, they had no property to guarantee loans and the famed agricultural loans at special interest rates have gone to the usual suspects: The few profitable agro-industrial enterprises in the hands of those with knowledge, experience and yes, with money, who mostly arbitrage the financial system, borrowing at preferential rates and depositing in those banks paying high yields in their deposit accounts. Or maybe simply buying US dollars in the “non-existent” parallel swap market, paying rates below local inflation and waiting for further devaluations of the currency.
Of course, the robolution also tried to get into the more industrial part of the agricultural business importing plants from Cuba for sugar processing all of which, yes all of them, are behind three years, creating further bottlenecks to the few hard souls that remained in the fields most of which abandoned sugar for crops not under regulation or which the Government has paid little attention to.
Five years of controlled prices, combined with five years of 18% average inflation have destroyed the country’s productive industries, while the Government continues to import at the official exchange rate now in its fourth continuous year at Bs. 2,150 per US$. Small increments in prices have lately been approved, at an incredibly slow pace (it was time for rice this week), but new regulated prices are imposed, insuring that nobody will make any new investments.
And if things are not working, why not intervene customs at the country’s biggest port to “audit”� where food imports are going, as if auditing them at the source will in any way change where they end up. But such is the revolution, naive, inefficient and incompetent. Who cares if you introduce weeks of delays in the middle of the biggest food shortages the country has ever experienced? The private sector can sustain the losses.
Those near the border are detained as being suspect of smuggling things into Colombia, while the reality is that people actually now go to Colombian border towns to fill up on the overflowing shelves of Colombian supermarkets in marked contrast to the empty ones on this side of the revolution.
But rather than admit the failure of the ignorant and naive policies invented by the autocrat, the reaction is to have PDVSA distribute food, threaten industries with expropriation via illegal decrees, even suggest some will be expropriated if they don’t sell their products to the Government as if it had some form of pecking order above the efficient distribution to the people.
Things are so ridiculous that milk producers are even accused of dumping milk in rivers, never producing a proof, the revolution is always right, it is private enterprise who represents the devil, the empire and yes, the CIA in the form of Bush or whomever may be elected in November from Obama to Huckabee.
To say nothing of the famous cooperatives, mostly inoperative and defunct, with billions wasted in Government financing to projects doomed to failure from day one, as predicted in this blog. Invepal may be the most dramatic case, in which a company in operation was taken over, without compensation to the owners or banks that had lent it money, only to see it disappear, together with the Deputy who made it her showcase to fame, but who carefully stays away from the same workers she drove to this crazy adventure into obvious self-destruction.
Today, to insure the final destruction of the agricultural sector the Government announces massive imports of milk, meat and wheat at the official rate of exchange just to insure wiping out local industry before they leave. All in exchange for oil, of which we have less and less as the days go by.
And then there is the Venezuelan oil industry, the same one that everyone thought was impossible to destroy. By now, even the cheerleaders of the robolution are convinced that the fabled 3.3 millions of barrels of oil a day only exist in Rafael Ramirez’ imagination. The true number is around 2.4 to 2.5 million barrels a day. With an irresponsible subsidy for gasoline and imported cars (for the rich!), gasoline consumption has gone from 420,000 barrels of gasoline a day to 700,000, barely leaving some 1.7-1.8 millions of barrels of oil for exports, as the remainder is being subsidized by a company with cash flow problems, on top of US$ 12 billion in social spending, no investment in increasing production and US$ 15 billion in gas subsidies.
Just think, at US$ 100 per barrel, PDVSA receives US$ 63 billion a year for its exports, or US$ 5.25 billion per month, not far from the US$ 3.8 billion given out by CADIVI, the foreign exchange control office in January, which corresponds to US$ 74 per barrel, scarily close to today’s value and a clear indication of how stretched things are in Venezuela, with a recession looming in the US and maybe the world.
Add to that the firing of the country’s oil workforce, 20,000 strong, increasing personnel from 42,000 before the firings at PDVSA to 70,000 today and putting the company in the hands of the incompetent and ignorant and you have a recipe for self-destruction. PDVSA is destructible after all.
And as PDVSA begins to feel the cash flow crunch, you expropriate your partners without fair compensation, hoping against all hopes that oil will continue to go up to save the day once again. And your partners will bow to the autocrat.
Then one day one of them does not, and decides to try to get fair payment. You invoke sovereignty at the same time you violated it, firing 20,000 of your best advisers for political reasons, or compromised oil production with future sales, which is forbidden by the country’s legislation. Then you accuse the empire, bully it that you will do what you have never prepared yourself to do: cutting off oil supplies to the US Or, like today, saying you cut off oil supplies to Exxon. But wait; there is a footnote in your pompous announcement, “except for valid contracts”. Since almost all the oil you sell to Exxon is under these contracts then these are empty words, traders (your own?) can buy the rest from you and then resell it to Exxon and no harm done. But the medium is the message and the robolution is all messages, no substance as nine years of it demonstrates.
And the robolutionaries add to the histrionics, suggesting that the Prosecutor accuse of treason the members of Congress that were part of the oil opening which allowed the heavy rude partnership, when over 95% of the Deputies approved these contracts in the mid nineties. The suggestion is as ignorant as everything in the revolution, as many of the now Chavistas Deputies and officials, such as Rodrigo Cabezas, Minister of Finance until the end of 2007 were part of that almost unanimous majority which approved this “treason” against the Nation. Are we all traitors after all?
And then there is corruption. From suitcases full of cash, to financial transactions to the outright stealing of money, never has Venezuela, or any other country for that matter seen the dance of billions in corruption we have seen. A Russian friend was in Caracas rec
ently and after a few days talking to analysts and Government officials, told me that prior to his visit he had thought his country to be the most corrupt in the world, but it was little comfort to see Venezuela top it as easy as it seems to be doing it.
Lost in the PDVSA/Exxon shuffle was the sale of the Fonden structured notes to some “friendly” banks last Ftiday in order to move down the parallel swap market, which according to the National Assembly does not exist. A strange priority to have when the swap rate is not under pressure, as the Government self-induced liquidity crisis has kept it low recently.
Until you see the numbers and realize the notes are sold to friendly banks at 105% at the official rate of exchange of Bs. 2.15 per US$ Thus one million dollars cost you 2.2575 million Bolivars. But the notes can be sold for 60%, so you only get US$ 600,000 for them, but you can sell these dollars at Bs. 5 per US$, or a cool profit 850 thousand Bolivars 1.4 per dollar from which you have to subtract the commissions to those handing out this largesse to these friendly banks, for their “intermediation” efforts, or a cool 62% profit between “bankers” and handlers. Maybe they have no time to get rich like their predecessors and thus the rush.
It is as if lost in its own incompetence, the Government has decided to hand an empty shell to whomever or whatever is the opposition when this all self-destructs. Except that this is spiraling down so fast, that while they may be thinking they can survive for at least a year, their own actions will precipitate their own and revolutionary demise before the dawn of 2009.