The hopeless destruction power of the Chavez revolution

March 24, 2008

The day before the Easter vacation/Semana Santa began, the Government owned telecom company CANTV reported it’s 2007 financial results. We had not seen much of a glimpse into these results as the company discontinued its quarterly reports under new revolutionary management, but the company is still publicly traded and the managers decided to comply with the law and present the yearly financials. Well after nine month under the revolution, the news is not good. The company reported that earnings were down 51% from a year ago.

Of course, Chavez has said repeatedly that the company will now have a social purpose, whatever that may mean and the profits will be used for social programs. The problem is that if in only nine moths profits are down 51%, how long will it be before they become negative and there are no profits to use in “social” programs. At that time, the ideological whim of the former autocrat, becomes a cost that will subtract money from social programs. Like so many other things the revolution has destroyed.

And it was an ideological whim, because when CANTV was privatized in 1991, it was not only sold for a huge price, but it was also mostly dysfunctional. IT was hard to make a local call, let alone an international one. At the time, however, it was a monopoly, which allowed it to be mismanaged, give terrible service and lose money year after year.

This time around, since Chavez decided to nationalize the company (which also cost money that could have gone to social programs) without consulting anyone, the problem is that CANTV is no longer a monopoly and private companies will take advantage of the new incompetent management to gain market share by providing better services. Just better, not necessarily good services.

And CANTV made less money for a simple reason, margins are down, the company is charging less and costs increased as the number of workers has increased. It is typical Government management, when the job is not being done, then throw more people and money at it in the hope it will.  But, it wouldn’t.

While I have yet to see the financials of Electricidad de Caracas, I have already seen the effects of the new revolutionary management: More blackouts, a note saying I have yet to pay my bill 21 days after I did and the senseless buyback of the company’s debt I talked about a few days ago.

But even more troubling is that an efficient and working company like Electricidad de Caracas will be taken apart by the decision to merge it into the new PDVSA owned and run, Compania Nacional de Electricidad, whose acronym CNE, simply gives us a glimpse into what we may see going forward.

Juts imagine, a company that runs well, will be split into pieces and merged into a new structure with no proven track record, which will be run and “managed” by an inefficient company like PDVSA. Anyone with the most rudimentary management training or ideas, would have suggested either keeping EDC’s structure or merging the non-working companies into EDC, the jewel of the bunch. Instead, eight or nine regional companies will be merged into a single entity all under the supervision of PDVSA managers, the same ones that have been unable to keep the company functional since the strike, losing production year after year and failing to invest for the future. What a joke!

But of course, this is the same revolution that in 2001 passed the infamous Land Bill and made sugar and cattle their focus for the future. It is not coincidence that he first shortages were in sugar, we have now become net importers of it, as acres of sugar cane plantations lay abandoned as none, yes not a single one, of the sugar processing plants is working at even half capacity under the advise, supervision and sometimes imported machinery of “expert” Cuban advisers. The same “experts” that made Cuba an irrelevant sugar producers long time ago. And the Chavez Government has spent billions; yes billion of dollars in sugar plants alone. Just the CAEEZ project, the jewel of the project in Chavez’ own Barinas State cost US$ 200 million. Obviously “cost” is a euphemism as US$ 200 million was spent in the initial stages of the project and only some land was cleared and some beams went up as the robolutionary National Assembly investigated corruption for US$ 3 million, but never asked where the other US$ 197 million were.

And there is cattle of course, all those large estates, the hated “latifundios” taken over by the revolution, none of the have even half the heads they did when taken over, as the beneficiaries sold off or killed the cattle when things started to not go well. Milk shortages by now have become chronic, not that Venezuela was ever self-sufficient in milk production, but whatever sufficiency there was has been reduced even further. More waste, more destruction, less money to where it is needed.

But rather than see and recognize the errors, the robolution goes after the next link in the chain, buying off dairy farms, producers and distributors, because they have now decided that is where the problem is. But all it means is more pain ahead as these enterprises from Parmalat to the ones bought off more recently become inefficient, wasteful under the inefficient Government eyes.

 It’s the same everywhere; a dysfunctional Government takes over working structures and rapidly thermalizes them with its own structure, for the worse, never for the better. 

It’s the same everywhere; a parallel health system was created to replace the existing one, today both lie almost useless, the old one decrepit due to the lack of maintenance, the new one mostly abandoned, as the focus on it seems a thing of the past. In education, not much ahs happened other than the change in name. Fewer than 200 new schools have been built in nine years, students graduate without receiving the obligatory math, physics and chemistry in high school. They get passing grades because there are no teachers. The lucky few that get into universities struggle with basic concepts they should have heard of three ears earlier.

The solution? As usual, destroy the existing structure, the functioning one: force universities to take on a fixed percentage from each public high school. It’s democracy they say. But it isn’t. In the end it will be simply frustration, as these students will become chronic repeaters unable to pass the most elementary courses. Universities will set up, like they already do, remedial courses to help them, and even that will not be enough. Most will fail and drop out, it is already happening without this destructive creation invented by the current Minister of Higher Education. Students from public high schools, the ones that have been able to pass the entrance exams are not doing well, too many gaps in their backgrounds, too much competition.

But the beat goes on, despite nine year of oil windfall and failure, the revolution looks for new targets to destroy, with its unique and hopeless power to destroy and undo however little works and functions in Venezuela.

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