Archive for February 10th, 2009

Say NO to letting them take away what is yours by Teodoro Petkoff

February 10, 2009

A modest looking lady requests medical attention. The receptionist informs her that now this health care center is private and she has to pay. The voice of the narrator says something like of the NO wins “they will take away your missions”.

This  scene is a TV ad by Chavez’ Government. It is a despicable ad, it represents an indescriptible low point, based on the crudest lie, of those you hope, according to Hitler, that is so exaggerated that it ends up being credible. What in the campaign of officialdom is not based on the figure of Chacumbele (Chávez), its based on the false manipulation of the good faith of the poorest sectors.

The smallest reflection by a victim of this dishonest campaign, will make him realize that this lie lacks any support from what is happening in real life. Or don’t misiones function  in Zulia and Nueva Esparta States where the opposition governs? If in any of these two places its respective Governors had shut down even one Barrio Adentro module, don’t you think the noise form the loud birds of the official channel and from Chacumbele himself would have reached the sky? In Petare the new opposition mayor, Carlos Ocariz, found thirty Barrio Adentro modules completely destroyed and without doctors and he is rebuilding and reequipping them, as well as providing them with doctors. The lie has very short legs.

But beyond these confrontations between lies and facts that refute them, the reality is that in order to protect the social programs what is advisable is to vote NO, because if anyone has been reducing them to their minimum expression is the Government of Chacumbele itself.

According to PDVSA’s report on the subject, between January and September of last year, the contributions of the oil company to social programs were reduced 65.3% with respect to the same period in 2007: from 2.3 billion dollars they dropped to 804 million. According to PDVSA itslef, the misiones most affected by this brutal cut were Barrio Adentro, Mercal and Milagro. For this year 2009, in the budget approved by the national Assembly–even before there was talk of an economic crisis–, there is no increase considered for the misiones. Thus, what was reduced, stays reduced. “Say NO to letting them take away what is your” says the advertising from the Government,don’t let the Government take away what is yours giving away to the Givemesomething Group the money that is needed here. All those cuts were made in a year in which Venezuela’s average price for a barrel of oil was 88 US dollars. So far in 2009, that price has dropped down to 37 US dollars. If having the money in 2008, the misiones received much less financing, what will happen in 2009? Will they continue sacrificing misiones to pay for Russian weapons? Say NO to letting them take away what is yours.

Observing a possible financial duck close to Venezuela

February 10, 2009

When financial markets experience turbulent times, like those we have witnessed over the last year, institutions with shaky foundations or suspicious business models begin to unravel and it is difficult for those managing them to continue hiding behind high growth or questionable practices. This is what happened with the now well known Ponzi scheme of Bernie Madoff which managed to divert some US$50 billion out of people’s pockets. (For a fairly comprehensive coverage of the Madoff affair check out clusterstock).

Since the Madoff affair, there have been quite a number of smaller cases discovered and in Venezuela it gave rise to fairly entertaining blog in Spanish called Venepiramides, which has been covering this subject in detail.

Then last week, Veneconomia, in its monthly issue (of which I am a collaborator), carried an article called Duck Tales, (in Spanish here) written by our friend and sometimes reader Alex Dalmady in which Alex analyzes Stanford International Bank (SIB), an Antigua based financial institution with some US$ 8 billion in deposits mostly from Latin America and an estimated US$ 3 billion from Venezuelans. Another blog in English, Caracas Gringo, has already reviewed most of Alex’ findings.

What Alex does in a very entertaining style, is to ask what you should ask yourself if you are trying to find a “Financial Duck”, that is, a financial institution which like Madoff, it’s too good to be true, nobody can match what it does, like the Madoff pyramid it is run by a very small group of people and with no single institution having the incentives to uncover the fraud.

After analyzing SIB, Dalmady concludes that SIB has feathers, quacks, waddles and has webbed feet. That is, all of the tests that Dalmady could come up with, point to SIB looking a lot like a financial duck and people should be more careful of not placing their money with something that looks like  a duck.

For many years, I have been hearing stories about SIB. When most banks paid 3% in deposits, SIB paid 6-8%. No amount of digging or understanding would clarify what it was they were doing, much like Madoff did in the US, where he managed to trap some very smart people. In fact, looking at its financial statements, I realized a while back immediately that SIB looked more like a hedge fund (half the banks investments were in stocks every year) where investments were made with depositor’s money, but those taking the risk were compensated with fixed income rates of return. As long as markets were fine and growth continued, nobody would notice, but as Alex analyzed in his report, the question now is how much did the bank lose last year and how can anyone really find out?

In fact, while Dalmady found a transaction between SIB and a company called EMAG that was delayed in December and which may represent a warning sign, I found a second one last week which has already played out: A company named Elandia had an agreement to receive a loan of US$ 28 million but terminated it it last Friday. Because of this, Elandia has canceled 16.5 million of its own shares previously owned by SIB. As a result, SIB has lost control of Elandia. While there may be a reasonable explanation for this, it seems surprising that a bank with US$ 8 billion in deposits would lose control of an investment because it could not deliver US$ 28 million.

Thus, this represents another surprising feature of the taxonomy of this financial animal, which we are all exposed to. In fact, I have found so many people near me exposed to it, that I am simply amazed about how easily people trust their money to financial institutions without much transparency, just because of the promise of more yield. It is in the end greed that drives the whole thing.

The same greed led many Venezuelans in 1994 to deposit their money in the local banks that paid the highest interest. They paid dearly for it. Will they once be caught by another Anatidae financial bird?