Archive for June 5th, 2009

A peek into the oxymoronic economic models of XXIst. Century Socialism

June 5, 2009

After ten years in power you would think that Hugo Chavez would have at least learned a little bit about how the world works. But it is clear that he while he does not like capitalism, there is no concrete alternative behind his vaporous XXIst. Century Socialism.

As an example, I was quite dismayed when I first saw the financial report for Electricidad de Caracas for 2008. While I was quite sure that the company would go downhill fast after its nationalization (It was already deteriorating due to the freeze in tariffs), I was surprised at the speed at which the destruction of value in the company is taking place.

Not that I really understand the financials anyway. I mean, a company that sent a press release talking about its shareholders meeting took place on May 31st., can’t be too careful about its financials either. It ahs since been fixed, but I keep a copy as a souvenir of the robolution.

Reviewing the financial statements, the first thing that surprises you is that despite energy sales being the same, price per GWH being roughly constant, revenues for the company went down from US$ 1.01 billion in 2007 to US$ 851 million, a 15.7% drop which as far as I can tell has no reasonable explanation. But this is  a revolution, so I move forward and I find that “operational expenses” went down from 681.4 million US$ to 648.8 million US$, surprising given that the number of workers went up from 2816 to 3427, an increase that seemed to have little impact, I guess the revolution is stingy with the “working” people.

I finally get to the capitalist line and find that Electricidad de Caracas went from earning 60.8 million in 2007 to losing US$ 140.4 million in 2008. It turns out that margins, which had been in the upper 30%+ range, dropped to only 23.75% last year. But even more worrisome, margins dropped to only 15.07% in the last quarter of 2008.

Why you may ask?

Well, a number of reasons. First, Electricidad de Caracas had to increase its purchases of electricity by 25% in 2008, no explanation given. But even more interesting it also includes the cost of buying back a bond expiring in 2014 at an outrageusly high price and issuing a new one almost three times larger (including corruption profits for both).

But then Chavez says that such concepts as profits are simply a capitalistic invention and are irrevlevant. Except that Electricidad de Caracas, which had revenues (i.e. energy sales) of only 851 million dollars, owes US$ 681 million dollars (in US$) of the new fangled-corruption bond and has to come up with at least US$ 55.8 million every year to pay the interest, together with investment, maintenance and the like. At the rate they are going by 2010, there may not be money for either.

But then, just to assure us that the robolution has no clue, the Head of Corpolec tells us that the only reason Electricidad de Caracas lost money was because those damned capitalists were not investing. Except that there is no evidence whatsoever that anything has changed. According to the financial statements, there was no change in operating expenses, no increase in capital equipment, so Mr. Hipolito has no clue.

But it gets worse, he actually says that because of this operating costs were above normal, but they were actually smaller by 1.99%! and until the revolution says so, if the number is less than, it means that it was smaller. Of course, then we are told that some Spanish Group will build a new plant for US$ 2.1 billion. I guess this plant will go right next to the Trans-Amazonic pipeline. By the way, what ever happened to that?

What is clear, is that this capitalistic concept that there is no such thing as a free lunch is still alien to XXIst. Century Socialism. At the rate EDC is going, in two or three years, it will no longer be able to service ts debt, let alone invest in the future. Sound familiar? It’s the PDVSA model, except there is nothing to nationalize  here to push the collapse forward into the future.

And since we are talking about PDVSA, the absence of a model or a plan other “than Hugo wishes to do something”, was ratified this week when it was learned that capo di tutti capi Hugo Chavez, had given a Russian consortium some tracts of the heavy crude oil field Carabobo I. You may say, nothing wrong with that, he is the President after all, no?

Except that PDVSA opened a bidding process last year, inviting all oil companies in the world, to participate in these projects of which they would be allowed to own up to 40%. The process was to have been culminated in April, but you know, we did have a referendum that distracted us, so it had been postponed till August 14th.

So, the other 18 oil companies which paid US$ 3 million to participate in the process are asking themselves what they have to do to get ahead in the line.  Easy, join the buddy group, its like the mafia, but among nations, the Brazilians did it, now the Russians, what are they waiting for? It will help if nobody complains in your country, just ask the Argentineans.

But what this shows is that the concept of an economic model for XXIst Century Socialism is simply oxymoronic. There is none, beyond a plan to have oil prices be higher in the future.

The rest will depend on whether (or not) the moods are whims of Don Hugo Corleone Chavez favor you or not.

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WSJ on Human Rights: Human Rights Beyond Ideology

June 5, 2009

This Editorial in the Wall Street Journal talks about a conference on human rights, organized by a Venezuelan who “gets it”.

Human Rights Beyond Ideology

By JOHN FUND
June 5, 2009; Page W13
Oslo

Twenty years ago, as Soviet communism was collapsing and new democracies were springing up everywhere, there were bright hopes for the spread of human rights. But while this year marks the anniversary of the Berlin Wall falling, yesterday was also the 20th anniversary of the Tiananmen massacre in China, a reminder of just how unyielding authoritarian governments can be.

Tiananmen was very much on the minds of the 200 human-rights activists who gathered in this tidy capital city where the Nobel Peace Prize is awarded every year. But the Oslo Freedom Forum, organized by the New York-based Human Rights Foundation, was unlike any human-rights conference I’ve ever attended. As at other such gatherings, racism and gender discrimination were on the minds of plenty of participants. But there was no desire to blame such problems on the U.S. or other Western nations. The emphasis was on promoting basic rights in all nations at all times.

“It’s pretty simple,” says Thor Halvorssen, a human-rights activist and the conference’s 33-year-old founder. “We all should want freedom of speech, freedom of association, freedom from torture, freedom to travel, due process and freedom to keep what belongs to you.” Unfortunately, he explains, “the human-rights establishment at the United Nations is limited to pretty words because so many member countries kill or imprison or torture their opponents.”

Indeed, the U.N. Human Rights Conference held in Geneva last month was a disgrace, with Iranian President Mahmoud Ahmadinejad denouncing Israel as a “racist regime” and saying that “Zionism” was dominating the media and financial systems of the West. The U.S. didn’t send a delegation to Geneva, and a number of the European representatives walked out during Mr. Ahmadinejad’s rant.

The Oslo Freedom Forum, by contrast, was a serious gathering of grown-ups. Even Oslo’s leftist newspaper Klassekampen (Class Struggle) overcame its initial skepticism, declaring the forum “an impressive assembly of people.”

Holocaust survivor Elie Wiesel, former Czech president Vaclav Havel and Yelena Bonner, the widow of Soviet dissident Andrei Sakharov, couldn’t attend due to ill health, but all sent videotaped statements. Ms. Bonner challenged delegates to combat the “anti-Semitism and anti-Israeli sentiment growing throughout Europe” since she accepted the Nobel Peace Prize here on behalf of her husband in 1975. Vladimir Bukovsky, a scientist who was tortured by the KGB for years, warned that many of Russia’s old oppressors were “safely in power again” in new guises.

The conference also brought together activists from far-flung corners of the world. Palden Gyatso, a diminutive Tibetan monk, told horrifying tales of being imprisoned for 33 years and being tortured by Chinese captors who wedged electric batons into his mouth and destroyed all of his teeth. After his talk, he was embraced by Harry Wu, a survivor of 19 years in China’s network of labor camps, which still contain untold numbers of prisoners.

Although quiet and reserved, Abdel Nasser Ould Ethmane kept his audience riveted as he told of how he’d been raised in an elite Mauritanian family that kept slaves even after the practice was officially abolished in his land in 1981. While living in Paris as an adult, he became infuriated at the world’s indifference to slavery and teamed up with a former slave from Mauritania to provide legal help to escapees and also conduct covert rescue operations of those still in bondage. Mr. Ethmane’s talk was followed by presentations from two powerful speakers from Kurdistan and Uzbekistan, both women who had served time for democratic activism.

Some voices at the Oslo meeting are seldom heard in the West. Victor Hugo Cardenas of Bolivia prides himself on his indigenous background but is an implacable opponent of leftist President Evo Morales, a protégé of Hugo Chavez. Mr. Cardenas, a former vice president of Bolivia, called Mr. Morales a “false indigenous icon” who was deploying “shock troops” to silence critics. Indeed, he said that some of Mr. Morales’s thugs had recently attacked his house and beaten members of his family. “But you will hear little of this from our media, much of which is bought by the Venezuelan money of Hugo Chavez,” he thundered.

The Norwegian hosts seem keen on repeating the event next year. The forum certainly attracted the right enemies. During the conference, Norwegian papers reported that the Cuban Embassy had emailed a lengthy denunciation of the forum, accusing Mr. Halvorssen and former Cuban political prisoner Armando Valladares of being CIA agents. The embassy also wrote that Mr. Valladares was a “terrorist,” and it accused the Human Rights Foundation’s Bolivian representative of “providing the bulk of the funds for the terrorist gang” that had supposedly plotted to assassinate President Morales.

Mr. Halvorssen expressed both amusement and exasperation at the charges. “They accuse me of working for the CIA in countries I’ve never visited,” he told me. “As for Ambassador Valladares, he was Amnesty International’s first prisoner of conscience from Cuba. Amnesty doesn’t usually protect CIA agents.”

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