Archive for August 4th, 2009

Chavez guarantees his “cafecito” in the future

August 4, 2009

(Este post en español aquí)


After ten years of controls and interfering with coffee production and commercialization, The Chavez administration intervened on Monday the largest coffee processing companies in the country and today it decided to nationalize them so that at least the Dictator will have his own personal supply of “cafecito” ever morning.

But clearly, it would never occur to Chavez and his cohorts that they are the problem. Which happens to be the case, even if they continued the policies they inherited and added price controls. Veneconomia says that ten years of controls have dropped the country’s coffee production to a 20 year low. The whole chain of production has been unraveled by the stupid policies of the Government. Growers feel there is no point in increasing production, processing plants can’t get the product and the consumer can’t get enough of the product. With the price controlled and world prices higher there is contraband too.

The Government then takes it over and blame everyone but the sheer ignorance of its policies. Thus, Venezuela, traditionally a coffee producing country, will likely see chronic coffee shortages going forward. Coffee will go the way of sugar, milk and all those other products in which the Government decides to stick its big finger in and screw the whole thing up.

And Chavez will continue blaming everyone but himself…as long as he can have his “cafecito”

Government surprised CVG can’t issue bonds (We aren’t)!

August 4, 2009

cvg transparente

This is the type of story that worries me the most. Some nut within the Government thought that one way of raising funds so that the Government could get to the end of the year would be to have the Corporacion Venezolana de Guayana (CVG) issue some US$4 billion in bonds. A couple of international banks were hired and eager to get their fees Deutsche Bank and Credit Suisse went to work.

These guys tried to be creative, suggesting that the company coul back the interest payments with the proceeds from the sale of the company’s gold subsidiaries. There were some other problems on the way though. First CVG does not even have audited financial statements for the last three years, least of all a credit rating (One does not come without the other), so you have to hire accountants and generate them. But second, CVG probably loses money (nobody knows, since financials are not available) and is likely to be cash flow (more money out than in) negative too. Finally, even if you generated the financials for three years, got the credit rating, provided the gold proceeds as guarantee, you still would not have the complete picture, as Sidor was incorporated into CVG this year and there are numerous new contingences involved.

So, if PDVSA has to come to market at a 20+% yield, imagine what CVG would have to pay. Investors would ask for 30%+ which simply does not make any sense. Thus, the advisors (who are collecting their fees for it) told them it was not possible or advisable for CVG to issue anything.

And according to today’s El Nacional, this actually “upset” the Government, to learn in this way that their dear CVG could simply not go to market. It is not clear whether they were mad at the advisors charging so much to reach this conclusion, or that they actually thought CVG was the “crown jewel” that Chavez seems to think it is.(It sells Aluminum for $1,000 a Ton which costs US$ 3,000 to produce, for example)

The worst part is that many in the private sector actually thought this was feasible. But the truth is that the whole picture was simply horrible: Money losing operation, with “C” rating, a multitude of operations, full of union conflicts, controlled by uncontrollable Government leader, wants to issue bonds guaranteed by cash flow from gold sales and the Bolivarian Republic of Venezuela.

Yeah, sure!

Media Control Bill (CDM) stopped on its tracks by Chavismo

August 4, 2009

(Este post en español aquí)


After the General Prosecutor went to the National Assembly last week and presented and discussed the very controversial Media Control BIll (CDM), there appeared to be cracks in the Chavista armor today with the Head of the Media Commission of the Venezuelan National Assembly daring to say that there was no project for the Bill being considered and blaming the opposition media (!) for creating the matrix of opinion that such a law was being considered.

I guess El Universal must have invented both the text and the picture of this article during the General Prosecutors speech, which was  devoted exclusively to the Prosecutors speech present, arguing and defending the contents of the Bill she was presenting. And this blog, of course, helped out with it, posting the picture of Luisa Ortega as she gave her speech.

It was typical Chavista manipulation and doublespeak, trying to change history in the best Orwellian/Soviet style, not only denying the existence of the Bill, but going as far as suggesting that somehow the opposition media created the Bill and made the country believe that the Chavez Government presented it. The worst part is, that given the Government’s dominance of the media, they may actually get away with it.

But the reality is that that the CDM Bill has opened cracks in the Chavista and by now, and while the hardcore of Chavismo was defending the Bill in today’s papers, like Escarra in today’s El Universal, between the dissent among the Chavistas and the noise the proposed Bill has created both nationally and internationally, has now forced the Government to put the Bill in the freezer for now.

The Bill simply went too far, even prompting the co-creator of the most discriminatory instrument in the country’s history, Luis Tascon, to call the Bill fascist and a lukewarm Chavista, Vladimir Villegas, to note that the Bill will not only criminalize journalism, but silence even the critics that may arise within the Chavista communities to the Government’s actions.

Because by now, even Chavistas recognize that measures aimed at silencing the opposition, end up being a double edge sword as Chavismo itself feels threatened by them and there are no channels available to transmit the frustration of what is happening to people, whether it is crime, inflation or the mostly dysfunctional “misiones” , which seem to have lost the attention of the the President and his Cabinet.

So, “por ahora”, the Bill will be tabled, but you can be sure ot will resurface at the appropriate time. Lina Ron will be arrested, held and then quietly released like he husband was. In fact, even as she was being charged the Minister of Information assured us that the blond diva of the revolution had respected the rule of law in her attack on Globovision, as if attacking your enemies with tear gas bombs was perfectly normal and legal in a democratic society.

Because by now, even the Chiguire Bipolar’s explanation of Ron’s attack on Globovision seems reasonable: It was the networks guards that attacked her, as she was trying to go to the bathroom at the TV station. And even if Chavez criticized Ron, he does it because he needs international attention to move elsewhere at a time of accusations against his Government about supporting drug trafficking, shutting down media outlets and providing weapons to the FARC terrorists.

In the end, it is the drugs and the support of terrorism that most worries the Government. Venezuela remains off the drug trafficking and terrorist supporting lists, because the Venezuelan Government has appeared to be contrite when caught red handed in the past. But as Chavez and his underlings continue acting with total arrogance thinking that they will not be caught again, they have. And any form of sanctions may have a strong impact on an economy showing increasing signs of dysfunctionality.

And Chavez has placed all his bets on oil prices increasing in the near future, but they don’t seem to be helping enough so far. The swap rate goes up, inflation is hurting and the Government has ever increasing financing needs to avoid a sharp slowdown.

As usual everything is political. Chavez is thinking 2010 (and 12!). We have a new Electoral bill that changes and disguises the rules, if the economy can be held off (can it?) then Chavze can retain his control of the National Assembly, control the media and slide into home plate in 2012 just when oil prices begin to rise sharply once again.

At least he has a plan, even if fragile, do we?