Archive for February, 2010

The far reach of Chavista incompetence in financial matters touches Uruguay

February 22, 2010

The ability of Chavismo to waste money due to sheer incompetence and idiotic idealism is simply remarkable. Not content with wasting money in nationalizing companies that now give losses, or wasting money in nationalizing banks in Venezuela, the latest failure of Chavista management reaches now Uruguay and unfortunately, those responsible for this silly investment remain today in positions of power in the Government’s financial system.

The story begins in 2006 when Uruguayan coop bank Cofac went under and Venezuela’s development bank Bandes decided to take over the institution which had about 35 branches and some 120,000 depositors. You may wonder what Venezuela is doing helping a country with a higher GDP per capita than Venezuela and little poverty, but that is one of the mysteries of Chavismo, the ability to waste money abroad when people suffer at home, but I digress.

So, some genius at Bandes (more on whom later) decided to save this coop bank in Uruguay, rather than use the money here. It was a time of higher (relative) oil prices and Chavismo spreading around Latin America and the world. Bandes financed the institution, taking over all of its workers and assuming all deposits. Bandes Venezuela created Bandes Uruguay to help small industries in that country in a bank with “solidarity” at the core of its basic concept.

Except that four years later Chavista management, the same one that lost Banco Industrial’s capital three times in eleven years managed (surprise, surprise!) to lose in 2009 alone US$ 22.5 million while the banks’ capital is US$ 30 million. The bank also lost money in 2007 and 2008, what did you expect?

By now, Uruguayan authorities are talking, once again, about Venezuela capitalizing the bank (The alternative is bankruptcy). Of course, it does not look like the bank will do well in the future anyway.

And who, you may wonder, was the man (military, of course!) at Bandes that decided on this strategy of helping Uruguay with this investment? None other that Captain Hernandez Behrens, then President of Bandes and who has been Superintendent of Banks for almost two years presiding over the demise of eleven banks. Moreover, reportedly Chavez decided to eat his financial bolibourgeois class to save Hernandez Behren’ behind.

Maybe it wasn’t worth it…


Cuban doctors sue Venezuela and Cuba for “modern slavery”

February 22, 2010

Seven Cuban Doctors and a nurse sued Cuba, Venezuela and PDVSA in a US Court for conspiring to force them to work as “modern slaves” as payment for the oil that the Venezuelan Government provides that country.

Those being sued “willfully and arbitrarily” placed these medical doctors and the nurse under “conditions of servilism for debt” turning them into economic slaves and converting them into political promoters according to the suit.

The suit allegs that they travelled to Venezuela under false pretenses and threats and were forced to work without time limits in Chávez’ Barrio Adentro program. The suit alleges that “free and innocent people ” were placed under contidions of forced labor, captivity and as servants in exchaneg for payment of the country’s debt.  The suit also accuses the Venezuelan Government of persecuting, threatening and forcing the doctors to return to Cuba, blocking them from moving to other countries. They also said they practiced medicine illgeally in Venezuela in violation of the country’s laws (Sovereignty anyone?)

Another wonderful tale of the robolution, including PDVSA, Hugo “who cares so much for the people” Chávez and the bearded devil from Cuba.

(Note: The article notes that there is a precedent of Cuban citizens forced to work for a company to pay Cuba’s debt, who were awarded US$ 80 million)

Peasant Militias in the “peaceful” revolution of Hugo Chavez

February 21, 2010

The hats are all new, some don’t even know how to hold their guns, but these peasant militias are another sign that Venezuela is well in its road backwards into the XIXth. Century

OAS and Peanuts join forces against Chavez

February 20, 2010

Lying “Niño” by Teodoro Petkoff

February 18, 2010

(Still on vacation, so I translated Petkoff’s editorial on Tal Cual for your enjoyment, in case you missed it)

If we were to follow what Chacumbele says, we would say that “El Niño” has it in for us. If not, how do you explain that in all South American countries on the Pacific there are no blackouts  and here we have them all the time?  According to our eminent conductor, these are the evils of the little kid. It’s very strange, because Colombia, for example, which receives its full impact, is offering to sell electricity to us and some years ago, we used to sell to Colombia, which has caught up with us. “The  Niño”, go figure out why they have christened in such a tender way a natural phenomenon that behaves so badly, is a cold current flowing from the Antarctic to the north, all along the Pacific coast and that when it gets into warmer waters causes serious climate disruption. Since El Niño is on the loose, all over South America  anomalous natural phenomena are occurring of an intensity greater than ever before.

Catastrophic floods and brutal droughts alternate, even in neighboring countries.

But something does not fit in the  Chacumbele’s alibi . In fact, struck by the fact that none of the countries directly affected by El Niño, there is an electricity crisis and we have one here. The explanation can not be, then, the one  Chacumbele is trying to sell us so hard.

That the summer is being particularly harsh and that drought is strongly punishing the headwaters of major rivers Guyana, nobody can deny.

But why, if in 2001 the summer drought was worse than this time and the water level dropped to the fatal Guri 240 meters above sea level, there were no power shortages? It is obvious then that the national electricity system had an installed capacity of generating electricity  that allowed him to compensate for the reduced flow of electricity from Guri. The country was living off  of what previous governments had left him.
Chacumbele also argues, in a mixture of his proverbial lies with truths, that demand has grown and that supply  is not enough.

Columbus (Translator Note: Venezuelan expression for obvious). But did the illuminated foreman stopped to consider the fact that all neighboring countries  also had increased demand and yet the offer is sufficient? He scored on his own goal post without shoes on.

In neighboring countries, where El Niño strikes with more fury than here and where demand has also been growing, governments took care of making the necessary investments to increase electricity generation to the beat of that same growth.

Is it so hard to understand this? Here, simply, “El Niño” who governs us, as destructive as his namesake, did not do his homework and flunked. The funniest thing that has happened recently in this field is that the “tough guy” Jaua rejected the Colombian supply of electrical power, as if it were an insult. We have next to us a country that can provide some kilowatts and the government refuse it,  but he brings some Cuban technicians who are on the subject of electric power is in the Stone Age, to advise us. Worse than a bad government is a bad one that is stubborn and stubborn and which, on top of it, claims to be socialist.

New York Times: The rise and fall of Venezuela’s financial bolibourgeois elite

February 17, 2010

I am still on vacation, not in touch, so I thought I would publish the New York Times overview of how Chavez allowed the rise and fall of the financial bolibourgeois to suit his purposes, demonstrating once again that this robolution is anything but about the “people”

Purging Loyalists, Chávez Tightens His Inner Circle

Published: February 16, 2010

Being one of Venezuela’s richest and most influential men, Mr. Fernández, 44, went to the headquarters of the Disip intelligence police to clear up the matter directly with the agency’s powerful spymaster.

Then a surprising thing happened, especially in a nation that had grown accustomed to the unfettered activities of pro-Chávez tycoons like Mr. Fernández. The self-described socialist revolution of Mr. Chávez notwithstanding, the prominence of these moguls was so well known it inspired a nickname — the Boligarchs — for their fast accumulation of wealth and their ties to the government, which reveres Simón Bolívar, the 19th-century aristocrat who won Venezuela’s freedom from Spain.

But instead of dismissing the matter, the intelligence chief imprisoned Mr. Fernández last year and ordered agents to start detaining other pro-Chávez magnates. Some slipped into hiding abroad and are still being sought. Several others and their associates were arrested and put in cells adjacent to Mr. Fernández’s.

The purge has revealed a power struggle at the highest levels of government, leading to the fall of some of Mr. Chávez’s military comrades and reports of secret dossiers on businessmen compiled here by intelligence agents from Cuba, Venezuela’s top ally.

At a time when Mr. Chávez struggles with public ire over electricity shortages and an economy in recession, the arrests show his ability to nimbly consolidate power while crisis swirls around him. To do so, Mr. Chávez is using tactics like secret-police raids and expropriations of some of his most powerful supporters’ businesses, relying on a dwindling number of military loyalists to carry out his orders.

“We are witnessing the battle between competing mafias who prospered at Chávez’s heel,” said Ismael García, a leftist legislator who broke with the president in 2007. “Chávez still has the cynicism to camouflage his rule in socialist rhetoric, but anyone with a brain sees that his loyalists are in it for just two things: the power and the money.”

Some bankers here apparently acquired too much of both. The rise of a shadowy group of pro-government tycoons had for years been an embarrassment to Mr. Chávez as he was promoting anti-capitalist values. Included in the Bolibourgeoisie (another name for the so-called Bolivarian moneyed class) were men like Arné Chacón, a former navy lieutenant who took part in Mr. Chávez’s failed 1992 coup attempt.

In newspaper photographs back then, Mr. Chacón, like Mr. Chávez, looked like a skinny idealist. But Mr. Chacón amassed a banking fortune, appearing in newspaper photographs here with more girth and a selection of the more than 40 purebred racehorses he owned.

Now Arné Chacón is just another jailed magnate, joining Mr. Fernández and eight other imprisoned bankers and state regulators as investigations into their activities slowly advance. Mr. Chávez himself announced that officials had seized Mr. Chacón’s properties, including his prized horses. The justification for the imprisonment of Mr. Chacón and other tycoons involved accusations of irregularities in bank acquisitions.

Reports by nongovernmental outlets here point to other motives for the crackdown. Teodoro Petkoff Malec, a former Marxist guerrilla and one of Venezuela’s leading intellectuals who now edits Tal Cual, a left-wing opposition newspaper, reported that a dossier prepared by Cuba’s intelligence service might have crystallized the purge.

The intelligence report, Mr. Petkoff said, was delivered to Mr. Chávez by yet another former military officer, Ronald Blanco, now Venezuela’s ambassador in Cuba; he passed it along as a form of retaliation after Mr. Fernández tried to have Mr. Blanco’s brother-in-law ousted from his post as the government’s superintendent of banks, Mr. Petkoff reported.

Mr. Chávez’s government has remained silent about the existence of a Cuban dossier. The president’s information minister, Blanca Eekhout, did not respond to requests for an interview.

But Mr. Chávez has clearly continued the purge, issuing warrants through Interpol for at least nine bankers thought to have fled Venezuela, and seizing 11 of their financial institutions to fold them into a new state banking company under his control. The fallout from the purge continued this month, when Mr. Chávez named a former army captain who took part in his 1992 coup attempt to oversee the seized banks.

Mr. Chávez is also relying more on his Cuban allies to address other issues. This month, he brought in Ramiro Valdés, Cuba’s 77-year-old vice president and a founder of its Soviet-inspired state intelligence apparatus in the 1960s, to advise him on the electricity shortages, an appointment that has further angered Mr. Chávez’s critics here.

None of the fallen Boligarchs have gripped the public fascination here like Mr. Fernández, who was arrested at the start of the purge. “Fernández Barrueco made the fundamental mistake of believing he was powerful,” said Juan Carlos Zapata, an investigate journalist who is writing a book on the Boligarchs. “By taking him out, Chávez sent a message to anyone who aspires to power in Venezuela.”

Mr. Fernández rose from obscurity to put together a web of 270 companies in industries as diverse as tuna-fishing and banking, amassing a fortune of about $1.6 billion by 2005, according to study by the Caracas affiliate of the KPMG accounting firm. He thrived in rural Venezuela, where Mr. Chávez’s dominance goes largely unchallenged, acquiring an interest in a pro-government newspaper in Barinas, a state that is a Chávez family bastion.

Still, Mr. Fernández remained an enigma as his wealth increased. Today, he resides in a military intelligence holding cell.

Other resignations in January from within Mr. Chávez’s ruling cadre followed the bankers’ arrests. Vice President Ramón Carrizalez and Eugenio Vásquez, the minister of public banking, left the government. It remains unclear whether their exit was related to the earlier purge.

Those who remain in Mr. Chávez’s good graces provide a glimpse into the president’s priorities. They include former military officers like Diosdado Cabello, who as chief communications regulator engineered the removal last month of RCTV, a television network critical of Mr. Chávez, from cable channels.

As for those swept out by the purge, Mr. Chávez has made few apologies. “I’m not a judge,” he said on national television referring to the arrest of the magnate, Mr. Fernández. “But I have enough evidence to say that he’s a criminal.”

Silly things I heard recently that matter to Venezuela

February 15, 2010

(Eleven years screwing it up)

–Colombia offers to sell electricty to Venezuela

I guess El Niño only goes up to the border between the two countries.

–There are 60,000 Cubans helping Venezuela out from Ramirito Valdes down.

Whatever happened to sovereignty? Wasn’t the robolution about that?

–Ecoanalitica says the purchasing power of salaries will drop 12% in 2010 after dropping 6.2% in 2009

Imagine those that don’t have salaries!

–And to the consternation of Chavista fanatics, their idol Minister of Commerce Eduardo Saman was removed from his position.

It is not known if this was because Chavez read my blog and realized that Saman never worked at the Arepera Socialista , as promised, or that after all of the noise with Zuluaga’s Toyotas, a case could not be built on any violations. Of course, he may have been caught stealing, but we never know about those.

–Edelca workers prayed for rain and for the Guri dam.

It’s a test of faith and wills, you know what the opposition has been praying for years. So far, neither has results.

–28 airplanes used for drug smuggling were “found” in San Juan de Los Morros in a hangar.

That is why we feel protected, when such stealth and small objects used in drug trafficking are found by the authorities.

Thinking about what happened with Globovision…

February 14, 2010

PDVSA finds only two partners for three projects in the Orinoco Oil belt

February 14, 2010

While President Chavez and the President of PDVSA tried putting on a cheerful face, the truth was that the sale of the Carabobo oil field projects did not go as well as planned. After a year and half of delays due to the refusal by the Chavez Government to make the terms comparable to international ones, some of them were relaxed, but the refusal by the Government to allow international arbitration in the end was costly. While Chavez had said that there were bids for all three projects, the truth was that one of the consortia had bid for two projects with the condition that it only wanted one. Thus, after 19 oil companies registered to bid in 2008, only two of the projects were assigned in the first new oil project in almost 12 years to be started in Venezuela. In some sense that’s progress, but it still is bad execution, as usual.

Thus, Carabobo 1 was won by a consortium led by India’s INGC, Repsol, Petronas and two other Indian companies, while Carabobo 3 was won by the consortium led by the Empire’s Chevron, Mitsubishi, Inpex and Venezuela’s Suelopetrol. Chavez Russian and Chinese buddies did not bid and Italy’s ENI which had suggested it would also bid for Carabobo after it got a Junin block, did not bid either.

People should not read too much into Chevron winning a field, it is not a gesture towards the US or any such thing, simply put if Chevron was not assigned the field, only one out of the three projects would have been assigned and the process would have been considered a gigantic failure. Carabobo is supposed to be the prime real state of the Orinoco Heavy oil belt. If only three of the projects could be sold, it just would not look good at all, after Chavez’ Chinese and Russian buddies did not particiapte. (Yes, they will have chunks of Junin, but Carabobo is supposed to be much better)

The two projects assigned yesterday, will produce 200,000 of blended heavy crude with light crude by 2012 and an additional 200,000 after the upgrader is built to process heavy crude and turn it into lighter (still fairly heavy) oil. The upgraders are unlikely to be ready before 2017.

The conditions were eased somewhat. The Royalty was reduced to 20% from 30%, a signing bonus spread out in time had to be paid (Which turned out to be US$ 1.05 billion for Carabobo 1 and US$ 500 million for Carabobo 2). In addition, the company winning the “right” to own 40% of the project will have to provide at least US$ 1 billion in financing for PDVSA’s share of the project. An additional condition that was relaxed was that the contract allows for international arbitration on the financing conditions of the projects. PDVSA ahs also promised that the windfall oil tax will not be applied to these projects, but the Assembly has not acted on it.

The question is how all of this would be financed. PDVSA can not issued debt to finance its end, it will simply be too expensive, as PDVSA bonds currently yield to maturity around 14-16%. PDVSA owns 60% of all projects and between Caraabobo and Junin it will have to come up with nearly US$ 20 billion for its end of the projects in the first five years. The partners, who will be able to include the oil as part of their reserves (so much for sovereignty again) can not pledge them for financing. Thus, the only viable option seems to be that the projects will issue debt guaranteed initially by the partners until oil production begin. Thus, they will look more and more like the old oil partnerships of old.

Thus with a year and a half delay and 66% success rate, the Carabobo field was finally assigned. Contracts will be signed in March and infrastructure work will begin by the end of the year. Hope it happens.

Veneconomy on the electric crisis and GDP growth in Venezuela

February 12, 2010

Veneconomy in its weekly publication attempts to estimate the effects of the electricity crisis on the economy. His conclusion is that the economy will shrink by at least 8% in 2010, ignoring the effects of the banking crisis which has destroyed almost 10% of the money in circulation. I have shortened the article to eliminate hings that have been said in the blog already

The real costs of the electricity crisis by Veneconomia

This presidential decree – like everything else the Chávez regime has said or done in relation to the national electric­ity crisis – is no more than noise, smoke and mirrors. Moreover, the “investments” the regime pledges to make, including $4 billion in 2010 to add 4,000 MW of genera­tion capacity, are an illusion at best, and outright lies at worst. Nothing the Chávez regime attempts will reduce the electricity supply deficit in less than three to five years, and the rationing the country will suffer until at least 2012, if not longer, will have an immense cost in terms of lost eco­nomic growth. Meanwhile, the question that most economists and analysts are only just starting to seek answers to is this: How much could the electricity crisis re­ally cost Venezuela?

VenEconomy has attempted to calculate an approximate answer to this critically important question. It’s not simply a case of how much the regime can or should spend, but rather how great might the over­all economy’s losses be while the electric­ity crisis lasts. The baseline employed for the following estimates is a proposal made by a group of analysts including experts from Simon Bolivar University, who pro­posed “reprogramming” all of the country’s “commercial and industrial ac­tivities to four days a week,” and reduc­ing all activities on Sundays to the maximum possible extent. Moreover, these experts suggest that a four-day work week and three-day weekend should be contin­ued until Guri Dam’s reservoir refills and the government restores the thermal power generation park to full operational capacity including the completion of all planned new generation projects. This would achieve the desired electricity con­sumption savings of 20% which the gov­ernment has set as its official short-term conservation target.

However, there’s an important glitch in this proposal’s basic assumptions, which is that this plan only would have to be maintained until the rains return to Ven­ezuela, presumably in May or June.

VenEconomy believes this core assump­tion is mistaken. The electricity deficit will persist for two-three years, or more. Even President Chávez acknowledged just two Sundays ago that Venezuela’s electricity crisis would be worse in 2011 than in 2010. This indeed is a very ominous admission,considering Edelca’s warning that it could be forced to shut down 5,000 MW of Guri’s hydropower generation capacity before end-May 2010, triggering what Edelca calls a “national collapse” due, in part, to the fact that Guri water is what powers the downstream hydroelectric plants.

VenEconomy thinks that the country faces at least three years of permanent electricity rationing.

VenEconomy’s initial crude calculation was that a four-day work week would cost Venezuela the equivalent of 20% of GDP over the course of 12 months. Obviously, most of that loss would be compensated for via increased output of goods and ser­vices over the four working days. Thus, VenEconomy thinks a decline of 5% of GDP is almost certain, to which another 3% of GDP contraction would accrue from the near-total shutdown of the basic indus­tries in Guayana.

As a result, VenEconomy’s preliminary estimate is that the crisis will cost the na­tion the equivalent of 8% of GDP in 2010, plus another 6% in 2011 (assuming that Chávez is mistaken in saying that 2011 will be a worse year for the electricity sector than 2010), and a further 4% in 2012, for a total cumulative three-year contraction equivalent to 18% of GDP, for a total of some Bs.F.5,000 (in today’s bolívars) for every man, woman and child in Venezuela.