(I order you to stop!)
Sometimes, living in Venezuela can be a very bizarre experience. As you probably noticed, I have not posted much most of this week. A lot happened, but how many times can you write about Chavez-Farc-ETA? Or how many times can you write about the electric crisis? Or the economy shrinking? Or the Government’s lies? Or Chavez going in Cadena?
It does get boring, but at the same time it has become our every day life. I spent part of the week considering various scenarios if Guri should collapse. We don’t know if it will, but the probability that it happens is finite and significant. While Chavez talks about 100 days for the critical level to be reached, because there are 14 cms. to go and 14 mts. to that level on January 12th. the Government said the level was dropping by 9 cms. daily. Thus, it is not a linear phenomenon, like Moses discussed in the comments at the time. In fact, today El Nacional is talking about days in which the level dropped by 16 cms. this week.
Yes, it may rain before May, but reality is that this planning is not virtual it is quite real and absurd at the same time. But while planning for work is complete, I have not planned for my home. I do have a couple of UPS’s around that may last a couple of hours each, but when you meet someone that knows about electrical networks and he tells you that he installed a power plant in his home two years ago, the term “inside information” truly acquires a new meaning in your life.
And while Quico still has the stomach not only to watch Chavez, but even Tweet about it, I don’t. Chavez is clearly campaigning for something while the country falls apart. But he is definitely as cynical as can be. First, he announces that a tiny power plant will now be used to power the town of Guanta. The plant was part of Cemex’ nationalized cement plant. From there, he goes to Barinas, where he has the guts to go and visit CAEEZ, a monument to the corruption and incompetence of the Chavze Government. But hey! The CAEEZ project included a small power plant which uses residues from sugar cane processing, so he can’t help but show it, even if CAEZZ is such a symbol of the economic and production failure of Chavez’ whatever-you-want-to-call-it project.
And if that was not enough, he announces the nationalization of Turboven. But wait! Wasn’t Turboven nationalized three years ago?
Well, yes, the whole of Venezuela’s power generation industry was nationalized three years ago, but after an initial letter to Turboven, nobody followed it up. EDC was nationalized, Electricidad de Puerto Cabello was Nationalized, the Government overpaid for Seneca, Margarita’s electric company. But in an incompetent and inefficient Government, everyone forgot about Turboven. Until yesterday…
So yesterday’s Cadena was about an irrelevant power plant, a symbol of the Chavze Government corruption and incompetence and and after thought…That is how little Chavez has to show for eleven years of bread and circus.
Very little.
And then, the Central Bank, after a three week hiatus comes back and sells US$ 50 million in zero coupon bonds to bring the swap rate down. It moved down all right, from Bs. x.9 to Bs. x.8 per dollar, while the Central Bank sold dollars at Bs. 4.8 per dollar, if you got any. Is this policy? You could have fooled me. Giving away dollars is perverse and inmoral, but what else is new. As Chavez said ” We can’t bring down the swap rate down in one week, it takes months to do it”
Yes Hugo, but since you announced that you were bringing it down to Bs. 4.3 per dollar, all it has done is move up and it flirted with Bs. 7 per $ this week. In fact, the joke is that CADIVI is not functioning, because at Bs. 4.3 plus commission to get your dollars, it is almost the same as going to the swap market, without the paperwork.
And in closing this rant, I have a message to those that say or think the Government has so much money to spend ahead of the September elections: While it is true, in theory, it is not quite right. The Government devalued from Bs. 2.15 to Bs. 2.6 and Bs. 4.3. PDVSA, the only supplier of foreign currency for all practical purposes, will have to exchange 70% of its dollars at Bs. 4.3 and the rest at Bs. 2.6.
But it so happens, that last year, the parallel swap market was heavily intervened by both the Government and PDVSA at levels above Bs. 5 per US$, so while PDVSA and the Government will have “more”, it will not be a huge amount given that PDVSA and the Government sold some US$ 13-15 billion above Bs. 5 per US$.
Moreover, there is a huge difference between selling into the swap market and selling to the Central Bank at Bs. 4.3 per US$. When PDVSA sells US$ to the swp market, it absorbs Bs. that are already in existence. When it sells them to the Central Bank, the Central Bank “creates” Bolivars, which go into the monetary base and are inflationary unless the monetary authority sterilizes them, which it has not done very efficiently in recent years.
Finally, I have bad news and good news. The good news is that the Constitutional Hall of the Venezuelan Supreme Court reinstated the Mayor of the Sucre municipality in Zulia State. Don’t interpret too much into this, it was so absurd and irrelevant that it was reversed. Naming the Mayor that lost the election was simply stupid. The bad news is that economists think that 2010 will be better than 2011, unless oil prices shoot up, which nobody thinks they will.
And thus, I end my rant, nothing happened this week in Hugolandia, but what a week!
The Devil's Excrement 
May 21, 2010 at 5:17 am
Hey could I quote some of the content from this blog if I link back to you?
May 21, 2010 at 7:14 am
Of course
March 9, 2010 at 7:00 am
loro, yes indeed. Chavez is the worst and foremost of Venezuelan leaders, but certainly not the first to head down the path of stupidity. He is a symptom of his predecessors in many ways. The only possible good thing I see coming out of the downward spiral upon which he has set Venezuela is that people may finally realize that it really is the wrong path, and seek a new alternative, one which is not laden with get-rich-quick-without-really-trying schemes.
But as bad as his economic mismanagement has been, I really wonder if he has done more damage to the country with his intentional divisiveness. Those wounds will be very difficult to overcome, and could conceivably preclude consensus on the above.
March 8, 2010 at 10:24 am
“They focus on policies which bear nice short-term benefits, but are poor long-term ideas. As time goes on (getting away from short and into that long term), the pressure mounts for a new short-term policy, which usually ends up being something that distorts the prior distortion, because the leadership certainly can’t undo it, since that’s backing down, and giving in to the other side, or whatever.”
Precisely, though the “Fifth” Republic will try to diminish everything that came before it (except to place blame), before Chavez, there was Caldera, and before him Carlos Andres Perez’s second period (also Velazquez), and before him Lusinchi, and before Herrera Campins. Every which one of them inherited serious problems from his predecessor and adopted measures that did not break Venezuela out of the exponential demands race, but intensified it.
The only “break” between was the boom in oil prices from 2006 to 2009. It was wasted TOTALLY, and in the same manner that CAP and Herrera Campins wasted theirs (complete with nationalizations), and thus we come back.
March 8, 2010 at 7:24 am
loroferoz (I do love that name, by the way), you are absolutely right to describe this as a vicious circle – but socialist/populist concepts, when taken to their extreme, are necessarily so. They focus on policies which bear nice short-term benefits, but are poor long-term ideas. As time goes on (getting away from short and into that long term), the pressure mounts for a new short-term policy, which usually ends up being something that distorts the prior distortion, because the leadership certainly can’t undo it, since that’s backing down, and giving in to the other side, or whatever.
Witness Argentina – one of the richest countries in the world 100 years ago (with a higher per capita GDP that Spain, Italy, and even the U.S.) – as an example of a country which has persisted in this mindset for decades, even longer than Venezuela, and is now struggling not to be called third-world. Pride goeth before a fall – but sometimes after, too, which ends up leading to another. And begets a vicious circle.
I’m glad to see that the Sucre/Zulia decision was reversed. I’m rather stunned by it, too. We all know it wasn’t simply because it was the right thing to do – if that’s the case, we’ll soon see the removal (or at least suspension) of the judges in the Sala Electoral for this “grave and inexcusable” error, and I’m not holding my breath. God knows that other judges have been fired for much less, but only when their decisions weren’t intended to suck up to Hugo.
March 7, 2010 at 11:40 pm
Really, I at least do not see a way out for the Chavez government (or the petrostate for that matter). Out of this vicious circle. PDVSA, the BCV, social and electoral promises that cannot be kept (unless you devaluate), exchange controls (or dual exchange rates), devaluation, and inflation.
Now, I do not think that the history of Chavez should be named the History of Evil. More like the History of Idiocy, Madness, Populism and Corruption.
And lastly, pardon the crude joke. But did you write “Chavze” on purpose? It reminded me of Goatse, and I thought that in the end, Chavze could become a political equivalent thereof.
March 7, 2010 at 1:25 pm
Glad to see you are addresing issues of which you know something and not
CUBA .
March 6, 2010 at 8:15 pm
“On a more practical level, how are supplies of rechargeable batteries, inverters, chargers and I hope generators”
I solved the problem for our guests with a 1200 watt UPC. When the 3 times a week rationing arrives I hook up 3 lights with 11 watt energy bulbs. They last the 2 hours of the cutoff & keep our guests at least with some light.
The rechargeables that you can buy here don’t last very long & in a short time only last 20 minutes or so.
March 6, 2010 at 6:59 pm
here is more of the same http://news.yahoo.com/s/ap/20100306/ap_on_re_la_am_ca/lt_venezuela_media don’t forget to read the comments.
On a more practical level, how are supplies of rechargeable batteries, inverters, chargers and I hope generators ( i can buy a 1Kw for 150USD here ) holding up? Some folks north of Boston are still freezing in the dark from the last snow storm. At least in Venezuela you don’t need a wood stove when the power goes out!
March 6, 2010 at 5:34 pm
The week is not over yet:
http://www.elpais.com/articulo/espana/Espana/Venezuela/reafirman/lucha/ETA/elpepuesp/20100306elpepunac_2/Tes
Disgusting!
StJacques
March 6, 2010 at 3:13 pm
I don’t mean to be too rude with this, and I know it’s completely irrelevant but I’m just going to say it anyway! Whhhhhaat the heck has Obama been smoking these days? There, I got it off my chest! 🙂
March 6, 2010 at 1:11 pm
This is not all that different from the economic policies of the US and EU when you come to think about it. Greece and Iceland were the first to be hit full-frontal with reality in the EU but they won’t be the last. Their politicians will try to do anything but what actually needs to be done.
Our government is now saying we will have trillion dollar deficits for the next decade, which is not really possible. We won’t last another decade of borrow and spend. Who is going to keep loaning us money when it is becoming obvious that the US is a bad risk?
It wouldn’t be so bad if the government pursued pro-growth economic policies but we have the most anti-business administration in history. It was bad enough when the government spent money like crazy and we had a growing economy, but its likely to kill our economy now.
Venezuela is smaller and these things impact it much faster. Greece and Iceland were able to pretend it would work because they were a part of Europe. Well the pretension is coming to a fast end, I hope that smaller EU countries realize that if they ain’t German or French, then the EU is not about them.
Of course I can say that I would hope the world learns from Greece and Iceland but they obviously did not learn from Zimbabwe. If you can’t learn from the most extreme case of bad economics and currency inflationary in recent history then you’ll never learn. Of course they could look up Weimar Germany for another good example.
I think your right that Chavez doesn’t have a plan, he is winging it. Haphazard Governance is definitely not good for the economy, stable economies need a predictable environment. If they have no idea what new regulations, restrictions, taxes etc are coming, then they cannot plan and invest for the future with any accuracy.
I am almost surprised there are any businesses left anywhere, I guess they just need more time. How long until Hugo is blaming the bad economy on the small shopkeepers? If he isn’t already. He’ll run out of targets sooner or later I guess.
March 6, 2010 at 12:41 pm
Hi
I am no fan of any dept US or other and US is in big trouble by any calculation as all the numbers are corrupt that are published in the US. So who knows really whats what… kinda the same in Venezuela. Who do you think is buying US dept paper now… US banks with all the free money they got and are still getting from the fed. Paper is and will only be worth the value of the paper it’s printed on and how well it will burn in a cold winter is about all it’s good for. protect your wealth get some gold and silver to cover your butt. you can buy gold in Venezuela
I have a question on the Bond swaps going on in Venezuela to get money out. Can anyone explain the process and the risk and cost’s involved? I have an opportunity to participate in a Venezuela government funded project as a consultant and I am looking for ways to get my fee out it is easy to be paid in Bolivar’s. I herd the bond swap is one and another way is to buy physical bullion and carry it out… still looking at the risk of that as well. I get conflicting opinion’s on flying out with gold in my pocket
March 6, 2010 at 12:32 pm
O, Do you know how damage are el río Caroní from the gold exploitation?
I do know that the level of the river is if not by the Niño effects, but maybe have to do with the gold and mineral exploitations, the exploitation using pumps against the borders of the river and by other means can effect the caudal of the rivers, I am not ecological expert, but I think this can effect is they do at great scale.
And the government in their search of money maybe is pushing forward brutally (as alway) with the exploitation of minerals in Venezuelan rivers.
March 6, 2010 at 11:50 am
Firepigette, I agree completely with you.
And some one had to write The History of Evil, when he will down. MO should write a book to show to the new generations how bad was this hell. Please, save these post to History recall.
The Venezuelan have the curse of repeat their own hells, time, after time, after time (like a Duracell battery).
Chavez resembles the dictators we have from independence to the recent “half democracy” in at the 1960, and that decade democracy have been the better democracy in our History, even we have the luxury that we kick the ass to a Cuban invasion.
The only difference of Chavez with other Venezuelan dictators is the false socialism ideology to badly hide his totalitarianism and “cubalinization”. Venezuela has longer history in the Spanish colony and dictatorships subjects than anything else, and that become a pretty boring History for a country.
March 6, 2010 at 10:10 am
https://youtube.com/watch?v=jzIC8bBfFQE%26hl%3Den_US%26fs%3D1%26
Sorry the above link was not working.Here is the new one
March 6, 2010 at 10:06 am
Indeed evil is boring.It IS repetitive and predictable how the Chavez government will repress, destruct, ruin, threaten, confuse, and create hatred.
Also true that there are many folks who (out of self defense and unawareness), will say to themselves” we have to look at the bright side” or for every bad deed there is another good one”, etc.Or “The opposition is just as bad.”
Some of these people will even consider it evil to concentrate on the negative side of Chavez.Some will find solace among the various new age groups, and religions out there.There are Yogic groups in Venezuela who practice meditation and whose worldwide orgs bring in practitioners from the US,India and Europe to spread the belief that Chavez has good intentions.They say Chavez needs help.They say the good that he wants to do is being suppressed by negative thoughts coming from the opposition.
Below is a youtube comedy about this dangerous phenomena based on our natural aversion to repetition.To keep on reporting evil takes guts, and it takes staying power.In part this is why Chavez went slow.People get used to life in hell, but also they get tired of all the negativity.
https://youtube.com/watch?v=jzIC8bBfFQE%26hl%3Den_US%26fs%3D1%26
Keep up the good work Miguel !!
March 6, 2010 at 9:36 am
Because when you print new Bs. there is more money out there, more money is inflationary and will create more pressure on the swap rate. When PDVSA intervened it was recirculating Bs., when it sells to the BCV new Bs. are created.
A year ago there were around (guessing) Bs. 6 per $ in reserves, today it is around Bs. 8 end of the year like 11 or 12, that is very inflationary and there are more Bs. looking for the same $.
March 6, 2010 at 9:30 am
MO,
Why does it matter for the Government’s capacity to sell USDs whether the Bs. are hot of the printing press (from the CB) or coming from the hands of the private sector (permutas)?
March 6, 2010 at 9:29 am
St Jacques:
Me too
Kepler:
He is running out of options, 12 billion this year looks very hard
March 6, 2010 at 5:23 am
Good post, Miguel, but Hugo will look for more money when he runs out of what he has now and if that means selling off more of Venezuela’s future, he will.
In the same way as he got 12 billion beginning 2009, he will find 12 or more billions come June-July just on time to buy thos mattresses and mixers and bags of US rice or Belorussian milk or Dominican black beans that help win elections in Venezuela.
March 6, 2010 at 1:42 am
Miguel,
You wrote:
“… but how many times can you write about Chavez-Farc-ETA? Or how many times can you write about the electric crisis? Or the economy shrinking? Or the Government’s lies? …”
Wait a minute! That is all I’ve written about for the last two weeks!
LOL! I’m wasting my time. Sigh!
StJacques
March 5, 2010 at 10:38 pm
and today its empty
March 5, 2010 at 10:36 pm
you forgot the .ve:
http://www.opsis.org.ve
March 5, 2010 at 10:36 pm
Miguel:
Thanks for mentioning a previous comment !
In this link you can see a graph that shows the non-linear relation between the water height of Guri and he date of the measurement:
http://www.noticierodigital.com/forum/viewtopic.php?t=625097&postdays=0&postorder=asc&start=15
Of course using least minimum squares to predict a date (extrapolation) is not entirely correct, but it gives you an idea… the sky may fall at the End
of May
regads,
Moses
March 5, 2010 at 10:31 pm
You can see the water level and volume situation in Guri in real time at http://www.opsis.org look for boletin diario.