The Devil's Excrement

Yesterday, the Spanish Government made the formal request for the extradition of former ETA member Arturo Cubillas. Cubillas, who was a member of ETA before sent to Venezuela by the Spanish Government, has been accused of training ETA members and FARC members in Venezuela on how use weapons and how to make bombs.

This case reveals the lack of ethics and scruples of many members of the Venezuelan Government including former General prosecutor Isaias Rodriguez and current General Prosecutor Luisa Ortega.It also reveals how they have supported terrorist groups and now try to hide it.

Rodriguez, who is currently Ambassador to Spain and was the country’s first Vice President under the new Constitution (Reason enough to eliminate the position in the future), was quick to jump the gun when the charges first appeared and made very undiplomatic statements suggesting that the two ETA members who said they had been in Venezuela to be trained by Cubillas had been tortured by Spanish authorities.

As if this was not enough, Rodriguez and Ortega, made the same statement on the case that was simply not true, showing their ignorance of the law and their remarkable desire to defend Cubillas at any cost. They both said Cubillas could not be extradited, because he was a Venezuelan citizen. This is simply not true, as the extradition of Rodrigo Granda proved. Granda, the FARC’s Foreign Minister lived in Venezuela and became a Venezuelan, but was extradited by Hugo Chavez’s Government, when Isaias Rodriguez was the General Prosecutor by the revoking of his nationality arguing there was fraud in the process.

Rodriguez later backtracked, realizing his mistake, but under common ethical rules, Rodriguez, who has submitted his credentials to become a member of the Venezuelan Supreme Court, should not give opinions, wishy washy ones at that, about a case that may come before the Court.

The Cubillas case, gets weirder by the day. For some reason, the Venezuelan Government decided on day one to go all the way out on his defense. Cubillas, a nationalized Venezuelan and is married to a very close aid to current Vice-President Elias Jaua and occupied security positions in the Ministry of Agriculture when Jaua was there.

But the Government has tangled itself in its own explanations and inconsistencies as Alex Boyd has so carefully documented. To begin with the Chavez administration said that it was a prior Government that nationalized Cubilllas, which was quickly debunked by Alek, who found a copy of Cubilla’s official nationalization during Hugo Chavez’ tenure in 2004.

To add to the comedy, Cubillas goes to Venezuela’s General Prosecutor to request that he be investigated but uses different national ID numbers in his request! To add to the puzzle, Cubillas is accompanied by a lawyer from Venezuela’s premier human rights organizations Provea, who dares say that he is 100% sure that Cubillas is innocent!

But it turns out that Cubillas had problems with the law even during Chavez’ tenure, even if it is difficult to determine when his protection began.In fact, yesterday a former Prosecutor who worked for Isaias Rodriguez, charges that in a man of Spanish origin was detained sometime between 1999 and 2001 at Caracas’ Maiquetia airport and the case was buried by passing it along to a prosecutor who Rodriguez trusted. The accuser contends that man was none other than Cubillas and the Venezuela General Prosecutor, former Venezuela Vice President and today Ambassador to Spain said to him:

“That man (Cubillas), was a member of an armed group (ETA) that was fighting for many years in favor of just and irreprochable causes”

The truth is these people support and have supported terrorism from day one. They lied their way to power and continue to lie and manipulate in the belief that they can fool all the people all of the time. They are cynics with no scruples. Unethical men and women who care less if Venezuela is destroyed, enjoying the trappings and luxuries of power in the name of the revolution.

But one day, the details of all these stories will come out. Some will have to face the Court in The Hague and others like Alek Boyd, will be toasted for their work in debunking and exposing them.

I toast to him today! Cheers!

(I am your leader. Follow me!)

You have to wonder what goes through the brain of Hugo Chavez. As the country struggles with everything from unemployment to infrastructure, he travels to a bunch of countries and signs a bundle of agreements, few of which make much sense in terms of cost, contribution to Venezuela’s development or it’s economy. He just gives our country for nothing and nobody says much.

Even worse, Chavez uses the term treason to projects that were in the hands of North-American companies, such as the case of the Las Cristinas gold mine, but fails to say that it was…Hugo Chavez that signed the agreement with Canda’s Crystallex in 2004. In fact, it was the current Governor of Bolivar State, then President of the CVG, who signed the contract. But since then, Chavez has fallen in love with Russians and their autocrats, so he has take it away from the Empire to give it to another Empire. No rationale behind it.

He then went all over the place signing agreements to build housing. As if the Uruguay case did not prove anything. But how can you justify buying housing abroad, that could be built from scratch here, creating thousands of jobs. Our private sector could do it if the Government wanted it. So we are to believe that Iran will build 50,000 housing units, Russia 10,000 for the military, Belarus 5,000 and Portugal 12,000.

But wait! We paid US$ 90 million to Belarus for some housing in 2008 and our friend Kepler has  not been able to find them anywhere, but the Belorussians said they got paid!

Then let’s send them 200,000 barrels of oil a day at a discount and since we are importing coffee because Chavez also destroyed that crops’ production, let’s promise we will send them 50,000 Tons of coffee to keep Belorussians awake. Who will we buy the coffee from? Will it be free?

If I were from Belarus, I would have asked for iPods and iPdas, you never know…

And then, since we are short natural gas in Venezuela because of the lack of distribution across the country, offer US$ 780 million for a gas project to:

Iran..

Yeap! Let’s take 25% of the amount of the recent PDVSA bond and give it to our Iranian friends who are so much like us and will love us so much for doing it.

Also buy some air to surface missiles, some tanks, spend another US$ 850 million and done, The trip is over. Even if we never spend one cent on the phantom nuclear plant, Chavez spent over US$ 2 billion, gave the Russians away the Las Cristinas mine and will give the Belorussians a $4 million dollar discount a day on oil, which adds up to US$ 1.3 billion a year.

Voila! Hugo spent all of the PDVSA bond issue in a single trip.

And we still don’t know why or what is going on through his head. Is the purpose to screw the private sector so that the opposition can not be financed? Or is it all a grandiose show and he plans to complete none of the announcements? Or is he just so out of touch with reality that, like the 2008 Belorussian apartments he will never ask  what happened to the housing that was never built.

Nobody, even Chavez knows the answer. What we do know is that around him are groups and mafias making money like crazy, while they laugh at the jokes and antics of the Venezuelan autocrat and dream of the day they can enjoy their profits.

And nothing happens as Hugo gives away the country…But it seems cheaper to keep him here, at least he can’t give anything away.

A while back, like two years ago, I published a table of PDVSA’s cash flow that many people thought was an exaggeration. Hell, I am no oil expert, just love to crunch numbers. I showed the calculation to oil “experts” and not one found a hole in it, but not one endorsed it either.

In that calculation, the “good news” scenario, had PDVSA exporting and getting paid for 1.5 million barrels of oil, while the “bad news” scenario had it exporting and getting paid for 1.3 million barrels of oil a day. Well, it has been my pleasure to hear oil expert Alberto Quiroz Corradi, do a similar calculation in the radio and the news lately. Nelson Bocaranda publishes his numbers today:

China 200,000 a day (no cash flow)

Belarus 200,000 a day (Cash flow?)

San Jose Pact 80,000 a day (50% cash flow)

Caracas Energy Plan 130,000 a day (I think this is 50% cash flow)

Cuba 100,000 a day (Ha ha do I need to say no cash flow, we probably pay shipping too)

Daily Consumption 700,000 barrels a day

Well, if you accept 2.4 million as the country’s production like IEA and OPEC say (They actually says it is less!), then you have 2.4-0.2-0.2-.105-.1-.7~1.1 million barrels a day, taking into account that some does get paid from San Jose and the Caracas Treaty.

I don’t know what Chavez promised Belarus, so I would (for now) subtract that from the total, however, I think local consumption is near 800,000 barrels a day. China may not be up to 200,000 a day …yet

So, add 0.2 from Belarus and 0.1 from China, but subtract 0.1 from more local consumption and you get around 1.3 million barrels a day of real cash flow from oil exports. which at $70 per barrel is US$ 34 billion for a country importing more than US$ 40 billion a year and you see the problem. Except that we have a loan from China, a US$ 3 billion issue by the Republic and now an additional US$ 3 billion in the new PDVSA and things look a little better.

But two years ago, I made the same calculation and now we are up to the worst case scenario!

It could get worse!

Except that Venezuela and PDVSA can’t keep issuing debt ad infinitum or ad absurdum and the model will break down in the next two years.

Oh yeah! Those heavy crude projects? Forget them! There is no money!

Just for the record, newly elected Deputy of the Venezuelan National Assembly for Falcon State for Chavez’ PSUV party, Jesus Montilla  ratified today that the Venezuelan Government violates our civil liberties. In no uncertain terms, Montilla thrteatened people who use Twitter saying:

“It is incredible that people who tweet do not know how easy it is to locate them and identify them”

No Mr, Montilla, it is not easy, you need to acquire the technology, assign the people and be willing to violate people’s rights.

This whole thing is not new, I have reported about this fact and this evidence a few times, here, here and here, but just want to add to the clear evidence that the Venezuelan Government under Hugo Chavez, has accumulated technology and made the effort to spy on its citizens, in violation of the Venezuelan Constitution and International Human Rights agreements signed by our country. The country does not work, but the spies of Chavismo have the technology to follow you and find you if you are a threat.

Smells like a Dictatorship, tastes like a Dictatorship, has the consistency of a Dictatorship.

(I don’t know what you are good for, but you make us look important)

Venezuela’s budget has always (even before Chavez) been an exercise in lying. Beginning with its premises, grandiose expectations of a growing economy, lowering inflation and ending with a total amount that is always increased by 20% with “added credits”. Then, there are Chavez’ parallel funds that are use as petty cash to satisfy his whims and indulge his exhibitionism.

Thus, you can always look at next year’s budget, promising 2% GDP groth, 22% inflation and no devaluation as another futile exercize.

But I found it interesting that in the middle of announcements of a revolutionary nuclear future, with as many as 4,000 MW to be “built” in the next ten years, during 2011 the Venezuelan budget via the Ministry of Electricity assigns only Bs. 1.5 million to Nuclear projects. That is about 577,000 US dollars at the lowest rate of exchange. With that amount, you could not even do the studies for an adequate site for the first nuclear plant.

But even more worrisome is that the budget for all of the Ministry’s expenses comes to Bs. 6.6 billion, a meager US$ 2.5 billion for a sector that supposedly was going to receive US$ 4 billion just to build infrastructure in 2011. Want to know how absurd this is? The Supreme Court’s budget is Bs. 4.7 billion, US$ 1.8 billion, 72% of the electricity budget…Do I need to say more?

We may assume that funds will be moved from other allocations to the now so important nuclear sector, but then you go and read that the budge for new housing in the 2011 budget amounts to a scant US$ 300 million, while Chavez said he was assigning it US$ 1.5 billion.

Clearly something has to give. While funds may be found for one or the other, they will be limited and in the end it will all end up in announcements that do not become reality, as new announcements are made.

It’s the story of eleven years of Chavez’ rule.

As The Minister of Transport was asking people not to use Caracas’ subway because it is overloaded, Chavez’ 500 MW nuclear plant plan was suddenly escalated into a 4,000 MW plan that would be accomplished in ten years, as announced by once-considered-serious Minister of Electricity Ali Rodriguez.

I guess that after working for the  revolution for eleven years you lose sight of reality or join your boss into using the same BS. After all, it was Rodriguez that fired PDVSA’s 20,000 workers, including its research and development center, in another irresponsible act of ignorance and cockiness, that the Nation is still paying for.

But one thing Chavez, Rodriguez and their combo have learned is that nobody follows up on promises, kids go hungry in the streets after ten years, crime and corruption are rampant and have tripled and grown by orders of magnitude respectively, eight employment plans have been forgotten, five housing plans have been ignored and why not, even Rodriguez’ electric plans announced in April of this year have been forgotten. After all, the revolution/robolution has done nothing concrete but managed to stay in power. So why bother?

Going nuclear in Venezuela is best represented by the cartoon above: How do Ali and Hugo plan to build these things if they can’t even keep the subway and the electricity running? You need people, trained people at that, not reinvented sargents with no abilities like most Ministers.

But the word “nuclear” has always made the Venezuelan military’s eyes tinkle with the thought that they could somehow rise above their own mediocrity. In 1956 Venezuela bought its first and only reactor, a 3 MW research unit made by General Electric. The reactor went critical for the first time near 1960, but except for generating some neutrons for some now forgotten and irrelevant physics experiments and backing the little expertise that there exists in radioactive protection, it was an expensive toy which never had the right human resources to take advantage of it.

Not that the Government did not try. Many were financed to study abroad, some came back, gave up or emigrated, but in the end the whole thing was scrapped in 1994. Expertise is now much more limited than it was then. There is no training program in place or understanding that you need it, as exemplified by Rodriguez’ firing of the whole oil research center. You need qualified people to do something like that. Yes, even a subway, a railroad and even a nuclear reactor need experts to get things done.

So, unless they import some 10,000 Russians to build the reactor and a few hundred to run it or them, don’t expect much to be built. It is all smoke and mirrors now on steroids by the the bombastic and silly announcement by Ali Rodriguez.  Just think, a Government that has not been able to complete a few hundred Kilometers of railroad in ten years, now plans to build eight Nuclear power pants in the same time.

But ask yourself: With what money?

Because PDVSA and the Government are simply short of cash, have been trying to raise money and you would think that PDVSA’s expansion projects are more significant than going nuclear. Because a 1,000 MW plant costs around US$ 2 billion ad takes 7-12 years to build in countries with expertise. So we are talking some US$ 8 billion (sans commissions and graft) and a country with a broken down…management capability.

As we say in Spanish: Cuentame una de vaqueros (Tell me a story about cowboys now)

Unless Chavez sells out the country and pays Russians or Chinese to build and run these plants, it will never get done.

Never.

These are not F-16, that you can learn to fly and crash in a Microsoft simulator. These are complex and expensive toys that require hundreds of highly trained people. We just don’t have them…nor the money.

So, store your Geiger counters. forget about irradiating your mangoes to kill the bugs and/or irradiating your food to preserve it.

Not one nano watt of nuclear power will be in place in Venezuela in ten years, unless someone discovers simple  cold fusion with tap water and an ipod charger. Please, don’t make it more complicated than that, the revolution could not handle it.

But Chavez and the revolution still dream of going nuclear, but they can’t even build 12,000 imported prefabricated houses.

Really, cuentame una de vaqueros.

I know, I know, I have been derelict in my duties here, as the PDVSA bond was announced and not a sound from me. Yes, I was traveling for work reasons and really did not want to take the time to read about the PDVSA exchange and bonds.

But here I go: Last Tuesday, PDVSA said that would would offer an exchange for its Petrobonos 2011 (issued under Venezuelan Law) and that on Monday it would announce the terms for a new bond (under International Law) maturing in 2017 that it would sell to Venezuelans in exchange of local currency (called Bolivars to those who are just arriving here) but all denominated in US dollars.

The Exchange: In July 2009, a.k.a just last year, PDVSA issued a Petrobono 2011 zero coupon bond, i.e. a bond that paid no interest, under Venezuelan Law and in the amount of US$ 3 billion. Venezuelan law, because there was some sovereignty to protect, so we revolutionaries were not about to issue it under some capitalistic and imperialistic rules. After all, as the red tank above says: We all own PDVSA now. Sure!

Anyway, things have not been great for PDVSA since, revenues were up 47%, but earnings dropped 14%, so, it is time to think about how PDVSA will pay for the bond next July. Instead, PDVSA hired some smart bankers that gave the company the standard capitalistic solution: Don’t pay, as long as you are allowed to postpone payment forever, ask Ecuador about this!

Instead, offer bond owners something so juicy that few will refuse your offer. In this case, we will exchange to anyone willing his/hers (how Bolivarian of me, no?) Venezuelan Law Petrobono 2011, for a PDVSA 2013, issued under international law, with a coupon of 8% and at an exchange ratio of 112.5%. That is for each 100% of Petrobono 2011 you have, you get 112.5% of the longer dated PDVSA 2013 which pays interest.

Worth it?

Well, yes and no. Yes, because today the Petrobono 2011 was trading around 94% where it is worth exchanging. No, because when the announcement was made it traded as high as 97% where it was not worth it.

Why?

Because you are being paid with a bond that matures in 2013 and investors want such a bond to trade such that if you hold on to 2013 (after the Presidential elections!) you get a yield to maturity of around 12%. Since the coupon is 8%, the new bond has to trade at a discount, i.e. below its face value of 100%, which is compensated partially by the 112.5% they give you of the new bond.

So, as I write this, yes, do the exchange, you will have more money that way if you sell the 13’s after the exchange. Moreover, after the exchange is completed (There are two dates, but I will not bore you with details) I suspect that the 2011 will drop. That may be the best trade there is, buy the 2011 after it drops when the exchange is completed. You will be buying a nine month issue with a yield to maturity around 11-13% and little risk of default.

Nothing like this is available in the world today!

Why international law for the 2013? Well, it is a long story. We all own PDVSA now and we defend sovereignty, but you know, it is cheaper if it is international law, so we will ignore Venezuelan law, the revolution and sovereignty and hold our noses while we issue it this way.

So, concluding: For the exchange, do it, it looks profitable. If you have neither, just monitor the price of the Petrobono 2011 after the exchange ends and if it goes near 91-92% buy it.

The 2017 bond: Separately, PDVSA will issue another bond (also international law, who said sovereignty out there?), a worrisome addiction, which matures in 2017, but will pay one third in 2015, one third in 2016 and the remaining third in 2017.

This dollar bond will pay a coupon of 8.5% and will be sold in exchange for Bolivars to all locals at 100% of its face value: i.e. you pay Bs. 4.3 per US$ of the face value of the new bond. Since this bond has to trade near the other PDVSA 2017, which is around 15%, then it also has to trade at a discount.

Is it worth it?

Well, banks were giving today a repurchase price of 65% for that bond. If you pay for $3,000 Bs. 4.3 per dollar or Bs. 12,900, if you sell at 65% of face value you get US$ 1,950 or Bs. 6.8 per US$ which is quite good, but in any case, if you wait a few days, the bond should  go to 69% or 70%, where your dollars cost you around Bs. 6.57. In either case is quite good, the “implicit rate” of M2 over reserves is now near Bs. 9 by now.

If you want a bond in dollars and just get paid the yield, the issuing of the bond will give you a few possible good chances:

-First, if the Government decides to issuemore than US$ 3 billion, i.e. US$ 4 or 4.5 billion, the offer will be large and too much bond will hit the street and it may become cheap to buy the new 2017 at around 65% (nobody sells at that price in NY today). Good deal.

-Second, people have been selling the PDVSA 2014 (local law), because the 2103 becomes more attractive and because PDVSA issued another US$ 1,5 billion of it without announcing it officially. At the close today this bond was the highest yielding of all Venezuela and PDVSA bonds at near 19% yield to maturity. Once again, you can’t get that anywhere!

-Finally, the whole selling of these bonds is rattling the Venezuela yield curve, changing prices of all bonds by the hour, as investors shift from one to the other and sell one to favor the other. The Venezuela 2022, for example, was today back down to near 85% after hitting 90% last week. At these levels and with a 12.75% coupon it becomes very interesting, as it is above the yield curve of bonds issued by the Republic. If it drops more, it will be extremely interesting.

So, better late than never, this is my take on the exchange and the new bonds. Meanwhile, the international offering consists of a 300 page plus document with lots of info on PDVSA. I may or not revisit that in the future, I need lots of time to look at it which I may not have, but I love the risk part of the document talking about PDVSA not owning the oil fields and the Republic may take them away from it. It gives a new meaning to the conceptual difference between PDVSA versus sovereign risk!

I am away for a few days, but I have been going around something I read right before I left Caracas that left me simply speechless, and I quote a translation from Spanish as precise, as I can do one (Pardon the length, but all words should be included, bold is mine):

“The boligarchy is nothing more that the singular or collective grouping of those who throughout this process have devoted themselves to amassing immense fortunes in the name of the revolution or simply of the ongoing revolutionary process…Many of them show off their wealth which they did not have before the arrival of the Government in December 1998″

“These people are professional thieves, white collar and gray collar, with shirts which are roja, rojita in the best style of of those who have disguised themselves of a symbol, have managed to take advantage of the honey pot of power for their own personal benefit…behind a well protected facade, what these criminals that act in the name of the Bolivarian revolution have done is to enrich themselves with the money from the State”

“These people should be denounced, separated from the socialist process led by President Chavez, all privileges obtained from their political connections should be removed from them and they should be tried as common criminals…The tragedy that the Bolivarian process carries on its back is the impunity that exists in practice and the lack of sentencing to those that can be shown in convincing manner of proven acts”

This text could have come from, for example, this blog during the last few years, or From Daniel’s, or Caracas Chronicles, or Alek Boyd’s, or so many others.

This is what we have been saying in English and for which we have been accused of being paid by foreign Governments or something ludicrous like that. We have also been insulted, called liars and so many other things for saying pretty much the same thing over and over during the last few years.

PSF’s and other pro-Chavez specimens regularly come here and comment on accusation of  corruptions by us, saying we hate Hugo, invent things and it is all lies.

Who said this? Who wrote this? Who is the author?

Well, this was quoted by El Nacional on Wednesday, section V, page 7 (by subscription) in an article written by Andres Rojas, quoting a book (which I have not seen) written by none other than Jorge Giordani, entitled “Everyday Impressions”, which was written during the last year and a half.

Yes, the same man that has been Minister of Chavez’ Cabinet for nine out of the last eleven years, that not once, never, has denounced any act of corruption and has been a staunch defender of Chavez, his policies and his revolution, makes the same accusations we did, but he had the power to make this formally, he had the contacts to do what nobody in the Chavez Government has done and try to clean up the robolution.

But he never did it!

Because he is such a fanatic, so irresponsible, so unethical and so immoral, that he never once said anything. He has allowed these “thieves” these people with “rojo, rojita” shirts, to “amass immense fortunes”, yes, to steal from the same Venezuelans who trusted Chavez and his robolution.

And in some sense he is also stealing from us, because the same article says Giordani has written and published three books during the last year and a half. He is paid to be Minister full time. He has been Minister of Planning form 1998-2002 and from 2004 to 2009 and now he is jointly Minister of Planning and Finance. With the way the country is going, the economic disaster, the crumbing infrastructure, 30% inflation and the robolutionaries stealing us blind, Mr. Giordani somehow thought he had the time to relax, and while we paid him his salary and perks as Ministers, he devoted his spare (!!) time to write three books.

We are always told that Giordani is “honest”. Well, he is not. Honest people would not have allowed any of what he writes about to take place in silence. Anyone honest should have either resigned long ago, denouncing what he is saying in his books or stayed in Government to fight. Instead, he has done nothing. He even comes and publishes these books quietly and to date, he has made nor formal accusations. He seems to know exactly who he is talking about.

Like the boligarchs he criticizes, Mr. Giordani is as dishonest and irresponsible as them and he too has been robbing us blind for the last eleven years!