Archive for December, 2010

The never ending Bandagro story comes back to haunt Chavez

December 20, 2010

(Tobias Nobrega, Waldemar Cordero and Marisol Plaza)

This weekend, once again, the Bandagro bond story came back to haunt the Chavez administration, when a badly written report by the New York Post, gave the impression that the Chavez administration would have to start paying up US$ 8 billion in Bandagro promisory notes, because an Appeals Court had ruled against the Venezuelan Government.

But this is just another step in a long series of a story that is remarkable. In the end you can say: Only in Venezuela! But the truth is that this story has been complex and what is amazing is that it has managed to survive this long.

Bandagro was a Government bank that went bankrupt in 1980. While it was in the middle of its bankruptcy process, the bank considered issuing some promisory notes that would guarantee a loan with a US bank. According to the then President of Bandagro Waldemar Cordero, he never signed them, as the deal was never completed.

Here it is important to note something. Today, bond trading and payment is electronic. At the time, bonds were issued in special paper that need to have the correct signatures and seals to be valid, they were also numbered.Well, in the 80’s the Venezuelan investigative police caught some people leaving the country with unsigned Bandagro bonds and accompanying seals. Everyone thought the issue would die there.

The promisory notes, which are issued at a discount but don’t pay interest, were supposedly issued in 1981 and were supposed to be paid in ten years. During Carlos Andres Perez’ Presidency the Comptroller researched the issue and determined that the Notes were never issued and once again that seemed to be the end of the story.

I first heard about the notes in the late nineties when some people asked me to check their veracity, it would be the first of dozens of such requests. By the end of it, people were surprised that I knew the details of the great deal they were being offered, even before they told me what they had. Finance Ministry officials in the late nineties during the Caldera Government ratified, once again, that they were fake and they had never been issued.

But when a racket has so many zeroes attached to it, lots of people are attracted by it, particularly in the land of “The Deal”, Venezuela. These fake bonds were being offered so much all over the place, particularly Italy, Panama and Switzerland, that then Minister of Finance during Caldera’s Government Maritza Izaguirre had to publish and ad in the paper telling the world (or trying to) that they were fake.

And here it is important to make a second stop about history. Venezuela defaulted in its debt in the 80’s during the first Mexican crisis. Earlier, it had stopped making foreign currency payments on debt after the 1982 devaluation. These Bandagro bonds were never part of any of the negotiations that followed in either case. In fact, Venezuela’s debt during Lusinchi’s Government defaulted and was renegotiated as  a package with the aid of the US Government when Nicholas Brady was Secretary of the Treasury. Brady bonds were issued to replace the country’s debt, guaranteed by US zero coupon bonds, the so called Brady bonds. The Bandagro bonds were not included in that, nor did anyone ask that they be included. Just think, you have US$ 50 million of a note from a Government that defaulted and there is a restructuring backed by US Treasuries and you don’t show up to be included!


But even worse, when Venezuela returns to markets in the second half of the nineties, both with multilaterals with Caldera’s IMF agreement in 1996, as well as with the issuing of the Venezuela 2018 bond with a 13.25% coupon (1997?), Venezuela agrees to cross default clauses with both and the Bandagro notes are never mentioned.

After Chavez takes over, the notes began resurfacing and sometime in 2001-2002, then Minister of Finance Rojas publishes another ad in the papers telling people the Notes are fake.

How much money are we talking about? Nobody knows. I have heard that originally there were 55 Promisory notes, each for US$ 50 million. The suit in Ohio is for two Notes, worth US$ 100 million, the one in Switzerland is for US$ 1.075 billion, but they are all asking for interest since 1991.

In 2002, a lawyer representing a group from Panama, called Triad, sent a letter to Chavez asking that US$ 600 million of the Notes be paid. And that is when things began to unravel.

Things start to get tricky here, according to pro-Chavez webpage aporrea, the investigation began at the Ministry of Finance, but in their effort to protect Hugo, they forget that Chavez asked the Finance Committee of the National Assembly and the Ministry of Finance if the Notes were legit.

It is then that Minister Tobias Nobrega asks his legal counsel Oscar Guzman to look into the matter. He sent experts to banks in Miami and Switzerland and they said the Notes were authentic, concluding that the claim was legitimate. That report is sent to Marisol Plaza the “Procuradora” (Government’s lawyer), she then issues a report saying that the Notes are valid and should be paid. Here I differ in my memory from aporrea. I recall the Procuradora saying that that first report was an internal one that was leaked, while she later reversed her opinion. Aporrea says that the Minister of Finance asked her to reverse her position and she refused.

In the middle of all this, Waldemar Cordero signed an affidavit, upon learning that the Notes could be paid, saying that they were false and he had never signed them. Nobrega reopens the case and Marisol Plaza reverses then her decision.

By then the Skye Group had introduced a suit in an Ohio Court and  separate suit was filed in Switzerland.

In a decision that I can’t find, on Sep. 13th. 2006, Judge John Holschuh ruled that the decision that matters is not whether the Notes are fake or not, but whether the opinion by Marisol Plaza was legal or not. Basically, if Skye purchased the Notes in good faith based on the opinion of Marisol Plaza, then Skye had the right to demand payment, at which point according to this document, the issue became one of jurisdiction and the Sixth Court in the US began investigating whether there was jurisdiction or not on the issue by a US Court.

And that my friends, is what the ruling last week was about. It is not about whether the Notes are fake or legit, it is whether Venezuela or Notes issued by a Sovereign country are immune or not from being issued in US Courts. The Court rejected the immunity agreement in September and on appeal, it rejected it again last week. The only document I have found was this one and all it says that the petition to review the case was denied.

Thus, now the case (I am not a lawyer) goes back to that Court for sentencing and that decision in itself I am sure can be appealed many times. All the Appeals Court said this week is that Venezuela’s argument that it was immune to US Courts were invalid. And even that  am sure can be appealed to the Supreme Court.

But what do I know. All I knows is that Venezuela’s bonds dropped today because of the article that said the payment could be as much as US$ 8 billion. But if Chavez refused to pay it, nobody could argue cross defaults, it is clear the bonds magically appeared at some point and have  a dubious history. If I were Hugo, or he asked me I would say: Don’t Pay!

If you ask me, they are fake, but the mishandling of the case has come back to haunt Chavez, that is what happened when you appoint political hacks to important positions like that of the Procurador.


A Resident of the El Peonio farm tells Hugo Chavez what a farce his revolution is

December 18, 2010

This video of one of the employees and residents of the El Peonio farm in the South of Lake Maracaibo should be seen by all Venezuelans. It reveals the farce that the revolution is.

For those that do not speak Spanish, the lady starts by saying that their farm was not flooded because the owner helped build the barriers that contained the water, while the “revolutionary” Major spent the money on something else (She suggests cosmetic surgery). But the water came close, they could have easily been homeless too.

She then says that the farm is a town, with more than 50 families living there. She says that some of those left homeless by the floods have been given refuge by the farm. She then asks: ‘Show me one revolutionary that is housing homeless in their farms or homes?”

She goes on to list some of the farms expropriated by the Government previously, and asks why don’t they take the homeless there, why do they have to take over the 47  productive farms with the excuse that they will take the homeless there.

She then says: “If Chavez loves the people so much, why doesn’t he kill some cattle from the Government farms and give it to the people? That cattle was saved thanks to the owner of our farm (Jesus Melean) who provided the trucks and helped, and this is the way they are paying him.

These are the “people” that Chavez claims to love and care for…

Rebellion in Santa Barbara del Zulia, Venezuela

December 18, 2010

Yesterday, the Minister of Agriculture showed up with the military in the area south of Lake Maracaibo known as Santa Barbara del Zulia to take over 47 farms, most of which are devoted to milk or meat production, giving a harangue against the farmers, attacking the “oligarchs” that own the farms. It appeared to be another take over of land in the Chavez Dictatorship.

Except that the farmers and cattlemen and their workers have decided this time to fight and began blocking the road, demanding the presence of the authorities, blocking the National Guard from going through and saying that they would stay there until the measure was revoked. The workers of one farm, named Los Peonios, stopped the National Guard from taking over the farm they work and live at. (It is unclear what their plans are, some leaders say it is a 24 hour protest, others that they will not leave until the measure is revoked)

This confrontation is a strong challenge to the Dictator, however, these people have everything to lose as they face the power of the Venezuelan Army. At the same time, this is also a challenge for Dictator Chavez and his Government as the people of the area are well armed, are used to confrontation and any bloodshed could create a backlash both in Venezuela and internationally against the Venezuelan Government.

For now, this remains the most important challenge to Chavez’ arbitrariness in quiet a while and if this were to continue, people from other parts of Zulia State may decide to join the farmers, creating a significant challenge and a potential trouble spot for the Dictator.

Even if you expect it, the Chavez revolution never fails to amaze and surprise

December 17, 2010

(Tyranny that respects itself will control the Internet)


It was an incredible week in Venezuela. While we have always expected the revolution  to step all over us, perhaps we were expecting Chavez and his comrades to continue a more slow motion take over and destruction of Venezuela, the same way that the Venezuelan President has moved in the last twelve years.

Instead, we got a the opposite, the nervous autocrat/dictator, trying to press on, move the revolution forward before it falls apart. And the speed and surprises were remarkable. The revolution simply never fails to amaze and surprise. From a Science and Technology Bill that basically defines science with the oxymoronic name of “useful science”, to a Social Responsibility Law that aims to shut down the Internet, or at least free speech on it, the Chavez destructive revolution moved at an incredible speed to control and intimidate the opposition and the people.

And perhaps, what was most surprising to even skeptics of Chavez’ democratic credentials like me, was the fact that there was no remorse or qualms about what they were doing. Perhaps the Bill for Political Parties was the most representative of the recent autocratic streak surfacing within Chavismo. Imagine that! a Bill basically saying that if you vote what you feel or think, you can be impeached for treason to the party slate you were elected on!

This Bill, simply questions the democratic mindset of Chavez’ PSUV members. After all, if everyone has to vote in the same way, why have a Parliament at all? Just calculate the percentage of Deputies for each party and for four years, say each Bill sent by Chavez down was approved by 61% to 39% or whatever the outcome of the election was. No discussion, no arguments, just have the party send the Bill, we will process it and we are done.. Why even pay the Deputies! They can build housing for example.

Thus, the “revolution” that rose as a possible alternative to decisions made in smoke filled rooms by the parties of the IVth. Republic, is ready to make an institution  out of them except that only Hugo Chavez and some Cubans hacks seem to be the only ones in that room room, and he does not smoke, so the smoke come apparently from the Cuban cigars.

But that’s what we have come to. Chavez’ leading supporters have never understood or bothered to understand democracy. Their game is power for its own sake. Preserve Hugo in his positions no matter what, even if he is doing a terrible job, which he is.

But from Escarra hanging up on CNN’s Patricia Jenot, to a bunch of Chavista Deputies trying to send a message to Hugo that something is not well in the revolution, you know that Chavez and his buddies are running scared. Nobody denies that Chavez is still popular, but even his own supporters can see that the failure of the revolution is hard to hide.

The problem is that besides the lack of funds, the revolution suffers from a lack of brains. Minister’s Giordani’s solution to the shortage of funds are simply measures to raise taxes only as a way of raising more funds for an increasingly incompetent Government. And as oil prices push higher and higher, there are more and more signs that the Chavez administration is incapable of dealing with the President’s ambitions. And more taxes will simply increase inflation and insure that the recession will remain with us another year, as Giordani’s economic ignorance continues to dominate decisions.

Things are likely to continue getting worse. Stagflation can’t be fought with tax increases, the feeble recovery expected for 2011 is now in jeopardy unless a bigger and better social program is implemented. But there is no money and Chavez’ supporters are getting antsy. There are no signs of recovery and the floods did not help.

And nothing can compete with the “bad” private sector which has built 70%-plus of all housing units built in Venezuela over the last four or five years. But under the recent threat of invasion and intervention, private developers are likely to stay away until the threat is clear. But no logic about prosperity or accomplishments works with Hugo and his cohorts. Power and ideology are the goals even if after tons of ideology and money have yielded very little over the last couple of years.

And with Chavez assuming enabling powers to continue in his search for a model that works, he fails to realize that it is not only the model that fails, but also the people that implement it and he is not ready to change that.

Thus, the solution is to press on, increase control, increase the threats, have the weapons ready, limit free speech and wait for things to improve and if they don’t by 2012, then simply gamble with the elections, there are only two outcomes, Chavez wins or Chavez loses, but he stays as President in both.

The New Icons of Venezuela’s “Socialist Science”

December 16, 2010

As part of the destruction of Venezuela’s scientific infrastructure and community, the current authorities of Venezuela’s former premier scientific research institute IVIC, have decided to change the icons of knowledge and creativity by those of ideology and destruction:

Chavez’ Enabling Bill beyond Jan. 5th. is a Constitutional Coup

December 14, 2010

To all those that always say that Venezuela is a democracy under Chavez, the President’s proposal that the Enabling Bill extend for up to 18 months is simply a Constitutional coup and a disregard for the mandate given by the people to the new National Assembly that will be sworn in on Jan. 5th. In fact, the length is irrelevant, the President should wait for all new legislation to be approved by the new Assembly, which was democratically elected on Sept. 28th. and in which Chavez did not get the two thirds super majority he wanted in order to continue legislating at will.

Thus, democracy will be dead in Venezuela when this Bill is approved and if it is not stopped.

While this is more of the same, the President is stepping over a very clear threshold that violates democratic rules and I don’t see the opposition doing much. In fact, I don’t see the same Deputies whose rights are being violated doing or saying much. I think they should all go to the National Assembly and demand that the Enabling Bill not be approved. But I don’t expect much from them, they have been largely silent and passive in the face of Chavez’ decision to trample over democracy, free speech and the electoral mandate given by the people

To me it is clear that if Chavez loses in 2012 he will not hand over power, which in the end may be the best outcome as this will signify the beginning of his demise. But there will be a lot suffering before that and a lot of confrontation. Chavez was never a democrat and the upcoming months will show that. He backed two coups in 1992, he is taking ever increasing undemocratic steps as 2012 draws near.


A picture of revolutionaries looking for a post

December 13, 2010

I wanted to write a post around this picture, but could not do it…

Would you ask them: Take me to your leader?


Would you ask them where is Larry (Fine)?

But, don’t you find it disturbing that these are the leaders of the PSUV and the revolution?

Just scary…

Enabling Chavez’ Pantomime

December 12, 2010

In his grand style, the little Dictator asked for his fourth Enabling Bill, which will allow him to legislate by decree,  to help him to face the emergency and the tragedy that is affecting Venezuela. But this is all simply another pantomime by Chavez, another expression that he is an actor and a Dictator at heart, because the last thing he truly needs is an Enabling Bill to confront and deal with the recent floods.

This is all a pantomime by Hugo, a show for the gallery that he expects will make him look like the hero he is not.

Because if he had any clue as to how to attack the emergency and the crisis he would ask some very basic questions: Who, with what and how?

And neither of these requires legislation.

Because when he calls on Farruco Sesto to lead another new Minsitry, this time for the Reconstruction, he is naming as gray a character as he can. Sesto, an architect by training, had publicly said he had no interest in urban planning, which never stopped Chavez from naming him Minsiter of Housing in between to long stays at the Ministry of Culture, Sesto’s real interest. And you have to wonder why Sesto’s time at the Minsitry of Hosuing was so short. If that is all Chavez can come up with in terms of who will lead the emergency, then he is in real trouble.

As to the resources, Chavez controls all the purse strings of the Nation, both the visible and the invisible ones, so there is little that an Enabling Bill will contribute financially to ease the pain of those affected by the floods. Chavez has all of the pockets, coffers and accounts needed, legislation will not helped. He has used the Development Fund Fonden and PDVSA as his petty cash funds, why not do it again.

As to the how. Of what we need is housing, to do that you need land and materials. The land, Chavez has been taking without any compensation for the past few years at will, so it should not be a problem. As to construction materials, Chavez nationalized the cement and steel companies that produce some of the most basic elements of housing. And he did it all without any special legislation and ignoring the mandate of the Constitution for expropriation. In fact, he has yet to compensate the cement companies. So, why go through this Enabling Farce?

The truth is that that is all Chavez is: a farce. He needs the Enabling Bill, because he knows the opposition will cry bloody murder and then he can point to how heartless they are and how they don’t care for the “people”. Because he is on his fourth Bill and he bypasses laws most of the time, so in the end what matters is the announcement, the propaganda, the view from below, not what he is going to accomplish or not with this Bill.

Beacuse for almost 12 years, Chavez has failed to build housing, but seems to have never asked why this is. By choosing the same incompetent comrades that suck up to him all the time, he is condemned to fail and he either knows this or thinks he can compensate for it by having these displays of doing something, which in the end has no impact on any results, if any, in dealing with the crisis.

But he needs the pantomime, the show, the images of a very clean Chavez “managing” the problem, calling on the National Assembly to help him urgenly, saying he used the phoen and told the President of the Assembly to approve the required legislation.

In his heart Chavez must also be relishing the fact that he may even extend his Enabling Powers beyond the 23 days left for the current National Assembly to legislate. On Jan. 5th. the new Assembly comes in and it would obviously be a Constitutional coup to extend the proposed Bill beyond that. But there have been so many coups of this sort that who cares? Really. We held a referendum for Constitutional Reform which Chavez lots, the people spoke and the President went on to legislate 80% of what was rejected by the voters.

What else is new?

All they will do is enable Chavez to continue to look like he is managing the country, until tragedy strikes again.

The Venezuelan Oil Emperor Does Not Even Have Rags On!

December 9, 2010

Through the wikileak cables we conform what we always suspected: Ramirez and Chavez were a total failure in the sale of the natural ags and heavy oil crude projects and in the end had their arms twisted by the bid bad oil companies. The Venezuelan oil Emperor has no clothes, in fact, he does not even have rags on.

Just think, the defender of the sovereignty, the revolutionary, being blackmailed by the bad ass imperialistic oil companies and abandoned by his buddies from Russia and China when he needed them. Of course, nothing new here, we had always suspected all of this, after all, the Russians and the Chinese did not even bother bidding for the Carabobo oil field:

That Russian and Chinese national oil companies did not submit bids in Carabobo suggests the Minister’s travel is to ensure support from “like-minded” countries and to avoid new public setbacks

This forced Chavez and his combo to give the concession to none other than Chevron. Throughout it all, Ramirez and Chavez keep a straight face, kept lying through their teeth and hailed the success of their failure. What cynics!

The cables are a treasure trove of all the lies we have heard in the last two years as well as the ability of Chavez and friends to lie, for example, on natural gas:

Senior PDVSA officials are reportedly upset over the failure to solicit bids from international companies for the Mariscal Sucre offshore natural gas project; PDVSA announced it would develop the resources on its own

No way PDVSA will be able to do that on its own, it has no money to do it.And no matter how upset they were:

In Beijing, XXXXXXXXXXXX expected Ramirez to focus on “bringing CNPC” back in line and advancing the various Chinese heavy oil projects in the Faja. XXXXXXXXXXXX believed Ramirez’s stop in Tokyo would be designed to seek additional financing for PDVSA, to advance the Junin 11 reserve certification study (Ref B), and to reprimand the Japanese companies for not submitting bids in the Mariscal Sucre bid round

Well, CNPC never came back in the fold and the Japanese did not advance financing upset over the nationalization of briquette companies.

But the best part is how Italy’s ENI simply backmailed Chavez and Ramirez by threatening to leave thirty minutes before teh documents were to be signed:

Thirty minutes before the ceremony was tto begin , the CEO of the Italian company Paolo Scaroni, told Ramirez: Take it or leave it, I can get on my plane and move on. Ramirez took thirty minutes to convince President Chavez to accept all of the terms proposed by ENI or rsik losing the deal, according to the cable, the italians said they would not pay the signing bonus, because PDVSA owed ot US# 1 billion

There you have it, the empty and naked revolution is a bluff and an empty shell, not even its “buddies” like the Russians and Chinese participate in their projects because the terms are not attractive and they yield then to the “imperialistic” companies of Italy and the United States.

The Chavez revolution is simply a farce.

How many housing units can you build in Venezuela for the cost of a sophisticated air missile system?

December 8, 2010

Today we learn that Russia sold our almighty leader 100 sophisticated air missile systems. It had been known that Venezuela had made the purchase, what was not known is that so many of them had been acquired. Thus, Chavez continues to arm the country for an unknown war with someone. The enemy used to be Colombia, now I gathered it must be back to the US and Obama, since Bush is no longer around.

There are two interesting questions. The first one is that according to Chavez’ original announcement, the purchase was made on credit from the Russians. Amazing no? A Government that is incapable of satisfying the most basic needs of the population, spends wildly on useless toys to satisfy the ego of our Dictator and keep the military men surrounding him happy with these expensive Xboxes.

But the second and more dramatic question is that the financing was for US$ 2.2 billion for some tanks and the 100 missile systems. I have no clue how much of these systems costs, but we go back to the example of a couple of days ago, For US$ 2.2 billion you could have built over 80,000 housing units, or 800 housing units for each missile system.

Which only goes to show that Hugo Chavez cares little for the “people” that he claims to love and that he has become the most irresponsible and insensitive President Venezuela has ever had by far. And we thought it would be hard for anyone to achieve this, but Chavez had done it by orders of magnitude. He finances Cuba’s invasion of Venezuela, guarantees that China will own the Heavy Oil tar sands by signing agreements impossible for PDVSA to comply with and borrows money to purchase absolutely useless weapons systems, while the people have water up to their necks…

I do hope Hugo Chavez rots in a jail cell in The Hague…