Archive for January, 2011

Venezuelan Social Security Pensions: Can the country afford them?

January 30, 2011

For the past few years, the Chavez Government has been paying anyone that has worked a minimum of 5 years in their lifetime a Social Security pension equals to minimum salary plus four months of bonus per year. At current minimum salary and assuming the official rate of exchange we are talking about Bs. 1,200 (US$ 279 a month) per pensioner, but each pensioner receives Bs. 19,200 per year, equivalent to US$ 4,465 per year. besides the 5 years of employment, you get a pension when you turn 55, if you are a woman, or 60 years old, if you are male.Additionally, survivors are also eligible to receive 100% of the pension of the deceased.

The Chavez Government and the opposition seem to be in a battle to outdo each other in offering even more benefits. Last year, Chavez lowered the minimum number of payments required for nine months, so that more people could receive the benefit. The opposition in turn, made a proposal during the first week of the new National Assembly, asking that pensioners also receive a 10% increase given to them as food stamps, a benefit that most formal workers receive in Venezuela.

At this point, I have to clarify that these pensions don’t come from a “fund”, Venezuela’s Social Security administration has gone broke at least twice in my lifetime. People pay monthly proportionally to their salary, but there is a cap, the cap is around the payment for a yearly pension, but only those making more than 5 minimum salaries a year pay that much.

What I have never been able to figure out is whether the country can afford this. And as far as I have been able to figure out, ever since the old Economic Committee of the National Assembly disappeared, such calculations are not even made. So, both the Government and the opposition are playing populism without having a clue as to whether this makes sense or not.

So, I decided a few weeks ago to throw some numbers and see if this makes any sense.

My starting pint was the INE website, where I found data on how many Venezuelans are above 55 (for females) and 60 for males. This data can be found here, except that for some weird reason, the 55 to 59 group is missing from the table, so I had to do some extrapolation. The result is that there are 1.2 million women eligible by age to this pension, while 716,000 men qualify. That is over 1.9 million Venezuelans. If all of them qualified, the cost would be US$ 8.6 billion a year to pay all of the pensions.

The next step was to figure out how many of those people, given the low five year requirement and the fact that the pension can be inherited by widows and widowers, as well as underage children, which must be a small group, my guess was that around 50% of that population was eligible and collects that pension. Imagine my surprise when I found out that it is 83% of those eligible that receive the pension!

Well, at that rate, it costs the Venezuelan Government US$ 7.145 billion per year to sustain the pension system. I don’t know how much of this comes directly from those that contribute today to the system, but it sounds high to me. Very high. Because this year’s budget at Bs. 4.3 per US$ is US$ 47 billion, so we are talking about 15% of the budget going for pensions. And this number will simply increase every year as more people get older, unless the Social Security system is funded, a project that Chavez killed when he first became President in 1999.

But the opposition is no less irresponsible when it proposes that pensions should be increased. Without knowing whether the system makes any sense, asking for an increase about the minimum salary is not a very responsible position. Unless both the Government and the opposition begin calculating costs and looking into the future, the country’s finances will always be doomed under the management of irresponsible politicians.

And this does not even consider an even more complex question: Is it fair?

Breaking a Rule: The Devil on Egypt and the Middle East

January 29, 2011

I have tried during the last eight and a half years to restrict this blog to Venezuela and related subjects for the simple reason that this is not only the subject of the blog, but additionally because there are so many other significant and important subjects out there, that I did not want to distract attention from my main subject. Thus, I have tended to ignore in my writings, not in my mind or in my readings, other subjects, even when they had something to do with Venezuela.

I am breaking that rule today because of a personal story that made me follow Egyptian politics for the last ten years. Roughly ten years ago, give or take two years either way, well known investor Jim Rogers came through Caracas in his second drive around the world. (His first one was on a motorcycle). It was a very pleasant evening with Jim telling us about his recent experience around the world and asking us about Venezuela, trying to understand Chavez and the dynamics of our country.

At the end, he gave us a sort of overview of the world and he noted that he thought the Middle East was a powder keg and he worried most about Egypt, an explosion waiting to happen, whose impact would change the face of the Middle East forever. Egypt, he said, was the most worrisome, because unlike many of the other important countries in the region, it not only had the most ruthless dictatorship, but it was also the poorest country. His fear was that Egypt would explode and the impact would be felt all over the Middle East, toppling Governments everywhere, including places like Saudi Arabia and Kuwait.

Thus, I have kept up with the somewhat dysfunctional and complex politics of Egypt over the years.

But as the world watches Tunisia and Egypt asking for more freedom, it appears to me that the protesters in both Egypt and Tunisia, know clearly what they don’t want, their current or recently overthrow Governments, but don’t have a clear definition of what they want or where they will end if their protests are effective and succesful.

Because the truth is that while the movements leading the unrest are pro-democracy, freedom and pro-human rights, what lurks in the background is not only more of the same, another strong man looking to control the population, but one that embodies either the militaristic or the religious leader, if not both.

Remember that most of these countries have no democratic tradition and do have a strong religious influence, mostly fundamentalist ones. Thus, it would appear to me that few of these countries are on the road to a democratic Government. Perhaps something like a more benign Dictators will be more like it, but the religious factor clouds any prediction.

Perhaps the military will simply oust Mubarak and replacing him with a string of new military rulers that will promise more freedom, but not deliver it. Perhaps the democratic movement will manage to have the new rulers hold elections. But in the end, the winners of those elections will not be them and under the guise of of a democratic mandate, the people will continue to be repressed and dominated.

It is hard for me to see any other outcome. From what I have learned over the years, the region is sadly unlikely to move into more democracy and freedom. There is simply no tradition of that. Maybe all one can hope is that the new rulers truly strive to improve people’s lives, if only for fear that their stay in power will not be brief.

I hope I am wrong, but as I follow the events in Egypt in fascination, I can’t help but remember other examples where the people knew what they did not want and acted accordingly, only to get an equal or worse alternative.

For now, just remember you are watching history and no matter what the outcome, these historic events will likely change the Middle East region forever.

How a bully Dictator like Hugo Chavez runs Venezuela

January 26, 2011

This is how bully and Dictator Hugo Chavez runs Venezuela. Law and order be damned. When a couple told Chavez that they had not been able to move in because Banco Provincial had not approved a loan or given them the money, Chavez called the President of the bank and told him if the bank was not willing to fulfill the Constitution, decrees and the laws, then Chavez said:

“You have to begin to give me the bank, I will pay what the banks costs…do you have something to respond to me?” Chavez said.

At this point the President of the bank requested that his voice also be broadcast on nationwide TV, like that of Chavez.

Chavez said no, telling him he could go to the Government’s TV channel and ask for time.

“This is very serious” said Chavez “Tell me how much the banks is worth, I will not argue with you”

Then Chavez says that the President of the bank is saying the information is not correct. Chavez points at the guy with a document. The guy shows it. Chavez tells him that someone is not telling him the truth.

Threatening him Chavez says: “you are involved, you have to assume your responsibility… you have to meet with this people… tell me how much the bank costs, I buy it” the President off Banco Provincial says the bank is not for sale, Chavez says he can perfectly expropriate it.

Like a true despotic Dictator, Chavez threatens the President of the bank, without even knowing the details of the case, who is right or not, whether an illegality has been committed or not. There are laws and procedures for all this, but not for allmighty Hugo.

That is the way the bully runs Venezuela, like his own personal fiefdom, where he can do what he wants, if he desires something, it becomes “the public interest”, without even finding out the truth of the case.

If the same method were to be applied to his incompetent Government, he would have left long ago, as he is the one that does not follow the laws and abuses all of the time. Government owned banks have the lowest ratios for loans and are not forced to lend to the agricultural sector and the housing sector as strictly as private banks. But in any case, Chavez did his bully act without knowing anything about the case.

But he is the all powerful Dictator and ruler of Venezuela. With this he creates rumors, instability and people fear for their money. He then will say the opposition creates the instability.

So, beware!

How people in Taiwan see Hugo

January 25, 2011

Chavez’ New Folly: Fitting another Caracas within Caracas

January 25, 2011

If there is something this Government has failed to do, is to plan ahead. In the Electric sector, as an example, planning was terrible, after canceling some hydro-electric projects that were in the pipeline, nothing else was planned to replace it. While the decision to cancel these projects could be justified, not finding alternatives to it was.

The same can be said about many things. Decisions are made, but implications and alternatives are not considered. Crime grows, but little is done to fix the problems at jails, or even to improve jails or the judicial system. Housing is similar, as the Government has been more and more incompetent on the housing front, the plans have been set aside until the floods hit in December and Chavez decided to make housing a priority, a dangerous strategy given that he is unlikely to have anything to show for it by election time in December 2012.

And then we come to Caracas. A mess of a city under the combination of no major roads built in twelve years, unchecked crime and low gasoline prices. This has created a hostile city, where people spend four to five hours commuting, the subway does not work, public transport is a mess and there are traffic jams late at night and now even on weekends.

Nothing has been done for Caracas on most fronts during the long twelve Chavez years. The President has said that he did not emphasize roads and highways, because he had other priorities. I disagree with that viewpoint, but it is a valid one.

But there can be no justification then to now want to attract people to Caracas. It is true that people will continue flocking to Caracas no matter what the Government does to stop them, but hey, please, just don’t promote it.

But that is exactly what the Venezuelan President is doing. Last weekend he spelled it out when he said:

“We can fit another Caracas within Caracas”

A true folly by the Venezuelan President. Caracas is collapsing. Traffic gets worse, the subway gets worse, the water problems get worse, electrical problems get worse, crime gets worse, unemployment gets worse,  sewage problems get worse and yes, there is even flooding in Caracas, so why would Chavez want to fit another Caracas within Caracas?

Because he discovered that the housing problem is glamorous and may just be what tips him over the top in 2012.

Which is stupid, because even if he started one housing project today (which ain’t happening) it will be difficult to have it finished by the end of 2012. He can bring Chinese, Belorussian, Turkish or whatever housing experts, but even if they can build houses instantly, they still have to provide services to it, including water, electricity and sewage, as well as digging foundations and getting permits, which are not going to go away because Chavez says so.

It is not that Hugo is out of touch, he definitely is, but this is simply that he keeps jumping from one of his inventions to the other because he thinks it will gain him popularity. Never mind experts, studies or problems, Hugo’s creativity has no limits, only those of his twisted mind.

But the problem in the end is that you can’t just move people into the city, least of all Chavez’ folly of doubling the population, without a commensurate increase in the infrastructure, including all the basics, until then forget it, you will turn a very disagreeable city into Hell.

Even if it seems like that is what they have been trying to do all along…

Verboten to Accuse Hugo Chavez of Bad Faith

January 24, 2011

The Venezuelan Supreme Court just said that those that accuse Hugo Chavze of “Bad Faith” can be prosecuted. I did not understand what it meant when it caem out and was going to write about it, but then Laureano Marquez in Tal Cual wrote this article entitled Bad Faith” that just about covers it all and with humor to boot. So, instead of writing, I translated his stuff:

Bad Faith by Laureano Marquez

How do you define bad faith? I ask the question in good faith, to know, because the Supreme Court just said that those who accuse the President of “bad faith” may be prosecuted. It is not clear whether the penalty is for those who accuse the President of “bad faith” or those that in “bad faith” accuse the President. The difference is not small. We know, and it is clear to all, that the Supreme Court, for now, will not promote any sanctions against Esteban, as demonstrated ad nauseum, but I imagine that in the future, what they pretend is that people simply will inhibit themselves and denunciations will not even take place. I guess the judges are feeling the legal tiredness that must arise from both having to twist the law to take away the reason from those who have it and they want to preserve their material and spiritual discomfort. But let’s look at a legal definition of bad faith, I mean, the term “bad faith”:

“Willful misconduct, intentionally malicious act by which rights of others are violated or a duty is not fullfilled.” Examining the concept, the first thing that comes to mind is that you know who could perfectly be accused of acting  in bad faith (it is not an accusation, it is a fanciful exercise made  in good faith, in order to understand bad faith) . “Acting intentionally malicious,” “harming the rights of others” and “failure to comply with a duty,” is the impression that many Venezuelans have of their head of state, among which I do not include myself, of course, because I’ve always believed that that guy acts in good faith, that is he acts correctly, according to his nature, aims and purposes.

Here is my doubt: He who acts in good faith to act with bad faith, can also be accused?  Because even if it is true that he is acting in bad faith, he is telling it to you, which is an act of good faith. So, I become a tropical Kelsen and affirm – and forgive me – that this time the Supreme Court is correct: All charges against the aforementioned are in bad faith because he is accused of something he has admitted in good faith. Chesterton rightly said: “Some men are not disguised by their disguises, but they are revealed by them.

Each person  disguised  itself, according to what is inside “… and I quote it in good faith.

Island Canuck inflation Index closes at 59.7% in 2010

January 23, 2011

Our friend and reader Island Canuck sent me a while back his final numbers for inflation in 2010. Recall that at the end of June the expat sent us his numbers and inflation was running at a 30% clip for the first half of the year. Well, despite the fact that there was no devaluation in the second half of 2010, his food and beverage index essentially doubled in 2010 as you can see in the table below. Note that most vegetables had triple digit increases in the year (They are mostly produced locally). Note also that things that are not available had small increases. Any insights by readers are welcome.

Using Cranes in Venezuela to Defend Your Property Rights

January 22, 2011

Today we hear about some 20 plots of land (earlier reports said there more) in the Chacao area of Caracas which were invaded last night by organized Chavistas. By now, the squatters have been removed, the Government claims this was done violently, but it respects property right, despite the fact that it was Chavez that told his followers to look for these unused plots of lands.

All of this has reminded me of a curious phenomenon I have been noticing around Caracas for a while: The presence of cranes in unused plots of land. They arrive, they build a tin house, set up the crane and nothing happens after that.

Asking around, what I determined is that in most cases these cranes are bought or leased simply as protection for property rights. You set up the crane and you can claim your plot of land is being used. Simple introduce a project asking for the permits, dig some dirt and have a crane in the plot of land. Your land is being used, it will not be expropriated and if they ask why it is going slow, you can argue lack of funds, the loan has not come though and survive another year under the revolution.

Another quirky distortion under the Chavez revolution, Thanks God that construction activity is so slow, that there are lots of cranes to go around.

Hugo Chavez Flip Flops Whitin Twelve Months About his Marxist/Communist beliefs

January 18, 2011

So, last Saturday Hugo Chavez reneged on his Marxist beliefs, when he laughed at those that that claim there is a communist project being put in place in Venezuela.

Let’s see the evidence:

1) He has inundated Venezuela with thousands of Cubans, a country which, as you know is self-proclaimed Communist country.

2) His own buddy and friend (now in jail) Genera Baduel, the man that saved Chavez after he had a bunch of people killed in 2002, said that we had to stop this communist project.

3) Even more curiously, exactly a year ago, Hugo Chavez said in exactly the same venue, his annual speech to the National Assembly: “I am a Marxist”. Here is the video:

He says: “I am a revolutionary and I am also a Marxist…for the first time I assume Marxism…I assume it…the same way I assume Christianity…But Marxism is without doubt the most advanced theory…the most advanced proposal towards the world Christ came to offer us….”

So, by now you may be confused, if it is so good and so advanced, why is it that this is not where he is taking Venezuela?

Or maybe you remember Hugo when he was saying he was not a Marxist, but a socialist. Or maybe you remember him when he said that he did not believe in the after life, a funny sort of Christianity:

But maybe, just maybe, you, like Hugo you believe in polls…

How much is Chavez’ show worth?

January 17, 2011

Last Saturday we saw another episode of Chavez’ show, the long running and best selling program in Venezuela’s TV, now in its thirteenth year. And the title of this post follows another long running program in Venezuela: ¿Cuanto vale el show?

Because in the end that is all we have had in those thirteen years: a show run very well by the President, in which he makes believe that he is running the country, helping the poor, caring for the poor, but in the end it is all fake, just another show.

A very costly one at that, as billion of dollars have been wasted in allowing loyal incompetents to run the country. While in the early stages Chavez had some people who knew what they were doing, they are fewer and far between these days. He is surrounded by the loyal and chosen few, most of which have no management experience or very poor one at that.

The Saturday show proved that Chavez has had no plan for housing or crime for thirteen years.  Chavez sounded more like a recently arrived President than one with so many years in power. As usual, he refuses to accept responsibility saying the crime problem is not his fault, it is everyone’s fault! Sure, who replaced all professional police heads around the country by loyal military friends who could be trusted? It was Hugo himself.

He did admit that he had failed in housing, promising 150,000 housing units in 2011, because now he is in charge. Mercy! How many housing programs has Chavez announced of a much smaller scale only to be met with failure?

And he lied through his teeth, talking about the inflation at Caldera’s time, without realizing that world inflation was not only high at the time, but the country saw its banking system decimated by a crisis of Caldera’s own doing as oil prices hovered around $12. Had Caldera had Chavez’ oil prices he could have bailed out the system as easily as Hugo was able to hide it a year or so ago. But Hugo’s inflation has actually been comparable to Caldera’s

The same thing when Hugo talked about agriculture. He only talked about the rice crop being bad in 2010, but it was across the board, and the 2% plus he mentioned for rice is fifteen times smaller than what experts say happened in 2010.

But who cares about the truth, this is just another show!

Unfortunately, Chavez did not get any smile from opposition Deputies, who held back as much as they could even when the jokes were really bad.

But it is all a show. The other day, I posted about the electric crisis. Chavez claimed to have solved it last Saturday, it has been taken care of by Hugo himself, but fails to explain today’s black out in six states and in parts of Caracas. (Radar de Los Barrios reports lights went out at 10 AM in El Valle in Western Caracas and at 7 PM the electricity was still down)

The problem is that Hugo has gotten away with this for quite a while and high oil prices are likely to allow him to continue for a while. A commenter in the electricity post a few days ago, CarlosElio, proved this very eloquently. He reminded us that in 2005, Chavez had “Gabinetes Moviles” a new form of his variety show in which he held Cabinet meetings in different parts of the country and made it look like he was solving and attacking the country’s problems. There are three such posts, here, here and here, but just looking at the first one should be enough. (All three are worth reading if you know Spanish, Anna Black makes some very witty comments about what people are saying)

In this first Gabinete Movil, which took place of all places in Anzoategui State, one of the states that suffered the most last year’s electric crisis, you can see the style. It was all show, you can read the details there but it went something like this, Here is the link to the full video:

The Mayor: Wel,l lights go out seven eight times (a day) and when lights go out, pumps go out (no water) and I would like help…because here in Anzoategui we have lots of water problems





Please Jackeline (Farias) don’t leave without talking to the Mayors, just there in a small meeting and we can get a small working plan (plancito…)

Why do lights go out so much there?

The Mayor: Its grave , Mr President it’s grave

President: Which Electric system do you have there? What is happening with Eleoriente (The electric company there)

The Governor: I would say 70% of the State has been affected by a very grave energy crisis that has been going on for years (Blame the fourth, of course!). I was talking to the Minister of Energy and we agreed to make a working plan and a technical meeting to truly get rid of this problem….It is humble people that are being affected…this a a State problem Mr. President…

President of Eleoriente: I have been in my position since December (five months). The situation is critical due to the lack of investment and growth…

Chavez (looking Presidential) And what is your proposal? Answer: To invest. On what? says Chavez…then you should talk to the Minister of Energy and the Minister of the Environment on water.

So, it all looked very efficient, except, NOTHING was ever done. Anzoategui was one of the states that had the worst and longest blackouts in all of the country in 2010. (Remember this is circa May 2005, almost six years ago!)


Because once the Producers, the cameras, the teams, the Cabinet came back to Caracas, there was no meeting, no “plancito” no investment. Nothing.

It was all about the show, having Chavez look like he is giving orders and solving problems, but in the end, nothing was done.

But the show was a huge success. Chavez did these mobile Cabinets for a while until he got tired of that variety of a show and came up with a new version.

The problem is that it works! Show after show convinces people that he is working hard, getting stuff done, but nothing is being done. These incompetent fools (not the President of Eleoriente, he is long gone and has been replaced by four or five nobodies) came back to Caracas, tired and ready for another show, a weekend with the family and by the time they thought about the “plancito” or the meeting, off they went to a new Gabinete Movil in Altagracia de Orituco. And there they went through the charade again of meetings and plans and technical solutions.

But the show must go on. And that is all the revolution knows how to do.

But it is a very expensive, very destructive show. New announcements every weekend which translate into mini-shows like expropriations that don’t work. Invasions that yield noise. Scares that make people emigrate. Crazy ideas that make no sense but have to be implemented because Chavez asked for them. And a year from now, nobody remembers any of it.

Not even Chavez, because the show must go on, no matter how much it costs. It is the Hugo Chavez show!