Archive for October, 2011

The Not So Blind Justice of the TSJ Decision on Leopoldo Lopez’s case

October 17, 2011

Well, I read the beginning and the end of the Supreme Court decision on the CIDH decision on Leopoldo Lopez and thought rationally, linearly, not with the twisted logic of the revolution. In this case, justice certainly was not blind, on the contrary, it was peeking all the way towards the future and covering all of the bases.

Or trying to…

When they were saying the decision can not be executed, they were saying Lopez has yet to be elected. They were saying he can run, be elected and then the TSJ will look into whether he can hold office or not. That is hypothetical.

Which is hogwash, as the CIDH explicitly said that his rights had been violated by banning him earlier. And he was banned. Period. Leopoldo Lopez was not able to run for Metropolitan Mayor. He is programmed  in the Electoral Board with a number which implies that he can not be a candidate. No two ways about that. What was said today is simply not the truth. The President of the Venezuelan Supreme Court simply lied. The decision is incorrect and not truthful. Lopez’ political rights have been violated by the State in Venezuela and the TSJ’s decision fails to address that point. As simple as that.

The rest of the legal  mumbo jumbo is simply covering their behinds and throwing confusion into the political campaign. Rather than disobeying the Court they go the typical Chavista way: The Gray Way. Can Lopez run? Yes, but maybe, just maybe, read between the lines, if he wins we may not accept his victory (I doubt it!)

But it does create confusion. It may split the opposition in pieces if they object LL registering to run. And I hope they don’t. I hope they allow him to run and back his running, time to turn Chavez’ weapons back at him. If LL wins, so be it, if he loses, so be it.

In fact, even Chavistas are confused, Cilia Flores backs the decision by the TSJ “not to allow Lopez to run” and the Comptroller in-charge, says that he can only hold office after the sanction ends, which is not what the decision says. Even Escarra says Lopez can not assume if he wins, which the President of the TSJ says the Court will have to rule when and if it happens.

And they cover their behind because, Lopez could lose in the primary and he could lose in the election even if he wins the primary. And if he wins the Presidential race, I am sure these Justices will allow him to take over. They also cover their behinds, or attempt to cover them, by not disobeying the CIDH decision, even if they are. But they confuse so much, it is not as if they were saying the Venezuelan Government will not follow the CIDH’s decision.

The strange thing is that I am not sure Chavez likes this decision. The TSJ was not really fully behind him on this. Lying or not, they did not defend Hugo’s position, they were very wishy washy (A sign Hugo is very sick?) Because Lopez could win it all and I think he would be unstoppable if he does. I just can’t imagine Lopez winning the election and the TSJ saying he can not take over.

I hope Chavez gets mad at them. Really mad. Because I see a crack in the TSJ’s decision. It is not 100% pure Hugo somehow. And LL could ask the full Court, rather than the Constitutional Hall to decide on it. But if I were him, I would leave it at that.

Note added: And the more the Comptroller in charge tries to explain, the more contradictions there are. By now, she is saying Lopez running would be fraud. Has she even read the decision? Can she read it? Who appointed here anyway?

Venezuelan Supreme Court Rules CIDH Sentence on Leopoldo Lopez Can Not Be Executed

October 17, 2011

In a twisty, legalese mumbo jumbo decision, the Venezuelan Supreme Court ruled that it can not execute the decision by the OAS Interamerican Human Rights Court (CIDH) on Leopoldo Lopez because, according to this temple of wisdom, Leopoldo Lopez has political rights, he can vote, he founded a political party and the like, but has this little matter of an  “adminisitrative ban” that “temporarily” prohibits him from holding office and this is simply a mechanism to guarantee “public ethics” (no joke!) and he can participate in political events.

I can not say I am surprised, but I was surprised that Chavez criticized the CIDH but not the decision, which gave me a glimmer of hope that they would let Leopoldo Lopez run.

Lopez now has to think carefully what he wants to do, the MUD has allowed him to register for the primary, but this will only create confusion given that the CNE will not let him register if he wins. He is now the kingmaker if he backs someone else. Any candidate can say that he/she will name Lopez as Vice-President, once elected he can receive a pardon.

More interestingly, the Chavez Government has once again decided to move step forward in severing its relations with the rest of the world. The fact that the Venezuelan Government went to the Court and fought there meant that it had to abide by the decision, there are no excuses now. Venezuela will now have problems in international organizations and Chavez will have to forget about Mercosur and will be severely criticized at the OAS.

Another step by the Dictator to violate the rights of Venezuelans. More abuse of power. Another sad day in Venezuela in a long string of them.

PDVSA Now Giving Away Gasoline to Gas Stations

October 16, 2011

Well, it had to happen, the price of gasoline has been frozen so long (13 years) that the margin PDVSA gives gas station owners is so tiny that over two months ago the company decided it was not even worth collecting the small difference. Thus, PDVSA is now giving away gasoline to gas station owners for free.

This is just another symbolic event in the economic idiocy of the Bolivarian revolution, a company that needs billions of dollars to invest in maintaining its level of production, gives over ten billion dollars of free gasoline each year.In this way the richer you are, the more of a subsidy you get. Talk about regressive.

We will no longer need to make calculations of how much the subsidy is, cost of opportunity and the like. It is rather simple, the subsidy now is everything, multiply 800,000 barrels a day, times the cost of a barrel in production or in the world markets and that is what this idiotic policy costs the company and all of us.

Next: PDVSA pays gas station owners to sell gasoline…

Plan Caracas 2020: There is Some Planning and Thinking in Venezuela

October 13, 2011

Last week I was in Caracas and a very good friend visited me, a well-known architect who works in the Alcaldia Metropolitana. He brought me a very nice gift, not so much for the gift itself , but because it gave me a sense of renewed optimism about the future. What he gave me was a copy of the Strategic Plan for Caracas 2020: The city we want to build.

This is the work of the Alcaldia Metropolitana, presided by Antonio Ledezma and the other municipalities, together with a whole bunch of volunteers. The material I got has two maps, today’s map of Caracas and the plan of what is required or the objectives for the city in 2020. This is the map I show above, it was a large map, so I took a picture with my phone to be able to show it to you.

The plan has general and specific goals. Some qualitative, some quantitative. Things it wants changed. Parks needed. Some things are ambitious, like removing private security to public streets.Others are controversial, like converting the golf courses in Country Club and Valle Arriba into parks.

But it is clear that people have been planning and thinking. Discussing things. Quite a change from what we have seen in the last twelve years.

I will not bore you with the details, but you can look up the website of Plan Caracas 2020, They have a Facebook page: PlanCaracas2020. They tweet: @plancaracas2020 or you can write to them if you like or don’t like something at plancaracas202@imutc. The text with the update of the plan is here.

The whole thing is like the fresh air Caracas needs, an organized group of people thinking and planning, experts and professionals in the relevant fields, not ignorant captains with no clue about what they are doing. Hopefully all Mayors of the municipalities of Caracas in 2013 will be from opposition parties, so that this plan can become a reality.

Venezuela to Issue a 2026 Global Bond: Ignorance, Idiocy or Else?

October 11, 2011

I should learn. There is no such thing as privileged information in Venezuela. For the last two days, I have been hearing that the Government would sell a bond to the public. Assuming it was PDVSA, which may need money, I thought maybe, just maybe, they will sell a bond to the Venezuelan Central Bank to supply that banks’ foreign exchange system called SITME. But given the volatility and the lack of depth of bond markets in the last few weeks, which ignorant fool would even think of coming out with a bond now?

I guess I forgot those in charge of finances in Venezuela have no clue. Thus, THEY are coming out with a new bond at a time where we may have Heisenberg’s Uncertainty Principle apply to them: Without the issue the price may be X, but the sheer presence of the new bond may push the price down…just about for all bonds, PDVSA or Venezuela. Way to go idiots!

But such are the idiots that run this country. They are clueless. Let me explain a little bit.

During the month of September, markets have been hit by three fears: Europe, a recession in the US and the Chinese economy cooling down. Because memories are fresh, the reaction by investors has been to run for safety. Despite the recent downgrade of the US, the dollar and US Treasury bonds became the “in” thing to have. People sold off everything, stocks, bonds, emerging markets bonds, Brasil, Asia, Russia. The works. Buyers went on strike with many of these. When there are no buyers and a few players, prices simply collapse. And the price of bonds did just that.

Russian bonds dropped 10% in price, Argentinean ones even more, Venezuelan ones like 10%, some more, some less. But people thought Venezuela did relatively well. the country’s “risk” went down, but not as much as most of the world.

But still, Venezuelan bond markets dropped, became fairly illiquid, by this I mean, volumes went down, down to 20% or 30% to what they were in June. Maybe worse, but these numbers are just not public. But that is what traders tell me.

So, after a month of no country or company issuing anything (Pemex even pulled out one bond) Giordani and his clueless combo decide to issue US$ 3 billion of a Global 2026 bond with a coupon of 11.75%. This will be sold to local investors, privileged ones at that (read oligarchs, the rich, the enemies of the revolution), who will purchase cheap (very cheap) foreign currency with their ever depreciating “Bolivares Fuertes” (Strong Bolivars, not a joke)

To put it in proper perspective. The Government will sell US$ 3 billion of this bond in Bolivars at 95% of the price. That is, people who buy $1000 of the bond will buy it at 95% of Bs. 4.3 times 1000 dollars or Bs. 4,085. Of course the bond will be worth somewhere between 70% to 75%, so you will get between $700 to $750 for Bs. 4.085 or you will pay between Bs. 5.83 or Bs. 5.44. Even if the bond drops to 65% you are still buying dollars at Bs. 6.28per dollar. A true bargain.

A great deal if I ever saw one, when you think a free floating Bolivar would be worth around Bs. 8-10 per US$.

But what is good for you today, is terrible for Venezuela tomorrow. This bond will generate for the Government the equivalent of US$ 2.85 billion at the official rate of exchange. But over the years it will cost the country with the 11.75% coupon a total of US$ 8,287. Too expensive to support a silly exchange rate policy. Pan para hoy, hambre para manñana.

But even worse, you have to ask yourself why? The average price for the Venezuelan oil basket in 2011 is the highest EVER. Period. At US$ 84+ per barrel, the country has never had such a high revenue level.

So, why compromise the future in this way? Why pay so much to get barely US$ 3 billion?

That is the 64,000 lochas (Coin for 1/8 th of a Boluvar) question. Either these guys are siphoning off billions of dollars to the parallel funds or they are being so inefficient that they need more and more. To pay the companies that skim off a few hundred million to subcontract electric plants, like in the previous post or simply to guarantee that Hugo Chavez gets elected in 2011.

And that is the scary scenario. After 2011, maybe they just don’t give a damn. All their eggs are in the 2011 basket, reelect a crippled Hugo and guarantee the survival of the revolution. Who cares about the people? Who cares about Venezuela? Who cares about efficient spending? Sovereignty? How do you eat that?

Issuing this bond is so crazy, that for the first time I believe these guys will default if Chavez is reelected. Not the next day. They will stretch it for as long as they want. Buy they simply don’t care. Hugon and the robolution is all that matters. Sovereignty, the people, efficiency are simply words, Hugo is the big deal. The only deal in town.

So, if you came here to find out whether to buy the bond or not. Go ahead, buy it, you will likely be getting Bolivars at below Bs. 6 per US$. It’s the deal of a lifetime. Just remember that this is compromising the future of the country in a serious way.

And the answer is: Else! These guys are idiots, these guys are ignorant and all they care about is the else: the survival of the revolution, the ability of Hugo to get reelected.

Except that cancer got in the way…

You Can’t Make Up the Stuff That Happens In The Bolivarian Revolution

October 11, 2011

The Chavez Disney style doll that goes around Venezuela (still has hair), was on TV this morning and lo and behold the dolls pants fell down. You can watch the movie here, but this would make this blog XXX if I posted the whole grotesque incident. Reality is stranger than fiction in the revolution.

Only in the revolution!!!

Another Day, Another Almost Tragic “Normal” Accident in Revolutionary Venezuela

October 7, 2011

It has been a month of accidents in Venezuela. Airplanes, trains, buses, accidents are now considered normal, nobody is responsible. In a country with four trains, three of them were involved in a recent accident leaving one person dead and 35 injured and the response of the Government was as if it was nobody’s fault, because “some cables had been stolen”

Then yesterday, we had another”normal” accident, this time in the Maracaibo subway system, a fairly new system, which has yet to be completed.  Basically, the brakes failed and the train continued beyond the barrier that is supposed to stop it and ended up a bare three meters away from falling down the end of the cement structure that supports the tracks, as you can see in the picture above.

The explanation?

It was all the rain’s fault! You see it rained, the train slipped because it had inertia. This seems to be “normal”. This is simply absurd, no rail system skips and slips because of the rain. If you put a barrier up to block a runaway train, it should stop a runaway train.  That is what engineers are supposed to design and prevent. But things not working in Venezuela are simply “normal” under the stupid revolution.

Of course, former Governor of Zulia Francisco Arias Cardenas, without having a clue, suggested sabotage by the opposition, another favorite explanation by this irresponsible revolution. They could not blame the IVth. Republic the subway system did not exist then…

And Now Hugo Wants to have ChOPEC

October 6, 2011

Today, Hugo Chavez held one of his impromptu nationwide TV address at noon, which had no purpose other than stop TV stations from showing the memorial and burial of former Venezuelan President Carlos Andres Perez.

The excuse for the address was some visit by Russian emissaries to the Orinoco Oil Fields. Chavez was obviously not there, but managed to talk and talk. During his verbal incontinence, he made a little publicized remark, saying that he had this “witty idea” , to create a new organization of only the four or five largest producers of oil in the world.

He gave no reason for this “witty idea”, he just “had” this whim and that is why this poor country has been suffering so much, because we keep implementing all the destructive ideas of Hugo Chavez, which never seem to be very positive or constructive.

I guess the whole point is to have the Chavez Organization of Petroleum Exporting Countries (ChOPEC) whose role would be to showcase…Hugo Chavez, would be my guess.

Chavez seemed to realize how silly the idea was at some point, saying that this “would not affect OPEC”, but never explaining why this new organization was needed at all.

But he never explained how Venezuela fits into the group of the four or five largest oil exporters in the world. Because it doesn’t! According to OPEC (page 46), Venezuela is the 6th. largest producer of oil within OPEC alone!

Another day, another Chow, sorry, show…

All hope abandon ye who live here in Venezuela

October 4, 2011

(And there is still ways to go…)

I felt like that line in Dante’s Divina Comedia, All hope abandon ye who live here in Venezuela. While Dante was talking Hell, it just seems like the same here and that Venezuelans seem to like it.

This is how I feel after reading the latest data from Datanalisis, a pollster which is quite controversial, but which has been fairly accurate in the past. According to them, Chavez’ popularity has jumped 10% points since July and is currently at 58%, while vote intentions went from 31% to 40%.

With the electric problems, inflation at 30%, airline and train accidents, shortages, even Chavez admitting the health system is the pits, people still love Chavez.

Makes sense? Obviously not, but that is our reality.

Go figure!

The eternal vicious cycle of inflation and shortages under Chavez’ revolution.

October 2, 2011

Today’s El Universal has an article talking about how hard it is for local producers to sell regulated products at a profit, which leads to shortages. The Government, of course, denies there are shortages, saying the whole thing is a “mediatic campaign” by sectors that control these products and want to have “exorbitant” profits.

Shortages are measured by Cavidea, pollsters and the Venezuelan Central Bank. Cavidea says shortages are running at 20%, in perfect agreement with Datanalisis, which gives the same number, up from 9% a year ago. The Venezuelan Central Bank gave for August (Cavidea and Datanalisis are for September) a lower value of 13.5%.

In order to look at this problem long term, I made a rather busy chart, shown below, in which I took the price for some basic products, all regulated, normalizing it to the price in 2003, when controls began and included inflation (in bright red), also normalized to 1 in 2003 and the price of the official dollar, which I did not normalize (in dark blue)


As you can see, if one compares to inflation, all prices are behind the inflation curve. This curve is also not complete, as inflation for this year is not included, in the plot, 2003 inflation is added in 2004, 2004 in 2005 an so forth.

Of course, the Government gives foreign currency to some importers to bring these products from abroad, so that a comparison to the official dollar for imports may be fairer in some cases, with the caveats, that even if you import all your product, you still have local costs that keep increasing every year at a good clip.

However, most of the regulated products I included in his chart are made in Venezuela, with the exception of milk. Interestingly, this item, which is currently one of the most difficult to find in markets, has kept up rather well with the inflation curve, rather than the US dollar curve, despite being mostly imported. In contrast, vegetable oil producers are being squeezed, no matter which comparison you make, to either inflation or the official dollar, lagging by 250% the inflation index. So have pasta producers.

Other products, like rice, after holding them back for the first few years of controls, have kept up rather well in the last few years.

However, from the chart it is clear that it must not be easy for any of these producers to make money if one compares to inflation, after all, we are talking about the fact that inflation has increased by a factor of more than 500% since 2003, while only rice and meat, have managed comparable gains in prices of more than 450%.

This graph also show why the Government shoots itself in the foot in its goal to reduce inflation: The more that it holds back price increases, the more inflation will be held back until next year, making it practically impossible to reduce the yearly CPI. In fact, in 2001 the CPI was only 13.1%, in the absence of price controls and exchange controls, but just about then, the Government began to spend beyond its means, needing a devaluation in 2002, which pushed inflation higher and introducing price controls and exchange controls in 2003. Inflation went down in 2005 and 2006, precisely because many price increases were held back, that is what is fueling inflation these days, just trying to manage the balance between shortages and inflation.

Like so much under Chavez it is an impossible policy in the long term. Something has to give. It is a vicious cycle, if you hold back prices you create shortages, if you don’t allow prices to go up to fair value, you push inflation into the future. If you don’t allow for reasonable profits, you get less investment and fewer products.

But the revolution thinks it’s winning