Archive for December, 2011

The Curious Downfall of the Heir Apparent to Hugo Chavez

December 17, 2011

It was one of the biggest political surprises of the last few months, if not years, when Hugo Chavez announced that his Foreign Minister Nicolas Maduro, would be the candidate for Governor of Carabobo State in 2012. Maduro had been considered Chavez’ heir apparent if it became necessary for the Venezuelan President to step aside in 2012 due to health reasons. In fact, many people, including yours truly, believed that Chavez would name Maduro as his Vice-President some time in the very near future, replacing Elias Jaua, who is not popular among various Chavista factions.

That all was not well in Maduro-land was barely noticeable last week when his wife, Cilia Flores, was replaced in the leadership of Chavez’ political party PSUV by none other than Diosdado Cabello, once also considered Chavez’  clear successor. But Flores had been in the doghouse for a while, as she had been removed early in 2011, before Chavez’ illness surfaced, as President of the Venezuelan National Assembly.

It was unclear why the sudden change of heart for Maduro, who had been acting in roles beyond that of Foreign Minister, including being the main speaker at a service held for Hugo Chavez in Manhattan and being part of the commission studying the changes to the new Labor Law. Maduro was also the only Cabinet Minister to go back and forth between Caracas and La Habana, when Hugo Chavez received treatment for his cancer in that city between June and September.

Chavez’ announcement was made the day after Maduro received an ovation that apparently irked the President, but I am sure there is much more to the story. For now, Chavez is in the search for a new Vice-President, with most betting that it will remain all in the family with his son in law, Jorge Arreaza, the current Minister of Science and Technology, being named Vice-President early in 2012*. His current Vice-President Elias Jaua, had already been nominated as candidate for Governor of Miranda State by Chavez a few months ago in what was believed to be an elegant way of disposing of Jaua.

Chavez is making daily changes to his entourage, with rumors that new important military appointments will be made soon. For now, none of the groups fighting for power feels they hold in a solid position, as the downfall of the heir apparent may simply be a signal by Chavez that he has yet to make his mind up. When he does, Maduro may be back, in another sideways move by the Venezuelan President.

*I don’t think that Arreaza can be Vice-President if I understand what “parentesco por afinidad” means in Art. 238 of the Venezuelan Constitution, which bans the VP from being related by blood and/or affinity to the President. I believe, but I am not 100% sure that Chavez is related to Arreaza by affinity.

A Gallery of Chavismo “cursileria” (Tastelessness)

December 14, 2011

Yes, I read Tal Cual and saw the magnificent Guardia Nacional “cursi” tribute to Chavez that Daniel and Quico posted, but just did not have the time to post about the symbolism (Why so many indians? Really? Jesus Christ? Who is the guy in red?)

Thus, since I am late to the party, but the painting just has to be in this blog, here is a gallery of similar cursilerias from Chavismo, including today’s masterpiece:

Nativity Scene:

Bolivar and Hugo, or is it the other way around?

Merging his profile with the flag:

I guess Bolivar does goes first:

Just art

Sometimes Jesus comes in last:

and please don’t ask who is the guy with the beard, I have no clue.

The Devil Excrement at work…in Norway, as a smør shortage hits that country

December 13, 2011

While I usually don’t write about other countries, this one is too cute to pass up. Thanks to my Norwegian friends I learn that in that oil rich country there is a shortage of butter due mostly to protectionist policies imposed by the oil rich Government. Prices have reached absurd levels, like US$ 109 per pound and the like.

People are giving smør, as butter is called there, as gifts.

Now, there is an idea, a kilo of powdered milk for Christmas, I think I just finished my shopping…

Amazing how well these concepts work everywhere.

How Did Crime In Venezuela Ever Get to Where It Is today?

December 12, 2011

It was 1988, Venezuelans were truly upset about crime. Imagine that! That year, there were all of 1,600 homicides in Venezuela, all of 9 homicides for 100,000 people.(I am using Veneconomy statistics)

Then came the Caracazo, the violence of that fateful day made numbers soar and that year, the number of homicides soared to 2,513. The coups in 1992 did not help numbers, 3,336 people were killed in 1992, doubled the number of 1988. And with it, gave way to the outrage and dissatisfaction that led to Hugo Chavez being elected. By the time Hugo came to power, 4,500 people were killed in Venezuela in 1998.

Today, the National observatory for Violence says there were 17.600 homicides in 2010, 57 deaths for each 100,000 inhabitants.

Almost seven times as much as of 1988 (per inhabitant)

Almost triple (per inhabitant) than when Chavez got to power.

These are homicides, the actual killing of a human being. Say nothing about the increase of theft, kidnappings or petty crime. The Government and people don’t even look or think about those numbers.

But look at the other side. According to the same Veneconomy numbers, when in 1998, the year before Hugo Chavez became President, the police made 118 arrests for each 100 homicides. Yes, they would detain more suspects than crimes, but they would be released.

Today that number is down significantly. How much?

Venezuelan police detains nine suspects for each 100 homicides.

That’s right. For each 100 people that lose their life only NINE are detained, many released when they are found not be involved.

Can Chavez be blamed for this?

You bet!

To begin with, he was the guy who refused to swear he would uphold the old Constitution, Yes, he created a new one, but he seems to have ignored it olympically.

But for 12 years, Chavez simply minimized security as an important issue. He dismantled a fairly competent police management created over the years, replacing them with former or active military with no clue as to how to fight or control crime. Meanwhile Chavez even justified stealing if you are hungry, much the way the Supreme Court decided to decriminalize invasions of private property today.

A prelude of new things to come.The end result will be the same, until the invaders take over the Justice’s property.And they will.

Meanwhile, the fight against crime becomes a struggle. Start with the numbers of weapons. After 13 year without control (and it wasn’t great before that!) the number of pistols, rifles and the like has also tripled. Unless you go and try to reduce that, there will be no progress.

Follow that with jails as full as they have ever been, where the jailed are innocent, half guilty and guilty, but now they all train for a new career in crime under one single roof. Ready for the real world next time the Minister for Prisons decides to lighten up the numbers.

Or take a Justice system that follows now the orders of the big honcho, jailing all those that make it alive to the prison. Yes, Hugo has discovered the crime problem and the cops are dealing with it the most effective political way: Kill them!

Do I need to go on? Not really. In the end, the question is not how we got here, but how do we get out of this?

Which goes back to Daniels’ question: Why do these opposition guys/gals want to be  President?

Barbarians at the Gate: Chavista Hordes Set Fire to UCV’s Aula Magna Over Election Loss

December 10, 2011

The picture above is that of the fire set last night by Chavista hordes at Univerdad Central’s Aula Magna, a magnificent concert hall/auditorium, designed by Carlos Raul Villanueva and whose acoustics were fixed by Alexander Calder. A picture of the concert hall is shown below:

As votes were being counted for the election of Student Union President and other positions, more than 40 motorcyclists, their heads covered, invaded the university shouting “Castro-Communist Chavista Hordes” trying to disrupt the counting and burn the electoral material. They had incendiary bomb and tear gas canisters (wonder how they get them?) which they used to disrupt the process and scatter people away from the university.

Their problem? That once again Chavista forces not only lost a student election, but the Chavista candidate, Kevin Avila, received less than one out of each fifteen votes, as the three opposition slates received over 7,700 votes to Avils’a 500. Fortunately the data was preserved and the votes had been counted when this happened.

Kevin Avila is a Chavista student leader which was expelled from the University for violent behavior against the President of the university, but was quickly reinstated by the Venezuelan Supreme Court in one of those flash rulings that only those that support Chavez receive.

The total rejection of Chavismo by students and the fact that more than 50% of the students showed up to vote, despite threats of violence by the Chavistas to scare away the vote, was too much for Avila and his fascist comrades, as they roamed the university at will without any sign of security forces near the university attempting to detain them as they came out (The University is autonomous and the police does no enter its campus, but there are only well-defined narrow entranecs that can be controlled by security)

Is this is a sign of what we will see in 2012? Is this how Chavismo will act when and if it loses the Presidential election in 2012? That is the scary part. As Chavez spoke to the radio last night, claiming to be fine and jogging, these barbarians were trying to burn down Universidad Central de Venezuela, one of the leading educational centers of the country, which ironically nurtured most of the university graduates in Chavez’ Cabinet and where Giordani, Merentes and Navarro worked all their lives. Shame on them and on the Government for allowing this to happen. But more importantly, shame of them for staying silent in the face of the type of fascism that they claimed to ahev spent their lives fighting.

A Back of the Envelope Calculation of The Finances of a New Venezuelan Government

December 8, 2011

(To my friend: Yes, we can!)

Everyone worries about how a new Government would function financially  if there was to be a political transition in 2012. Personally, I think this is the least of our worries. Things like dealing with unions and personnel in PDVSA and nationalized companies will be orders or magnitude more difficult than dealing with “money”.

Here is why:

We are paying about US$ 6.5 billion for 30,000 Cuban doctors. Divide those two and you get about US$ 216,000 per doctor per year. Renegotiate this to Venezuelan doctor salaries and you have saved US$ 6 billion a year, about half of what the country and PDVSA issue in debt every year.

Then, there is Petrocaribe, sending oil to “country’s in need” and giving them easy credit conditions, like pay 50% now, two years grace period a less than 5% a year for the next like 25 years. The math is hard, there is barrels sent to Cuba, barrels sent to Petrocaribe and so on. But there is an easy way to quantify this: Last year, according to the Venezuelan Central Bank, accounts receivable with “friendly countries” reached US$ 23.088 billion. As of September 2011, this number had reached US$ 32.7 billion, a difference of, give and tale half a billion of US$ 9 billion in nine month or US$ 1 billion per month.

Yeap! This is the crazy revolution, borrow at 12% abroad and lend at 2-3% per year to your buddies, while your country goes hungry, enjoys shortages, malnutrition and the like. It is indeed a strange revolution.

But add the US$ 12 billion from these “friendly countries” and you are already up to US$ 18.5 billion a year in “savings”

Few countries in the world can find money so easily to balance the budget.

The Chavez Government has refused to do anything about gas prices. Gas is basically free today in Venezuela. We are talking about 700,000 barrels of oil a day given away (literally). At US$ 100 per barrel (it is more for the refined products we use) this is 700,000 x 365 x 100, some US$ 25.5 billion A YEAR in this subsidy. It is actually more, because producing this oil/gas is not free. Let’s say you decide to cover PDVSA’s cost, nothing more. That’s about (back of the envelope) about US$ 30 per barrel or US$ 7.65 billion a year. Say US$ 7 billion.

We are up to about to US$ 25.5 billion in “savings”

Now, the new President call him Leopoldo or Maria Corina, can call the IMF, the World Bank and/or CAF and from all of them extract without conditions, say US% 15 billion. With conditions you may get this up to US$ 30 billion, but politically, the conditions will be tough. So, we take the cheaper route.

We are up to US$ 40 billion, give or take half a billion. Nice war chest to remove exchange controls, no?

You could go bolder. Tell the Chinese you are sorry, but the law says you can’t pledge oil for loans and this will have to be renegotiated. Some US$ 10 billion in savings, as you will pay it slowly, let’s say at half the rate, 200,000 barrels a day, not 400,000.

We are up to US$ 50 billion.

Remove exchange controls. Buy back debt. Say you will not issue new debt. Change debt at 12% for multilateral debt at 5%.

Money will flow back into the country and you have yet to say you will privatize all those Government owned enterprises which are in intensive care.


Do the math, it is as simple as 1+1, the hard part will be dealing with real people…

How a Computer Virus Drove Venezuela’s Debt Up Higher Today.

December 7, 2011

If Venezuelan and PDVSA bonds are worth some US$ 60 billion, then today a computer virus made them gain about US$ 1.2 billion, just like that, as the virus was embedded in an email with a headline mourning the death of none other than Hugo Chavez.

The whole thing was bizarre. Venezuela and PDVSA bonds were sort of mixed in the morning and all of a sudden, around noon, I noticed they were up strongly, but there was no news explaining it. Then, a friend calls and tells me New York is full of rumors suggesting that Chavez may have died. I got a dozen calls or cahts on the topic within minutes. Given that he supposedly signed some documents mid-morning, it was hard to believe this could be true.

But the rally kept going. It was only later, that another friend sent me this denial by La Prensa:

You can read it better in the original, but basically it says that this email purportedly showing a page from Panama’s La Prensa was circulating, saying “All of Venezuela in Mourning” because of Chavez’ death. But the whole thing turned out to be a virus, as if you clicked in the video of Chavez, it would download a virus which supposedly takes over your PC.

Well, some people did not even click, they believed the news and it spread all the way to debt markets, where it had a not insignificant effect. Even Panama’s Police felt it had to issue a warning.

Go figure!

Some people speculated the virus came out of the Presidential Palace. Others joked it had to be fake, how could it say “All of Venezuela in Mourning”. But in the end, the underlying truth is that debt markets would have an incredible rally if there wa the possibility of political change in Venezuela. And I understand why. What I don’t understand is how not knowing how orderly or disorderly that transition may be, does not make a difference. Just think, if the news had been right, Venezuela’s President would be Elias Jaua, a lightweight politically. Jaua just happens to be in Russia today, I wonder what his enemies would have done about that if the news had been true.

But the effect is there, an orderly political transition in 2012 will lead to the rally of a lifetime in Venezuelan paper. In fact, the possibility of such a transition should n itself provide a rally for the books.

The Venezuelan Opposition Debate I Did Not Watch

December 7, 2011

Unfortunately, I was unable to watch the debate among opposition politicians due to travel. But I have watched clips and read impressions from all sides. My conclusion: It is unlikely that the race will change much between now and February.

The format did not help, asking different questions to each candidate is simply useless in terms of being able to evaluate the field. It is clear that Maria Corina Machado was the best performer, but that type of performance is not what wins debates or changes a race. She started too far back and maybe we should start understanding that the average Venezuelan prefers a gray populist than a sharp visionary. It is, after all our history: Populism sells well. Chavez promised the world, but only delivered on the populism, he forgot about crime, democracy and corruption, but through over promising, remains popular despite his failed decade in power.

Those in Diego Arria’s camp had high hopes that he would once again win the day, but he failed to have the same spark he did the first time around. He had no big announcements and continued to sell his experience as the salient point. Diego’s run is valiant, he is making lots of good points, but my gut feeling all along is that Venezuelans do want new faces, even Chavismo does not seem to get that.

Leopoldo Lopez emphasized fighting crime too much. I did expect him to do much better, he did well, but not enough to move the numbers which is what he needed. Leopoldo should follow his instincts more, he got to where he is on his own, maybe he thought too much about what to say. I still think he should have made more out of the box proposals if he wanted to gain ground.

I think Pablo Perez did well, he was more relaxed than the first time and did not blow it, staying in second place behind Capriles. He needs this, as Venezuelans don’t like to waste their votes and any bad vies surrounding Perez could drop him like a stone. He avoided that.

Finally, there is Henrique Capriles, who won by not shaking the boat, which is what front runners are all about. Ever non-confrontational, Capriles seems to think he is ahead and does not want to offend the former Chavista voters he wants to attract in the Presidential race. So far, HCR has played every step of the way right. He is stiff, non-ideological and non-confrontational, which I would have thought was a sure recipe for disaster, but it seems to work. His CHACACA (Chavistas Con CApriles) joke, obviously prepared became amazingly one of the high points of the night. Maybe it was the realization he may have a sense of humor. I still don’t get him.

Debates are funny events. The format on Sunday did not help, but typically those in the lead try not to screw up and those behind try to catch up. Diego Arria managed in the first debate to create a bigger impression on the electorate. So far, he seems to be unique. Maria Corina did well this time, but there was nothing dramatic in her performance, she was uniformly better. Pablo Perez and Henrique Capriles did not blow it. That is a victory for both. Barring surprises, on primary day voters will all think about those two. Capriles seems ahead, but Perez has more traditional party machineries backing him, he has a chance

Oh yes, there was Pablo Medina ranting every fifth question. That is all he has done in his life, including backing Chavez’ coup in 1992. He has never been electable, but give him credit, he has a point he wants to make and does it.

Some Winners at Chavez’ CELAC summit

December 6, 2011

Chavez’ CELAC shindig is over and it went well for Hugo, attendance was better than expected, while everyone thought Dilma will show up, they weren’t sure about others like Felipe Calderon of Mexico and Piñera of Chile.

But beware of visitors coming to a Summit they don’t believe in. They always do at a price and there were some very nice winners for attending.

The biggest winner was the President of Mexico Felipe Calderon. He got Chavez to pay US$ 1 billion for nationalized Cemex Venezuela to Cemex, Mexico’s premier international company, which has been having financial problems due to the construction crisis all over the place. I noted this in the previous article.

But Calderon had another card up his sleeve, he managed to have Chavez reverse the nationalization of Gruma’s Monaca and turn it into two joint ventures with the Venezuelan Government to produce flour, rice, pasta and oatmeal. Not a bad change of terms for Gruma, as it places a long term bet that things may change in Venezuela.

Cemex probably preferred the money with US$ 15 billion in debt coming due in 2014.

Finally, Chavez signed a deal with Brazil’s Dilma Roussef to buy 20 jets built by Embraer, Brazil’s airplane company. Now, Embraer is a private company, formerly Government owned, trades in New York and while it is true the Brazilian Government owns a symbolic golden share, this is not the type of deal that President’s get involved in, unless…

Venezuela was dealig with Embraer and Dilma just gave the whole thing a little push at the end.

It is indeed a strange revolution. It pays money to its natural enemies in the region to gain favors. It pays high interest rates to capitalists and it gives preference to foreigners over Venezuelans. Just today, it gave a nice “windfall” to holders of Fertinitro bonds, much like it did with PDVSA, CITGO, EDC, Petrozuata and Cerro Negro before. If it fits the goals of the revolution, the money is there to pay for it.

Nothing says a revolution has to have scruples.

Did Venezuela Really Compensate Cemex For Only Half of What it Wanted?

December 2, 2011

Headlines are beautiful things. Just witness yesterday’s “Venezuela to pay Cemex US$ 600 million for its assets in Venezuela”. It really sounds like Venezuela got the good end of the deal, as Cemex had sought US$ 1.2 billion in arbitration and supposedly ended up with only half of that. But did they?

Not really.

First of all, Venezuela had said that Cemex Venezuela was worth only US$ 450 million when it first nationalized it. On the other side, Cemex was asking for US$ 1.2 billion for it. What is not clear is whether Cemex was asking for US$ 1.2 billion for Cemex Venezuela or for its 75.7% stake in it. That alone makes a big difference.

But let’s look at the numbers and the announcements:

1) Venezuela will pay Cemex US$ 600 million, US$ 240 million in cash and US$ 360 million in PDVSA bonds in 4 parts, each one of them of US$ 90 million in the next four years. I am guessing this means that next year Cemex will get a 2013 PDVSA bond, the next a 2014 PDVSA on and so on and so forth.

2) However, Cemex owed Cemex Venezuela US$ 154 million ( I think it is US$ 158 million, but that is a minor difference). You see, after the Venezuelan Government announced that it would nationalize the cement sector, Cemex Venezuela sold its parent Cemex, its subsidiaries in Dominican Republic, Panama and Trinidad for US$ 355 million. Cemex paid US$ 132 million of that amount with dividends that were retained in Cemex Venezuela, US$ 60 million that were assets of Cemex Mexico in Venezuela and thus Cemex owed Cemex Venezuela US$ 158 million. As part of the settlement this debt with Cemex Venezuela is settled. Thus, Cemex Venezuela gets the US$ 600 million in cash and bonds AND gets US$ 154 (or 158 in my numbers) million that it no longer owes, thus Cemex is getting US$ 754 million

3) Cemex did not own 100% of Cemex Venezuela. The public owns 24.3% of it. Thus, the Venezuelan Government that said that Cemex Venezuela was only worth US$ 450 million, is saying that the company is worth US 996 million. Under Venezuelan law, the Government is obligated to buy out these minority shareholders ( I am one) at the same price (in local currency, of course, Venezuelans are second class citizens, more so if they are oligarchic investors). Whether the Government will follow the law or not, it says that the 24.3% not in the hands of Cemex is worth US$ 242 million.

So, Venezuela has to pay about a billion dollars for Cemex Venezuela, closer to the US$ 1.2 billion that Cemex wanted, whether it wanted it for its stake or for the whole thing, than the US$ 450 million the Government was offering.

That this is more of a victory for the Mexicans than for the Venezuelan Government is confirmed by the fact that Mexican President Felipe Calderon said he was coming to Chavez’ CELAC shindig, only hours before it began and right after the agreement with Cemex was signed.

Oh, the pretty revolution!