Watching Some “Strategic” Companies In Bolivarian Venezuela

May 8, 2012

Over in Caracas Chronicles, Juan Nagel wrote an article criticizing Capriles’ stance on keeping industries in the hands of the State, which prompted a response by Capriles’ Chief Economics adviser, in which a defense was made of keeping certain “strategic” companies or areas in the hand of the Government. I must say that the article by Ricardo Villasmil was not to my liking, because he seems to be “lloviendo sobre mojado” (Raining over areas which are already wet). First of all, we have fifty years of experiences on the matter which should tell us where to go and where not to go.

But more ominous to me, is to hear the Chief Economic adviser of the opposition candidate suggest or say that “We don’t have it clear which is the way to development”

Well, I certainly have a clear idea of where not to go and confess being bothered that someone in such an important position does not have it clear where not to go or even where to go. Venezuela had some areas where a capability had been developed and they were abandoned, oil research is the best example, while it had areas like telecom and electronic, where the private sector was doing a reasonable job, until the Government arrived.

Take CANTV, the national telecom company. I have no idea whether this is considered strategic or not by Capriles or Villasmil. But we all remember how in 1989 it would take three tries to get a dial tone for a local call or years to get a home phone.  The company was privatized and very quickly, failed dial tones became a thing of the past and you could get a phone relatively quickly.

Then, in 2007 Chavez decided to nationalize CANTV, a very profitable company which was second in the country in cellular phones. I will not bother you with how CANTV has been favored with CADIVI dollars and the like. I will also note that CANTV is still making money, remaining highly profitable even after 5 years of Chavista management.

But when you look under the “hood” you start to get worried. CANTV has maintained the cheapest cellular phone rates in the country, while receiving the largest amount of official dollars of the three companies that compete in this business.

But guess what? After five years in Government hands CANTV has invested little in promoting the high speed networks required for smartphones, falling behind Movistar and Digitel, which are doing a reasonable job (even if the service is terrible), given that they do not receive regular dollars from CADIVI like CANTV does.

But when we go to the Internet the story becomes more worrisome. In 2007, you could get ADSL with a velocity of 1.5 Mbps. Today, you can get either 1.5 Mbps or 2.0 Mbps. That’s it, no more. Even worse, the 1.5 Mbps connection costs Bs. 260 a month, or US$ 60 at the official rate of exchange. (which I use because the company gets “strategic dollars at Bs. 4.3 to buy all the equipment). If you barely want to move up to 2 Mbps, the rate almost doubles.

Compare that to other countries, like Argentina,where you can get 20 Mbps for $40, much like the US, and you see the problem when these “strategic” industries are in the hands of the Government. CANTV has a captive market, little competition, subsidies and a Government that uses no benchmarks to measure its performance.

With the old private CANTV, Conatel could have required the company to increase speeds at a certain rate, while keeping prices constant. And if there was competition, all three cellular networks would be increasing bandwidth to compete.This affects everyone in Venezuela, not only the well to do as many revolutionaries who have little understanding of the country would suggest.

Let’s see Internet first. According to revolutionary statistics, Internet penetration in Venezuela was about 40% of the population as of 2011. That is close to 12 million people in a country of 28-29 million. Thus, by having CANTV be “strategic” and in the hands of the Government, what you are truly doing is delaying the progress of the inhabitants of the country.

And while it may be idealistic to think that this would be better if the opposition ran things, I just don’t see the point. A new Government, Chavista or opposition, would have so many other things to worry about and be priorities, that it would be best to have the private sector take care of CANTV. The Government could simply sell part of it and once the company runs well, sell the rest.

Venezuelans would be better off in many ways, as owners and as users.

The impact would be even higher if CANTV had a good 3G network. The country’s cell phone penetration is basically 100% according to official figures. Can you think of a better educational impact that having good Internet access on all cell phones?

And the Chavez Government has made a big deal, as it should be, of the PC and cell phone business. We have a Canaima computer bought in Portugal, which could have been built in Venezuela, but that is another problem. Separately, the Government has a company called VIT which sells computers. VIT also gets official dollars. except that the cheapest laptop costs Bs. 4,430, or US$ 1,100, more expensive than a comparable HP computer (or a MacBook) and certainly much more expensive than clones made in China.

But the whole policy is screwed up. While the Government promotes Canaima with Linux, it buys 200,000 licenses from Microsoft, sort of fighting itself.

I do think that the Government can create a policy in the computer business to orient things, but much like telecom, whether access to the internet or making cell phones, the way to development is to let the private sector do things, even if owned partially by the Government, but forcing it to meet benchmarks in price, performance and international competition. That is how other countries have done it. Whether Korea or China, the State was not running the manufacturing companies, but pushing them, helping them, coordinating the, but more importantly, imposing on them goals and benchmarks for their performance which would make them valuable for the people and the country.

The path to development is not a mystery. It is a matter of setting priorities, deciding areas to get involved and areas not to get involved. Areas with competitive human resources, areas with competitive advantages and areas where the state should play a role.

The rest as they say is just hard work and some mistakes. But the path is not that complicated. Just have the Government concentrate in the basics, low risk areas and let the private sector take the risks, under State supervision. Their loss, will be their loss, not the State’s.

Strategic? Education and health and maybe power generation. That’s about it. And even there, there is lots of room for flexibility given the limited funds.

101 Responses to “Watching Some “Strategic” Companies In Bolivarian Venezuela”

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  2. […] Watching Some “Strategic” Companies In Bolivarian Venezuela […]

  3. m_astera Says:

    I would nominate the postal service as a strategic service industry that the government would have reason to be involved in. Though I realize that a government run postal service can only work when the employees and the managers are honest and have the desire to do the job well.

    Perhaps worth noting that almost no one on Margarita knows where the one government post office is (Ipostel), not even the taxi drivers. One of the two times I tried to buy postage stamps there, they had no stamps. But in countries where the postal service works, it works quite well.

    • island canuck Says:

      The Canadian government sent me 2 envelopes on Jan. 23 that have not arrived yet in Isla Margarita.

      Some friends from Belgium sent us some chocolates by regular mail BEFORE CHAVEZ and the package arrived with only the papers that the chocolates were wrapped in.

      Major institutions in Venezuela have not worked since I arrived in Venezuela 25 years ago – Ipostel, Transito, HidroCaribe to name a few. There needs to be the will to clean house & start from scratch. This is not a political problem per se, it’s just a management problem.

      Why does it take 13 guys to repair a water pipe?
      Why are the roads filled with cars that should be in a junk yard?
      Why are there no police patrols to take the abusers off the road like in most other countries?

      A lot of work needs to be done.

      • Kepler Says:


        My dad used to write a lot to people abroad. I did so since I was a child until 1992.
        A normal letter from Valencia’s post office to a friend in Brno (Moravia), Beliko Turnavo (Bulgaria), Berlin (Germany) or Moscow (Russia) or to London (Ontario) would take two weeks at most. A letter from there to our mail box at the post office would take the same amount of time. I sent and got hundreds of letters and dozens of packages and I never got anything stolen. I have sent a couple of things to friends in the States from here and those things (book and chocolate) got stolen. I have sent packages of all types from one Western European country to the other and I have never had a problem. The service was very slow in Venezuela. I sent myself a postcard from Chacao to my actual address in Valencia (not to the mail box at the office) to check it out and the postcard arrived 30 days later…probably transported on a donkey and the donkey got sick for 2 weeks in Maracay.

        Last year, in January, my sister sent me a postcard from Valenciaand I got it at the end of June. Alexander von Humboldt reported in his diary that a letter he gave to a priest in a mission in an Indian village of Apure took 6 months to arrive to his cousin in Saxony…and he remarked the delay was specially aggravated because Spain was at war with Britain back then and British ships were marauding Venezuelan coast all the time and it was very hard for ships to travel safely to Europe.
        So now the Bolivarian government has taken us to those standards…without a war between Venezuela and Britain.

    • syd Says:

      Agree with the suggestion that the postal service should be in state hands. And yes, it has long been deplorable, even before Ch. But I do want to say something praiseworthy about it. Pre-Ch., a letter was mailed to our long-standing Caracas home (in La Catellana), after the family migrated to Canada and my dad pased away. The letter was returned to sender with a rubber-stamped note saying “fallecido”. I was both puzzled and floored by the efficiency.

    • m_astera Says:

      I’ve had quite a few letters, books, and packages mailed to me in Porlamar from the US and Europe; it has been slow, but nothing has been stolen.

      Mailing things the other direction or within Venezuela using Ipostel I haven’t tried. DHL costs around 200 Bs for a letter to the US, or ~500 Bs for half a kilo. Package courier service from Miami to Porlamar costs $110 per kilo.


  4. syd Says:

    So I watched the transmission (or video) of Ch’s arrival, “last night”. And all that was needed were a couple of hurdles for him to jump over. I saw no evidence in his walk of a fracture to the femur, as a supposed result of the ‘radioterapia’, or his being at death’s doorway.

    Yes, I noted a few instances of hesitation, of some catches in his voice. Yes I noted some sweating through the makeup, and hands that looked very thin in comparison to a distended abdomen, under the same ‘mono’ that he has chosen to wear throughout his ‘ordeal’. Gossip mongers have intuited thatCh. might have been given a shot of adrenalin. Others noted that no daughter was with him, a strange occurrence. Still others mentioned the variable in the Maiquetía weather, between that which was happening at the supposed time of arrival from supposedly Cuba, and that which appeared in the transmission. leading one to believe that the show was rehearsed at another time and place.

    Who knows.

    Whether Ch. is dying slowly, or not. Whether he is putting on a show (hmmm, Sean Penn’s involvement now makes a lot more sense), or not, one thing is clear to me. During his extemporaneous weavings, last night, commemorating Mother’s Day, I could not help but think of those who have been wrongly accused, jailed or killed, at Ch.’s behest.

    You see, the Apontex2 revelations (and those of LVA that had lesser ‘shock value’) loomed large in my mind, during Ch.’s attempted chatter. Could it be that others are thinking the same thing? And that no matter how much of a show, Ch. and his acolytes put on, they will never be able to surmount the worms of doubt that have crept into the minds of even the most fervent believer.

  5. CharlesC Says:

    Maybe I am “old-fashioned, but I hope Capriles Economic Advisor stops borrowing money and tries to eliminate the huge debts left by Chavez.
    Otherwise, can you spell G-R-E-E-C-E?

  6. Bodies can be kept on life support for considerable lengths of time…
    However, hearts can stand only just that much abuse
    that comes from anesthesia,
    and cancer cells tend to run wild on their own schedules.
    Maybe we should be asking,
    how long will the venezuelan population allow terminally ill
    individuals to cling to power.

  7. CharlesC Says:

    “We don’t have it clear which is the way to development”Politically
    that was a “faux pas” -shoot yourself in the foot-moment.
    Literally almost anyone -can see several avenues available for “development”
    for Venezuela and venezuelan people. Venezuela is absolute I believe
    a “land of opportunity”. My main worry is that Chavez has given away the
    country and the future to China, Cuba, etc. and these traitor contracts must be

    • moctavio Says:

      Villasmil blew it, he shoud not have said that in the article and should have been more vague on what is “strategic”

  8. megaescualidus Says:


    Two questions:

    1) Do you now have a “revised” prediction of HC passing (i.e. he’ll no longer be “with us” by your birthday next year, or something like that)?

    2) Do you know the date in which Capriles can start officially campaigning for the October election? Correct me if I’m wrong, but, it is later, at a date closer to the election, when all parties can officially start campaigning, right? Anyway, we all know those kind of rules are really meant to straightjacket the opposition – the Goverment never abides by rules like that (or pretty much any rule, for that matter).

    • moctavio Says:

      1) as usual there is no info, but it has been 12 days and we have heard from him once for 20 minutes only. There has to be a reason for that.

      • moctavio Says:

        2) the registration for the election has to take place 90 days before it and that is when campaigning beings, I think the exact date is June 10th.

      • syd Says:

        I predict Ch. will not be campaigning on June 10th, or anytime after that.

    • extorres Says:

      Latest I’ve heard, lungs are involved, so estimates are sooner, rather than later.

  9. CharlesC Says:

    Chavez spending money like a drunken sailor-via Tweet while in Cuba…

  10. NET Says:

    Capriles is a pragmatist–why waste words on meaningless labels. His social programs have worked in Miranda. Large-scale Misiones/CADIVI/state-owned companies cannot be dismantled or even changed quickly. No-one even knows if CANTV is “profitable”, what with phony accounting/CADIVI dollars, etc. SIDOR et. al. were never profitable if non-subsidized realistic costs (electricity/water/Government bailouts).) were assigned to them. Capriles cannot rock the boat if he doesn’t even know if the boat can really float, nor can he scare off massive welfare program recipients at this stage.

    • CharlesC Says:

      NET-I think you nailed it. Specifically, Capriles and his economic advisors want to avoid labels-opposite of the extreme idealogical driven economic decisions under Chavez.

  11. A. Shaw Says:

    When Capriles says he likes social programs for the working class. That’s bourgeois liberalism which is only distasteful to crackpot reactionaries of all classses.

    But when Capriles goes further and says he likes the State to own certain means of propuction and certain means of distribution, then that could be either souped-up liberalism or populism or socialism.

    Socialism requires workers chiefly exercise state power and exercise power chiefly for the workers.

    Clearly, Capriles dislikes power in the hands of the working class. He ain’t a socialist. So, Capriles likes either liberalism or populism.

    If Capriles likes liberalism or populism, he’s a bizarre sort of reactionary.

    Most likely, the issue is: What is Capriles — a bourgeois liberal or a bourgeois reactionary?

    You say he’s only two-faced — that is, he’s a reactionary who pretends to be liberal to get votes.

    Are you sure? The Devil isn’t.

    • moctavio Says:

      Shaw: I may question Villasmil, but he is an economist, he understands basic concepts, not like the mediocre Mathematician at the Central Bank who has no clue, or the silly Urban Planner that is Minister of finance and has never taken an economics course (and it shows) in his life. I take Villasmil any day. At least he is willing to engage in discussion, while the idiotic fools who run the Venezuelan economy thin they know the “truth”, to them it is a religion, even if they dont even know the ten commandments.

      So, please spare me the condescending tone.

      • A. Shaw Says:

        “So, please spare me the condescending tone,” the Devil complains.


        Devil, if intent rules over result, then my tone was congratulatory, not condescending. If result however rules over intent, then my apologies.

        I understand your message and I, of course, shall act in accordance with it.

        I’ve enjoyed the correspondance with your space.

        May Fortuna, the greatest of the divine beings, smile on you,

        A. Shaw

  12. MasterBlog Says:

    In this government, if you can call it that, anything that makes money is strategic!!

    “ tenemos muy claro cuál es el camino del desarrollo..” does not bode well for HCR. The people know the state is bankrupt, enough nannying. The business of making money should be left to the private sector…

  13. Carlos Says:

    Have to disagree Miguel in your comments about CANTV and telecom industry in Venezuela.
    State owned telcos are bad but private telcos are actually worse. And it happens that satte owned CANTV or MOVILNET are really bad and cheap while MOVISTAR and DIGITEL are worse and more expensive.
    It was, its is and it will be a scam,
    Venezuelan private telcos were and are ripping off customers, both for cable TV operators, mobile providers or fixed lines (former CANTV/Verizon)..
    I still remember the privatized and efficient CANTV/Verizon rising rates every 3 months and charging full minute rates for any access to dialup internet for years until somebody finally enforced CANTV to create an all-you-can-eat rate.
    We were paying 6 to 7 times international rates when compared to the US or Chilean operators.
    And now look at mobile. I have a Digitel which was literally destroyed from the day Telecom Italia sold it to a venezuelan private investor (Cisneros). 3G is a joke, it simply does not work, calls interrupted, no signal, and keep adding.
    Then I bought a MOVISTAR, the best of breed. Well, something better but again a slow network with noisy calls and many broken areas.
    And rates for pot-paid medium plans (say 500 to 1000 minutes per month) are 3 times equivalent US rates.

    Now, and well againts all my wishes, I had to buy a Movilnet, and well, unfortunately this is the only one that work and is reasonably priced. And 3G works faster.

    • moctavio Says:

      Well, I disagree with you, that is what regulators are for. As to why things are messy, it is easy, dont give dollars to the telcos and how do they buy equipment? CANTV is doing worse and worse and the rates are subsidized more an more, CANTv is living off the investments made before the privatizations. You want cheaper rates? Allow more and more telcos. But until you resolve the exchange dilemma, nobody will do anything. Bopth Digitel and Movistar have had the problem of bigger response to 3G that they ever expected and they cant invest at the same rate, it is a vicious circle.

  14. Ira Says:

    I don’t understand your misgivings, Miguel:

    I would rather hear a politician say, “We don’t know exactly just yet” than one who says “I am 100% right and know exactly what to do.”

    Given the phantom nature of Chavista financial statistics (who the hell knows WHAT’S going on within any given company)…combined with the voting block of state workers who would be put off by too much talk of privatization…I think he pretty much said the right thing.

    • moctavio Says:

      Villasmil is not a politician, he is the Chief Economic adviser to the opposition candidate, if he does not know where we should go, to me, it is a HUGE worry. But the little he says about where we should go worries me even more.

  15. VJ Says:

    I agree with what the Devil said about letting “the Government concentrate in the basics, low risk areas and let the private sector take the risks, under State supervision.” and also that “priorities” must be defined. BUT (in capital letters!) if Venezuela wants to embark in a privatization program and attract foreign investment, first of all, we have to put our house Venezuela in order.
    Meaning: 1- The Rule of Law must be reinstated. 2- The separation of public powers must be respected. 3- The judiciary system must be refounded from ground zero. 4- We need to start fixing the economy, controlling inflation, adjusting the foreign exchange rate. 5- PDVSA and the Armed Forces must be reorganized . 6- Clear rules must be established to restore investor´s confidence. And last but not least important: 7- The new government must show to the world and the future foreign investors, it is able to “GOVERN” the Nation (forgive the repetition).
    So if Venezuela wants to attract foreign investments, we better start thinking now in how we can accomplish the colossal chalenges that are waiting for us all in the very near future.

  16. Milton Says:

    I have heard Villasmil as a university professor in the past. I would say he is ok for the job. At leask he ticks all the boxes from a career/educational point of view, which is a lot to say when compared to the economic thinkers of the chavismo. However, I agree with Miguel in the sense that there seems to be much better qualified people out there. For that reason he is just “ok”.
    We have to be careful in judging what he declares. He has a difficult task, on one hand to convince the economic establishment in and outside Venny and on the other hand help Capriles win votes from the left…Therefore we are going to have to get some big magnifying glasses and start reading between lines…

    • syd Says:

      well, I hope that by the time Villasmil is ready to convince the financial establishments, in and outside Vzla, he’ll have an economic plan in place. Because his “ tenemos muy claro cuál es el camino del desarrollo..” needs no magnifying glass, inspires no confidence .. and does not bode well for votes. tick tock .. 5 months left.

  17. I think we are forgetting the past…and as they say, would be doomed to repeat it if that is the case.

    Lets not forget that when Chavez decided to leave and Carmona took over, the first thing he did was try to get rid of all the Chavez appointed senators, military etc etc. Of course there were a lot of those ingrained in the government and none of them wanted to leave so they turned the tables on him and brought Chavez back.

    So the lesson here is, Capriles cant just wipe the slate clean and get rid of everyone that has their loyalties with Chavez, they would just rebel and oppose all radical change! There are way too many interests at stake for Capriles to get rid of that many people, so him treading lightly and not laying down his plans 100% at this point I think is a smart move..both before the elections AND after. At least until things stabilize and go back to normal…

  18. megaescualidus Says:

    CANTV is strategic to the “rojo-rojito” Government of HC because electronic votes are routed thru it in every election. The Government definitely wants to own the conduit those votes are routed thru, back and forth, and with as many turns as it should take to get them “doctored” into HC’s liking. Everything else, as far as CANTV’s mission, is secondary.

  19. Caracas Gringo Says:

    Possibly Capriles’ chief econ adviser is hinting that it’s the same old same old…or, como dirian algunos, “a trapiche viejo, cana nueva.”

  20. A. Shaw Says:

    Capriles and Villasmil suspect the occurence of a big shift in ideology within the reactionary sector of the electorate. They seem to believe Feb. 12 implies and affirms a big switch from hard-core, crackpot reactionaries to soft-core, rational reactionaries.

    In other words, old school reactionary leaders are being quietly dumped by reactionary sector of the electorate.

    Capriles would never make this big tactical move based on a percieved ideological shift in the reactionary sector of the electorate without an OK from US imperial authorities.

    At the moment, Capriles and Villasmil are NOT reaching out for the wishy-washy liberals on the Left. Capriles prays cancer will bring liberals to him. The softcore reactionary leaders are trying consolidate their precarious hold on the whole reactionary electorate, before the hard-core crackpots snap to what may be taking place.

    The Devil senses or feels something has happened or is happening, but He doesn’t see what it is.

  21. Devil said – ‘
    But more ominous to me, is to hear the Chief Economic adviser of the opposition candidate suggest or say that “We don’t have it clear which is the way to development”

    Unfortunately Capriles is a me-too candidate.
    He would sneak in without offering the voters a clear alternate vision.
    When hugo’s health fails, then I, capriles, will surely be voted in….
    yechh.. that could be a bad judgement call.

    Capriles has said cadivi is a sacred cow,
    not to be tampered with.
    he is also wishy washy about issues.
    No clear alternatives are being offered.
    Should Hugo lay his hands on an acceptable psuv candidate,
    Capriles support will shrivel,
    and the ni-nis will wash their hands off him too.

    • sincero Says:

      Read Capriles “Empleo Para Todos” document! lots of very good answers here couched in practical non ideological language. Ideologies of any kind are the bane of the real world. Hard to fight with most of what is written here.

  22. A. Shaw Says:

    “They DO care, they want the Government to own communications, period,” the Devil insists


    Why is everybody pickin on Villasmil? He’s not Charlie Brown, you know.

    Villasmil is an economist but he’s not a political campaign economist. Campaign economists are rotten economists and vice versa, rotten economists are excellent campaign economists.

    Give the guy a break, after all, he’s right when he hints that the current crises in EU and North America and elsewhere are products of economies that were — and still are — largely managed by the private sector of the bourgeoisie. The record of late of the buck-passing private sector is really lousy.

    France and Greece, like Venezuela, may now be sick of private sector tales.

    • Alek Boyd Says:

      Give the guy a break, after all, he’s right when he hints that the current crises in EU and North America and elsewhere are products of economies that were — and still are — largely managed by the private sector of the bourgeoisie.

      Whaat? He’s right about what?

    • EscarlataEscarlatico Says:

      Funny, you seem to know as little about France and Greece as you know about Venezuela. Anyone that thinks the problem in those countries is the private sector has never read their respective Labor laws and mandatory pension plans, particularly for Government employees, which are at the root of their problems.

  23. Bruni Says:

    I don’t care who does it, Miguel. My point is that it must be done and must be treated as a strategic area by the goverment, meaning they have to be very close to the developments.

    • moctavio Says:

      But that’s the whole point Bruni, to them “strategic” means the State has to do it, not anyone else. Our poor state can not do all the things that they want, they never realize that. Now we have cement, telecom, steel, aluminum, electricity, pc’s , nothing works. In that sense, to you all areas where the Government has a say are “strategic’. That is not what it is to them, read what Juan Nagel ( and Villasmil wrote. So, they DO care, they want the Government to own communications, period.

      • Bruni Says:

        Then they have the wrong understanding of how to implement something “strategic”.

        For instance, if telecommunications are strategic, you give priority to scholarships or funding in telecommunications, or access to dollars. You pay more attention to how you are going to regulate them. You create a climate for telecommunications to flourish (for instance liberating some spectrum to create new competing telcos, or incentivate telco manufacturers, etc.)

        I am not against the state owning telecommunications nor the other way around..but I think that the state must be very careful to make the area flourish.

  24. moctavio Says:

    Bruni: At $60 per line, it would be difficult to increase penetration, that is exactly what the Government owned company is doing, importing parts at Bs. 4.3. The solution is not for the Government to do it, that has been proven over and over again in Venezuela. You could require that companies that provide cell service, for example, have to provide internet service to x number of people for each new line they sell. Those formulas exist, it happened with other services like electricity, which by the way used to work better in private hands too and everyone had to have the service. .

  25. moctavio Says:

    I dont think this is all about getting votes. I just dont think Mr. Villasmil is adequate for the job. A Ph.D. in Economics who has no thoughts on the path to development has clearly been thinking about other issues. I have not heard much with substance from the guy so far. Capriles has much betters advisers than him, but seems to have fixated on Villasmil. Bad sign.

    • Alek Boyd Says:

      Ohhh, that’s going to get you into trouble with the neo indignado fru fru movement Miguel. Questioning the wisdom of Henrique Capriles Radonsky, the MUD and its appointees? Big no no. Prepare for the ostracism…

      • moctavio Says:

        Never wrote to be in good terms with anyone, I just believe in ideas and discussing them…

        • colon Says:

          Good strategy, and great post as usual!

          One ‘big elephant’ idea to discuss: privatization of the oil industry…well maybe in the next generation…A recent interview with Ronald Coase in npr goes a ‘bit’ far right…..

          Nobel Laureate: ‘I’ve Been Wrong So Often, I Don’t Find It Extraordinary At All’

          Is there anything in the world you would consider a public good?

          COASE: I don’t know. I can’t think of anything. Oh, yes, I can. The provision of the Army is something which I think the government can provide, on the whole, better than leaving it to private enterprise.

          KESTENBAUM: Can you think of anything else that definitely falls in that category?

          COASE: Not in the moment.

        • Alek Boyd Says:

          Hey, I’m with you mate, and very much celebrate the fact that you too are willing to question the new status quo, and their idiocy. I absolutely abhor groupies, whether the object of veneration is Chavez or HCR matters little.

      • Cristina Says:

        Love that term Alek ‘neo indignado fru fru movement’…though I think I’m one of them.

      • syd Says:

        The ostracism by the indignado neo frufrus is not nearly as severe as that practiced by the indignado alarmista set, whenever their practices are questioned.

    • A. Shaw Says:

      It’s all about getting votes but Villasmil isn’t getting them.

      Mr. Villasmil isn’t even sub-adequate.

      He thinks about other issues — like Disneyworld and red sodawater.

      Villasmil comes from the nebula, not substance.

      Capriles is “fixated on Villasmil.” Oh no! You Devil, please don’t get into that.

    • syd Says:

      I’m going out on a limb here. But is it possible that shared religious loyalties trump seeking out the best people for the job? For there seem to be quite a few well-scrubbed altar boys running around Capriles.

      Need I say more, as in O.D.? Just wonderin’ as I run to put on my asbestos suit,

    • Eric Says:

      Villasmil was lead economic advisor to Teodoro Petkoff when the latter was preparing his short-lived run for the presidency in 2005, me consta. So he’s had lots of time to think about big-picture economic policy issues. Methinks he, like so many others who flock to presidential candidates like lawyers chase ambulances, may be more interested in salir en la foto than doing the heavy spadework required to craft a coherent economic development policy. Digo yo….

  26. extorres Says:

    moctavio, my rule of thumb is that governments should only receive income from taxation. They should not profit from any business because it becomes a conflict of interest, leading to all the ills we know too well. The caveat, then, is that any business the government gets into has to be free, like education, paid for by the taxes. “Strategic” is a term being used meaning “militarily”, not a good foundation for decisions regarding a sound economic system.

  27. Bruni Says:

    Telecommunications, particularly wired ones tend to lead to monopolistic companies, because the costs are just too large. When that happens you need strong regulations by the government regulatory entity. Like the old Bells.
    The problem with state owned companies in this area is that they become monopolies without regulators..unless the government insert them in a structure that makes them be efficient.

    Wireless networks are cheaper. That is why you have more companies, and, therefore more competition and less need to regulate. The problem with wireless is the spectrum limitation. Even with 4G we will not be able to keep up with the increase of (particularly difficult) traffic by just relying on wireless.

    The low bandwidth is unacceptable in a dense city like Caracas, but it is being a real problem in rural areas everywhere in the world, even in Canada. The problem is that the investments that are needed for what will be low density areas are just too large for the expected gain. So companies just decide to not offer high speed in those areas, nobody competes and those areas are left without appropriate access to the Internet.

    Interestingly Finland had a solution: impose high speed Internet as a right. The government passed a law imposing that every citizen in 2010 have access to a 1Mbps connection and 100 Mbps in 2015.

    So the issue is not that straightforward. Telecommunications ARE strategic everywhere. No country can develop and flourish without appropriate telecommunications. You cannot just leave the market act by itself, without carefully crafted regulation but, at the same time, you cannot just leave a state monopoly do the minimum.

    • Kepler Says:

      Half of the people I know in Venezuela answer back my emails with responses ending in “sent from my blackberry” or the like. And yet…and yet: things are really much worse for the average Juan Bimba.

      I think Rimouski (46000 inhabitants) or Gaspé (16000) have a better internet access than Maturín (population: 800000) or Punto Fijo (300000)

      Montreal + metropolitan area have over 50% of Quebec’s population.
      Greater-Greater-Caracas (echandole a Guarenas y probablemente llegando hasta Los Teques) Greater-Greater-Valencia-Maracaibo-Vergatario+Barquisimeto together may reach 40% of the population at most. 45% live in cities with more than 100 000 inhabitants and yet they are really isolated but for a tiny minority – even if “200%” of Venezuelans have mobile phones and Venezuelans are among the most frantic tweeters in the Galaxy.

      Even people in some areas of what I would include as “Greater-Greater-Valencia” (like most of Guacara Municipality or the highly populated Los Guayos or Southern Valencia) are probably worse off than people in Iqaluit.

      But Chavismo says Internet access has increased in 10000000% since 1998.

      • Ronaldo Says:

        Chavistas also claim Chavez is leading in the poles. Chavez is up to 110 percent of the votes. The opposition and undecides split the rest.

    • moctavio Says:

      Bruni: When the cell phone licenses were given out, companies were forced to build up rural infrastructure, that is why regulators are there for. The proof is in the pudding, with the Government running things, there is no Internet, it was much better when it was run by the much hated markets.

      A good case in point is Venezuela’s cell phone penetration 100%! And even Internet penetration at 40% is impressive, if there were no exchange controls Movistar and Digitel would be eating CANTV’s lunch.

      • Kepler Says:

        What does it mean to have 40% Internet penetration in Venezuela?
        I am not sure how they come up with this figure.

        I keep a Spanish blog I hardly maintain. It has just 149 viewers a day on average. I often mention secondary cities there.

        Here you have the last hits from Venezuela:

        Venezuela Caracas, Distrito Federal
        Venezuela San Juan De Los Morros, Guarico
        Venezuela Caucaguita, Miranda

        Venezuela Caracas, Distrito Federal
        Venezuela Caracas, Distrito Federal
        Venezuela Maracay, Aragua

        Venezuela Caracas, Distrito Federal
        Venezuela Valencia, Carabobo
        Venezuela Caracas, Distrito Federal

        Venezuela Valencia, Carabobo

        Caracas and Valencia together don’t make 30% of the population.

        Is Internet coverage when a street can potentially get Internet if they pay but things are not installed? Is having a prepaid card with possible internet access also part of that Internet-coverage? Because José Rodríguez may have two mobiles, but he will hardly have the money to go and
        surf newspapers with that…

        • moctavio Says:

          I dont know how they measure it, but it is supposed to be people who use the Internet n a regular basis.

      • Bruni Says:

        I don’t know about the type of infrastructure that was built at that time, Miguel. All I can tell you is that cellular infrastructure is “cheap” compared with wireline infrastructure. What costs money is sending a cable to every home.

        Wireless is a good solution then, but the problem is that wireless has its limitations and will have much more as the type of traffic that we are getting nowadays increases. The forthcoming wireless traffic prediction are just huge. Developers develop applications and people adopt them regardless of the bandwidth available, and everybody forgets that bandwidth is limited.

        Kepler, Rimouski is not considered rural at all. When I say rural areas, I am talking about places that have a few citizens per square Km, like farms or small villages.

        IMHO there must be a joint effort by goverments and companies to build a wired infrastructure to every home if one wants development. No company will do that alone. Canada did it with the old telephone: every house had a telephone line, regardless of how far and isolated. It should be done again with the Internet. It is just a matter of priorities.

        • Kepler Says:

          I chose Rimouski and not, say, Percé, on purpose: been there several times, it is definitely a city. What I am trying to say is that Maturín is even much worse off than Rimouski, which would be a big village for Caraqueno-Valenciano standards.

          It is understandable that a village like Perce or some remote place in the Northern territories or Northern Quebec are not cover…for Goodness sake, that’s the second largest country on Earth and it’s tundra out there…too bad…but then we don’t have good coverage even 3 kilometres away from the Panamericana but for the biggest hubs – Caracas, Valencia, etc.

          So: Miguel’s 40% number, which I have seen in El Universal as well: I don’t what that really is.

        • moctavio Says:

          Yes, I agree, but my point is that in Venezuela, the Government has little chance of doing that and recent history proves it. But the Government if it got rid of the mentality of doing it all, could do it. Let me give you an example: I havent seen the statistics recently, but in Venezuela there are like 2+ million ADSL connections to the Internet, but there are like 1.5 million Internet connections using mobile connections to their computers. This is precisely because the fixed line infrastructure is so bad. So, why used fixed line? Why not go the mobile way? Provide that service at a reasonable price and the access would not be the problem, it will be the traffic.

          And the Finnish may have been ahead of themselves, but may be they were wrong, by 2015 most people will connect mobile anyway.

  28. Jeffry house Says:

    The Capriles advisor says they don’t know which, if any, firms should be privatized. To me, it sounds like they are going to study each case before moving precipitously. Given that Chavez releases no information about anything, including government owned companies, this seems appropriate, and responsible.

    • Gustavo Hernandez Acevedo Says:


    • syd Says:

      “..they are going to study each case before moving precipitously.”

      Then that is along the lines of what Villasmil should have said, instead of :
      “creo importante reconocer que no tenemos muy claro cuál es el camino del desarrollo,” a comment that goes to vagueness and indecision. It does not make for good politics.

      • Jeffry house Says:

        You are right.

        • Milton Says:

          Capriles and Villasmil are currently looking for votes. They will not reveal their strategy beforehand because privatizations are an algid debate, that most likely will not serve them in obtaining votes. The best strategy is not to lie and say that they will privatise some companies, but cannot be provide details as they might be target of many critics. You can argue about vagueness and indecision, but I see it as a pure game of politics. Take the example of Spain, Rajoy was precisely criticised for being too vague during the campaign. He knew he had to take difficult measures after winning the elections and he has delivered by taking those difficult measures so far. The results look quite grim in the short term, but definitely are the best choice in the long run for the current spanish drama. Unfortunately, in politics you do not win votes by exposing your strategies to be criticised and especially in the current Venezuelan scene. They need to manage their economics plans with the political strategy. The key is not to lie (they are saying they will privatise) but do not provide further details. Once in the government they can analyse the political environment and undertake the privatisation. We have to read between lines, at the end they are politicians.
          Yes I would like to see 99% of the companies privatised, but do not want to see the same picture we had in 89-92 with a government doing all the check marks in the economy but none in the political sphere. We need the economic measures to be delivered taking into account all the politics they involve, pushing them too fast can result too costly as we experienced in the 90s.

          • moctavio Says:

            Milton, I disagree, they are doing exactly the opposite, they are talking specifics about what they plan to do in areas that they are not even asked. It was Capriles that first brought up the issue of not being able to remove exchange controls and it was Capriles that first rose the issue of “keeping” certain strategic companies.

            • Milton Says:

              That is a good point. However If you look into it those specific are actualIy directed to win sympathies in the left, instead of exposing them to be criticised from the left which was my point. Yes they are exposed to critics from the main stream economic thinking but at the end what part of the electorate this sector represents ( I wish it were more than 80%, unfortunately it a small fraction of it). If I were to literally considered his comment I would strongly disagree. However, I am considering the political issues Capriles is facing and use them as background to interpret his declarations. I honestly see it as political strategy . In a more recent article Juan Nagel tries to dig deeper into what Capriles-Villasmil were trying to mean by “keeping certain strategic companies”. He uses the example Brazilian state owned public companies that fair portions of their shares being publicly traded. Is that what they are looking for? I do not know and guess will not know for while, but would not be completely opposed to the idea as a previous phase to a full privatisation.

  29. Roberto N Says:

    I agree, Miguel, that there are few endeavors in which the Government with a capital G should be involved.

    However, I ask:

    What private capital is going to be willing to take over say, CANTV for example when it is possible that Capriles and the opposition could be a one term president and therefore Chavismo could return in 6 years time, only to re-nationalize CANTV?

    Whoever does take that risk will not only have that scenario in mind, but will build in to the deal any failsafe and/or conditions that insulate or insure them against such a loss.

    Since Chavistas are wonderful at stepping all over our laws and Constitution any guarantees are going to likely be economic and upfront, or close to upfront as possible.

    So, who takes the risk?

    In Juan’s post I posited that there are bound to be certain sectors which a Government should start in, to later privatize when conditions are right and when it makes sense economically. Not a first nor second world solution, but one that may be the way to go in the case of Venezuela Post Chavez.

  30. nolo Says:

    I totally agree with Miguel and most of the comments; however we have to consider that the regime has 13 year teaching communist ideologies and resulted in a massive brainwash of much the Venezuelan population, many people believe that “PDVSA ahora es del pueblo” or CANTV is good because they offer the cheapest price of the market and that is socialism. They don’t know about ADSL and much less what is Mbps neither that CANTV has been favored with CADIVI dollars. I reckon we must focus on the priority, which is working together to get out of this long nightmare and after that we can discuss topics such as strategic and development

  31. captainccs Says:

    Capriles, it seems to me, is just another populist, socialist. La Cuarta all over again? Un pasito pa lante y cinco pa tras. 😦

    Well, as long as we get rid of Chavez. En el camino se endereza la carga.

    • Carolina Says:

      Capriles is just a transition. I think he knows that and we all should know that no matter how much we like him.
      There is no mesiah here and that’s the way it should be.

      • syd Says:

        well said.

        • sincero Says:

          If we read Capriles statements right, he is proposing solutions that people want, he is not saying how he is going to achieve them. For those who know how the economy works, we know that it is the private sector that creates real productive jobs. See how most European countries killed the goose that laid the golden eggs and now they have no way to pay for the freebies politicians gave away by borrowing the money from productive European countries at cheap prices.

  32. syd Says:

    First, my congratulations, Miguel. I very much appreciate your careful analysis of this issue.

    Second, I agree that it’s worrisome when the Chief Economic adviser of the opposition candidate doesn’t know, five months before elections, where he is to take the economic reins of the country. Villasmil’s comments are also highly impolitic. He might have considered, instead, including Juan in a call for the top economists in Venezuela, with the objective of studying and discussing this issue, behind closed doors.

    Having said the above, I agree with Ronaldo. The primary objective of Capriles’ command central is to get out there and obtain votes. Any defined position on the economy could easily risk those votes.

    In addition, we all know by now that Capriles wants to follow, to some degree, the Brazilian model of government. It, I believe (but am not sure), combines state and private initiatives.

  33. sincero Says:

    The government has money because it takes it from productive people, directly via VAT or personal income tax or indirectly via a myriad of corporate levies including income tax. If you or I were to do this, it would be called stealing and we could go to jail, but if the government does it, it is called taxes and is lawful. That is why government expenses are called unproductive, since they steal from the productive sector to pay for unproductive jobs, some might be necessary for the public good and therefore productive, but most are just waste. That is why the English nobles forced king John to sign the Magna Carta and the American colonies rebelled against the British stamp tax on tea. We are happy that we can force American motorists to pay our taxes on oil, while we get our auto fuel at much less than production cost. Such are the perversions governments create to keep their voters happy.

    • captainccs Says:

      >>>The government has money because it takes it from productive people, directly via VAT or personal income tax or indirectly via a myriad of corporate levies including income tax.<<<

      Which country are you talking about? Surely not Venezuela. Here money comes only from oil and recently drugs. "Productive people" have been prohibited, exiled, expropriated or just plain bankrupted.

      • Ronaldo Says:

        It is my understanding that less than half of Venezuelan government revenues come from oil. The rest is from taxes.

        • sincero Says:

          Yes that is correct, and the ones who give us the oil money are the american consumers. And venezuelan politicians are not accountable to the american consumer who foots the bill. As I said before governments do not have money, that only take it away from some to give to others.

  34. Ronaldo Says:

    Capriles is trying to capture votes. Employees know that the Government has money to pay wages even if the business is failing. Private business failure means bankruptcy and no jobs.

    Governments should only own an industry for reasons of self-defense. For example, a private army may look great but can it be trusted. Governments lack the profit motive and will be inefficient compared to the private sector. Private monopolies such as electric companies can be regulated for price and performance.

    • Roger Says:

      I agree this is all about getting votes and all those votes are way out in left field. In France Holande was talking way left last week to get votes. Today he has already started moving back the other way. Simple question is can Capriles be trusted to bring Venezuela back to a working democracy? Actualy the question mote, he is the only option as far as elections go.

      • A. Shaw Says:

        “I agree this is all about getting votes and all those votes are way out in left field,” Roger says.


        So, in other words, Capriles is two-faced.

        It’s not a question of whether the Left trusts two-faced Capriles, but whether even reactionaries trust Capriles.

        Yes, Capriles is lying to get votes. But where does the truth — if any truth exists in him — reside?

        Reactionaries deserve a candidate with one face.

        • Wanley Says:

          A chavista complaining that a politician lies? Are you kidding?
          In my house we call it hypocrisy.

        • metodex Says:

          Chavez LIED on an interview saying Cuba was a dictatorship.
          Now he says Venezuela and Cuba are a single patria.
          Wich means Venezuela is also a Dictatorship.

          Do you have Skype? I want to watch the short-circuit you will experience when you expose yourself to this simple logic

      • Roberto N Says:

        And that candidate is certainly not Hugo Chavez or any of his acolytes, is it?

        The man who promised not to expropriate, to work with business for the good of the country and to construct a society where the democracy would be participative.

        So now we have:

        A Labor law that was discussed by NO ONE, approved with an Enabling law that had to do with RAIN EMERGENCIES IN 2010

        A Constitution that has been stepped on so many times it should be called a Cachapistution

        More expropriations without reparation than you can count

        19,000 murders and 95% impunity

        I could go on, but you get the point. Your POS candidate, Mr. Chavez, has more faces than there are TV screens in Venezuela.

        Go fly a kite, Shaw, you moron.

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