The Devil's Excrement

So, Maduro came back with a bunch of economic decisions purportedly signed by Hugo Chavez personally, and the questionable Vice-President suggested that there would be changes in the gold “structure”. Rumors began circulating that the Government would propose a “new” foreign exchange mechanism using its gold production, but it sounded impractical to me, the main reason being that Venezuela’s gold production currently is below US$ 500 million  a year, indicating any novel mechanism would have little impact.

But instead, the Minister of Oil and Energy and President of PDVSA announced the new measures and so far, they are not that impressive if no others are coming:

-The Government will change the windfall profit tax, such that the trigger point is no longer US$ 70 per barrel, but US$ 80 per barrel. What this means is that PDVSA will be able to keep more of the foreign currency it gets for selling the oil abroad. Before when the trigger point reached US$ 70 per barrel, the extra foreign currency would go to Chavez’ petty cash fund Fonden, from which the money was spent with no transparency whatsoever. Now, this is increased such that if oil prices stay the same, Fonden will receive US$ 2.9 billion less in 2013, of which US$ 2.4 billion will end up in the Venezuelan Central Bank and the Treasury will receive an additional US$ 383 million. Of these US$ 2.4 billion will have to be sold to the Central Bank.

Thus, this is nothing but shifting funds from one pocket to the other, giving PDVSA more (needs less financing now), strengthening the international reserves and the flow via CADIVI. Given PDVSA’s and the Central Bank’s needs, this is not that much of a measure. in terms of size.

-Ramirez also said that they had notified the beneficiaries of Petrocaribe’s largesse, whereby Chavez gives oil to certain countries in Latin America and the Caribbean with grace periods, only 50% upfront, and twenty years to pay the balance at a very low interest rate, that the terms will be changed.

But Ramirez said little about which terms will be changed. Last time there was an emergency, the Government only changed how much money upfront had to be paid by 10%. Since we have not heard an outcry from those receiving the almost free oil, it is hard to imagine that the terms are being changed significantly. This will improve a little the flow of dollars to the Central Bank.

-PDVSA will now be in control of the country’s gold via la Corporacion Venezolana de Mineria (CVM) which will exploit all of the mining of gold in the country. This is another change of many in gold legislation, restructuring and the like in the last 14 years. As Damian Prat notes in his book (previous post) the Chavez Government has not carried out ANY new projects in Guayana that it started to completion, in the last fourteen years. In fact, during Chavez’ years, gold production has fallen from about 10 Tons a year to somewhere between 3 and 4 Tons. Even if they recovered production to the old levels (which will take time), it would be worth about US$ 600 million more at best.

-Ramirez also announced that PDVSA would not issue new dollar bonds because it would be “too expensive”. Funny, he issued bonds up to roughly 300 basis points (3%) above what we would have to pay today, but now it would be expensive. This would be good news, if PDVSA would not acquire more dollar debt. However, Ramirez has denied new bonds were coming before and they were announced only a few days afterwards. The market clearly did not believe him, as investors pushed the prices of bonds down yesterday when the announcement was made.

Nothing about devaluation, paying CADIVI debt, new foreign exchange mechanisms. Maybe they are coming. But the measures announced so far are of little significance.

Stay tuned…

While in Caracas, I bought a copy of Damian Prat’s book : Guayana: The Upside Down Miracle, Editorial Alfa, Colección Hogueras, Caracas, 2012, and all I can say that it is one of the best records of how the Chávez Government has destroyed this country, by selling its sovereignty, its assets and its principles for the sake of the preservation of Chávez’ power. Unfortunately for Hugo, there were other plans for him that interrupted his plans and have made the whole thing a whole waste of Venezuela’s money, for nothing.

And Prat does a magnificent job of documenting everything, step by step, he tells us how Chávez destroyed Guayana and its industries and continues to do so. In fact, the Government has announced now that it is giving the exploration of all our minerals to China’s CITIC, despite the fact that most of the work on prospecting what Venezuela has or not has been determined by Venezuela’s University  Professors long ago.

But going back to Prat’s book, it condenses his program “Publico & Confidencial” in newspaper Correo del Caroni, where he chronicled the whole thing in over 2,000 articles, which together with 370 Tal Cual articles represents an amazing document that documents the destruction of Venezuela’s Guayana industrial complex. How Chávez used corruption to tie up loyalties, while making dozens of announcements that never materialized, How Chávez nationalized working industries, only to shut them down or reduce them to a fraction of their potential, so that we could import the same material’s via graft and corruption, involving the top leaders of Guayana’s industrial complex.

I will try to write separate articles about the many complex cases involving Guayana’s companies, so that each individual story can be told and remain here for the record in English.

Each of the companies has an incredible story of inefficiency and neglect. I will try to write an article about each. For now, here are some glimpses:

Tavsa: The seamless pipe company used to provide PDVSA with 90% of the pipes it needed. Today, the plant does not produce a single pipe. It was stopped by orders from the highest levels of Government and today PDVSA’s needs are supplied by China and Mexico, while 400 workers go everyday to work and do absolutely nothing.

Bauxilum: The company used to provide all of the bauxite needed in Venezuela, with up to 6 million Tons of production a year. Today, it produces two and a half million Tons a year, with the remainder being imported. Why? It is not clear, there has been no investments in the company, trucks don’t work, much promised Chinese loans never arrive. Someone is making a lot of money with these imports.

Sidor: Sidor now produces 11 million fewer steel beams that it used to before it was nationalized. These tubes are being imported mostly from Mexico, from Ternium, the same company that used to run Sidor before it was privatized.

Ferrominera del Orinoco: China via Wisco, is buying 40 million Tons of iron ore, while Venezuela’s use of this ore to produce higher grade products has fallen, and we have gone from using 60% of our iron ore to only 30%.

Alcasa: Under orders from Chávez, 140 reduction cells were shut down, damaging the cells irreversibly, so that energy could be saved there and not in Caracas, which would have generated protests. The aluminum plant used to produce 200,000 tons of aluminum a year, now it barely manages 70,000.

And there is much more: Venezuela’s aluminun production was given to Glencore for money in advance, such that until 2018, the country will not receive one dollar from 30% of its aluminum production. We import oil coke for aluminum electrodes, even if Carbonorca accumulates the same material, because the Government has not had the US$ 400 million (Fonden, where are you when you are needed?) to pay for the plant that produces it. The dredging of the Orinoco river is now done by a Chinese company. And the importing of parts by Ferrominera has been outsourced to a Chinese company. Chávez has made eleven announcements with respect to Alcasa and not ONE has occurred.

Oh yes, meanwhile, union leaders of Guayana have been jailed, mysteriously killed or persecuted, all in the name of the revolution and socialism, while there are memos signed by Chavez not to sign any collective bargaining agreements with the workers.

But perhaps, nothing nails it like the fact that in fourteen tragic years, the Government has announced six new projects and not ONE of them was ever started, forgotten in Chavez’ over-promising and Sunday’s variety show Alo Presidente.

If you are in Venezuela, please go buy the book, so Mr. Prat can write others, for the rest, I will write individual chapters on this upside down miracle, so that the record is here to be seen in English.

BTW, Mr. Prat’s radio program in Union Radio also called “Publico y Confidencial” was recently cancelled under pressure from the Government, following the steps of reporter Marta Colomina and others, victims of Venezuela´s strange version of “free speech”

Relatives of prisoners grieve when they learn of the deaths of their relatives

When Venezuela’s fake Vice President Maduro called the deaths of 61 prisoners in a weapons search at the Uribana prison a “tragic confusion”, one does not know what he is referring to. Is the tragic confusion electing Hugo Chávez fourteen years ago? Or is the tragic confusion naming Deputy Iris Varela as Minister for Prisons, a woman with zero management experience, let alone experience with prisons? Or is the tragic confusion the fact that after all her failures, Iris Varela still is the Minister of Prisons?

Because there is no confusion about the National Guard going in to search for weapons at the Uribana prison and within a couple of hours to find that 61 prisoners are dead (Who cares if it is now only 58, as the Minister is quick to clarify?) and a similar number has been injured. But the Ministers reaction is first to blame Globovision for “announcing” that the search would take place, when it was somebody from her Ministry that said it was going to take place. None other than the Head of the prison talked to Globovision to announce it.

And the Minister looks even more ridiculous when she says, with a straight face to boot, that it is being said that “the prisoners were being abused by the National Guard” which was not the case. Funny, over two percent of the prisoners were killed in a weapons serach, but the Minister finds there was no abuse. What a strange concept of human rights and  abuse Minister Valera has…

And then comes the magic solution (Another tragic confusion?): The problem is solved by shutting down the Uribana prison. In a country with prison facilities for less than 20,000 prisoners, but where close to 45,000 people are in jail, the solution is then to shut down a prison for 2,500 people and relocate them to the other already overcrowded institutions.

Tragic, yes!

Confusion, yes!

Confusion in Maduro’s and Varela’s minds that still think they have no responsibility over all this. That this was all some sort of unfortunate mistake, rather than fourteen years of negligence and mismanagement, which was only compounded by naming Varela to the Ministry to attempt to tackle one of Venezuela’s most difficult and complex problem.

Only Chávez is missing form this charade and confusion, maybe he could say something wise like “The show must go on!” and claim a philosopher said that…

After spending a week in Caracas, it would appear as the word division is the common ground for both the opposition and Chavismo. While Chavismo shows unity so far, this unity is likely to dissolve once Chavez is finally enshrined and many try to claim to be the true spiritual son of Hugo. Diosdado and Nicolas claim to adore each other, but to me their behavior seems to show exactly the opposite, as Diosdado seeks the limelight daily and tends to be much more aggressive than Maduro. He also seems to always make statements whenever Maduro says something, indicating there is little coordination between the two.

Meanwhile I found that almost every opposition person I talked to had a different plan and/or opinion on what to do now. The range goes from those that swear they will not vote in the upcoming Presidential election, to those that believe that Capriles strategy is the only possible strategy. More surprisingly, it seems that the only thing that unites all these people is the belief that absent Chávez, Maduro is beatable, which I disagree with, if the election were to take place before April.

The Government is clearly trying to build up Chavez’ mythical image and Maduro’s campaign is clearly going to be based on exactly that, which may be the only explanation for delaying the election: They intend to take advantage of the adoration of Chávez to insure PSUV’s permanence in power. And it will work, as long as the election is not delayed beyond March.

Beyond March, because the country continues on hold, even if Maduro arrived last night claiming to have a set of economic measures approved by Chávez. Meanwhile my conversations with local manufacturers shows that CADIVI has not been paying bills for months, creating shortages of all sorts of products and indicating that the devaluation has to be larger than expected in order to insure that demand contracts. The fiscal numbers simply do not add up and monetary liquidity has gone up 142% since the last devaluation, that is there are 142% more Bolivars in the system than two years ago, but reserves are the same, giving an implicit exchange rate of Bs. 25 for each dollar in reserves.

But I really do not expect much from these “measures”. It is likely to be more smoke and mirrors to support the system until an election takes place, rather than real economic measures to attempt to resolve the many distortions in the Venezuelan economy.

You can bank on that and it is likely to be the subject of my next post.

Venezuelans complain a lot about inflation. The December CPI was 3.3% for the month of December of which 5.4% was for Food and Beverages.

But nothing prepares you for it. I went out my first day, went to the Chacao “Mercado Libre”. On the way,  I bought El Nacional, then I got some peaches and finally a delicious Palmi Zulia chunk from Maracaibo.

Totals:

El Nacional Bs. 9 US$ 2.1 at the official rate of exchange

Two Peaches Bs. 9.6 US$ 2.23 for two small peaches

405 grams of Palmi Zulia Bs. 38 US$ 8.8 per $

Total US$ 13.1

You may say: Who can buy or get $ at Bs. 4.3 per $.

Very few people, but tell that to the guy who makes the cheese or produces the peaches competing with imported fruit.

As for El Nacional, newsprint is largely imported at Bs. 4.3 per US$.

Oh! How easy it is to lie! Particularly if you are Chavista and sloppy. And sloppy they were, as shown by by an expert, which clearly shows that Chávez signatures were faked in the decree naming Jaua as Vice-President, which also happens to be the same signature as in Chávez salutation to the Armed Forces at the end of the year. The same in that the trace is the exactly the same, despite the Government, via Minister Villegas,  and Vice-President Maduro claiming Chávez actually signed it. No electronic signature here, these guys have been saying Chávez did sign it.

But you don’t need to be an expert. A friend noted this yesterday and I confirmed it later with a very simple exercise. Basically, the decree published in the Official Gazette on January 15th., has not one, but two decrees about Jaua. Curiously the two “signatures” of the President are different, in the sense that one uses a thicker ink trace than the other:

See, the two are MADE to look different, the ink is thicker on the left one. But additionally, the seal was placed in a different location and so was the name of the President, so that visually, there would be appear to be a difference. But the two signatures are IDENTICAL, no matter what the Venezuelan Vice-President says, that Chávez signed the decree. I did the following very simple exercise:

I placed both signatures on top of each other on a window, so that light would shine from behind, I then used my very sophisticated iPhone and holding both pieces of paper and the phone took this picture:

This picture is the superposition, magnified of both decrees, the ¨thinner¨signature of the two decrees is actually in the front. Despite this, as you can clearly see, the signatures in both overlap perfectly, despite the rather crude procedure, showing that this was made using an autopen machine: The signatures are identical, which never happens with real signatures, least of all with a convalescent patient. As the expert showed here, this signature is also identical to the end of the year salutation, which carries no legal validity, but shows that these are all fakes.

But Maduro is so dense, that even today, he tells EFE that Chávez actually signed this decree, which is clearly one of the many lies they have been telling us the last few days. To say nothing of Minister Villegas who said the decree would “prove” that Chávez named Jaua to the position.

As Jose Ignacio Hernandez’ article shows, all of Jaua’s acts are illegal, for the simple reason that he has not been sworn in by the President, as required by law, but more importantly, Chávez has yet to be sworn in, even if they might try to surprise us one of these days. (rumors he might come back tonight). But it is all illegal in any case, because the signatures are fake.

But even more importantly, faking the signatures is not only a crime, but using different widths and trying to make it look different, shows intent to defraud the Venezuelan Constitution and its citizens. And the Vice-President seems to be in on it.

I actually did this yesterday, but to be sincere, was too paranoid it to publish it first.

Only the paranoid survive!

Venezuela’s poor Constitution is being abused and raped every day.

Today President (?) Maduro, claiming that Chavez made the appointment, named Elias Jaua as Foreign Minister.

However, Chavez has not been sworn in, thus he can not appoint anyone until he is.

And Maduro, under the “administrative continuity” interpretation, has to wait until Chavez gets here and is sworn in, that is the whole point of “administrative continuity”

You could argue there are all “interpretations”, but, nobody, even the most rabid Chavista lawyer, or clueless person, can’t say this article was not flagrantly violated today:

Artículo 237. Dentro de los diez primeros días siguientes a la instalación de la Asamblea Nacional, en sesiones ordinarias, el Presidente o Presidenta de la República personalmente presentará, cada año, a la Asamblea un mensaje en que dará cuenta de los aspectos políticos, económicos, sociales y administrativos de su gestión durante el año inmediatamente anterior.

In English:

Art. 237. Within the first ten days of the installation of the National Assembly, in regular session, the President of the Republic personally will present each year to the Assembly a message that will report on the political, economic, social and administrative management during the previous year.

Was Chávez there ¨personally¨? Does the article allow the VP to do the job if he is not “President encargado”

I think not.

So, what happened today? Easy, an illegal act, a violation of the Constitution, all of which are punishable by law to those that participated in it and/or orchestrated the charade.

The violations of the Constitution and the law keep piling up. It will come back to haunt them.

As will claiming Chávez is on the way back.

Hear that Nicolas!

(Dilma and Hugo in better times)

I am not sure which part of this article I find more offensive: The Brazilians want elections? Who asked them? Because so far they have played ball with Chávez and PSUV, as the law has been violated and trampled under Chávez, before and after Chávez’ illness. And they never said anything and instead, always kept sending Chavez cheerleader Marco Aurelio García every time it was needed.

And now they want to have a voice about legality in Venezuela?

So, my not so dear friends at Itamaratí: Why do you send the message to comply with the Constitution when Chávez dies and not today? Is it because if he dies, someone else may be in charge of paying Odebrecht or Embraer?

I don’t know. What I do know, is that if I was Capriles and I got a call from Itamarati, I would tell them to call Diosdado and PSUV and have them respect the law NOW, not in the future. I would emphasize the words “absolute” and “temporal”  in case these chulos had any doubts at what I was pissed about.

Because it takes glands to call the opposition on this now. Did they call Chávez to tell him he should not run because he was sick and his candidacy was a travesty? Did they call Chávez in December and tell him he knew what was about to happen and should declare his absence whether temporal or absolute?

Did they even try to call Raúl and tell him to keep his hands (Or is it his arms?) off Venezuela?

And instead of sending someone impartial, they send that perverse and Machiavellian figure of Brazilian diplomacy named Marco Aurelio García who has never made an impartial statement about Chávez and his revolution. Add insult to injury and send the most partial and biased pseudo diplomat they could find.

Jeez, only Jimmy Carter was missing from this charade to complete the set of left-wing mercantile chulos who like democracy and human rights…sometimes.

But yes Dilma, the opposition wants elections, even if we will likely lose them. Don’t call us, we will call you when and if, the law and the Constitution are ever reestablished in Venezuela and no thanks to you. And please, don’t even mention human rights. Clearly, you have no clue what you are talking about, even if yours were really trampled with.

Face it guys, if cancer had not struck, you wouldn’t have given a hoot about legality in Venezuela.

So, again, don’t call us, we will call you.

No sooner had the twice destituted Judge and President of the Venezuelan Supreme Court Luisa Estela Morales ruled her absurd sentence allowing for administrative  “continuity” between one Presidential term and the next one, that continuity Vice-President Maduro presided over the non-inauguration and immediately left the country for Cuba. Violating that same administrative continuity, which is below the Constitution, Maduro named his own replacement, something he can’t do legally, but even if he could, it would be absolutely illegal under the same principle of continuity invited by the not so august Chief Justice.

And thus Venezuela continues on autopilot. Nobody is in charge, at a time that there are pressing decisions to be made. But politics and Chavez’ health prevail over insecurity, shortages and the economy.

And just as Maduro was leaving, someone maybe, just maybe,  told him about the magical inflation number for December which came out at “only” 3.3% for the month, corresponding to an annualized level of “only” 47.6%, but more ominously, the highest monthly inflation in almost three years (33 months to be precise). This sudden jump, compromises the goal stated by the President of the Central Bank of reaching single digits in 2014, more so, when the all important Food and Beverages jumped all of 5.7% in December, an annualized level close to the scary 100% per year, for those items for which most people in Venezuela spend over 80% of their budget.

But even more ominously, the “shortage” index reached 16.7% of all products, the highest level in four years. And these are all “official” numbers, massaged and improved to make them look good.

Which makes you wonder how these guys sleep at night.

Because each day that goes by without a devaluation, represents financing needs of roughly US$ 166 million (Assuming a deficit of Bs. 21.5 billion a month at the current rate of exchange, which all serious economists agree on). The twelve days that have gone by represent already US$ 2 billion.

But compound the level of inflation with a much needed devaluation to around Bs. 7.5 per US dollar and you see the problem. Maduro lacks the charisma to explain that away to the people and Chavez told him not to devalue until his Schrodinger’s Cat status is no longer in question.

But the country remains on autopilot.

Maduro seems to think he needs time so that people get to know him better, but the same time the needs to campaign conspires against him (And so does his personality). The more he postpones a devaluation, the less money he will have to throw around to the electorate. The more financing he will need before or after the election. The bigger the distortions. The bigger the hole he will dig the country into.

And then there is the crime problem. Venezuela has just surpassed 20,000 homicides per year, putting the country in a class of its own. This number was only 4,000 homicides in 1999 when Hugo Chavez came to power. What is worse, is that the victims of these homicides, are not the well-to-do, but the poor, as crime rates are much larger in poor neighbourhoods.

To say nothing about the country’s infrastructure, as another bridge collapses on the highway that connects Caracas to the East of the country (the second in three months)

But instead of fighting crime, the National Guard is sent out by someone to stop and harass students, as in the picture above, where a student from the Catholic University of Caracas is stopped for having a sign that says “No to Dictatorship”

But fascism breeds fascism. I don’t know who gave the order to repress students the last two days, but given that nobody is in charge, we get all these mini-Dictators in the military, ready to please the new owners. They might even get a promotion this way! By now, all these military officers have been trained to forget about human rights, particularly of those considered to be “opposition”

Meanwhile Chavez continues “assimilating” his treatment, which we all now is true of any treatment, you assimilate until you stop doing so. But the “treatment” he receives is just to make him survive, have less pain or whatever, but no longer to cure him.

And until this is resolved, the country will simply remain on autopilot

Hi! Colleague!

So, in one single and rather brief sentence the Venezuelan Constitution, once the best Constitution in the world, Chávez dixit, has been turned into the most malleable an useless piece of paper in the land. Remarkably, the decision cites Art. 231, which is the one that was asked to be interpreted and instead of citing the many articles relevant to the decision in the current 1999 Constitution, it goes back and cites Art. 186 of the old 1961 Constitution, which is not only obviously invalid, but also irrelevant, since there was no reelection (Wise move!) contemplated under the old Magna Carta.

But I keep going back to the motive in this crime: Why give such a twisted and convoluted interpretation, when there were other apparent more Constitutional paths available?

This tragicomedy has three main actors, with a ghost behind some of them: Hugo Chávez, Nicolas Maduro and Diosdado Cabello. (The ghost is Cuba):

Hugo Chávez may be in bad shape, but while he failed to say on Dec. 9th. what should happen in this particular case, he has never been one to want to give up power. Thus, clinging on to the position fits Chávez’ personality to the hilt. (And the ghosts desires) Today’s decision is consistent with not allowing either a temporal or absolute absence and just let Art. 235 of the Constitution ride. Imagine how ridiculous the interpretation was: The President can ask for it (Did he? I did not see him like I did on Dec. 9th. Did you?) and on top of that it can be as indefinite as he wants, without anyone allowed to question why he continues to be on leave. A good decision for Chávez, if he knows what is going on or expressed he wanted this to happen.

For Maduro, a very poor speaker (chosen by the Cubans), and fairly unknown to boot, the sooner a possible election takes place, the better for him, as there will be little time for the “people” to think about him and have an opinion. However, being such a yes man, Maduro will not go against Chávez wishes, imagine if Hugo resuscitates! (r the Cubans get mad!)

Time is also in Maduro’s favor in terms of the economy. The deficit for 2013 at Bs. 4.3 per US$ is about 16% of GDP. Devalue to Bs. 7.5 and you have about a 4% deficit in round numbers. Easy to finance. But each month you delay the devaluation (Ten days going so far) you generate the need to finance about Bs. 20 billion (US$ 5 billion) or take it from the mysterious parallel funds (If they all exist). If they all have what they are supposed to, you will be at zero by the end of the year.

You can also cut spending, which has already happened, but with an election coming and with Maduro as the candidate, you need all the spending you can get (or find!).

Then we come to Diosdado. He can support Maduro’s path, if that is what Hugo asked for, but as long as Chávez is alive, he can’t go a different way. But Diosdado knows time favors him. If Maduro runs the show for two or three months, with no economic adjustment in place, people may be fed up with Nicolas before even the race starts.

And why didn’t Hugo and Nicolas (And the Cubans!) want Diosdado to be President?

Easy. First they don’t trust him. Second, if a temporal (or absolute) absence was invoked and Diosdado became President, Maduro will be the candidate as: Nicolas Maduro, son of the man, member of PSUV, Chávez anointed successor, but Diosdado would control the purse strings. But, after tomorrow, under the wonderful and twisted interpretation by the Venezuelan Supreme Court, Nicolas Maduro will continue being the Vice-President of Venezuela under the “principle of continuity” cited by Luisa Estela Morales, President of the TSJ, today.

What this means is that if something were to happen to Hugo of a temporal or absolute nature, Nicolas would automatically become President under Art. 233 of the Constitution and run for President as the man in charge, controlling powers and purse strings all along. Moreover, he may even (Barring a Diosdado adventure) be President not for six, but for seven years as he would formally (Or would it have any formality?) assume his Constitutional term on Jan. 10th 2014.

And that is to me the only motive of this tortuous plot: This was the way to avoid Diosdado, have Maduro run as President and comply with Chavez’ wish to remain in power to the last breath.

And the economy? Who cares, let Nicolas take care of it, after all, politics is all that matters…