The Devil's Excrement

The more I think about Maduro’s “announcements” and speech last week, the more I think the whole thing was incredibly inconsequential and very little was truly announced that day. No matter what interpretation anyone wants to give it, what Maduro did was roughly repeat what was said last May, a couple of weeks after he was sworn in as President of Venezuela.

For example, Maduro announced that Cadivi would be eliminated and a new institution, the Centro Nacional de Comercio Exterior (Cencoex) would take over for it. But do you really think this will be a major change? Cencoex will have new stationary, there will be signs on the door and a new website, but the rest will all remain the same. After all, Maduro wants tighter control over who gets the foreign currency, which implies that controls will remain in place and the seventeen steps required today by Cadivi, will become twenty some under Cencoex. If not more.

In fact, the Vice President confirmed this when he said that “The paperwork will remain the same until we make new announcements”, which simply says, we have no clue what to do anymore than we did in May 2013, we just know this is not working this way.

And yes, a new Minister of Finance was appointed, this time a General and an active one at that. As if a General would somehow figure out what others have not been able to. And this General is no Economist, maintaining a long tradition of having someone who is not trained in Economics or Finance for the position. Which obviously shows.

And I repeat, he is military, as if did not have enough military presence in the Cabinet as it was.

And Nelson Merentes, a Mathematician who has created a reputation as being a “pragmatist” goes back to the Venezuelan Central Bank, where his pragmatism led to the artificial  creation of money to the tune of 60% -plus per year, which has lead to the glorious levels of inflation we have.

And some people actually think it is good that he is going back to the Central Bank. It must be a collective death wish of some sort.

Meanwhile, we were told that Sicad would become more important as a mechanism to obtain foreign currency. That the auctions would be dynamized and more companies and people would have access to this mechanism.

Except that is precisely what was said last May/june by Merentes and Ramirez, the latter the other “pragmatist” in the Cabinet. And we have to wonder what makes Ramirez a “pragmatist”, since he has done very little for the economy, pragmatic or otherwise, since he became  Vice-President for Economic Affairs, and very little that can be considered pragmatic. Oh yeah! he made a couple of pragmatic decisions in PDVSA before, but you have to remember that PDVSA is the goose that lays the golden eggs to sustain the revolution, but the revolution is all about ideology, not pragmatism. So, keep the eggs coming so that we can cummunalize Venezuela, if such a word exists, which I doubt.

And once again we were threatened with a modification of the Foreign Exchange Illicit Bill, something as recurring as comets in the past, but now returns so frequently that they have become artificial satellites and pure BS at that. And every time this changes are mentioned, the optimists think some form of market exchange is coming soon, while Chavismo knows that no such animal will exist again as long as they are in power. But people are gullible enough to think that Giordani is on his way out and the revolution will become softer. Sure, as soon as you can say Elvis Amoroso backwards one hundred times in a row and drunk.

In fact, there were so few announcements in the State of the Union speech that the easy part, moving students dollars, travel and the like to he Sicad rate was not even announced. That is how improvised the whole thing was.

And while everyone and the New York Times seems to think that the gasoline price increase is coming, Maduro did not even mention the subject last week and by the time the whole subject is discussed and processed by the Government, what we will have is an increase which is unlikely to match 2014’s inflation in Venezuela, implying that Maduro will simply be running in place by the end of the year.

Because what is happening is simply policy paralysis, influenced in part by fear. Any distortion that is removed will have a political cost in the country, while the way the distortion is removed erodes Maduro’s standing within a Government divided by ideologies, all of them extreme left wing.

Which requires in the end, bringing in more military, active and retired, murderers and coupsters, in a macabre dance of incompetence, to compensate the absence of the one almighty leader.

But in the end, it is all about ideology. Don’t be fooled. The Government will assume any role that they think can be better performed by them. Foreign currency will be channeled through the Government. Imports via State companies and friendly Bolibourgeois, so that the shortages have no way to go but up. And more military will be placed in charge.

Perhaps nothing summarizes this more than the title of Ecoanalitica’s report in reference to Maduro’s speech: “How to make a 360 degree turn”.

And indeed it was, use all the cliches, back to the future, deja vu all over again and the like. Maduro went back to May, losing what is likely to be his only opportunity in the next few years to make an economic adjustment that would have a lasting effect. By the time the distortions become even more dramatic in mid-2014, Maduro and his team will be thinking about the Parliamentary elections in 2015, inducing policy lethargy and the appeal to extremely unorthodox policies and methods to allow the Government to survive until then.

But while the radical wing led by Minister Giordani remains in place, nothing will change. Chavismo/Madurismo will be trapped in its distortions and its inability to execute what is needed to have things improve. Till then, more of the same.

What are these guys smiling at?

Lots of expectations today. Rumors of positive change. Bonds moving up. Maybe, just maybe, Maduro was about to change the course of the Bolivarian revolution. There was talk of a fairly competent oil manager becoming President of PDVSA. Of Ramirez moving to Finance, which would have been a bummer. Of Merentes being shipped back to the Central Bank. In the end, the last one was the only one that became true. Ramirez stays where he is and Merentes is replaced by Rodolfo Marco Torres. Pardon me, General Rodolfo Marco Torres.

As for devaluations and distortions in the economy, not much to report. Maduro did say that travelers will have to go to Sicad or better said, use the Sicad rate for their travels. But he did announce that Cadivi will be eliminated, which many interpreted as the elimination of Cadivi for the private sector, and the Government keeping the Bs. 6.3 per US$ rate to itself.

The path is clear: For the Government, extremely cheap dollars, for everyone else, not even Mastercard, only black market.

As For Minister Marco Torres. What can I say? He does have experience in the Government’s financial sector, but not the type I would boast about. When he was a Colonel, he was in Fonden (uups!), was Treasurer at a very touchy time (oh baby!) and then he was moved sideways to Banco de Venezuela and Minister for Public Banks (I think it happened in that specific order, but who cares, really?). Now he is moved to a new Joint Ministry of Finance AND Minister for Public Banks. The revolution has all these supermen with no training that can do the job or two or three people at once.

And yes, there were other announcements, like they are going to go after speculators and crooks. (Seriously!) Or that they will merge the Superintendecy fo Price Controls and the Consumer Protection agency. (Saman is out once again!).

And yes, Nelson Merentes returns to the Venezuelan Central Bank, where he expanded monetary liquidity at such high pace, that inflation is now in the mid fifties. I guess he is being rewarded for his accomplishments, and sent back to keep up the good work, after his failure in Finance.

But in the end, what Nicolas Maduro is saying is that the revolution will stay the course. That he fails to understand the distortions and dangers to the economy. That between ideology and fear, he can’t even begin to attempt to solve the problems of the Venezuelan economy. I have heard of a few people that talked to Maduro this week or last week about the problems. He heard them all politely, but nothing of what was said is reflected in this speech.

In some sense, this is what Maduro has done in the nine months since he was elected (perhaps?) President. He can not make choices. He has not listened. He has tried to please everyone in his unholy Bolivarian coalition. From Marxists to military, from Socialists to enchufados, from radicals to pragmatists, from Communists to Cubans. He has been unable to make decisions, And he continues and will continue to do so, as long as the Bs. 6.3 per dollar rate is feasible or doable. The private sector seems to be relegated to mostly Sicad or the black market. Maduro thinks the State can do anything. Run everything.

That is the model of the revolution. And as I suggested earlier, there will be no collapse this year. But I can say Maduro’s style suggests that the deterioration will accelerate much faster than it needs to. Inflation will be up this year (85%?). So will the black market rate (double?). GDP will contract (-3%?). Shortages will increase. (35%?) The only thing I can say I am sorry about is that I used the title “Clueless in Miraflores” in the previous post.

It would have been even more perfect for this one!

In the traditional structure of a Government, the Vice-Minister or Under Secretary plays a key role in that he or she runs the Ministry or Department, while the Minister or Secretary, a more political appointment, takes care of the political side, going to public functions and the like. In Venezuela, it used to be the same, the Vice-Minister was a more managerial, less political person, who would run the day to day administrative aspects, while the Minister attended functions, Cabinet meetings and the like. The Vice-Minister also took the place of the Minister when the Minister was away. Under the Vice Minister, there were the “Directores”, who ran each area of the Ministry. Obviously, Vice-Ministers have more perks than “Directores”, higher salaries, cars, body guards and the like.

When Chávez came to power, he began “inventing” Vice-Ministries, mostly to reward buddies who had done something for him, but could not be named Ministers or Vice-Ministers at the moment. I clearly remember when Merentes lost the race for President (Rector) of Universidad Central de Venezuela His grand ambition) and I heard he had been named Vice-Minister of Finance, which made me wonder who would run the Ministry in the absence of the fairly competent person who was Vice-Minister. But there was no problem, Merentes was actually appointed to a new Vice-Ministry, created by Chávez just to thank him for services rendered. Later, when Maduro became Minister of Foreign Affairs, he created three Vice-Ministries, each in charge of different regions of the world. The funny things is, in time, his close friend and confidant Temir Porras, now disappeared from the Government, began covering two of the three, as Maduro trusted him and could not find someone else to fill the third Vice-Ministry.

And now, in a clear sign of how clueless Maduro is about management and how to run a Government, he creates 111 new Vice-Ministers to accompany the thirty Ministers that accompany in his Cabinet. The hilarious thing is that the decree creating these new positions (Decree 730) actually says that this “optimizes” the structure of Government, not once, but twice.

Just imagine, now some Ministries will have as many as six Vice-Ministers, who will have to be coordinated by the Minister, the same guy who will have to spend half his day listening to Maduro, attending formal occasions and going to other meetings and functions outside the Ministry. The Vice-Ministers will be fighting for territory and budget and none of them will be in charge of administration, legal department and many others. Just not very efficient or “optimizing”

Even worse, each of these guys will spend the first month finding an office, getting bodyguards, cars and support staff for the new position. But hey! Everything is working so well in Venezuela that there is really no urgency to do things. Like there is a two month backlog at the Puerto Cabello dock, but there is now no wheat flower, so bread rationing has begun.

Wonder which Vice-Ministers (it overlaps many) are in charge of solving those two problems.

You can have fun reading the list of Vice-Ministers. You will be happy to know that the Vice-Ministry for the Supreme Social Happiness of the People (1.3) survives this restructuring. Or you may wonder why we need a Vice-Minister for Economic Cooperation in Foreign Relations (3.1), if we have one for each region of the world. Or how the four Vice-Ministries in Planning separate their responsibilities (5.1-5,4). Or what Socialist Industries (8.1) are all about. And what exactly does a Vice-Minister for International Tourism (9.2) do? Travel? And really, the Postal Service (20.3) is part of Science and Technology?

But nothing, absolutely nothing, will prepare you for the new Vice-Ministry for Social Networks (21.5). What does this person do? Create more failed “socialist” social networks?  Surf all day? Tweet all day? Monitor and spy on the “people” who use social networks? Block us?

We will soon find out.

But the message is clear: Maduro is so clueless, that he thinks somehow things will work better if each Minister has more and more Vice-Ministers under him or her, as if the number of people at high level can help solve problems, instead of people with the required knowledge. Or if they are chosen not for the loyalty but for their abilities.

But I am sure many of these new positions will be filled with current or former military officers, insuring that nothing will be done better or “optimized”, so the record of Chavismo remains unblemished in its inability to run and manage the country. They wll do exactly the oppite.

Maduro is simply, Clueless in Miraflores.

Institutionality. Such an easy word. But so easy to destroy, so difficult to build up. And therein lies the biggest conundrum facing Venezuelans in the future, whether in a year (not likely), or five (probable) or even later (Can God be so mean to us?), we can attempt to rebuild what has been destroyed by Chavismo. Because it is easy to think anything will be better than this, but when you face an avalanche of crime or economic distortions, you need more than change, you need the required institutionality to create the appropriate culture at each institution, whether part of the Government or of the decentralized Government.

And that is the problem. The sad thing about the loss of institutionality at the Venezuelan Central Bank, is not the clowns at the top, it is the technical professionals that will be hardest to find when (and if!) things change. Because while the exodus at the monetary authority may just be beginning, it has had a long run elsewhere in the country under Chavismo. How do you convince a former Intevep researcher working in Canada to come back?. Where do you find a Venezuelan Professional policeman (with a capital P) willing to come back from abroad and face the myriad of problems our cities face? Or medical doctors? Or Judges?

That is the problem. Chavismo has managed to destroy institutionality at all levels. From the Electoral Board, to Cantv, to PDVSA, to the Comptrollers office, to the Judiciary, those still inside have given up, left or sold their souls to the revolution in exchange for money.

The tough part will not be changing the Government, it will be rebuilding it. Like the picture above, it will take many bricks and many guarantees for people to want to help. As the saying goes: Once burned, twice shy. While some will be willing to come back and help rebuild, many will think they already paid their dues and are not wiling to come back at low salaries and with few guarantees to build an uncertain future.

And uncertain it will be, because unless Chavismo steps over the line badly, once out, they will try to claim they are democrats and they will fight you every day. They will blame crime, low scientific production and even PDVSA’s failure, on the opposition, the economic war, the US or whatever.

Which leads me to the origin of this post. While the murder of a former Miss Venezuela last night, her husband next to her killed in the robbery and their four year old girl surviving the episode is terrorific, this has become daily life for most Venezuelans. By now, a couple of dozen more similar homicides have taken place since this incident last night. Except you don’t know about their lives, whether they were valedictorian, or studying for their Ph.D. or simply  completing high school or university, all useful for a country like Venezuela. Or winners of the Miss Joropo contest…

Except that the destruction of institutionality is such, that the successful ones, the ones that can come up with a plan to fight crime, develop technology or fixed the complex problems associated with health care, are all abroad, developing the same dreams they had, but paid in foreign currency and with their kids going to wonderful schools.

Do you really think many will come back?

And that is the tragedy. Chavsimo thought that the most incompetent, undereducated, corrupt group of Venezuelans, the military, could do everything. And in the process the military got rid of those that had the know-how, the experience and the ability to fix the problems. And unless you get rid of the same military, it will be an uphill battle to get rid of these former, current and active military officers, that have no clue as to how to run anything. And they will try to keep their positions.

The reality is that the sharper Chavismo’s drop, the better the chances at change and institutionality being restored and rebuilt. Unfortunately, the country’s down fall, unless oil prices drop precipitously, is likely to be just a muddle through, with the usual suspects surviving and managing to live another day.

The only positive note I can give you, is that the radical wing of Chavismo is trying to push everyone out, guaranteeing that little is done to fix economic distortions and accelerating the so called collapse of the economy, increasing the chances for a change for the better.

But if Venezuela continues its slow motion downfall, it any not be until at least five years from now, that some form of institutionality can be rebuilt, except the country will not count with the brightest and the best, but with whatever is left. A different picture form what was available before Chavismo came to power.

A long road ahead for recovery. Likely too long for someone my age. Restoring institutionality may take the same thirty or forty years that it took to sort of build it up. Meanwhile the world moves forward, thinking about technology, ideas, know how, globalization and the like. Which Chavismo barely even thinks about.

And on that note, I end this post for the New Year, apologizing for the somber tone, but somehow hopeful that I am completely wrong.