Random Thoughts About Blogs, Venezuela and a Government Caught in Political Asymptotic Slavery

February 2, 2014

It has been one of those weeks in Venezuela where nothing happens and that is what worries you: How long can the Government continue without making decisions or making half-assed ones, expecting that nothing will happen? But at the same time, Government officials and supporters say the darndest things and you wonder what type of thought process goes through their minds.

And in a country with little significant news to talk about, Quico of Caracas Chronicles, all of a sudden decides to call it quits, sailing into the sunset and deciding that he no longer has the intensity to continue writing about Venezuela. And in some sense, I envy him, because the idea of not writing the blog any longer, comes back frequently into my mind like a boomerang, but while I am writing less, I somehow can not cut that cord off. I am not ready yet. Kudos to him that could write for eleven years and give up. But somehow I can’t.

I wish good luck to him and those that will carry the torch for him now.

When I originally started writing these pages in the summer of 2002, my goal was to tell the world how absurd Venezuela was becoming and how the Chavez Government was using gray areas to subvert democracy and law and order. A few months later, if my memory is correct, Quico began his chronicles, a welcomed relief in my mind, as the intensity at the time was hard to keep up with. More sources, more coverage. Soon afterwards, Daniel showed up with his views and a bit later Alek Boyd started vcrisis. I did not know any of them, but over time, I met all personally and we became a sort of loose conglomerate of telling the world what was happening in Venezuela in English. Alek later looked for other horizons within the Venezuela theme, but Quico, with more coauthors, Daniel and I, kept going and I believe we did achieve a level of originality and credibility not found in the regular media, each in its own style and focus

Quico will be missed, with his sarcastic and provocative style which promotes thought and discussion. He leaves Juan and Gustavo, who will reveal a new look and collaborators, but as good as they are and can be, it will be a different era. We are all getting old, I guess. Time to move on…

For some…

But not for me. When I began this blog, I always envisioned the day when Chávez would disappear from the scene and I would write The End and that would be it for the Devil and the night job I never searched for when I started. Well, Chávez went away and THE END can not be written yet, because the absurd revolution is thriving in its inconsistencies and irresponsibilities, which are still around and amplified. And somehow, it is hard to see the end to all the insanity and absurdities, but I hope one day I can write something like a final chapter.

Physicists like to give name to theories. When I was a Physics student, asymptotic freedom was in vogue, later the name asymptotic slavery was also coined for the property of some superconductors.  Somehow, I have felt for a while that Chavismo is trapped in something we could call political asymptotic slavery.

Because Chavismo made a number of decisions years ago, that it thought it could one day change, but the longer it waits, it becomes asymptotically impossible to change things. As time goes by, Chavismo has become a slave to this decisions long ago. It can no longer backtrack. It is trapped, a slave to its own inconsistencies.

Let me give you an example: Gas prices. Even before Hugo Chávez became President, he asked then President Caldera not to continue increasing the price of gas as planned. So, let’s look at the price of a large tank of gasoline in US $ in Venezuela from 1998 to today at the non-official rate of exchange at the close of the year. I use a tank of gas, assuming it is 80 liters or 21 gallons, because if I used a gallon, it would be hard to show the price in US$:


In 1998, right before Chávez came to power a tank of 80 liters of gasoline, or about 21 gallons, cost about 13.5 US$ in Bolivars. Chávez decided to freeze the price of gas to preserve his popularity. By now, that same tank of gas costs 11 cents of a US$. (NOT A TYPO) Asymptotically, this is simply zero, gas is free in Venezuela, and is one of the many ways in which Chavismo is trapped. Raising it to two dollars, that is bringing it back to the equivalent of seven years ago, represents a factor of twenty increase. It would be political suicide to do so. But raising it to what it was when Chavez got to power would be a factor of 122, 12,000% give or take a percent here or there. Madness. Hard to get out of this trap. Slaves of their own ignorance.

Or take the money supply in Bolívars, the so called M2, the monetary liquidity in circulation:


When Chávez got to power, M2 was Bs. 10 billion in today’s “Bolivares Fuertes”. This is practically zero in the scale of the above graph. Today, it is 121 times larger, there are 121 times more Bolívars in circulation than when Chávez got to power . It is growing paraboliccaly, exponentially. Given that reserves are barely more than that fateful day, it is any wonder that the Bolívar has depreciated so much. (Curiously, it is another factor of about 120, scaling perfectly with the growth in M2. When Chávez got to power the exchange rate was Bs. 0.563, today the unmentionable rate is slightly above 120 times that. And Merentes in his aberrant ignorance says he has seen no evidence that increasing M2 affects inflation!)

We could call this inflationary slavery, another physics name. By now, they can’t slow down, they are trapped in their inflationary economy and fear getting out of it. There is no way to absorb that much money to stop inflation, there is no way for them to live without creating more and more money

The problem is that Chavismo thought they could ride their luck up. And luck they had and they seem to forget it whenever they talk about the bad old days. This is the yearly average price of the Venezuelan oil basket since Chavez came to power:


When Chávez came to power. the average price of oil the previous year was 8.08 dollars per barrel. Between that time and 2006, that average grew by a factor of ten, something somehow lost when Chavismo looks at its lack of accomplishments. Last year it was US$ 97 per barrel, but that was down like two dollars from 2012.

Chavismo thought this would go on forever, until it did not. Thus, Venezuela which had debt of US$ 35 billion (combined PDVSA and the Republic) when Chávez came to power, began borrowing by issuing bonds.

Today, the debt in bonds is about US$ 35 billion for the Republic and another US$ 43 billion for PDVSA.

But the Government realized that appetite for Venezuelan bonds was not infinite, so they borrowed about US$ 20 billion from the Chinese, to be paid in oil, so that the cash flow from that oil went to pay those loans.

Then one day, the Chinese said Wú (No) to any more loans. Thus PDVSA started not paying its suppliers. Later, it was its partners in oil projects that did not get paid. When that was not enough, Cadivi stopped paying for imports already in the country. And when that was not enough, PDVSA started borrowing from the Central Bank and the Treasury.

It all adds up and these are all of the country´s debts today:

PDVSA bonds US$43 billion

Republic bonds US$ 35 billion

China US$ 20 billion

Debt with private sector US$ 42 billion

Debt with Central Bank and Treasury US$ 105 billion (in Bolivars)

A cool US$ 245 billion, a factor of seven increase since when Chávez got to power.

And despite all of these policies, the Minister in charge of the Economy says today that there are shortages in “only” forty of the basic products. Well, in 1998, there could be shortages of one product, maybe two, but not chronic shortages of forty products. After all that debt, a factor of 12 increase in the price of oil, 120 in the number of Bolívars in circulation, you would think things would be at least as bad (or as good?) as in 1998, before this funky “revolution” came to power.

But they are not and they will survive one more year by taking money away from anybody left standing. (Banks?)

Everything Chavismo does now is talk about a future they will somehow build. They could not do it with money and they now will attempt to do with without money.

Yeah, sure…

And that is THE END that I want to be able to write about. I am not sure how this ends. I am not sure about the end of this tragedy (tragicomedy?). But after all this effort, I do want to be able to write about how asymptotic slavery was resolved, how the whole thing unraveled.

And unravel it will someday.

And I will not miss a beat of it.

Note added: I have received a number of private questions about the debt above. First of all, not all of its is dollar denominated, thus, it can be devalued. That would be the case of the debt of PDVSA with the Treasury and the Central Bank. Also, with the dividends included in the private sector debt , about US$ 14.3 billion. But additionally, there is debt in Bs. issued by the Government. The last number I have is US$ 66 billion, it is probably higher today.

61 Responses to “Random Thoughts About Blogs, Venezuela and a Government Caught in Political Asymptotic Slavery”

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  5. Mayke Santos Says:


  6. Victor Says:

    One thing is sure: Venezuela thus this form of government is closer to a colapse than it was a year ago. And it is very obvious that the deeper they dig the faster they take the country into caos. Lets hope they keep piling up the shit until it hits the fan.

  7. xp Says:

    Detallaron que la decisión se debe a un “conjunto” de anomalías y falta de cumplimiento en las normas exigidas, y que fueron detectadas en la revisión de las órdenes de compra consignadas por las empresas. [subasta Sickad suspendida]

    According to the Banco Central,
    las empresas presentaron anomalías, …
    y fallas en las NORMAS exigidas.

    POT calling the KETTLE black.

  8. Ralph Says:

    One of the best articles describing what occurred in Venezuela during the last 15 years. In 1980, when I was till living there, a friend of mine with whom I car-pooled to drive to work, asked me this question, “Things are not looking good for Venezuela’s future with all the corruption and wrong decisions regarding the macro- and micro-economy. How long do you think this will be going on?” My answer then was and still is today, “Until things get so bad that they reach the bottom of the river Guaire, nothing will happen. Only when the last person of the whole population finally comes to the conclusion that things have to change, they will not change.” He then questioned, “How long do you think it will take to get there?” “Two or three generations and then another three or four generations to get back up”. I have no reason to change my opinion. As long as one blames “The Imperium” or anything or anybody else instead of oneself, nothing will change. A society has to acknowledge it was wrong, only then will it move to do something about it and that takes a lot of courage as they have had in Eastern European countries in the late 80’s, 90’s and even today. People are ready to stand up and fight. I have not seen this happening with the population of Venezuela or any other Latin American population for that matter. They are not ready to sacrifice their livelihood and lives to do so, yet.

  9. I too would like to thank you for the blog, I’ve been an avid reader since 2008, and haven’t stopped. I also read your investment blog, which I love, thanks for all your hard work.

  10. bobthebuilder Says:

    Another great summary of the real issues. Please keep up the good work since your blog is one of the few remaining & dwindling reliable news sources.

  11. Alex Says:

    Without the blogs, how difficult would it be to keep oneself informed about Venezuelan affairs? I hope they reactivate Characaschronicles soon. Quico is a splendid writer but on economic matters, your posts are superior – no offense meant.

    I personally discovered these blogs in 2011 when I departed the country and am totally addicted to them. I only wish for more and more content, as if that was going to topple Chavismo!

  12. Morpheous Says:

    This is taken from The Economist (The Party is Over).

    Venezuela is running out of dollars to pay its bills. Although payments to its financial creditors of around $5 billion this year do not appear to be at risk, the country’s arrears on non-financial debt are put at over ten times that sum. These include more than $3 billion owed to foreign airlines for tickets sold in bolívares, and around $9 billion in private-sector imports that have not been paid for because of the dollar shortage. “Under the current economic model, and with this economic policy,” says Asdrúbal Oliveros of Ecoanalítica, “this [debt] looks unpayable.”

    The effects are already apparent. Foreign airlines have placed tight restrictions on ticket sales; some have suspended them altogether. Many drugs and spare parts for medical equipment are unavailable. Car parts, including batteries, are increasingly hard to find; newspapers are closing for lack of paper. The country’s largest private firm, Empresas Polar, which makes many basic foodstuffs, is struggling to make some products. In a statement Polar said the government owed it $463m and that production was “at risk” because foreign suppliers of raw materials and packaging were threatening to halt shipments.
    Track global exchange rates over time with The Economist’s Big Mac currency index

    The government blames the crisis on private businesses and “irresponsible” use of hard currency by ordinary Venezuelans. It has ordered drastic cuts in dollar allowances for travellers, especially to popular destinations like Miami. Remittances to relatives abroad have also been slashed. In a bid to curb runaway inflation, it has introduced a new law restricting companies’ profits to 30% of costs. Long jail sentences await transgressors.

    Without a big injection of dollars from the state oil company, Petróleos de Venezuela, which brings in 96% of foreign earnings, the crunch will continue. Better terms for foreign investors in the oil industry would bring in much-needed cash and boost stagnant production. But unless the government abandons its antipathy to private capital, the prospect of new investment is dim. Shortages of goods are only likely to worsen. If Argentina is an outlier, Venezuela risks straying into a different category entirely.

    • Victor Says:

      Indeed. Great analysis. I would only add that the people that are in the government are so arrogant and nearsighted (not to say they lost any credibility), it is impossible for them to bring real foreign investment. They are even struggling to keep the money inside the country. Businesses have stopped exchanging in black market and yet the Bolivar has managed to keep its slide. Besides its shortage, the other reason is that people are converting into hard currency every single Bolivar they can. No matter the price.

  13. Mitch Says:

    Ouch…Thank you for the numbers..Somehow reading it set against that of the days of the 4th Republic makes one think, “How can they not hide their heads in shame or even sleep at night” ? This is almost the complete ruination of a country, about as close as you can get without a war. Pray God the people will have the strength to pull out of this when it is all over. But the way it is unraveling, it will probably be soon.

  14. firepigette Says:


    Super that you will stick with it.Thanks!

  15. Leopoldo Aguerrevere Says:


    Gusto saludarte.

    ?puedo hacerle forward a un grupo de mis contactos de tu escrito?



    Saludos a Kathy

  16. Chris Says:

    I panicked when I thought for a moment this blog was going away. It is a lifeline to understanding what’s going on. Relatives can only inform me to a point and then it becomes more emotion than information. I’ve thanked you before, but I would like to take this moment to thank you again.

  17. NET Says:

    Hastening the end may be a probable decrease in the price of oil: U. S. mid-term futures just cracked $80/bbl., although Brent has held up somewhat better….On the other hand, the Country is in critical shape right now with oil at $97/bbl.

  18. nacazo Says:

    If the whole history of the world was a road and freedom were the parts that were paved, I would say that only 1 percent would be paved. The rest is a collection of pharaohs, emperors, kings, warlords, dictators, sultans, khalifas, etc enslaving the rest of humanity. Not an optimistic prospect. Even today what percentage of the world really leaves in freedom?

    Seems we like to oppress others when we are in power.

  19. nacazo Says:

    Has cuba unraveled yet?

    • Alek Boyd Says:

      And how about Zimbabwe?

      • moctavio Says:

        Well, for this to last they have to become repressive, really repressive, I dont think they are ready for that. They are wimpy. That alone can unravle it.

    • xp Says:

      On December 26, 1991, the dissolution
      of the Soviet Union was FORMALLY
      finalized by declaration no. 142-H …
      not as important as cuba 🙂
      but still …

      • xp Says:

        Gross Domestic Product (GDP) in Zimbabwe
        was worth 10.80 billion US dollars in 2012.
        The GDP value of Zimbabwe represents
        0.02 % !!!
        percent of the world economy
        [Pop. 13.72 million ‎(2012)]

  20. xp Says:

    Well thought out. Thank you.

    …. As time goes by, Chavismo has become a slave to this decisions long ago. It can no longer backtrack. It is trapped, a slave to its own inconsistencies. …

    “In a fixed mindset students/politicians believe their basic abilities,
    their intelligence, their talents, are just fixed traits.
    They have a certain amount and that’s that,
    and then their goal becomes to look smart
    all the time and never look dumb.

    In a GROWTH mindset students/politicians understand
    that their talents and abilities can be developed
    through effort, good teaching and persistence.
    They don’t necessarily think everyone’s the same
    or anyone can be Einstein,
    but they believe everyone
    can get SMARTER if they work at it.

  21. vanmonk Says:

    we appreciate your perspective and the news you give. I’m thankful you are sticking with it until somehow Chvisimo is more fringe than a factor in Venezuela. I have been thankful for this blog for many years.

  22. moctavio Says:

    If you go to BCV, Informacion Estadistica, Agregados Monetarios, Liquidez Monetaria (Semanal) you can download the whole table of M2 weekly.

    Dont understand the July question.

  23. Kepler Says:

    July? Why July? Just a hunch or first bonds to be tackled?

    Thanks for the M2 source. Where is that data from? Some BCV report? (if I use it for the Wikipedia article, I have to say where the data comes from)

  24. Ira Says:

    I’m OT again, but what else is new?

    How can I–or CAN I–post an image?

    Using image tags? (img, /img)

  25. francisco andamir Says:

    Impecable analysis. Thank you. The question about how and when will it end has indeed shakesperian dimensions. I do know though some facts at least about how will the asymptotic slavery be released, and that is, in a huge chaos. Such state will manifest in the form of a ruthless military right-wing coup or/(and) even a physical disembodiment of the country.
    Meanwhile, with signals such as the obscene celebration of the CELAC assembly in the very house of Colonel Kurtz (The character of Brando in Apocalypse Now) and the petty reaction of U-S-A by letting an anonymous statement of protest slip from under a State Department door, give proof that democracy and freedom spirit reserves among the region are at best in the E of “Echale”.

  26. Pepe M. Says:


  27. Virginia Says:

    As ever, very interesting. I have family in Caracas, doomed!
    Thank you for keeping us all in the loop. This very important to us all.

  28. moctavio Says:

    I can give you the breakdown of the private debt:

    CADIVI Imports not paid US$ 8.7 billion
    CADIVI Dividends approved US$ 4.3 billion
    CADIVI Services and royalties US$ 4.3
    Dividends no approved US$ 10.5
    Oil Contractors US$ 7.85 billion
    PDVSA Partners US$ 6.3 billion

    Source: Ecoanalitica

    • JD Says:

      you might need to add pending expropriations compensation. Just the ConocoPhilips case is likely to be many billions.

      • moctavio Says:

        The problem with those is that you dont know how much they will be. There is another US$ 14 billion of other nationalized companies that I dont include, because I think someday, who knows when, they will be returned to their owners.

  29. Milton Says:

    Miguel, thanks for this post. Keep on your good work writing this amazing blog. I have a question in regards to the amount of debt the government owes to the private sector. Does that number refers to the USDs that CADIVI has not liquidated? If you have more info on that number that could be shared would be great. Thanks in any case.

  30. Federico POGGIOLI Says:

    Well, no one knows the age of the devil, right? But everyone refers to him as a very old person, no wonder “sabe mas por viejo que por diablo”, therefore you (Miguel) simply cannot quit writing these posts until you die. Whether under Chavizmo or not, your comments about Venezuela are interesting.

  31. Juli Carbonell Says:

    “Unravel”? Maybe in my future greatgrandkids’s time

    • moctavio Says:

      Yes, as the article says, the Government has paid US$ 20 billion already. Moreover, the money for the heavy crudes project is barely trickling in.

  32. LuisF Says:

    100% agreed, no end in sight but an asymptotic sinking into chaos and hell.
    It becomes more morbid to watch as the days go by…

  33. extorres Says:

    If you’re here to write about it, I’ll be here to read it. Thanks for your dedication, moctavio. It is appreciated much more than it is ever expressed.

    • N Smith Says:


    • Island Canuck Says:

      Me too

      Excellent summary Miguel.

      With virtually no opposition these days, no communication venues & an oppo leader that seems to spend more time smelling the flowers then confronting the problems I see no hope for the future of Venezuela.

      We are slowly extricating ourselves from the business end of Venezuela & will live on our pensions. There are not many other options. Selling your business or property is a dream unless you want to give it away & then what? Prices for apartments, etc are more than what we are asking for a huge property & business.

      Alice in Wonderland 🙂

    • ErneX Says:

      What this gentleman said.

    • moctavio Says:

      Thanks extorres, Gold, NSmith, Canuck

  34. Bruni Says:

    Do you really think we will see the end of this? I don’t. I am not very positive these days. We may see the end of this government, but I think Venezuelan society is too deep down to get over 15 years of chavismo.

    The social and economic distortions are just too wide to be absorbed in one generation.

    I have come to realize that the problem was not Chavez, the problem is that Venezuelans were/are not ready to make the country a prosperous one. They elected Chavez and they kept voting for him. They lack the political maturity of what it means leading the country towards a first world society.

    A Capitanía General mentality followed by the Devil’s Excrement.

    • Alek Boyd Says:

      Bruni, Chavez was never the problem, but a manifestation. Chavez was but the Frankenstein of Venezuelans. Of all Venezuelans. The problem is still there, and it manifests itself in all spheres of Venezuelan society. The country is doomed, it will never be prosperous.

      Your last sentence says it all.

      • moctavio Says:

        Alek: I did not talk about prosperity, I talked about and end to this backwards thinking, clueless and irresponsible Government. Maybe we will get six months of a better Government, or 50 years of a barbaric Dictatorship, just dont know.

    • moctavio Says:

      Bruni: That is all I said, THE END of this Government. What comes next and in what form, I have absolutely no clue. But I assure you that this will unravel.

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