Archive for February 9th, 2014

The Maduro Government Is A Self-Parody

February 9, 2014


Sometimes one is simply incredulous of the things these Bolivarian revolutionaries can come up with. The country is not functioning properly and rather than devote their time to solving the problems, they seem to have some sort of anti-think-tank, where creative/naive/ignorant/revolutionaries seem to have a contest of funny proposals and ideas. It seems as if a bunch of guys and gals sit around a table shooting the bull, until they find something that they think is good, but which has no precedent anywhere in the world, nor does it seem to make much sense, nor any basis other than it seems like a good idea, independent of costs and difficulties.. Decrees are issued, laws are passed and soon the absurd, what appears a parody of reality, becomes a fact in rojo-rojito Venezuela. Add to that Maduro’s statements and you have a Government which seems to be trying to parody what a Government is supposed to be doing it. And they are extremely successful at that. So much so, that Chigüire Bipolar reads like Globovision in its titles. They have become a self-Parody

Here are the latest examples of these parodies:

Traveling Insurance: Minister of Tourism Izarra, as improvised a Minister as there can be, has issue a decree which makes it obligatory to have travel insurance, whether you leave Venezuela or come to Venezuela. Anyone traveling from Venezuela abroad, or vice-versa will have to be “informed” by the transport provider that he or she requires insurance for health and luggage.

Now, just to make life more difficult, it is the airlines that will have to provide you with this. And the decree explicitly forbids travel agents from selling it to you.

There are a number of strange things about this insurance. One, luggage is already insured by the airlines. If the airline loses your luggage, they have to compensate you, so I imagine that it also include theft of the luggage when you are no longer being transported.

But the weirdest thing about this idea, is that at the time that the airlines are owed over three billion dollars by the Venezuelan Government, they create this obligatory insurance abroad and in Venezuela that will be provided by some company or companies, but who the hell will pay them for dollars expenses abroad? Given the experience of the airlines, who will be interested in providing this insurance, when the Government is saying it has no foreign currency for the airlines or to pay private debt?

Who will pay for foreign currency expenses of these insurance companies? If the Government does not have enough dollars, why create a new need for new dollars? Is this in the budget for foreign currency now? Or is this Izarrita acting on his own and having no clue as to how this will be (ever?) be paid? I mean, according to official records, 1.2 million Venezuelans traveled abroad in 2102, at Bs. 800 to Bs. 1,000 per pop, we are talking about a cool US$ 100 per traveler at the Sicad exchange rate, or US$ 100 million a year.

Or is this another “guiso” and the Government already knows which insurance companies will be the “provider” of this service? Will those that travel and have incidents ever get paid?

Just asking…

Full Compliance Contract: As part of the new regulations for importing using Cadivi or Sicad rules, importers will have to sign a contract that they complied with the use of the foreign currency. The contract obliges them to obtain a bond from a bank or insurance company that guarantees the amount given to the importer plus the possible fine. Since the possible fine is up to 100% of the amount approved by the Government, then we are talking about banks and insurance companies issuing bonds or guarantees of up to 200% of the amount. (In US DOLLARS!)

Let’s run some numbers. Since the Government is taking three to six months to pay Cadivi imports, let’s use six months as the average time to “free” the bond to the bank or insurance company.

Let’s say imports this year (Cadivi+Sicad+pseudo-Permuta) reach US$ 48 billion, half of that is US$ 24 billion, an thus the amount amount outstanding in these contracts for six months of imports would be “only” US$ 48 billions.

There is simply no capacity in all of the Venezuelan banking system and insurance system to issue this amount in bonds, guarantees or whatever you may want to call them. This guarantees would have to be in dollars, not in equivalent Boívars.

Moreover, how many of these “importers” are worthy of a bank or an insurance company issuing them a bond or guarantee in US$ dollars for any amount?

Have these brilliant Bolivarian bureaucrats ever heard of the words “credit risk”. They clearly haven’t.

Just saying…

Maduro asks Toyota for the impossible: The last example comes from the top: Maduro and his VP for the Economy. Toyota this week announced that it would be stopping production in Venezuela indefinitely due to a lack of foreign currency. The announcement was made by Shino Yamada, who is a Toyota spokeswoman at the company’s New York headquarters.

So here comes a bully, arrogant Maduro, asking his Minister to have Toyota a heavyweight, either the President for Latin America or in his own words “someone from Japan”. Hey! Maybe Shino Yamada herself will be sent from the “imperio”. According to Maduro, maybe some lowly manger made the decision, which shows that he made no homework in finding out who made the statement. Years lost as Foreign Minister if you ask me. He learned very little.

But then, he shows how clueless he is when he says “It seems as if the only plan of some little managers is dollars, dollars, dollars..Where is the capacity to create the products here, we have it all: Aluminum, Petrochemicals, Iron, Steel…”

Well, how clueless can he be? To begin with, very few parts of a Toyota are made in Venezuela, which Maduro appears not to know. But more importantly, of the four industries that “we have it all”, only one can be said to be functioning more or less, petrochemicals, basically because the Government decided to take all them over. Or should I say Hugo Chávez?. The other three: Aluminum, Iron and Steel are producing very little under revolutionary management and can’t even supply other industries that do use these products in their manufacturing.

But this is the same Government who has brought fly by night operations from Iran and China to manufacture (assemble) cars here without any steady production or infrastructure, just a big arbitrage of the rate of exchange. Some, or many of these companies are actually not producing anything, they just don’t say anything. Toyota, in contrast, is a publicly trading company which is by law forced to disclose events that impact its bottom line. Venezuela shutting down is important. And Maduro is likely to react with his characteristic bully style, threatening to “nationalize” the Toyota plant, which will simply become another empty white elephant under Bolivarian management. But hey! We have homeland!

But what can you expect from President’s right? That is why you have “experts” right below him, like Vice-President for the Economy Ramirez. His accusation against Toyota?: Toyota Venezuela has debt with its Home Office.

Really Rafael? What do you expect these companies do, when Cadivi does not provide the US dollars for parts? The “Home Office” sends the parts on “credit” to the local company to keep the plant running until the line of credit with that subsidiary reaches its maximum. It’s called “risk management”, because as you know Rafael, a certain Minister said two weeks ago that Venezuela can not afford to pay its Cadivi debt, that includes Toyota’s.

And yes, Toyota Venezuela now has a debt with Toyota Japan. That is as evident as saying Venezuela owes bondholders (And right now, they are scared s…less)

In some sense, the Maduro Government has become a self-parody. They speak as if they were trying to outdo each other. Who can be crazier? Who can sound nuttier? Who can make the most outrageous comment? Who can be so creative, that he will promise the impossible?

And its becoming a daily competition. pero tenemos Patria…