Archive for June, 2014

Dear Hugo (An Imaginary Letter)

June 27, 2014

carta

Dear Hugo:

You know I don’t like writing very much, I prefer to talk, but since everyone seems to be writing letters all around me and you have not appeared again in the form of a bird since I got rid of your friend The Monk, I have decided to write this open letter which I hope you are the only that ever reads it. If my wife finds out about it, she will get really mad, because she keeps telling me to forget about you and start my own dynasty. But while I watched that TV  series when I was a bodyguard for the Venezuelan rich and famous in the 80’s,  I really don’t want to replace you and start a new anything.

In any case, you know I never wanted to be sitting here in this chair, but you insisted and look at the mess I am in now (Not to mention the country). I knew when you came back from Cuba for that last time, that you were really sick and not functioning well, when you told me that you had decided to name me your successor. While you dismissed my objections, I should have known your illness was getting to your brain. And for once in these fifteen years I was right, and you were wrong: The military does not like me because I am not one of them, the communists hate me, Godgiven thinks you should have picked him, the Garibaldis hate my guts because I am uneducated, the Francesitos look down on me and only the civilian jalabolas seem to like me. But they have little power and may not even like me.

So here I am.

But it is really hard to understand why you liked this guy The Monk so much. I still don’t get it. I know, I know, he was your thesis adviser, but like my wife says, you never finished your thesis, so why does it matter at all? While people think I got rid of him because he was disagreeing a lot with the rest of the Cabinet on what to do, the truth is that I don’t hold many Cabinet meetings anyway, they are long, boring and Rafael and your son in law want to talk all the time. I only like them when they are live on TV and  they end fast when Jorge’s (the other Jorge) sister says people are turning their TV’s off.

In any case, I got rid of him because he was really boring. He would come to Miraflores unannounced and sit outside my office waiting for me. Most of the time I would sneak out, but he would sit out there for hours waiting to talk with me. Even other Ministers began complaining that they would come see me and while waiting for me, The Monk would bore them to death. And the days I did receive him, he would just blabber and blabber about stuff I don’t understand, like social metabolism and the dimensionality of capitalism. And he would talk for hours. So much so, that I installed a switch so that when I pushed it, the Minister of the Interior would call me and tell me we had a national emergency, like another magnicide attempt. That is why we have had so many press conferences to announce them. I just needed to get away from The Monk.

The problem is that I am not sure what to do now. Everyone gives me advice, I am supposed to make the economic decisions, but what do I know? Rafa says we need to devalue, Jorge (number 3) says no way, inflation will hit 100% and I would be given #lasalida, Meanwhile the Monk’s buddy in Washington seems to agree with Rafa, but says we should keep the price of gas where it is.

The wife says we should do nothing. It has worked for a year, she claims, why not push our luck. But I really don’t know Hugo. I like being President. I can be very funny, talk for hours, just like you, but I don’t seem to scare anyone. And some of those Generals are really scary. I don’t like going to the interior like you. I am a Caracas kid, as you know. So, I stay put, Teresa Carreño is as far as I go.

And the World Soccer Cup has been a bummer. Everyone wants to watch the games with me, but they all go for crummy teams, like Algiers or Bosnia-Streptomagma, the one I can’t even pronounce. I like soccer, I wanted Spain to win, now I want Gremany, but apparently this is not politically correct, I am supposed to go for Brazil or Argentina. But I am mad at Dilma, and you know Cristina was never very friendly with me. You never minded that she wore too much make up, but I told her she did. She said that is something a Foreign Minister does not say to a Lady. Go figure, I was only talking to her. I was just trying to be constructive. The make-up never seemed to stop you though.

So Hugo, things are tough. I need some guidance. The first thing I am going to do is like what you used to do when things were tough: announce the restructuring of something. I think that if I say of the whole Government will be restructured, it will sound really Presidential, don’t you? I can do it while the World Soccer Cup is going on, so that people will not follow it in detail and in the end I will leave everything the same. Nobody will remember by then.

But I really need a hand. You really screwed up leaving this revolution in my hands, so you better help. I propose the following: Tomorrow at noon (ok, ok, 11:30 AM because of that fool Navarro convinced you to change the time half an hour, which totally confuses me), while everyone is watching Brazil-Chile, I will go out to the small garden in Miraflores with my Ouija board. You show up in your bird form and I will ask simple questions, like devalue, increase gas, fire someone and you just push the Ouija in the right direction. OK? It’s the least you can do for me, now that you got me into this mess.

Hope you are fine, wherever you are. If you see Sai B., please say hi and ask him to given me a hand if he can too. I need all the help I can get.

Venceremos!

Nico

P.S. I am still curious why you picked me, maybe when we are at the Ouija board, can you try to tell me? Thanks buddy, Patria and all that!.

P.S. #2: BTW, all these years we admired The Monk because he was born in San Pedro de Macoriz, where all great Dominican baseball players come from. It turns out he is from San Francisco de Macoriz not San Pedro (Did you read the letter?), different towns, no Pedro Martinez from there! What a fake! I bet he is not even a monk.

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Jorge Giordani Leaves Cabinet: So Long, Farewell…, But…

June 24, 2014

giordani

Jorge Giordani (also known as The Monk) has been such a fixture in Chavez’ Cabinet and now under Maduro, that the last time he was removed from the Cabinet, this blog had yet to be born. And this blog is now almost twelve years old. And even if there is no written record of that departure in May 2002, I do recall a feeling of relief that Mr. Giordani had finally departed. Except his absence did not last much and Chavez brought him back to the Cabinet, more powerful than ever. At the time, Chavez’ intelligence police must have been subpar, as Mr. Giordani held meetings on Saturday at his home with his buddies, where he mostly blasted Chavez, his collaborators and their policies. Then last week, as I was on vacation, Mr. Giordani was fired once again, which gave me an immense satisfaction and almost pushed me into writing something on the fly, but I decided this deserved some thought, as Giordani’s now infamous document “Testimony and Responsibility in Front of History“, not only gives us an unusual glimpse at some of the dynamics of the last few years, but deserves careful reading. Careful not only to achieve accuracy, but also in order to interpret the true meaning of the impact , if any, of Giordani’s departure from the Government.

Simply, there are too many inaccuracies in both the contents of the document, as well as in some of its interpretations.

If anyone has read Giordani’s document, it is fairly dense and obtuse. His writing is not the most organized and clear in the world and sometimes thoughts and ideas are not properly structured. Thus, one has to read it carefully in order to understand what the former Minister is saying. I have tried to do that in detail. Punishing work.

To begin with, Giordani clearly admits that the Government and him personally, repeatedly violated the law, when he says “that in order to consolidate political power as an essential objective to strengthen the revolution..we managed with a huge sacrifice and with a financial and economic  effort which took us to have access and use resources at extreme levels…”

Nothing new there, Giordani has never been one to follow the laws of the Constitution. In fact, when he came to power he ignored the law of the Macroeconomic Stabilization Fund, first not contributing to the fund what the law stated, which was followed up with the use of the resources in that fund for objectives different than those established by law. But in that simple sentence, Giordani states that he and his buddies broke many Venezuelan laws. Because you can’t use public funds to finance electoral campaigns and you can’t use funds for a purpose different that what they were budgeted for, both of which are punished with jail. The anti-corruption law would say that Giordani and other Government officials committed fraud, misuse, embezzlement, corruption, abuse of the position for political purpose and influence peddling.

Giordani and those Government officials responsible for this would get at least 5 years in jail. Of course, the “new” left, the modern, populist, socialist left, non-democratic left only applies the laws to its enemies. So, the revolution forgives him.

But the “principled” Jorge Giordani goes even further, because he talks about corruption in Cadivi (later Cencoex) and his suggestion to President Maduro that he become Head of Cadivi to stop corruption. Well, by law, Giordani as Minister was supposed to denounce this corruption to the Prosecutor and he is directly accusing President Maduro of covering it up, when he says that Maduro did not accept his proposal on corruption, implying Maduro also failed to denounce it.

And I use the term “principled” Jorge Giordani on purpose, because I have seen the term used referring to him both in Chavista and opposition circles since he was fired. Suggesting Mr. Giordani has principles, when he is confessing to violating the laws, diverting public funds and using public funds for political purposes is like saying any criminal that sticks to his methods somehow has principles of any sort.

And this lack of ethics extends to Giordani somehow avoiding to note that many of the irresponsible policies implemented were his responsibility. That the same funds that he suggests are being managed in a corrupt way, were set up by Giordani in such a way as to avoid controls and that the excess expenditures and that loans to PDVSA and the growth in monetary liquidity approved by himself as Minister of Finance, member of the Boards of PDVSA and the Venezuelan Central Bank.

And I can not forget the Fonden funds that are still unaccounted for and took so much space in this blog and others as some US$ 30 billion are still missing from the ledgers.

And despite using the word responsibility in the title of his document, Mr, Giordani is absolutely irresponsible all over the place. For example, he says that President Maduro gave him “new” responsibilities when he was named Minister of Planning, but Mr. Giordani never ceased being Minister of Planning since 2002, he just somehow convinced President Chávez to merge Planning and Finance into a single Ministry. There was nothing new in 2013 for Giordani, he was simply removed from the control of the purse strings in Finance and moved to the less important Planning Ministry to think long term.

But his selective memory is amazing in not recognizing how the same system of exchange controls he helped implement, generated the corruption that he now wants to fight so badly. And by starting the timeline at the time of Chávez last days, Giordani evades talking about the secretive way in which bonds were allocated in the numerous Venezuela and PDVSA issues, or how the Argentinean bonds were used to feed in a very non-transparent and corrupt manner the swap system. To say nothing of the infamous structured notes or the buddies and even brothers of the revolution buying banks under Giordani’s not so watchful eyes.

And his testimony conveniently starts right after Giordani single handedly killed Venezuela’s capital markets when he tried to pass the blame of not being able to hold the parallel exchange rate in 2010, jailing innocent people and destroying some 5,000 jobs in a process which was controlled by Giordani’s trusted men, many of which made fortunes in the process.

To say nothing of the money spent trying to replace that capital markets system starting the foolish Bolsa Bolivariana (still around?) and now, four years later after getting mad at the brokers for a 30% devaluation of the currency, the all mighty Giordani-managed-controlled system has yielded a 1,000% devaluation in that parallel rate, now called the black market rate.

Way to go Monk!

But if there is one puzzle to me, is the excitement by the investment community over the departure of the Monk. Somehow, it would seem as if he was replaced by a Venezuelan that just won the John Bates Clark medal for Economics, instead of a talibanic Geographer responsible for the only default (Sidetur) of a Venezuelan bond in the last 20 years. Somehow we are expected to believe that Giordani’s departure opens the way for the magic adjustment that the Venezualn economy requires.

But wait! Haven’t you read the letter? Giordani says he has been out of the loop essentially since Chávez’ health deteriorated and certainly since Maduro became President. So, if I may ask, how has he been an obstacle to the implementation of this so called magic adjustment program?

I can go even further, read the letter again. The style is obtuse, but Giordani says that six things will require to be “revised” going forward,  including the price of gas and other subsidies, reduce debt issuance, devalue and reduce subsidies to public companies. (This has been also noted by Victor Salmeron) In fact, Giordani says he asked for a reduction of public expenditures, PDVSA’s increasing debt should be revised and so should internal indebtedness.

Sounds to me like Giordani was the pragmatist and not the other way around like markets seem to be suggesting.

In fact, what this all suggests is that the various factions within Chavismo can’t agree on policy going forward. The much needed adjustment, including raising the price of gas and at least removing the Bs. 6.3 per US$ rate is something that Giordani also wanted, and economic Czar Ramirez wants, but the military may not want at this time. What is clear is that the current Cabinet is as trapped in its own past and contradictions as Giordani is and was. The longer they wait the deeper in trouble they will be. The window to adjust, if you think politically, its short if you want inflation to go down way ahead of the 2015 Parliamentary election. But apparently they can’t agree on policy and Giordani’s departure may create more passionate stances, for and against.

Yes, it is good that Giordani is out because his thinking, as evidenced in his article, is retrograde and perverse. Giordani fails to recognize any of his errors. His radical pedigree going back to the Garibaldi unit is all he is proud about. He considers himself Caribeño, but seems to have more loyalty to his communist beliefs than to the idea of his own country, his Patria.

I am really not sure Giordani throws such an important monkey wrench into Chavismo. Unless he continues to speak up, his departure will quickly be forgotten, as those in control, many of which are in charge of the same corruption he denounces, will make sure his allies are silenced or else. Ironically, while he never publicly denounced corruption frontally, he was one of the few voices internally to speak up against corruption. However, in his mind the end justified the means. The survival of Chavez and the revolution was above all and thus he never spoke up publicly like he should have.

I continue to be very skeptical that a full adjustment is on the way. Giordani will not be missed, as the kids song goes: So Long, Farewell, Aufiderzein, Goodbye…Mr Giordani, you will not be missed, but your legacy of destruction and ideology will be really hard to erase.

 

Venezuelan Government Tightens Noose Around Its Citizens

June 12, 2014

photo(33)Somewhere where I have been recently. Any guesses?

I know I have been absent for a while. First, I went to Caracas and did not leave in a very positive note after all of the events of the last few weeks, but more importantly, I am on my yearly biking junket somewhere in the world, but before it starts I have been stuffing myself with the required protein for the task ahead.

As for Venezuela, things are getting worse. Not only worse in the sense of current events, but also in the sense that the Maduro Government has decided to do away with all semblance of democracy and in one swipe, it has extended the tenure of the members of the Electoral Board indefinitely. Recall that their terms expired a year ago, but now the Supreme Cort, using the same lack of judicial basis that allowed Maduro to become President, while Chávez was still alive, has decided they can stay there forever. Thus, Maduro and Chavismo have wiped their you know what with the 2000 Constitution, as we now have a Comptroller with an expired term by some three years, Supreme Cort Justices by one to two years and the all important Electoral Board by a year and counting. They could be there forever, as far as Chavismo is concerned.

Meanwhile, the Prosecutor (another one whose term will be extended forever?) not only continues to jail Leopoldo Lopez, goes after Maria Corina Machado and now, with her trumped up evidence, pretends that Interpol capture fellow blogger Pedro Mario Burelli, Diego Arria and Koesling. At the same time, the Prosecutor is asking student leader Gabriela Arellano to testify, together with human right lawyer Tamara Suju, all of which are suspected of conspiring against this dictatorial regime. Yeah, sure!

The case against Burelli, Arria and Koesling is laughable, as it is based on faked emails, Burelli has asked the Prosecutor to produce the headers for these emails, but of course, she can’t. Neither can she ask Interpol to capture people who have been cited only once, don’t know what they are charged with, have not been given the right to defend themselves and are obviously being persecuted politically. But more importantly, in the case of Burelli, he has not been in Venezuela in a while and last I knew, the Constitution only applies within the physical boundaries of the country.

But the strategy is clear, the Government is trying to intimidate everyone. And it does intimidate to think there is no law that can save you even if you are innocent and that you can be persecuted and prosecuted just because you fall on the wrong side of the authorities just because you have visibility or they feel like it.

And it plays well for the gallery, whether those in PSUV or those inside the Government that want to see Maduro being tough with the opposition.

Meanwhile, the Venezuelan media is being sold wholesale to the buddies of the regime with El Universal and Televen reportedly the latest casualties. And what this means is that most people will not hear about Burelli, Arria or Arellano or have an idea what it is all about as they swim in the sea of Chavista misinformation. Somehow, even if one can envision the end of this Government, it is harder to envision the dismantling of the media power built by the pro Government forces. The noose is working today, getting tighter and will be hard to loosen if this nightmare is ever over.

And in the corner of the world in which I work, I find it fascinating, if not perverse, that people actually find it positive that Minister of Planning Giordani was removed from the PDVSA and Central Bank boards. This is seen as a sign that the “pragmatists” are gaining power, as Minister of Finance Torre replaces him in the Central Bank.

Well, I find little encouraging in that for the first time ever, a member of the Board of the Venezuelan Central Bank is a former military with no economics and/or financial background. It is another step towards the military control of the country. But more importantly, Giordani remains, so far, as Minsiter of Planning, where his voice will continue to be heard. Until he leaves this position, I find it hard to be positive about the other moves. Giordani has always had an amazing ability to survive and resurface.

And in the end, this “pragmatism” that so encourages everyone consists of the creation of an exchange market, Sicad 2, which even President Maduro called a failure, or a  lack of success, this week. Given that Giordani opposed Sicad 2 and that it was the “pragmatists” that created it, I don’t see why next week Maduro may not decide to get rid of them too. In the end, Giordani was not in favor of the massive creation of money and his parallel funds are still around and the fight against inflation is no fight at all. In the end what is needed is new faces to come in. New people with some knowledge of economics and/or finance, as the “pragmatists” have never read more than a pamphlet on the matter in their lifetimes.

In the meantime I ponder on the high level of organization achieved by the societies that I am visiting, The infrastructure is awesome, most things function smoothly and there is respect for everyone, even if they think they have real problems.

They should read this post…