The Devil's Excrement

Lilian Tintori, Lopez’ wife addresses marchers

Yesterday, Venezuelans marched all over the country, and also abroad, to protest against the Government, in favor of political prisoners and asking for more democracy. The marches were peaceful and attendance was quite nice, given the fear that people have of a repeat of last year’s repression by the Maduro Government. The success of the protest was a tribute to Leopoldo Lopez, who seems more attuned in ail with the opposition than most of the opposition leadership. In fact, it was remarkable that from his cell and using a video, Lepoldo Lopez could accomplish what he did, thousands of people going and protesting, knowing the dangers that they were exposed to.

But what it showed is that people are fed up and ready to protest and Leopoldo has understood that quite well ever since last year. In contrast, the leadership of the opposition unity group, the MUD, really blew it, rejecting the march openly, rather than staying quietly on the sidelines.

What the MUD does not seem to understand is that at this point in time, there is need for many different ways to express opposition. Elections are a nice goal, but here we are May 31st. and there is no scheduled election to take place in 2015. Oh yeah, there should be parliamentary elections before the end of 2015, but what if the CNE does not call for them? Does the MUD have a plan B?

In fact, I find it very hard to understand why the MUD did what it did. To me, it really had only two choices: One to simply shut up, the other to back the march and incorporate demands for an immediate announcement of when the elections will take place into the protest.

It is as if 16 years of dirty tricks and subterfuges have not convinced the MUD that this is not a fair game, this is a game which is loaded with radioactive dice that do whatever the revolution wants and needs. And at every step, the revolution has had weapons, plans and tricks, while the opposition has always had a naive plan A, but no Plan B, or let alone any possible dirty tricks.

But dirty tricks is all the opposition will get from here on, from gerrymandering (here is a simple explanation from today’s twitter):

to faking census data, to fielding fake opposition candidates, to cheating on the elections, Chavismo is, as always, ready to pull all of the dirty tricks in the Universe. Including changing laws so that an opposition victory becomes meaningless.

And in the middle of this, the MUD can not even back a protest promoted by one of its leading members who happens to have a very vested interest in all this, given by the fact that he has been in jail 14 months for his strong stance against the Maduro Government.

And the MUD strategy was not to support the march? Gimme a break!

Well, in my humble opinion, they did more to damage their reputation with the rank and file with this decision than with any previous one, at a time that they are trying to promote the vote among the member of the opposition. In the end, it may not matter, Leopoldo will call for people to go and vote and they will follow his wishes. But why waste so much energy in non-existing problems?

What yesterday showed is that the people want leadership. They want to do things, but they do not want to sit passively until the CNE or Maduro or Cuba, whomever calls for elections in Venezuela decides to. They want to put pressure. They have many issues, from democracy, to Human Rights, to crime, to lines, to shortages, but they are being told to stay home till whenever some hypothetical elections take place.But they want action now, and they know now that Leopoldo and Capriles, who smartly backed the march, are the leaders. The rest are just living room politicians taking the supposedly safe road.

But that road does not include the people’s frustration and one day, the people may simply overcome the leadership and act on their own, unless somebody, whether in jail or not, is capable of leading them they way they want.

Elections and Protests are not two different strategies. They are part of an array of weapons that the opposition needs to use. In fact, marches and protests are the way to motivate and promote the vote, when and if, the Government decides that it will finally take place.

It has been a while since I reported on my Hyperinflated Arepa Index. In April I had one while in Caracas, but the variation in price was so small (see graph) that I did not think it was worth boring you with the small increase.

Then I went back last week, before the unmentionable parallel rate of exchange had soared, and as you can see in the graph above, the Hyperinflated Arepa Index seems to be a leading indicator of what the abominable website reports, as in one month, there was an increase of 53.3%. This is above what the parallel rate rose in the same period.

You be the judge…

The summary of the increases so far are then:

Nov. 17th. Bs 120

Dec. 7th. Bs. 156 Increase of 30% in three weeks

Jan. 21st. Bs. 178.6 increase of 14.7% in six weeks

April 15th. Bs. 187.5 increase of 5% in 11 weeks

May 15th. Bs 275 an increase of 53.9% in four weeks

Since it was almost precisely six months since my first delicious arepa for this experiment, we can quote the half a year inflation of 129.16%.

I could do a fit to the slope, but really, it is only five points, we dont not need such sophistication. .

I guess I will have to continue being a glutton and eat those delicious arepas in the name of data collection and science every time I go there. Will have to bike more too…

Venezuelans love a conspiracy theory. Sometimes it seems it is easier to embrace such theories than to analyze what is going on. Least of all, look at numbers to seek a possible explanation. This week was a clear example of that. As the parallel exchange rate soared, the most common explanation was that a webpage was manipulating the price of the dollar for some obscure or maybe not so obscure purpose.

That webpage claims to obtain its price from whatever its happening at the border of Venezuela with Colombia. These are real transactions. The exchange houses in Cucuta open in the morning and begin trying to make a market adjusting the price according to what they see. I have no clue as to the volume traded in Cucuta every day, but the border has a very active trade and there has to be a way of going back and forth between Bolívars and US$ or Pesos. This is what that webpage supposedly reports.

Of course, that particular webpage has a lot of influence, as it seems to be the one most people check. But let’s look at the variables that affect the exchange rate and what’s been happening in the last few months.

At the origin of everything, is oil. The Venezuelan oil basket determines how any dollars come in every day to the country, whether you believe the country’s production is X or Y, variations in the price of oil affect the cash flow the Government sees. And that determines everything. When the Government had savings and cash lots of cash flow, it would divert some money to the parallel exchange, whether before it became illegal in 2010, after that or in the last few months. The problem is that savings are gone, the Government owes everyone money and it has so little foreign currency that in March it created  a new and newfangled foreign exchange system with three official rates (Bs. 6.3 per US$, Sicad and Simadi) and the second one, Sicad, has yet to have an auction. It is only used as a reference according to the last value it had prior to the new system being announced.

That’s how little money the Government has.

This is what the Venezuelan oil basket has done in the last six months: As you can see, the price hit bottom at $38.82 per barrel the week of January 31st and has recovered to US$ 56.28 per barrel by now. However, most oil sold by Venezuelan is sold on a 90 day basis, so that the Government is receiving today is that of 90 days ago, or roughly February 20th., which was around US$ 47 per barrel.  Thus, cash flow has improved in the last three weeks (In theory the minimum was around April 30th), however, the lower cash flow has taken a huge toll on the savings (International reserves): Reserves began the year at US$ 22 billion, grew to over US$ 24 billion in March and since then, they have dropped to barely US$ 17 billion. That’s a 22.7% drop since January, thanks to the Dominican Republic buying out its Petrocaribe debt and down 29.16% since the beginning of March.

Not a pretty picture.

At that level, liquid international reserves are likely around US$ 500 million at most, which is peanuts for a country the size of Venezuela. And with shortages all over the place and the Government owing money to everyone (A Brazilian delegation of food exporters came to Venezuela a week ago, they left empty handed) there is simply little money for the parallel market.

Thus, as demand soars (companies have to function), supply collapses.

Guess what happens then?

Moreover, some of the supply disappeared as the jailing of a couple of Venezuelans in the US has apparently scared some suppliers of the market.

If goods are scarce in Venezuela, then the greenback seems to be the the toughest good to find.

And if you think that the dollar market price is artificial and there is little volume in that market, let me show you a graph of another market: The Caracas Stock Exchange. Volume in this market is very low, some $50k-$100k per day. Why? Because there are very few shares to be had. Well, this week, as the parallel exchange rate soared 31%, the Caracas Stock Index soared even more, jumping up 42% for the same reason: Simply put, there are very few stocks sold and people were looking to protect their savings, just like those seeking to buy foreign currency are trying to either protect their savings or keep their enterprises going.

And you can’t blame any webpage for the fact that stocks soared even more (close to 25% more!) than the actual rate of exchange. And there is some real trading in that market…

The point is that what is going on is simply the effect of scarcity. The Government has fewer dollars at a time that it has run down its savings.

And to make matters even worse, the Venezuelan Central Bank keeps printing Bolívars like there is no tomorrow, as shown by this plot of how M2, the Money Supply, has increased since last year:

As you can see, as the price of oil collapsed (fewer dollars), the Money Supply, the number of Bolívars in circulation (which can buy dollars) almost doubled and the savings are practically gone. This means that there are almost twice as many Bolívars chasing those very scarce dollars, local stocks and/or goods.

Simply, a recipe for disaster… So, don’t blame a webpage or a conspiracy…blame reality.

While there is no question that seeing Godgiven’s face on the front of the WSJ’s website was extremely satisfying and priceless, particularly to those of us that have spent over a decade trying to unmask the hoodlums in the Chavista regime, we are unsure that this headline will have the immediate meaning that some believe it has.

I mean, it is not as if Maduro got his copy of the WSJ this morning saw the headline and said: “Oh my God, how could he do this?”. I mean, this is old news. How many members of the Venezuelan military close to this person have been declared drug kingpins in the past, including his buddy Carvajal? Who happens to be Maduro’s buddy too…

And this is a press report, not even an indictment. Can we get one, please?

People have many theories surrounding this, but I buy few of them. The first and obvious one is that the Secretary of State’s Emssary Tom Shannon asked Maduro to get rid of Godgiven, showing him proof of his activities and the US would normalize relations and thus the leak

Really?

Is Maduro so strong that he can get rid of the most powerful former military in Government just like that?

I am not so sure…

After all, Maduro comes from the civilian, ideological side of Chavismo, while Godgiven represents the connection to active military. How many of his classmates hold important positions in  Government? Maduro’s connection to them is tenuous at best.

In fact, if anything, this could be the spark for increased political instability in Venezuela. If Godgiven sees his political base undermined, he may decide to go for the whole enchilada. And this would bode badly for everything: Democracy, Stability, Human Rights and the future of Venezuela.

But my bet is that this will be turned into a Venezuela vs. the US battle. Another excuse to blame the problems of the country on Obama and his right wing Government. The Evil Empire trying to get rid of the expanding ideological influence of Madurismo and simply another battle in the economic war against the extremely successful economies policies of Chavismo and other stupidities like that.

In any case, we will know shortly who is right on this…

This week, the Venezuelan military and the police essentially took over the city of Maracay, attempting to restore order in the crime ridden San Vicente barrio. While most of the news has centered on the origins of this confrontation, what I find the most interesting is that this happens to be ocurring in Maracay of all places.

You see, the city of Maracay, located about 130 Km. South West of Caracas is as much of a military enclave as there exists in Venezuela. Look up, for example, Wikipedia, and you will find the following list of “interesting facts about Maracay”:

After history and Economy and Transport, comes “Military”, because the military plays such an essential role in the life of the city. And under Military, you will find the following description:

Maracay is the cradle of aviation, Chavez led his coup from there, the 4th. Armored division is there and Venezuela’s gun production military company is there.

Despite this huge military presence, the military has been unable to protect itself from the widespread crime of the country. In fact, Maracay is among the top cities in crime per inhabitant and the crooks seem to be armed with grenades and weapons “obtained” from the many military facilities in the city. As an example, when some gang members were killed by the police, the gangs retaliated by simultaneously attacking three units of the investigative police with grenades, which led to the raid on Barrio San Vicente.

Which leads to my main point: Venezuela’s military is so incapable, so dysfunctional, that it can not even protect its own turf. You would think that a city dominated by military life would be the safest, as high ranking officers worry about their wives and kids. Instead, their inability to coordinate and execute, their lack of training and their corruption has made their own turf among the worst in the country.

In fact, the grenades and weapons come from the same factory the military runs. It is just big business to sneak out and sell a grenade here, a box of bullets there and a gun somewhere else. That’s how the gangs armed themselves.

But you can’t blame it all on incompetent military. This is in fact part of the Chávez legacy. Chávez wanted these now so-called gangs to be armed, in order to create paramilitary groups that would support him and his Government when and if the time came. Except that these groups took a life of their own, became independent enterprises, while the military found it hard to go against the Big Boss and looked the other way, while they also enriched themselves.

So now, over ten years late, the revolution tries to stop the monster it created. Reportedly, there were three dead and 800 wounded in the raid and they keep running them trying to isolate the gangs. But the big problem is that those detained will suffer the same system of injustice that has been allowed in Venezuela during the last 16 years: Jails have triple their capacity, most prisoners remain jailed without sentencing and guess who runs the jails?  The same gangs that run San Vicente, kill cops at will and fight the military.

So the military is now being bitten by its own incompetence, indolence and ability to ignore even the problems that surround them. When and if this nightmare ends, one has to wonder if the military simply has to be eliminated, they seem as dysfunctional as the Chavista Government and incapable of contributing to restoring order and organization in Venezuelan society.

The idea must have occurred to Godgiven C that fateful weekend when General Hugo Carvajal was suddenly jailed in Aruba and barely escaped deportation to the US. At that point it must have been clear to Godgiven, no more Miami, Andorra, Panama and the like in the future for him. Except for places he would not like to visit, like China, Cuba, Iran and Russia, he was now trapped in the hellish country the former Hugo created and he helped destroy. Not even his family could safely visit the Empire or even neighboring countries, as you never knew what trick could Obama play against them with all his influence. Well, he must have thought, if I am trapped in Venezuela and feel so claustrophobic about it, I will make sure my enemies are too. Because he felt truly awful. What would he spend all his money on if he was trapped in Venezuela?

Thus, why jail them? Why not sue the few remaining media outlets in the country and have the Judge ban their owners, Directors, legal counsel from leaving the country and thus subject them to the same unfair punishment the gringos imposed on him?

And so he did. The first chance he got, a really preposterous case, he sued for defamation everyone of importance at El Nacional, La Patilla and Tal Cual and a friendly Judge complied his wishes and 22 members of the respective Boards, including Miguel Henrique Otero, Teodoro Petkoff (again!) and Alberto Ravell (who is not in Venezuela) are now prohibited from leaving the country.

The case is so preposterous that all these media outlets did was simply to reproduce verbatim what Spanish newspaper were saying about Godgiven. This not only violates freedom of speech, but even international treaties exempt such reproductions of news items from legal liability, except for the source.

But it gets even worse. According to Venezuelan law, the Court had to notify each of the defendants, something that has yet to be done and under no circumstance can the Judge rule that the defendants were prohibited from leaving the country or be a flight risk if she had not even talked to them or knew in detail anything about them, other than they were on the Board of these media outlets.

And to add insult to injury, the defamation case got really speedy consideration and resolution in a country where the average prisoner has not seen a Judge in the first few months after its detention and most spend two years without sentence.

Of course, their name is not Godviven C. (A pseudonym used to protect the author of this blog).

Oh! his power! His manipualtion of Justice!

The intent is clear: To intimidate. If the simple reproduction of news items published outside or inside the country by any media outlet can be a justification to sue you for defamation and block you from leaving the country, the few media outlets that maintain some form of independence will be silenced even more.

And reporters, media owners, Directors will all be trapped in Venezuela and with Godgiven to boot. Just think, none of them can take a jaunt to Aruba to get some shampoo, soap or even Harina Pan, let alone enjoy their wealth.

The worst part is that at some point they may even  be trapped for hours with Godgiven in Court.

It is hard to think of worst punishment for them…

As you may have guessed, I have been away (Still am). The picture above, taken by me a couple of days ago in Northern Italy, depicts what I did for the last week, after celebrating an important birthday in Spain the previous one. So, I have been mostly out of touch with Venezuela, if that is ever possible, more so when you are traveling with a group of Venezuelans. And all we hear simply reflects that Venezuela has become a very dysfunctional country in all aspects of a daily life, led by an incompetent Government that despite its few successes, insists in continuing on its path which leads to mostly failures.

-Nothing shows this dysfunctionality more than the electric crisis. When the current Minister for Electric Affairs Jesse Chacón assumed the post in 2013, he said he would stabilize the system in 100 days. Two years and who knows how many billions later, the system is as unstable (or more) than two yeas ago and as usual Chacón and the Vice-President blame nature and the weather, but nt their blatant incompetence. And to prove their point the come up with the brilliant solution of having pubic workers work only in the morning to save electricity.

Brilliant!

I can think of two immediate effects this will have: 1) Many of these workers will join the ranks of the bachaqueros in the afternoons, promoting arbitrage, longer lines and higher prices. 2) The rest will go home to watch TV, turn on air conditioners and use more electricity than its used in public offices where thee same workers share the offices.

This was probably decided by Arreaza and Chacón without consulting any experts or even knowledgeable people, much like everything is decided in Venezuela by Chavismo.

-And in his infinite wisdom Maduro honored five Cubans whose main accomplishment was to get caught and be jailed in the US for spying. Quite an example. I guess Maduro would like to have some glorious past, other than being a bus driver, sucking up to both Chávez and Cilia. But I think he will not have time now. Remarkably, Leopoldo’s jail time is worth more than the five Cubans put together in terms of being repressed, harassed and the comforts of Ramo Verde.

-And only in a Dictatorship can the National Assembly decide that previously elected positions will no longer be voted for (Parlatino). No scandal, no noise as the Electoral Board agrees with this without even a discussion. I wonder what Dilma, Correa, Cristina and the rest of the the mercantile gang have to say about this…

-And despite cards, biometrics and increased Government controls, the lines are shortages are still there. But instead of reducing controls, Maduro wants to control the whole distribution system. I wonder if at that point, everything will be stolen and sent to Colombia and the country will stop functioning.

-And in a weird twist, the Government has decided to ignore certain problems it can not solve by dollarizing. Can’t figure out how to solve the problem with the airlines?: Dollarize and allow ticket prices in foreign currency. Don’t know what to do about the auto sector?: Allow Ford to dollarize prices. The good thing is that if you extrapolate, everything will be dollarized at some point, since they are incapable of solving any problem.

-And yes, the Government announces with pomp and circumstance that all cars in Tachira State now have a chip to control their purchase of gasoline. Of course, the Government says nothing about whether gasoline smuggling has gone down. They probably have no clue.

-And the new clown in the Government is the Minister of Health. When papers said that 13,000 medical doctors had left the country, he said that only 320 had left in the last six years. Never mind that graduate programs have no students, hospitals no Doctors and 90% of graduating classes have left the country. This guy is the new Chavista “expert” someone who has no clie but can make up stories as he goes along.

He could be a good replacement for Chacón in the Electric Ministry, he seems to be very good about inventing excuses.

And so it goes, back soon…