Archive for October, 2015

Venezuelan Central Bank Files Complaint Against Dolar Today In The US

October 24, 2015
View this document on Scribd

Thanks to the generosity of my readers, three of which sent me last night the document above, I managed to read the suit that the Venezuelan Central Bank filed against Dolar Today LLC, a Delaware company which supposedly owns the homonymous website and its related apps and channels.

I am no lawyer, but I did find this document remarkable in many ways. Perhaps the most ironic thing to me is that the Venezuelan Government via its puppet Central Bank (which the complaint says is independent), wants to use the US Justice system, daily criticized as unfair and manipulated by them, as a way to exert pressure on this webpage and even more audaciously, to seek “damages” from them.

But I am sure my followers will certainly enjoy the reading of this document full of the same crap that the Government spews out on a daily basis, this time translated into English and presented in legalese. And I am sure that the only intent of the complaint is or was to intimidate those involved with the website and its activities. Here I will refer to what I found ironic, hilarious, stupid, and enjoyable, without intending to be comprehensive. I invite my readers to add their own in the comments for everyone’s enjoyment.

To begin with, the only possible objective of this suit is to harass, intimidate and otherwise distract the owners of the Dolar Today webpages with the complaint. They will have to hire lawyers, spend money, go to deposition and the like.

The second interesting thing, to avoid saying laughable, is that says that Dolar Today is violating Article 1185 of Venezuela’s Commercial Code. That may well be, but the Judges in Delaware could care less about this violation, given that that is the law of the land in Venezuela, but certainly not in the US nor Delaware.

But it has to be laughable to argue that a webpage has created a form of cyber terrorism that has “wreaked, economic and reputational harm on the Venezuelan Central Bank by impeding its ability to manage the Republic’s economy and foreign exchange system.” by “Creating the false impression that the Central Bank and the Republic are incapable of managing Venezuela’s economy.”

Jeez, if a simple quote of a rate can do that and the Government and the Central Bank can do nothing about it, it would seem to me that the problem is not what the webpage did, but how clueless were the Government’s actions in trying to stop it. In fact, most Venezuelans remember multiple announcements suggesting that the Government was ready to “pulverize” the black market rate, but none of the plans were successful and in many cases people wondered what happened to them.

And you have to laugh at statements such as “Much of the world, including numerous members of the International Monetary Fund (“IMF”), engage in something that is both literally and figuratively quite foreign to the United States: the multiple exchange rate system.”

I would love to hear Nelson Merentes tell me the names of these “numerous” countries, assuming that given that he is a Mathematician, he will not argue that numerous means two or three countries. In fact the word numerous means “many” or “great in number”, which is simply false.

And you really have to be a cynic to suggest that the inflation rate in Venezuela is high simply because “it is an expected consequence of the Republic’s policies to promote social inclusion of the poor and economic growth”, when inflation is the worst possible indirect tax on the poor and those not included socially.

And since I am nitpicking, let me take advantage of it by noting that it is not true, as it says in numeral #26 and #43 of the complaint, that Venezuelans trade at the parallel or black rate via exchange houses. Such trades are not allowed at exchange houses and Venezuelans only can do these transactions privately.

Additionally, in the second graph of the complaint, the lawyers show a graph in which the parallel rate closely follows the implicit rate and only starting in October 2014 did the two diverge. In fact, had the Government made a long term plot of that, including the period before the “swap” market was shut down in May 2010, it would have shown that factors of two differences between the two have occurred before. Curiously, this widening of the difference between the two began taking place when oil prices began to drop and the Government no longer had “excess” funds to feed the black market, as an article in this week’s Wall Street Journal suggested was done via PDVSA in order to enrich a few individuals.

But the bottom line is, that the BCV and its lawyers will have to “prove” first, that Dolar Today actually manipulated the rate it published and second, that it used that information to benefit financially, something that I find extremely difficult to show. In the US, in the process of discovery, you have to support your accusations and if what you have is flimsy, the Judge is likely to throw at the case at the earliest stages of the process.

Simply put, how can they prove there was “wire fraud” or that the rate was set in order to to obtain a profit? A profit with respect to what?

And you have to love the fact that a Government that has shut down any possibility of a market for the parallel rate of exchange wold argue that “the DT Rate does not reflect any actual exchange market”. Of course, there are none allowed in Venezuela! The only “market” that exists is the border market in Colombia, which Dolar Today claims to use to set its rate.

In fact, between 2003 and 2010 the “swap” market existed and was legal and one could argue that it gave the rate transparency and liquidity, but it was the actions by the Government to shut it down that created the distortions that the BCV wants now to blame Dolar Today for.

I am also not so sure that you can prove a rate is “fraudulent” as the complaint charges. Even if the BCV could prove there was a transaction, it would prove that someone was willing to pay a particular rate and thus it would be hard to argue it was fraudulent. That is precisely what I tell people that say that the rate is being manipulated: Find me someone that sells them cheaper than that…or you sell it to me, since you can find it cheaper.

I have found no one that wold take me up on it.

I will stop at this, enjoy the reading. But if I could, I would suggest this to the Government: Allow a legal market to function for the parallel rate, I would bet that in time that market would find an equilibrium rate not too far or higher from where it is today. Because in the end that rate reflects the same lack of foreign currency which is causing causing lines, shortages and inflation. And it is the stubbornness of the Government to adjust and use economic theory that has created the distortions, including the anguish, pain and deaths of the thousands of people who can not get medicines or adequate medical care.

But the irresponsible regime of Nicolas Maduro wants to blame a web page…

(Maybe the complaint should be turned around and some Venezuelans should sue the Central Bank for the same reasons, but saying that by not following its Constitutional mandate of independence and monetary stability, it has caused harm on the Venezuelan people)

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Electoral Cheating in Venezuela, One Deputy At A Time

October 13, 2015

ballot

All of what I will write in this post can be found elsewhere, but I thought it was important to show and save it into this database of abuses and  rip-offs that have characterized Chavismo, as well as explain it in English. I am not trying to discourage people. I am just trying to show how Chavismo is moving all of its power to minimize the oppositions vote in December, without any ethics, morals and with blatant abandon.

To begin with, within the MUD, there used to be a party called MIN Unidad. In one of those strange moves, the Electoral Board, removed the Board of MIN Unidad, replacing them with others who claimed to be owners of that particular political country club. The MUD proceeded to suspend Min Unidad from the MUD, as it could not guarantee the “purity” and backing of the MUD by anyone named by the CNE.

Next thing you know, parties had to choose the location of their party on the upcoming ballot and MUD got to choose before MIN Undad. Where did MIN Unidad choose in the ballot above? Precisely next to the MUD Unidad location, as you can see in this blow up:

ballot2

a strategy clearly designed to fool voters into believing that MIN Unidad is part of MUD Unidad, which it ain’t.

You may think this is a dumb trick, but it works. Too many people get flustered when voting with these machines and can be confused by such subtleties, even if they have been warned about it. In fact, I went with my then elderly mother to help her cast her vote a few years back and even though she had memorized every step, once she was in front of the ballot, she had no clue as to what to do.

Clearly, the MIN Unidad location and design should nit have been allowed by the Electoral Board, but ethics is a four letter word among Chavistas, so there was simply no recourse and the position of MIN Unidad in the ballot stands for the upcoming Parliamentary election.

But it gets worse…

Let me now show you that ballot in better definition for Circunscripción 1 in Aragua State:

ballot3

In the MUD Unidad ballot is Ismael Garcia, a former Podemos leader who is clearly opposition. But wait! In the Min Unidad the candidate is also Ismael Garcia. What gives?

Well, the MUD registered Ismael Garcia and Jose Trujillo on August 7th. as its candidates. On August 15th. MIN Unidad registered its two candidates Eduardo Nava and Belkys Cermeño. But then, within the period that you are allowed to do it, MIN Unidad changed its candidates to Isamel Garcia (Not the same one as the MUD) and Freddy Solorzano.

Thus, when people see the ballots, they will not necessarily know which one is which. This is clearly an unethical attempt to deceive and take votes away from the “real” Ismael Garcia. While the law does not forbid two candidates with the same name running for the same office, the CNE should have at least made sure that voters could differentiate the two. But, of course, they hide behind the law and their lack of ethics.

The point of this article is that there are 1001 tricks that Chavismo will apply come Dec. 6th. but people are not being warned enough or not enough has been done about them. Instead we are supposed to go vote innocently into this unfair set-up with everyone thinking that we will get 80% of the votes and thus Deputies. I don’t believe this is a responsible way of handling this. People are supposed to shut up, move forward and maybe win, but maybe lose too.

I warned about all these tricks in August, if the above is not proof that Chavismo’s bag of rip-offs is not full of them, then let me sell you a used car. Really, it’s in great condition, low mileage, only one owner…cheap too!

 

Venezuela’s Vital Signs by Paul Esqueda

October 11, 2015

I have been under the weather for a week now and the two articles I have been plotting in my mind have not been able to get completed. But fortunately, my good friend Paul Esqueda, who has written here before, sent me the article below, which is timely and something I was worrying about, since about ten days ago Venezuela’s Minister of Finance “promised” investors in New York to  publish some of the missing data. But to this day, we are all still waiting, including Paul:

vene

The vital economic signs of the country constitute key information in fundamental decision making by all individuals and organizations operating or planning to operate in Venezuela. The Venezuelan Central Bank has not published the main economic indicators of the country in the last nine months, particularly inflation (Consumer Price Index) and gross domestic product (GDP). This is in total contradiction with what is stated in the by-laws of the bank in its Article 31, which is a national act of Congress. It clearly states that “The Central Bank of Venezuela will be guided by principles of transparency. In this regard, without prejudice to their institutional responsibilities, the Central Bank will keep informed in a timely and reliable manner the National Executive and other State agencies, public and private, national and foreign and the public in general on the implementation of their policies, decisions and resolutions of the Board, reports, publications, research and statistics to have the best information on the evolution of the Venezuelan economy, without compromising the confidentiality rules as appropriate in accordance with the Constitution. In fulfilling the mandate above, the Central Bank of Venezuela will perform regular monetary policy meetings and publish the minutes of such meetings through the means which it deems appropriate, including use of the most advanced computing services.”

What are Venezuela’s official vital economic signs? If you are entering the workforce or retired or considering retirement, is your projected income sustainable and sufficient in the long term for a decent living? How are companies currently operating in Venezuela planning their operations without reliable information? Are there any potential investors interested in Venezuela in such state of affairs? These questions and many others would have to rely on second hand sources (IMF, IADB, Dolar Today, and the Devil’s Excrement among others) to find answers for the moment. The current Venezuelan Government has chosen to let uncertainty reign by providing no information based on the fact that there is a state of “economic war” There is no formal official declaration of war against any specific entity so that excuse just adds to the uncertainty and to the overall country risk.

The vital signs of a person’s health are typically body temperature, pulse, blood test results, ability to breath and move about. When an individual is found outside the normal parameters in all the risk factors, the medical doctor can make informed decision about next steps to improve the person’s health. An extreme situation may require putting the patient in the extreme care unit on a respirator with all his/her vital signs being monitored 24 hours a day. The vital sign are critical to determine whether to continue life depending on the prognosis. What is the state of the Venezuelan economy’s health? What is the general perception of the credit rating experts? The rating of Venezuela ranges from CCC and Caa3 (S&P, Moodys and Fitch) as of 19/11/2015 which qualifies the economy as “extremely speculative.” Is Venezuela in a nonresponsive state by not releasing the main economic indicators? When a patient is in a nonresponsive state, he/she has no knowledge but those around him/her do know. Is the average Venezuelan conscious of the gravity of the situation? Are lenders pulling the plug on Venezuela? Where is the transparency declared in law of the Venezuelan Central Bank? Is it a crime to mismanage the economic future of all Venezuelans with evident violations of the law?  Undoubtedly history will pass the final judgment.

Hyperinflated Arepa Index IX: Index Resumes Rise

October 5, 2015

arepa10

We knew it would not last, and the Hyperinflated Arepa Index (HAI)  resumed its rise, jumping from Bs. 440 to Bs. 580 in the last month, for a 31.8% rise. With this rise, the HAI is up 283% since last November 17 2014, indicating that it will likely hit the 300% rise in its anniversary.

This is likely assured, given that in the next two months, monetary liquidity (M2) will rise somewhere between 15% and 20% as has been traditional when the Government pays its end of the year bonuses. This will put even more pressure on prices, including that of the parallel rate of exchange.

HAIOct

I inquired again about the drop last time with the owner, but he sort of evaded the question, saying again that they changed their invoices (???) but there was no real drop. The drop will remain a mystery for the time being.