The Devil's Excrement

The picture above created a lot of noise on Jan. 19th. It is a picture of the La Guaira port just outside Caracas, showing that there were no ships unloading anything that date. The picture was purportedly shown as proof that famine is coming to Venezuela as imports had ground to a halt. Moreover, people suggested, this also proved that the country was about to default.

The faulty reasoning about the picture is that the La Guaira Port has not been the main source of food imports for Venezuela for quite a while. In fact, most ships that stop in La Guaira are container ships, bringing “stuff” or “peroles”, as Venezuelans like to call them. Venezuela’s main port is the Puerto Cabello port, where most food imports come to the country, as the Port has silos for storage, grain sucking facilities, as well as liquid discharge facilities.

A while back I wrote a post about how ships carry  an AIS (Automatic Identification System) which allows all ships to be tracked. There are websites like this one or this one, where you can follow each step of what is going on. At the time, I was interested in the fact that there was a slowdown in downloading cargoes due to inefficiencies. Thus, on Jan. 19th. when the La Guaira picture circulated I compared picture from my post in May 2014, with that from the first website I mentioned on Jan. 19th.:

What I found was that on Jan. 19th. (right panel) there were 15 ships in port, the same number as in May 2014 (left panel), the difference being that in 2014, there were many ships outside waiting to go in. But the number of ships unloading stuff were the same on the two dates: Fifteen.

Of course, this is a static picture, may depend at what time of day you go in, for example; and you don’t know what it is that these ships are unloading at any time. Some could be container ships bringing nails, rather than being grains or something else

Thus, I decided to start going into the website frequently and writing down the number of cargo ships in port and call it the Puerto Cabello Non-Baltic Index (PCNI) and follow it in time and report any significant changes. As I said, this is just an indication of the number of ships and it could be that its not all food. But should the PCNI drop at some point it would indicate that there is indeed trouble in the future in terms of food supply.

I have been taking data since Jan. 19th. simply recording the number of ships docked, whether they are container ships or not (I could actually look at each ship in the website and see what type it is). I hope this is useful in evaluating whether tougher times are coming and in making more quantitative whether things are going to become serious or not in the absence of hard Government data on any of these matters in real time.

Below is the first plot since then. It began with 15 ships and it has indeed been going down in the last few days, with 9 ships today, but according to the webpage 6 ships are due to arrive, even if it does not say when:

There is clearly a downtrend, but it is not clear whether this is due to the Xmas season (Venezula shuts down for Xmas) or whether it si something to worry about. In a few days we should know.

I will try to update it whenever the changes are significant

One of the most fun things I do when I come to Caracas is to visit the Mercado Libre de Chacao on Sunday mornings. I just love watching the people, looking at the produce and, of course, buying those cheeses that you can only get in Venezuela. (Even if some failry good imitations are now sold abroad)

The market has changed, not only because it moved next door to a more modern building while Leopoldo Lopez was Mayor in 2008, but also because its nature has changed. What originally was created in the 40’s to have farmers from the surrounding areas bring fresh produce to sell directly, has now become a place to find what you can not find elsewhere. At premium prices, of course. But it does retain some of the original flavor, as produce remains its strength and since most produce is not regulated you can still find lots of good stuff there. (By the way, the webpage of the market ignores its previous history, only talking of the market from 2006 on, which is truly a pity)

The market has changed so much, that twenty years ago, I would go Sunday mornings because it was mostly empty (It opens from Thursdays to Sunday), but you would not necessarily find everything, most of the stuff had been sold. Today, Sunday are as bustling as any other day and what you can not get is likely due to its scarcity. The market has become so popular to look for scarce items, that even at noon on Sunday its still full.

These are some images from this morning:

On the left a picture of the produce section taken from above, you can see there is lots of produce and lots of traffic. On the right you can see the variety of produce you can find, since few of these are regulated, then you can find plenty of it at the right price. Not cheap, but most of it fresher and of better quality that you can get at the supermarket.

And then there is my favorite, the cheese vendors:

Some cheeses are regulated but many are not. He is well stocked. Note the beautiful PalmiZulia chunks on the left, the crinejas (strung cheese of a mozzarella-like cheese) on the right. One sign of the times is the “potes” (containers) of queso de mano, sort of in the middle. When these first appeared about fifteen years ago, they carried ten or twelve small “arepa size” cheeses. You can see on the left how they make them on small containers of three or four cheeses. The reason? The large container is 1200 Bs, (US$ 1.33) which most people can not afford, the smaller one is “only” Bs. 550 (US$ 0.60)

Even in the free market, it is really hard to find eggs:

On the left, you can see the empty egg store. I was told had some in the morning and they “think” they would get more in an hour. On that news, people start lining up as seeing on the picture on the rights. It’s only a hope, but the owners swears “some” will arrive.

While I was there there, was a big commotion:

The guy with the red shirt on the left is pushing a cart which has rice and oil, thus people start following him into the store on the right, where there were people already lining up for the goods that are arriving. As you can see in the picture on the right, this store specializes in hard to get goods at very high prices. You can see Corn Flakes, Domino sugar and on the left, all sorts of paper products that are scarce, such as diapers, feminine products and the like. Add oil and rice now, but those will not last long. As this was happening, the guy that owns the store where I was buying Saltine Crackers (hard to find) said to me: “I wonder where they can get that oil, I can’t”. (And that is his business line!)

The next two surprised me:

On the left a fruit stand that is usually well stocked. Most fruit stands looked sort of like this, half empty. This is not generally the case, fruit is like produce that you can find it because it is not regulated. On the right is the fish stand which was very well stocked, if you try to see the prices above the stand you will understand why, At Bs. 3,700. (US$ 4.1) it is not very affordable to the average population. (Remember the minimum monthly salary at the parallel rate of exchange is about US$ 10.7 per month)

You can have fun at the free market just reading the signs:

On the left, this stand advertises that it has a debit/credit card access point, but only for purchases above Bs. 500 (All of US$ 40 cents). In the middle a sign in the avocado stand plays a pun on the fact that the word in Spanish to play an instrument or touch something is the same: Do not touch (play), it is not a piano. BTW, the avocados were large and beautiful. Finally, a sign that says: For products with “just” prices (Maduro’s creation) there are no bags, additional bag Bs. 20 ( 2 cents).

Definitely signs of the times…

Finally, the free market continues to be a place for those with initiative:

On the left, a guy who claims to be a medical doctor and sets up a plastic table and provides Medical Certificates for driving. (Required in Venezuela) Today he was advertising hard, telling people that they should take advantage of it now, as the Government is about to increase the Tax Unit (Unidad Tributaria) which will increase the price of the Certificate, which today is at Bs. 600 (66 cents in US$). People were lining up for the bargain, including yours truly. That comes up to be about 11 US$ cents for year of validity of the certificate. (Remember on election day I was stopped by the cops and had all my documents in order, except that one)

And on the picture on the right above, the beautiful flowers grown in Galipan, inside the Avila mountain at near 6,000 feet above sea level. Flower growers from Galipan have been providing these since I was a little kid (Yes, eons ago) and as you can see, they continue to do so.

Always a welcome sight at the Mercado Libre de Chacao in Caracas.

Some people took offense at my last post on Santero Economics when the new VP for the economy was named. They thought the term lacked seriousness in an economic debate.

I disagree.

When I first introduced the term, I was making two analogies, one to the famous Voodoo economics term that Geroge Bush Sr. coined referring to Reagan’s economic ideas, but more importantly, I defined why the term was justified by defining what Santeria was and comparing it to the current framework for economic policy in Venezuela and I quote my post from July 5th. 2015:

“Santería, which is composed of a set of beliefs taken from various religions, which are some times incoherent and even contradictory and which are based on hope, spiritual beliefs and ideas with little fundamentals. Thus, we can characterize the current policies as, Santero Economics, as the policies are equally incoherent, based on hope and many times go against each other, with no relation to known economic principles and fundamentals.”

And today, I complete the cycle, first it was Tony Boza’s ideas, then Salas’ and now with a description of the foreign part of the Santero Trinity, Spanish economist Alfredo Serrano, who has recently espoused his seven steps to solving Venezuela’s Economic problems.

I will not go over all seven of them in detail, but this reminds me of an article which is somewhere in this blog in which someone suggested Chavez was proposing a society which had nothing to do with who Venezuelans where and ignores their habits, culture and idiosyncrasies. Serrano’s proposals seem to ignore the reality of Venezuela and Venezuelans today. In fact, it seems to ignore the reality of what Chavismo has brought on Venezuela in the last 16 years too.

Let’s look at the proposals:

Proposal #1: The State of “Misiones Sociales” requires an economic mirror; for every social mission, an economic mission is needed to unleash new productive forces internally. To do this, public procurement must serve as the economic muscle in favor of the new democratizing social metabolism. We must pursue  the economic multiplier effect derived from the Social Revolution.

Jeez, I really don’t know where to start, let’s do it at the beginning: Which Social Mission are we going to work with? Has Serrano made a diagnosis of the current status of those “misiones”?  The way I understand it, the educational misiones, Ribas, Robinson and Sucre are sort of half-assed right now, as people are not getting neither the instruction, nor the money, nor the promised programs. And if they were, how would you propose to promote Mision Ribas, for example, as an economic force, when you pay people to study. Do you want them to study or to produce something? My understanding is that it promotes people not working as the “beca” to study is more than enough to live on, or at least as good as also working.

And I don’t see how the health “misiones” can be leveraged economically, least of all, when Barrio Adentro is 60-70% abandoned.

I mean really, tell me how this can be turned and “leveraged” into production, when half of it is simply not functioning:

I mean, pick your favorite Mision and tell me whether is active or not and, if it is, whether it can be leveraged into a new-fangled metabolism for economic production. His words, not mine. Mercales show lines and shortages, Barrio Adentro is barely alive, people are not getting their “beca” for Rivas o Sucre.

I mean, really? What country is Serrano talking about? And how is he going to do it?

Let’s move on

Proposal 2: It is necessary to sort out what can be produced and what is not. A productive Revolution requires getting down to work with the new economic engines, considering: a) the real added value that can be generated internally, and b) the outer limit imposed by global value chains. Nothing would produce new goods if it is just for importing much of the value added.

Sounds wonderful! But isn’t that what the Government claims to have been doing for the last ten years? And isn’t the fact that the Government did that, “prioritizing,” that we have shortages, lines and empty shelves?

Are we going to import Martians to do it this time around? Or Chinese? (They are here already). Or Cubans, to see if this time they get it right? Because it seems that all the Government has done in 15 years is do exactly that and the results are sort of lacking…(More than sort of, but let’s be magnanimous)

Proposal 3: Not everything is a matter of engines; it is also  a matter of actors. The democratization of the production system is a necessary and sufficient condition in the new economic era because it is the only way to break the current oligopolistic dependence. The communal power must be essential pivot in the new economic order, both productive and distributive issue and marketer. The commune has to stop being economically marginal; the output is certainly not a neoliberal communal output.

Uff! As someone once said, “Como se come eso?” (How do you eat that stuff?)

First of all, we are talking about a crisis that needs to be resolved TODAY, not in five years. People need to eat, for example. People in the communes are concerned about making ends meet, getting stuff that they can’t get, standing in line and surviving under current hardships. What are you going to do? Bring a whiteboard telling they have to produce milk, meat, tomatoes, mangoes chickens and rice?

Has this guy ever considered how it is different to breed cows in the tropics? Or to grow any sort of plant? Does he know about how the Government nationalized and destroyed Agroisleña, the only provider of technical advise, seeds and even funding to the small producers? In order for the communes to get into any of this  “productive” stuff, you would need to return Agroisleña (now Agropatria) to its original shape, before you can even think about educating, teaching and training the communes to produce really basic stuff. And the Government that destroyed it is supposed to do it?

Really?

To say nothing of obtaining the required medicines and vitamins to grow a healthy chicken, which have been lacking for months even to producers that have the money. To say nothing of being able to buy the cows that can produce milk in the tropics, feed for them and the medicines for when they are ill.

All very long term and you need a lot of money if you ask me.

4. We must avoid falling into the  neoliberal trap to address the issue of foreign exchange from the exclusive focus of the nominal value. Is it important to discuss the exchange rate? Yes, as long as previously defined what the new currency allocation matrix. At a time of scarce foreign exchange, it is crucial to choose how they will plant to flower currencies other real economy in the shortest possible time. It requires a kind of acupuncture so he is they will be given an anti-inflationary,  productive use and pro growth to the available foreign currency.

The “neoliberal trap” of focusing on the nominal value is because keeping the nominal value artificially and incredibly low is what has given rise to the biggest corruption racket and trap in the history of Venezuela and dozens of billions of dollars lost to Government officials as well as to exports to Colombia, which the Government has for years been unable to stop.

Again, will we have Martians running this? Does Mr. Serrano even understand what is happening in Venezuela every day and how inefficient, corrupt and incompetent Chavismo has been in the face of all these distortions?

I will skip 5, but here is 6:

6. Faced with restrictions outside, it is essential to make progress on tax sovereignty. There is enough room to do a tax revolution based on principles of social justice. It must implement a plan to combat fraud and tax evasion. It needs to raise in whatever it takes to ensure social and productive investment, and preventing external shock has negative impact internally.

Really? Who will pay this tax? Social justice when professionals make less than $30 a month? Again, who will pay? Companies? Which ones? What is the magnitude of this revolution or uncollected tax? Does Mr. Serrano understand even who pays taxes in Venezuela? Does he know the cutoff for yearly income to pay or not taxes? Does he know that banks make money by buying tax free bonds from the Government, which will be impossible to sell if they were not tax free? Really, with an economy with a 10% GDP contraction the solution is a tax revolution? Please…

And the best is the last point. I dont know where Mr. Serrano has been, but here is point 7:

7. Another answer is to return to the regional path effectively. It would surely trigger special margin Sucre plans to import priority goods bypassing the dollar. It is essential also import new paths without dollar, Mercosur, with some compensatory methods, while a new map of investment is achieved from the region.

Well, I will not even comment on this,  the “regional path”, enough said, wonder what Macri thinks?…but I have to wonder, has this guy ever been in Venezuela for any length of time?

It has been six weeks since the opposition won the Parliamentary election and many things have happened. But I do not really want to give you a blow by blow analysis of what happens or is happening in the country, but rather try to see and understand the overall picture. Thus, I did not report on the details of Maduro’s speech to the Assembly or many other topics which some may think require some commentary.

But I think is more important to report on the overall picture of the country six weeks after the elections. And what I can say is that there has certainly been some progress, some steps forward, but the whole picture is still lacking, as the country seems to be drifting into a crisis, with probably more steps forwards than backwards, but too much uncertainty still present in the country.

To begin with, I don’t think either side has understood well the message the voters sent in Dec. 6th. On the one hand, the Maduro administration has not understood that the vote against it represents a vote against the consequence of its badly mismanaged economic policies. Despite this, it continues on a path to radicalize the country, blame the economic war, all of which will bring little economic benefit, precisely the only thing the voters wanted him to pay attention to.

The opposition, on the other hand, seems to be understanding its victory as a mandate to get rid of Maduro, which is probably why most opposition voters cast their vote for. But as I have discussed previously, The in between, both the Ni-Ni’s (who don’t belong to either side) and the pro-Chavista voters, were casting a vote to punish Chavismo, but not necessarily because the opposition electrifies them and wants them to run the country. So far, the opposition has said little in how it intends to deal with Economic problems. True, it is little that the Assembly can do on economic matters, but this does not mean that it can not make proposals or counter-proposals, of which it has done little on these matters. Perhaps the only exception is the Bill to give ownership to the Mision Vivienda homes, which was repudiated by Chavismo.

Perhaps the most positive thing to has happened is that there has been acceptance of the victory by the opposition. Even if this has been a reluctant acceptance or not, it is there, whether thanks to the military or not. The opposition found the need for security the first day the Deputies were sworn in at the Assembly, but the routine of at least bi-weekly sessions is such, that the last time the Assembly met in a regular session, there were no significant security forces outside the Assembly building. (The same inside, where reporters and public can now go in without much hassle)

This represents some semblance of the return of normal democratic life to the country, a huge advancement.

And this return to normalcy is also present in an increased access to the media by the opposition. Even if VTV did not want to show Ramus Allup (A negative nomination on which I have opined sufficiently), it had no other recourse but to show his speech right after Maduro’s speech. By now, some of the old/new media, such as Globovision, has begun to hedge it bets, increasing its coverage of the opposition.

More democracy can only be good.

I think it was a negative for the opposition to go back on the swearing in of the three questioned Amazonas Deputies. It should not have done so, if it was not willing to go Constitutional-conflict on the terrible decision by the Electoral Hall of the Court. Given the 45 thousand-plus decisions in a row  by the Court in the last 15 years, it should not have expected anything else.

While it was a puzzle why Amazonas was picked, given how close elections were there, the truth may have been revealed this week, when it was noted that some Chavista Deputies have requested the Supreme Court interpret whether the indigenous representatives to the Assembly should be elected by the population of those States at large or only the indigenous population. Curiously, the opposition had raised this issue in the past , only to be denied, even when Chavismo dominated that vote. Chavismo probably thinks that it can win one of the three Assembly members with this trick and deny the 2/# majority to the opposition, but I doubt it.

Unfortunately Maduro did not understand the message about the economy and seems to still be clueless at this time. Since Dec. 6th. oil has dropped by about US$ 8 per barrel (somewhat less for Venezuela’s oil basket) but the Venezuelan President did not mention any concrete measures in his State of the Union address and his “Economic Emergency” Bill” only include the possibility of more expropriations, despite the dismal failure by Chavismo with them over the last 16 years. He did say gasoline prices should be increased, a decision which is solely in his hands. He should talk less and do something.

And with oil under $30 per barrel (less than US$ 23 for the Venezuelan basket) this means that foreign currency revenues for the country will be under 50% of what they were during 2015. And as Venezuelans line up for food, medicines and even to have their deodorant refilled, one has to ponder how awful things will get in the upcoming months…

Well, sooner than you could say Henry Ramos, the first big Constitutional crisis exploded today, in Venezuela as the Electoral Hall made a ruling that sets up a huge confrontation between powers.

The Hall ruled:

1- The Venezuelan National Assembly is in contempt of the court for not obeying its decision to not swear in the Deputies from Amazonas State.

2- Because of this, says the Electoral Hall, any decision made by the Assembly so far and in the future is completely illegal

3- The Court orders the National Assembly to immediately “disincorporate” the three Deputies.

The decision is quite bizarre in too many ways, but what do you expect from “Justices” some of whom do not qualify to hold the position and violate the law in many cases, as they were card carrying members of Chavismo’s party PSUV?

First of all, the legal concept of taking away the proclamation of a Deputy does not exist. Moreover, there are precedents for this, which are not even mentioned in the decision by the same Hall and the Constitutional Hall of the Venezuelan Supreme Court.

Second, once proclaimed, according to the Venezuelan Constitution, only the National Assembly itself can “qualify” a Deputy. Nobody else can, least of all, the Electoral Hall of the Supreme Court which only rules on Electoral matters. Once the Electoral Board proclaimed the candidate, this is no longer an electoral matter. The same applies to nullifying acts by the National Assembly. It is not the role of the Electoral Hall to nullify such acts, least of all “future” acts, an absurd legal concept.

Maybe these “Justices” do not understand that the Electoral Hall rules on Electoral matters, no on matters which should be the realm, if at all, of the Constitutional Hall of the National Assembly.

Finally, it is sort of stupid to rule invalid decisions by the National Assembly that are taken without the three “questioned” Deputies participating in the vote. If they had nothing to do with the decision, there was nothing illegal about it.

But the real conflict arises and will explode now for the simple reason, that the National Assembly can simply not accept the decision for political reasons. Since the decisions are illegal, backing down would imply that the Court would simply stop the elected National Assembly from doing anything in the future.

And the key word here is “elected”. A Court that was not elected by popular vote and under questionable circumstances from a legal point of view, can not pretend to be above the popularly elected National Assembly.

Moreover, I think the National Assembly has no other recourse but begin proceedings against the same  Justices, something that they can do. Thus, we go into an infinite loop of non-recognition of one by the other.

Who will be the referee in such a battle?

Meanwhile, the economy gets worse, the price of oil goes down and the Maduro Government devotes itself to talking about the removal of Chávez’ pictures form the National Assembly building.

Clearly, there is no interest in attacking the economic problems and distortions. Even more clearly, there is no intention in recognizing the qualified majority obtained by the opposition.

Who was it that said Chavismo was democratic? Yeah, sure!

Organizational Chart for the new Venezuelan Cabinet named by President Maduro

 In July, I suggested that even with the upcoming elections, Santero Economics, the peculiar form of economic management that has taken over Venezuela since Maduro got to power would not go away with the Legislative elections. Yesterday President Maduro named his new Cabinet (Chart above, there are so many Ministers that it is essentially unreadable) and it is clear from it, that the Santeros have taken over.

What Maduro did, was to make Luis Salas Vice-President for the Economy. Salas is the center piece of the Santero Economic team as he represents one third of the group (together with Tony Boza and Alfredo Serrano, who is not Venezuelan, that has kidnapped Maduro’s Economic mind (yes, it’s meant to be cynical!) over the last three years.

There are some positives, like naming Economist Rodolfo Medina to the Ministry of Finance. Medina is a Professor of Econometrics at Central University, he is no Milton Friedman, but at least he knows and understands traditional economic theory. He is accompanied by Jesus Farias, a communist Economist, who at least has been proposing that there should be a single exchange rate, who will be the new Minister of Foreign Trade and International Investment, a newly created post, which only proves the level of ignorance involved in forming the Cabinet. Uber leftists Ricardo Menendez remains in the post of Minister of Planning.

One of the first problems of this team is precisely the level of incoherence involved. How will Medina, a practicing economist talk to Salas, a 100% Santero Economist? How will Farías argue with Salas, when Salas is against many of the ideas proposed by Farias?

 For the last three years, Salas, Boza and Serrano have imposed economic thinking in Venezuela, despite the fcat that they did not occupy any Ministry. They are the “creators” of the concept of “Economic War” as the explanation fro the large levels of inflation and the scarcity that is present in Venezuela. Their solution to the economic problems is more controls, more supervision, more taxes and fighting the oligarchs who are responsible for everything.

 While the foreigner in the Santero Economic think tank, Serrano, is an Economist, Salas is a Sociologist and Boza claims to be a Popular” Economsit”, whatever that may mean.

What these people do, is to disregard the body of work of economic knowledge, based on theory and experience and construct arguments (not theories) to suggest that body of knowledge is simply incorrect. There are no publications involved, just some self-published pamphlets which contain no equations, only graphs of empirical data, and hyperbolic and false statements to supposedly support their views. I linked Boza’s pamphlet last July, here are Salas’ Economic “postulates” for lack of a better word.

Among the many things that Salas posits, is that the law of supply and demand is vulgar, that monetizing the deficit is not inflationary, that inflation onl occurs because of speculation, that in real life inflation does not exist and that it all is an economic war, much like that waged against Allende in Chile. Thus, the solution is simply to be tougher, increase controls over prices and make the private sector pay more taxes.

 Which means that santero Economics will prevail, inflation and scarcity will accelerate and little will be done by Maduro and his Cabinet to attack the distortions in the Venezuelan Economy. Not only does Santero Economics not work, but those in the Economic team do not have the coherence or managerial capability to accomplish much.

Except for the pain that this implies, what this means is simply the acceleration of the demise of the Maduro Government, who will bring down Chavismo with him. There will be no change in direction now and given the past, those recently named will not exit the Cabinet fast if they obtain no immediate results.

This bodes badly for Venezuela and its people short and medium term, but at the same times sets the stage for promoting an outcome in which Chavismo no longer leads in the country.

(Two questions for the new VP:

1. If the law of supply and demand is “balurda”, can he comment on why oil prices have come down in the last year and a half?
2. If creating money does not cause inflation, why not print infinite money so that everyone is very rich?)