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Myths And Realities Of The Distorted Venezuelan Economy Part I

July 2, 2016

By now, news about shortages, hunger and protests in Venezuela have become quite fashionable in the international press. It is a crisis that is difficult to understand: How did such a wealthy country get into such a state that it can’t even feed it’s people? How could the one time appealing Chávez revolution stray from its supposedly heroic course? What went wrong in Venezuela?

For those of us chronicling the fake revolution, this is no surprise. We have been recording the inefficiencies, the corruption, the waste and the incompetence of Chavez and his cronies, to say nothing of the hare brained policies and controls of the last seventeen years.

Despite this, people want to be simplistic about what is going on in Venezuela. They think it can be understood simply as the “fall in oil prices” or “Things went wrong after Chávez died”, ignoring the fact that the origins of the crisis, as well as its most symptoms, such as shortages and inflation, began appearing in Venezuela long before Chávez died and way before the the downturn in oil prices began in July 2014.

The biggest myth is that the fall in oil prices is at the root of the current problems. Nothing can be further from the truth. As shown in the graph below from Econoanalitica, the Venezuelan economy was in trouble long before that:

eco

As oil prices hovered around US$ 100 per barrel in 2012, the Venezuelan economy began sputtering under the weight of irresponsible policies and ever increasing Government controls. In the first quarter of 2013,  when Chávez died, oil was at a hundred, but the Venezuelan economy could barely manage less than 1% growth in GDP. And by the first quarter of 2014, with oil still above US$ 90 per barrel, the economy began contracting by 5-6%.

And long before the fall in oil prices, inflation, which was already running high, began soaring:

Inflacion.jpg

jumping from 21% in 2012, to 40.6% in 2013 and increasing to 62.2% in 2014 as oil prices finally began their decline. No direct effect of the oil price drop there either.

And as oil prices began dropping in the summer of 2014, scarcity levels had already reached absurd levels, as shown in this graph:

Shortages.jpgAs by the time oil prices began dropping, Venezuela (the plot is only for Caracas) was showing shortages for 50% of the items considered to be basic.

Of course oil prices exacerbated the situation, increasing it to the near 90% levels seen today, but the root causes were sowed during many years by the absurd policies, widespread controls and increasing domination of the Government in the Venzuelan economy.

So, PLEASE, don’t blame the drop in oil prices for Maduro’s and Venezuela’s problems. You don’t see the same thing happening in say, Ecuador, an oil-dependent country with an equally populist Government, but where policies have not had the level of improvisation and ignorance that Venezuela has had.

What happened and is happening in Venezuela has its roots in policies that began in 2002-2003, when Hugo Chávez decided to involve the Government in producing foodstuffs, as well as controlling prices and the rate of exchange. The Government got involved initially in sugar, farming and milk production and distribution. Grandiose projects were started, most of which were never finished and produce very little today. Today, even some of the more emblematic products in which the Government got involved, are mostly imported with heavily subsidized dollars. Thus, not only was the Government a failure in producing these products, but it also destroyed the ability of the private sector to compete, as it began limiting their access to foreign currency, while importing products at the lowest possible available rate of exchange.

Since this was not working, the Government began then controlling prices, later extended to controlling profits of companies, a true recipe for disaster. And as the Government did this, it spent more on importing less, as the inefficiency and corruption, as well as over-pricing, began dominating the whole food chain from importing to distribution, leading to where we are today.

And as the Government did this, it created ever increasing and intertwined distortions, most of which are not only still in place, but are part of a complex and convoluted economy, which will be discussed in Part II, and which needs to be fully overhauled from scratch in order for the Venezuelan economy to begin a new path to normalcy.

But in the end, the fall of oil prices had little to do with most of it, in the same way the rise of oil prices did not create the value or the wealth that it should have.

 

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A Last Ditch Attempt By The Maduro Government To Stop The Recall Referendum

June 23, 2016

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                     People line up somewhere in Venezuela to ratify their signatures

The Maduro Government, via the Electoral Board the CNE, has tried by all means to block the possibility of a recall referendum. These attempts have been abusive of the Rights of Venezuelans, as the Venezuelan Constitution establishes this as a basic political right of Venezuelans.

The CNE has pulled all of the stops, creating first unnecessary delays, to finally end up violating the rights of thousands of Venezuelans by voiding their signatures using excuses as lame as saying that the petition form did not have Maduro’s complete name (Shouldn’t it have been printed on it?). To make matters worse, people could withdraw their signature (about 5,000 people out of 2 million did it!), but could not revalidate their signature if the CNE had voided it. A somewhat biased principle if you ask me.

Additionally, the Electoral Board has made ridiculous interpretations of the laws, such as requiring 1% of all voters in each State, rather than 1% of all national voters, since the position is not a State position, but a national one.

Finally, since people have to go and ratify with their fingerprint that they signed the petition, the CNE assigned only 300 fingerprint machines NATIONWIDE, while everyone knows they own thousands of them (40,000 of them to be a lil more precise), distributing them in such a way as to make the process really difficult for everyone.

But as if this was not enough, yesterday, Electoral Board workers began a slow down process in the few states where it is very tight to gather the required 1%. The CNE seem to concentrate its effort by now in Nueva Esparta State, the State where Margarita Island is.

Here is a first hand account by long time reader Island Canuck in Nueva Esparta:

“Here’s our story of trying to confirm 3 signatures with my family.

After hearing horror stories about Juan Griego & La Asuncion we decided to try and go to El Maco which is almost in the exact middle of Isla Margarita. A very small pueblo where no one would expect a confirmation point.

We arrived at around 10 AM and registered with the MUD table that was there. We were given wrist bands with a number and asked to join the line.

It appeared fairly short so we were really surprised when someone indicated the the line went around the corner of the next block.

After a check we discovered that there were hundreds of people ahead of us – maybe 400 / 500.

After waiting almost an hour the line had only moved maybe 20 mts.

We returned to the check-in counter to ask how many people an hour they were processing. The lady shrugged and said that ideally 60 persons per hour. There was only 1 finger print machine. She admitted that the number was much less.

We decided that waiting further was a waste of time as we would never be processed and left with the idea to return another day much earlier. Even this idea is without much merit as they can’t possibly process the number of people that show up under current conditions.

This is definitely a planned exercise by the CNE to prevent at least 1 state from getting their 1%. That’s all they need to destroy the whole process.

As of 1.30 it was announced that the El Maco site had only processed 120 voters in 4½ hours – approx. 27 per hour.

They are going to do everything in their power to block at least 1 state. Then for sure the revocatorio will not occur in 2016.

I’m depressed as the MUD has no power to change anything.”

The only number that matters here is 27 voters processed per hour. This is absolutely ridiculous as the process takes no more than 15 seconds and in a regular election a single machine processes up to 2 and 3 thousand voters in eight hours.

But fascism acts like this, while assholes like Zapatero defend them as poor souls who have not adjusted to having lost the December election.

The four ladies in the Board of CNE should be prosecuted for this one day.Thousands of Venezuelans have had their rights violated in order to preserve a fascist Government which can not even provide the basic needs of the people.

I do hope that someone points this out today at the OAS meeting on whether to invoke or not the Democratic Charter on Venezuela. It may make no difference, but it will show the true nature of these for-rent left wing former Presidents, whose principles can be bought with a few meals, some nice hotels and the chance to believe that you may be once again important.

 

 

As Imports Seem To Rise In Venezuela, Everything Else Seems Negative

June 19, 2016

It has been difficult to write about what is going on in Venezuela. I wish I could be the bearer of good news, but most of the time, news coming out of Caracas is simply negative and may I say, simply depressing. Things get worse and the Government continues to pay little attention to what is going on, continuing its “economic war” cry to blame their incompetence, their negligence, their corruption and their indolence in the face of hunger, illness and insecurity. (This from a Government that lost 120,000 barrels per day in oil production only in May!)

About the only positive news is that, as measured by the PCNI (Puerto Cabello Non-Baltic Index) imports appear to have picked up in the last few weeks as shown below:

PCabelloAs you can see, the number of boats arriving daily to the main port in Venezuela for food imports, has increased significantly from the lows that I reported in April reaching levels between 8 and ten ships per day, something not seen since January.

This is welcome news, even if it is clearly insufficient. Recall that last year, the average number of ships in Puerto Cabello was typically 14 to 15 each day. Moreover, you have to understand that there is a new mindset in Venezuela: that of extreme scarcity. Even those that have little money for purchases are hoarding something at home. Everyone has something in life that you feel you need no matter what. Thus, whether it is soda, toothpaste, sanitary napkins or simply milk for your baby, the scarcity mindset drives people to hoard their favorite foods. The results is that the cabinets and closets of the people are full of many of these items and it will take over-importing, something we are not even close to, in order to make this mindset disappear.

The consequence is that as the scarcity levels have increased, higher imports are simply not felt by the population.Meanwhile, the Government remains in control of what may be or not imported, while at the same time increasing its power over distribution channels. Its latest invention, ironically called the CLAPs, are committees to distribute food to only Government sympathizers, thus creating an apartheid in which if you don’t sympathize with the Maduro administration, there will be no food for you.

It does not get more fascist than that!

Meanwhile, scarcity is so bad, that the Government now has to resort to accompanying food trucks with security, lest they be looted by hungry people when trucks stop. Sometimes they don’t even have to stop, they are ambushed by people at the entrance of towns as they head to supermarkets and quickly emptied from their goods. In places like Cumana, stores have been looted and many of them have no plans to re-open, aggravating the problem.

Meanwhile at the OAS, Venezuelans became hopeful that some international pressure could be applied on the Maduro Government, something that has not worked in the last seventeen years. The Maduro Government masterfully played the diplomatic game, proving once again that countries have no principles, only interests.

Even recently elected Mauricio Macri of Argentina, found his personal interest in having his Foreign Minister become Head of the OAS more important than the fate of Venezuelans, backing out of strong statements made in the exuberance of his Presidential victory. To say nothing of the US, which decided to push for the mediation route, a path that is only meant to delay the feasibility of a recall vote against Maduro in 2016, thus guaranteeing that Chavismo, even if it has to get rid of its current bus driver, will rule over Venezuela until 2019.

And the opposition was partially to blame. It really was not playing international diplomacy at the same level, but it also accepted some initial gambit for negotiations, led by a bunch of former Presidents, who are not only pro-Chavistas and which have little significance in their own countries, but whose role as mediators is financed, funded and toasted by Maduro.

Of course, the OAS’s task was difficult from the beginning given the large number of fairly wealthy Caribbean countries that receive cheap oil from the Maduro administration and have sold their soul to the Chavismo Devil (not related) for years.

As for the recall, the many manuevers by the Electoral Board are so incredibly biased that their pro-Chávez members should one day be tried for the wholesale violation of the people´s rights (and their pensions rescinded).  Not only have the timetables established in the law not been respected, but rules have been made up on the fly to make the recall even vote more difficult. From requiring 1% of the voters for each State, rather than 1% of the voters nationwide, as clearly stated by the law, to arbitrarily voiding 600,000 signatures for the recall, to allowing people to withdraw their signature (something that less than 6,000 people out of 2.1 million took advantage of), the whole process has been shameful and should be enough justification for the OAS to do something.

The latest ruse? After signing the petition for recall, people have five days to go to the Electoral Board and ratify that they signed the petition using their fingerprint. Now, in a country where all supermarkets are now armed with fingerprint machines to restrict the purchase of price – goods, the Electoral Board came up with three hundred machines to have the remaining 1.352 million people ratify their signatures.

Even more shameful, the distribution of machines is as efficient and biased as the Government’s food distribution network. For 241 municipalities with 600,000 people who signed the petition, there will be zero machines to ratify their signatures. At the same time, 64 municipalities with 21,000 signatures will have all of 100 machines for people to ratify their signatures. The most ridiculous case is the town of Ocumare de la Costa, where there will be all of four machines to service the 264 people who signed the petitions. Of course, municipalities like Chacao, Baruta and El Hatillo, with thousands of signatures will have none, zilch, zero.

Only around 200,000 people are needed to ratify the recall petition, but each state will need 1% of its voting population. Thus, the task is made quite difficult by restricting the number of fingerprint machines. Fascist hoodlums is what the four pro-Chavez ladies at the Electoral Board are!

And so it goes…as this happens, Venezuelans get distracted by stories about cemeteries where the tombs of former Presidents are desecrated, which has been happening since even before Chávez took power in 1998, but which creates and outcry and diverts attention from the rapid, vertigo-inducing deterioration of the quality of life in Venezuela. As the Minister for jails, released prisoners to protest in favor of Maduro, there were two kidnappings very close to my family, including one nephew. But the police is too occupied guarding food trucks and protesting prisoners.

And so it goes…

Hyperinflated Arepa Index (HAI) XII: Cruising Through A Factor Of Ten Increase

May 28, 2016

arepitaarepapic.jpg

It was only a matter of time, but the Hyperinflated Arepa Index crossed the factor of ten increase in price with ease, as this week I went and had another delicious arepa at my favorite joint and I paid a price of Bs. 1,400 for my queso de mano arepa. This whole story began on Nov. 17th. 2014, at a price of Bs. 120. It took one year six months and four days for the price to increase by a factor of ten. This represents a 27% increase since the last report on April 9th. and a 409% increase since twelve months ago. The price has increase 1066% since I started logging it.

Of course, the increase is actually higher because as I reported last time, there has been a bit of Soviet style inflation, with the arepas getting smaller. Above I post a picture taken on Nov. 15th. 2015 and the arepa I ate this week. I don’t know if the plates are the same size, but you can easily see that the filling is much less generous now. On the top one there are four generous slabs of queso de mano, on the botttom one there are three not so generous ones. The arepas to me are clearly smaller (I suspect the plate on the right is bigger, but I wonder about how the paper around the arepa seems to be the same size)

The taste was as delicious as ever…

arepa52015

 

Venezuela’s Health Crisis Will Be Long Lasting

May 22, 2016

MaduroMarco TorresAristobulo  pa

Maduro with some of the soldiers during the military exercise and the Minister for Feeding, the Vice-President and the Minister of Industry and Commerce participate, some of them dressed in full military dress, even if they were never part of the Armed Forces.

As Maduro and some of his Minister participated this week in “military excercise” which mobilized half a million soldiers and civil militia members, at an estimated cost of US$ 20-30 million, you have to wonder what is going through these people’s minds.  While they spend money on this to make a show of force against a possible foreign invasion, the health crisis Venezuela is experiencing is something unheard of in the modern world.

And what is needed is resources, the same resources being used in these military exercizes and military equipment.

Wasn’t the revolution all about the “people”. Well, the people are dying and will feel the effect of lacks of medicines for a long time.

While we have all heard the calls for medicine xx or yy in Twitter or Facebook, what needs to be understood is that this is not only a crisis today, but something which will have an impact on the health of Venezuelans for years to come. The people above in the pictures, wasting their time and Venezuela’s money are not only ignoring those that die everyday due to the lack of medicines, but they are also sentencing many others to die in the future, due to the absence of the most basic medicines for health problems that can be easily controlled or managed.

These same people, are making daily decisions in Venezuela about which pharmaceutical companies can get limited foreign currency, which are based on their own ill conceived plans for the the development of the Venezuelan economy.

Today, Venezuelans find that even the most basic antibiotics can not be found. Why? Because it is not only that the foreign currency approved is limited, but that there is no health management concept involved in deciding which products get or not foreign currency.

Any rational plan would be based on guaranteeing the basic or essential medicines contained the the lists elaborated by the World Health Organization both for adults and children that can be found here. A lot of experience and thinking has gone into these lists, which are constantly being updated and modified. These are the most basic list of such essential products. However, as you peruse the list, you realize that you know for a fact that you have seen and checked reports that many of them are missing from Venezuela’s drugstores.

Take simple things, like disinfectants and antiseptics. There are a number of them which are only found in insufficient quantities thesedays, such that hospitals have to shut down areas and operating rooms, because there is no way to guarantee that patients can be held in these areas without disinfecting them first. This implies that operations are postponed, patients sent home and people simply die, because simple procedures that will prolong their life can not be provided safely.

Sometimes, not even the reagents needed to perform simple blood tests can be found and patients are turned away even before they can tell why it is they are not feeling well. Sometimes they have to wait weeks before they can have what is considered a simple exam in most, if not all, countries of the world.

And you may ask why if there is such a list, the Maduro Government does not use it? Simple, in the world of Chavismo, which ignores all knowledge and in which non-experts are put in charge of these complex problems, whether you get or not foreign currency has exclusively been determined by two factors in recent months 1) Are you importing raw materials to make the medicines or products in Venezuela? and 2) What products have significant shortages at this moment?

The problem with this criteria, is that not all medicines are produced in Venezuela. Thus, if for example, you ask to import the basic component of a drug against hypertension, which is basically all the final medicine contains, then you don’t get the foreign currency. Problem is, most modern drugs against hypertension are not produced in Venezuela. The result is that, for example, the pharmaceutical I use, has not been available in the country since March 2015, about 14 months ago.

Same with antibiotics. Some antibiotics are produced in Venezuela, but they tend to be old ones that people have developed resistance against, so, yes, you can buy antibiotics, but not necessarily those that may be needed for the particular infection you have.

Ironically, blood and blood plasma products, which used to be produced by Government run Quimbiotec, have not been produced since this plant was shut down last year, as the political battle for control of the plant destroyed the technical capabilities it had. Even in Aporrea, Chavistas call this a national shame, as these products are needed today more than ever due to the presence of Zika and the related Guillian Barre syndrome.

Thus, policies are simply determined using a misguided project for the manufacture of medicines and pharmaceuticals in Venezuela. And in the middle of the implementation of this, the Government discovers something is critically absent and then it stops approving foreign currency for all products, except for one particular sector. For example, last month, I am told the Government only approved foreign currency for manufacturers of contraceptives, which have been absent from drugstores for quite a few months. (Another LONG LASTING effect in the works!)

This haphazard way of doing things is not only killing people today, but will have long lasting effects over the Venezuelan population. As an example, take the same case of medicines against hypertension. Once you start taking one, you are supposed to never stop. Your cardiovascular system will cycle back to high blood pressure and you may have problems. Well, thousands of Venezuelans have had to reduce their dose or simply stop taking these products.

And there are many cases like this.

Thus, the Venezuelan health crisis will be long lasting. It is not only a matter of the damage it is doing today to those getting sick but are unable to do anything about it, but also the damage to those that were taking substances that controlled their illnesses, but can no longer do it.

The crime committed by these people, goes beyond wasting money in useless military exercises that seem more like a parody, but also in making it difficult for humanitarian aid to arrive in the country. While it has not refused yet any aid, none of it has supposedly reached the country because of all of the permits required. This is all done under the excuse that there is no humanitarian crisis to speak of.

When this nightmare is over, if ever, epidemiologists will come to Venezuela to study the effects of withdrawing modern medicine on the population for a certain period of time and see what can be learned from the irresponsible and criminal policies of Chavismo.

IMG_0479Playing hide and seek during military maneuvers. Hope the guys is not allergic, there are no antihistamines either.

The Supra Constitutional Decree Issued By President Maduro

May 16, 2016
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Today, we have a copy of the decree issued by President Maduro to give him extraordinary powers, which now needs to be ratified by both the National Assembly and the Venezuelan Supreme Court. The Assembly will obviously not approve it and the Supreme Court will and then will likely say the Assembly does not have to approve it.

But the decree is a beauty in its Supra Constitutionality. It simply deletes and does away with significant parts of the Venezuelan Constitution, including taking away powers from the National Assembly which are in the Constitution.

Pretty, it certainly ain’t.

And in some sense it is ironic that the decree contemplates that the National Assembly has to approve it, as it is quite obvious it will not. Approving it will be emasculating the powers of the Assembly, a sort of Hara Kiri for the majority that the opposition obtained in the December vote.

Let’s look at some of the details, not before reminding you that I am far from being a lawyer and I will try to be as precise as I can, within that limitation.

I will skip most of the introduction, which argues that ever since Chávez died, there has been this conspiracy between the local “right wing”, which I assume is all of the opposition and mysterious international forces to distort the Venezuelan economy. In some sense, the decree argues that all of the opposition is part of this and thus, it needs to be neutralized and its rights limited.

Way to neutralize over half the population!

In Art. 1 the decree gives the Government the power to adopt measures to insure the population can “enjoy” its rights, to preserve internal order, to have access to goods and services and magically, to diminish the effects of natural events (a.k.a El Niño) that have affected power generation, access to food (??) and other products essential for life.

And then we come to the all powerful Art. 2., which says too much, among many:

1.- The Government can adopt measures to insure the production, distribution of goods and “combat” distortive economic conducts, like “bachaqueo”, hoarding, usury, fraudulent alteration of prices and other (undefined!) economic illegalities.

Is bachaqueo a legal term? It’s certainly not in the dictionary of the Royal Academy of the Spanish Language.

2.-The adoption of “exceptional” mechanisms to supply raw materials, machinery, seeds, loans, to the agricultural and rancher sector.

3.-To guarantee, even with the intervention of the Armed Forces for the correct distribution of food and essentials.

Scary article to say the least! (What does correct mean?)

4.-The authorization by the President and the Cabinet to spend money from the Treasury and other sources of financing not contemplated in the Budget Law to optimize resources.(Read: To bypass the National Assembly and the Constitution in the process, issue debt and spend money)

5.-To approve and subscribe contracts to obtain resources without the need to have it approved by other powers (i.e.: Bypassing the National Assembly and the Constitution)

6.-To allow the direct assigning of foreign currency…for the purchase of priority goods.

Cadivi corruption on steriods?

7.-To decide to suspend the political sanctions against the authorities when these sanctions can become an obstacle…i.e. remove the power of the National Assembly to censor and remove Ministers and the Vice-President, as established in the Constitution.

8.-18.- More of the same

From which we jump to lovely Art. 4: The Finance Ministry will be able to coordinate to establish minimum and maximum limits for the incoming and outgoing of Venezuelan cash (Bs.), as well as restricting certain commercial and financial transactions, restricting such operations to the use of electronic means available in the country legally. (Corralito anyone?)

And after all this, the decree says the Supreme Court and the National Assembly will have to approve the decree…

Go figure…

But the objective is clear, parts of the Constitution are decreed void, The National Assembly is restricted in its powers, including many granted by the Constitution and an extremely powerful Government, becomes even more powerful to do what it wants.

Which as usual, it will do ineffectively…

 

Maduro “Announces” New Emergency Powers Decree

May 15, 2016

16520349-A-background-design-element-of-an-antique-historical-paper-scroll-document-or-decree-with-red-wax-se-Stock-VectorLast Friday, President Maduro announced that he would extend the economic emergency powers decree (The same one that the National Assembly did not approve, but the Supreme Court said it did not matter) and announced that he would also decree a state of exception to “neutralize and defeat the external aggression against our country”

Now, you would think that given the importance of such a decree, the Government would have distributed a copy by now, but, no such luck, the details of the decree are unknown. Maduro will apparently issue it taking advantage of the Supreme Court’s ruling on the prior economic power decree, in which the “High” Court simply scratched part of the Constitution (Art. 339 of the Constitution, for example)  saying the Assembly did not have to approve the decree.

Some people are calling this a “coup”. I disagree. You can’t have a coup when you already staged one. I can’t even recall when this happened and one could argue when it was. It may have been when Chávez was never sworn in in Jan. 2013, as Chavismo suggested this was simply a “formality”. Or it may have been when Maduro took over from Chávez for the new term, despite the fact that the VP is named by the President and there is no proof that Chávez was even conscious at the time. Or it may have been when the Supreme Court twisted and violated the Constitution dozens of time, just to have the Government get its way.

So many coups and nobody has been counting them, but this was not it!

And the funny thing is that just last week, the Venezuelan Foreign Minister went to the UN to say there was no crisis in Venezuela, no emergency. Funny, no? the President not only extends the economic emergency decree, but also expands it to include a state of emergency.

And it just so happens that during a state of emergency, there can be no public gatherings like those the opposition has been promoting to protest the recurrent delays in the processing of the request for a recall referendum vote against none other than President Nicolas Maduro. Each step of the process has been delayed, over-interpreted and postponed, using vaporous interpretations by the Government-controlled Electoral Board. Which, of course has everything to do with trying to delay a recall vote until after Jan. 10th. 2017, when if Maduro is recalled, his personally-chosen active Vice-President would replace him and complete his term until Jan. 2019.

And thus, the threat is not from the outside, as Maduro wants you or someone to believe, but from the inside: the fear that the opposition will increasingly take to the streets to force a recall vote before the fateful date of Jan. 10th. 2017.

Thus, the guessing game begins as to who the VP will be in January. Opposition lore will have it be current VP Aristobulo Isturiz, “someone we can talk to”. Forget it! Aristobulo does not have the red credentials, nor the trust of Chavismo, precisely because the opposition can talk to him. It will likely be someone who is in the Cabinet, someone Maduro trusts. Perhaps Marco Torre, a loyal former military a perennial Cabinet member. Perhaps better a civilian, Jorge Rodriguez, loyal to Chávez and Nicolas. But who knows? There is still a lot of time before January and maybe not enough people will show up for a recall after that date*.

Stay tuned.

*Maybe I placed too much emphasis on who will replace him, but the more I think about it, the more I believe that there will not be much motivation to change Maduro for someone else. Remember that the opposition needs to get more votes to recall than Maduro got in his Presidential election.

Tale Of Two incompetences: The Electric Crisis And The Bill supply

April 27, 2016

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As I watched the Vice-President announce yesterday from the Guri dam, that public workers will no longer work from Wednesday to Sunday in order to save electricity, I could not help but wonder how limited in their understanding that pathetic civilian-military combo in the picture above is. By now, they have become a parody of a Government, but they still want to stage the announcement for the benefit of some imaginary crowd that they think will applaud  and cheer them on, as they get their feet dirty, for once, but really do nothing to solve the problem at hand.

They simply have no idea how to solve it. They never have. Seventeen years running around like a lost electron, without knowing what to do.

And two current crisis (among so many) show the incompetence of Chavismo at solving any problem. The electric problem, a complex technical issue that has been mishandled from the beginning and caused by Chavismo and now the shortage of currency bills in the country, a problem created and executed with all of the whole hearted incompetence of Chavismo management, but which lacks any technical component or complexity, beyond simple common sense.

But Chavismo has botched up both, the complex one over and over and the simple one with its sheer and remarkable stupidity.

The electric problem began in 2000 with the all-knowledgable full-of-himself Jorge Giordani, who had a Bachelors in Electrical Engineering and a belief that he knew it all, which led him to cancel or postpone some hydroelectric projects in the Caroni basin, the same one as Guri. This was done in order to save money and because he did not believe in hydroelectric power, only in the magical power of Hugo Chávez apparently. Reportedly, he included in his wisdom that he thought Guri had plenty of power for our little Nation, a fact that I have been unable to confirm.

If you put together this, with Chavismo getting rid of anyone with any technical knowledge that was not fully loyal to the cause, and over the next few years, the electric problem got worse and more complex. Lack of investment at Cadafe and Edelca, now part of the all powerful Corpoelec, which includes the nationalized electric companies in 2007, only compounded the problem.

As if this was not enough, in the middle, Chávez brought Cuban advisors (Or Fidel sent them?) who at least were honest enough to suggest stuff they knew: The building of localized power plants where needed like in Cuba, isolated from the very distributed and highly interconnected system Venezuela had, a highly sophisticated system with power sharing.

Plants were built without transmission lines, the Government overpaid, many people made lots of money, as Venezuela paid over twice the internationally recognized price per MW. Meanwhile a parade of politicians with no technical background or an idea of how to run such a complex operation, from Comandante Fausto to Jesse Chacon, to Hector Navarro, to the current military officer playing boy scout that presides the Electric Ministry, were incapable of making the right,  if any, decisions. They had no clue and had few people around them with the know how.

Meanwhile, Guri was ignored, not because they knew there was no problem, but because it was better to give contracts to new people and companies, that pay maintenance to the original manufacturers of the systems and turbines that were the only choice to fix and maintain Guri.

And as the 2010 El Niño hit, the country came close to collapse, but the rains saved the day. Once the storm passed, the problem was ignored once again, there was money to be made elsewhere and despite the very ignorant boast by Jesse Chacon that he would fix the electric problem in 100 days, a recognition of how little he understood its extent and complexity, Guri continued to be mismanaged and ignored.

Mismanaged, not only because little maintenance was done, but also because the dam was no longer “managed”. A friend that worked at Edelca 35 years ago tells me that there were sophisticated computer models of how to manage the dam that can not be in operation today, otherwise the dam would have been shutdown.

And we stand today at the brink of a huge black out after two years of low rain, but not the dramatic drought the Government wants to convince us this is. And as 1600 mm. separate the country from a disaster, all Chavismo can do is tweet and be on live TV from the side of the dam, showing their incompetence. Only rain can solve the problem that Chavismo created and has been unable to fix.

However there has been a lot of rain in the last ten days and the level keeps dropping.

Contrast this with the currency bill problems. A simple problem when you come down to it. Printing bills cost money, so as inflation heats up, you design a new higher denomination bill, saving money on the number of bills. You send a purchase order, Pay for the bills and they arrive. As simple as that.

Instead, as Bloomberg reported today, as I was writing this post, The highest denomination bill is worth less than a dime, no new bill has been designed and after plane loads of bills arriving in the country to relieve the scarcity, the country stops paying the companies that print the bills.

No more bills for you!

A very simple process of decision making was interfered upon by an ignorant President, who did not want to print higher denomination bills, lest the citizens discover that there is inflation. As if the citizens were so stupid to not notice it when they go to buy food. And then to top it off, refuse to acknowledge the problem, bringing increasingly larger amounts of bills. Why pay if the printers keep sending them?

Until they didn’t.

Total incompetence on a very simple matter. You can’t make this stuff up. It just shows that whether simple or difficult, Chavismo has no clue about management, knowledge, technical issues, execution, costs and such complicated issues. If they only could use their political Macchiavellism to attack either of these  problems, whether simple or complex!

But everything is improvised. Just think, there is little evidence that sending people home saves any electricity. In fact, over Easter, a national holiday was decreed for ten days and according to Government officials, there were no significant savings. So, let’s simply not use what we learned then and completely paralyze the country. Who cares?

Venezuela is rich, what’s a few months without Government workers doing anything?

It’s Chavismo incompetence at its best!

PCNI IV: Number Of Ships Arriving Has Not Recovered

April 21, 2016

PtocabelloAbril

I was hoping the number of ships coming into Puerto Cabello would pick up before reporting, but since late March, I have not seen a single day with more than three ship on a single day. This just means that the Government is simply sacrificing imports in order to to comply with its international obligations. This also means that shortages should accentuate in the coming weeks, since the number in January was in the mid-teens.

I apologize for being the bearer of bad news, but that is what the numbers are saying today.

I will only report in the future on the PCNI if there is a significant pick up in the number of cargo ships coming into the country via its most important port.

Is Drought Really Causing The Problems With Guri Dam?

April 17, 2016

The title of this post may seem strange to some, when you look, for example, at the pictures in this Reuters report, it certainly seems like there is a drought in Guri, except that if the pictures were of the bottom of the now half -dry lake that forms the dam, it is obvious that it will look dead and drought-like in the pictures.

When I was in Caracas, someone told me that they had gone fishing in one of the tributaries of the river Caroni and the water level was quite high, something that was later confirmed by another friend who went fishing in the La Paragua river and saw the water level rise by a meter in a few days.

Despite this, the dam level keeps going down, so, what gives?

Both of my friends deduced from this, that the problem was not drought, but the managing of the Guri dam.

I stored this information in the back of my mind and did not look into this for  a couple of weeks, but all of a sudden, this blog post by Roger Andrews came out. While Andrews is not an expert in this particular field, he seems to be someone that likes charts and numbers and understanding problems. What Andrews showed, and I will come back to it, is that this has not been an anomalous year in terms of rainfall in Guri and that the problem with the water level was simply overuse of the dam to generate electricity.

It is useful before we discuss this, to show you an overall map of the area of Guri:

gurimapcaroni

On the left, you can see the overall area in the Southeast of Venezuela down to Brazil and Guyana. In the blow up on the right, you can see the Caroni river and all its tributaries, which is the area that feeds the dam. What matters in the end, is what rainfall is doing there, not in Caracas or Maracaibo or even Ciudad Bolívar, far from the dam, bot in the basin of the Caroní river.

What Edwards did, was to look at the data in five rain stations in Bolivar and Amazonas and see if rain was particularly light in the last few years. Here I show two of them: Tumeremo, to the right of the dam, and Santa Elena to the South and which is in the Caroni basin:

PluviometriaAs you can see, rainfall in Tumeremo was in 2015 about the same as any other year and in the case of Santa Elena, rainfall levels were at 200 mm per month level, not exactly low given the long term record.

While I could not find a long term record for the Santa Elena Station, I did find the record for Kavanayen nearby:

KavaThis graph shows the maximum rainfall at the Kavanayen Station (black), the average (blue) and the lowest level (red) from 1969 to 1998 (Funny, there is no data after Chávez was elected)

As you can see 200 mm. is way above the lowest level ever measured.

Just to make sure, Edwards blew out the data and I will show what is seen for Santa Elena:

SantaHelena

As you can see, last year was not too different than any of the past five years, when there was no “El Niño” to blame the supposed drought on.

At this point I wished I had current data for the stations with a long term record to compare. But then, a person I follow in Tweeter (@meteovenezuela) posted the following recent rainfall map:

LLuviaembalse

This is a map of the Caroni river basin above Guri, showing the accumulated rain from March 15th. to April 13th at a number of stations. What is interesting is that we have two stations that we can compared to the long term record: Kavanyen and Uriman. At Kavanayen, the rainfall was 229.1 mm for this almost one month period. This number is way above the average rainfall for April 1st. from 1969 to 1998 in the graph above, which was of the order of 150 mm per month, and we are  talking about comparing to the average! Not to the lows…

We can do the same thing for the Uriman station, close to the dam as seen above above, where the rainfall was 151.7 mm in the same almost one month period.

Below is the long term record for this station:

Urinam

I have placed a red dot on the curve with the data for this year, as you can see, it is right on the historical average, far from being an anomalously low value, as the presence of a severe drought would require.

Despite this, the Guri dam level continues to go down…

And to increase the mystery, I found this plot of the water volume in the Caroni river tweeted by @800GWHMWH:

Caronicaudal

Clearly, the volume of the river is at levels which are historically high, not low.

I am no expert, I just enjoy looking at data and graphs, I have looked for as much new data to complement Edwards’ and I must say, everything that I have found confirms what he concludes. I do hope one or many of the readers of this blog can help me in getting more information and data and debunking the Government’s claim that this El Niño-induced drought has been anomalously strong, because it certainly does not look like it.

In closing, I show a plot of the peak power demand in Venezuela in the last few years:

peakdemand

Clearly, despite the billions that were invested in order to increase power generation, we are now back to 2007 levels, indicating that something has been going downhill in the grid and I would bet, this has to do with the overuse of Guri, to compensate the decline of the whole network.