The Devil's Excrement

As the Chavez administration takes over middle class apartment buildings in order to score points with the Venezuelan middle class, the truth is that it has failed to complete ots won projects, such as the picture above of a development in Vargas State, which sits abandoned, buildings already crumbing, despite the sign that hails “Welcome to anew project by the Bolivarian revolution”

The problem is that this project is part of the Vargas Plan 2005, an ambitious development plan for Vargas State, the most pro-Chavez one in the Nation, which was suppose to build some 13,000 apartments for the residents of that State. Only 230 of them have been completed.

This is the same Government that took over apartment complexes that were almost finished as a way of promoting its won image among the middle class. Sadly, they have been partially successful. Because there have indeed been abuses by the private construction sector, some induced by the ban of selling apartments indexed to inflation, but in the end the truth is the Government does even worse than the private sector. not only has the Government not completed these projects in Vargas, losing money and leaving them abandoned, but there are many others all over the place in the same condition. Because in the end the Government has become such a central part of all activities, that it is also failing at being a regulator. Thus, in the end it “intervenes”, “expropriates” and “takes over”, where it should be imposing penalties and regulating.

But it is all a matter of style. “Intervening” sounds threatening and ominous, exactly the image wants to convey. At the same time it sound bold and powerful, exactly what the Government wants the middle class to think. But in the end, it is all a war of words. In six months, the building projects will remain abandoned, forgotten in the same foggy cloud where most bold Chavista projects lie.

But perversely, many will keep a positive image of all these announcements. The image of a Government that cares for the people. A Government ready to step in and defend their rights. Unfortunately, their rights are being trampled once again when they are led to believe this has any meaning in their future.

In the end, it is actually the opposite. The private sector is more efficient than the Government despite all of its problems. But now that it feels and is threatened, it will simply stop building and investing which goes precisely against the goals of all middle class Venezuelans to own their own home.

The perverse thing is that it works in the end. These actions do give the Government popularity despite their overall negative effect. Proving once again, how populism can be successful even after a decade of failures.

Just for the historical record (and the record books!) I wanted to make sure to include the full text of what General Henri Rangel Silva said today. General Rangel Silva’s statement is unconstitutional and represents a true threat given that he is the General in charge of “Plan Republica” The military plan that protects people and votes on election day. General Rangel Silva should be immediately removed and jailed for what he said.

“The National Armed Forces has no half way loyalties but full ones towards the people, one life project and one Commander in Chief. We are married to this national project,” said the head of the Strategic Operational Command  (CEO), General Henry Rangel Silva, who says that in a hypothetical opposition government starting in 2012 and any attempt to dismantle the military sector would have a reaction from both the military and the people who would feel that they are taking something away from them.

In an interview with Ultimas Noticias, Rangel Silva insisted that the sectors that oppose President Hugo Chavez continue their attacks against the armed forces and some of its leaders. “For many, there are some military leaders who are not convenient to them and they (say) they have to be out of the way,” he said.

“The attacks are on the agenda of the opposition. The Armed Forces element has historically been used to somehow topple governments … They act supported by third countries and that affects nationalism. The hypothesis (of an opposition government) is difficult, it would be selling the country, that’s not going to be accepted by the population, nor the Armed Forces, nor least of all by the people”he said.

The Chavez “revolution” has attracted all sorts of frustrated Marxists who had been looking for an occupation ever since the Soviet Union fell apart. The ironic thing is that few of them have even bothered to learn much about Venezuela, Venezuelans and our idiosyncrasies. Even worse, their economic ignorance, both in general and about Venezuela, is so incredible that they help magnify with their advise, the ignorance of Chavez and his cohorts.

The latest such case has been Adam Woods. In a document published here in Spanish, entitled “Where is the Venezuelan Revolution Going?” Woods spews out a bunch of statements which simply demonstrate he knows little about economics, Venezuela and is just another theorist of revolutions. I like more Heinz Dieterich, who I also disagree with, but is more realistic and is more candid and honest about what he thinks about the revolution, even if I disagree with him.

Woods’ document has some remarkable statements which simply show his ignorance about history or economics, I don’t think you can give him much credit for understanding Venezuela, his quotes are all from very light weight sources and in itself the content he links to, has little credibility, but he shows it without criticism.

First, Woods concentrates on the “victory” on Sept. 26th. by Chavez. Had it been a victory we would have heard celebrations that night. But for Chavez, the only acceptable objective was a majority of the votes and a super majority in the Assembly. Neither one was achieved. But Woods sides with the revisionist opinion that it was a victory for Chavismo, despite the fact that it took two days for Hugo himself to sell us down that road. He then goes on to say that many lower middle class people have been “cheated” by the opposition, I suggest Mr. Woods looks at eleven years of Chavismo with constant attacks on the middle class, its values and its standard of living, to understand who truly has cheated who.

He then goes on to say that the solution is to nationalize the banks, the large capitals and the basic “levers” of the economy as a way of convincing the middles class that Chavez is on their side.

Where has Mr. Woods been all these years?

The nationalizations of PDVSA, large estates, cement companies, Guayana companies, etc. have yielded little for the Government or for the middle class. In fact, in each case, it is the middle class that has lost jobs, contracts and even a life. And they have seen little out of these nationalizations, as Mr. Woods think will come out of new ones.

For every middle class worker who loses a job or is affected by nationalizations, there is an extended family that is affected. We are still Catholic Mr. Woods!

Because Mr. Woods even dares to entitle a chapter of his document with the pompous title “The Nature of Venezuela’s economy” but then proceeds to show he has no clue what he is talking about.

He starts by citing the fact that the balance between the private and public economy has not changed since Chavez took over. But this is not because Chavez has been meek about destroying the pubic sector, but because even under these dire circumstances, the private sector has managed to create value, which Chavez has yet to figure out how to do. Piece of cake for the private sector which has lots 65% of its industrial companies. Easy to say, but a tragedy on itself.

And just to prove a point, Mr. Woods throws in this pearl of a statement:

“The superiority of a planned and nationalized economy was proven by the colossal success of the Soviet Union…”

Hello? Should I just stop here? Is this guy serious?

Because Mr. Woods then goes on to say that “the opposition  uses shortages to undermine the revolution”

Maybe he has not heard about Pudreval and how the Government has tried to control imports and production, with the result that the more it controls, the more it has to import. The more shortages there are.

And in one of the most laughable paragraphs, Mr. Woods dare blame inflation in Venezuela on “food inflation worldwide”, ignoring not only that inflation around the world is very low, but also that monetary management by Giordani, Merentes, Leon et al. has been abyssmal, with M2 increasing by a factor of four while international reserves have remained constant in the last six years. Perhaps Mr. Woods should read the works of a guy named Friedman who happened to say: “Inflation is a monetary phenomenom”. How right he was!

He then goes on to hail the nationalization of Agroisleña, one of the biggest missteps and errors of the Chavez administration. Agroisleña was such a complex business that I suspect it is harder to run it than Polar. Because the company was not just about agricultural supplies, it was about financing, technology, credit, advise. And we find out less than one month after its nationalization that sales in some regions are down to 20% of what they were, financing is canceled and no seeds or sophisticated products are coming into the country as credit lines have been canceled.

A roaring success. Mr, Woods would lead you to think, except that farmers need the financing, the technology and the seeds, but Mr. Woods probably has never visited a Venezuelan farm. And they need it now, not in three months. It’s all about crops…

And then he focuses on banks. quoting one of the local financial rags, Mr. Woods says: ” 91.2% of banks earnings come from commissions”

Jeez, that’s like saying that 100% of Apple’s earnings come from Macs, the rest is just useless. Forget iPhones, Ipads and all that junk.

Anyone that knows anything about Venezuela’s financial sector (Mr. Woods clearly not included) knows that most of the earnings of the banking system come from buying Government paper at high interest rates and paying low interest rates to depositors. The interest on the Government paper happens to be tax free.

Why doesn’t the Government eliminate the tax free nature of the securities?

Simple Watson or is it Woods? Because if they were not tax free, nobody would buy them and the Government would not be able to finance itself at interests rates which are below inflation.

So, Mr. Woods, the whole racket is a vicious circle. Banks generate revenues in many ways, that their commission revenues are almost equal to their earnings is really irrelevant. What matters is that the Chavez Government during the biggest windfall the country has ever seen, needed to issue these tax free securities to keep going. Eliminate them, and banks would be forced to lend, but Hugo would have no money to spend.

And speaking of lending, Mr. Woods argues that nationalizing the whole banking system would “give the middle class easy access to cheap credit”.

Sorry Mr. Woods. As this post a few days ago shows, Government banks, have never been very efficient about giving out credit. Of the top twenty banks, three of the four owned by the Government are last in loans and Banco de Venezuela, which you say “strengthens the Government position” is weaker and weaker as days go by, going from the top five in intermediation to almost the last four positions.

And let’s not talk about all the new banking regulations, such as the fact that when you charge something on your credit card, they have to send you an email or a and SMS. You see, only private banks are complying with this. And don’t ask Banco Bolivariano to even come close. If you go there with a check from a different agency, they can’t pay, the “system” is not ready. It ahs not been for months, this in a country where all banks (private ones, that is) pay a check on the spot)

But they are revolutionary banks, they are accountable to nobody. And nobody asks.

The point Mr. Woods, is that you seem to have very little idea about the idiosyncrasies of the average Venezuelan. First of all, you may not know this, but we have a shortage of well trained people in almost all fields. Second, under Chavez, we have lost all checks and balances, which means corruption is rampant and nobody is checking. Third, when inflation is 30%, it is difficult to be able to reward and promote those that do their jobs right, so that everyone is just trying to survive and the sense of entitlement and reward are simply lost.

But more importantly, those that are put in charge of all of these nationalized enterprises are simply put there because of their loyalty. They haven n understanding, knowledge or interest in what they are being handed out, other than what is the angle they can take advantage of to make some money. Typically, they are former or active military, accustomed to give orders, rather than talking or arguing what is best.

Thus, all your “suggestions” and contributions to the “debate” are simply useless, because they are theoretical elucrubations, which simply ignore our local reality.

And the revolution will be worse because of it!

Explaining what has happened in Venezuela in the last decade can sometimes be quite a task. People talk about the “opposition” as if it were a homogeneous group with a common ideology. Besides the social-democrats, social christians and socialists, people always stare at me when I describe Bandera Roja, a Marxist/socialist organization that is part of Venezuela’s opposition and a member of the Mesa de Unidad (MUD) which fielded unified candidates in Sunday’s election.

Bandera Roja began as a Maoist guerrilla group. They were in fact, the last guerrilla group to abandon the armed fight and become a political party in 1992, to become the extreme far left in Venezuela. Despite this, Bandera Roja never backed Hugo Chavez, arguing he was no socialist or marxist, but an opportunist whose only project is his own self-promotion.

In 1982, what was then the Alejandro Silva front of Bandera Roja (picture above), held a meeting in a farm in Cantaura, inviting students that were simpathetic to the movement, many of whom were unarmed. The military somehow found out about it and started a military operation which began by bombing from airplanes in order to disperse those on the ground. As they dispersed, they were met by military ground forces which proceeded to capture many of those present. Reportedly, most were originally captured alive, but were later found dead.

The case was revived during the last few years, as Venezuela’s General Prosecutor’s office exhumed the bodies and began an investigation of the massacre in which a total of 23 people died.

In early September, Human Rights organization Provea, denounced the fact that one of those being investigated, was retired General Roger Cordero Lara, one of the leaders of the massacre, who piloted one of the Broncos that led the attack. Provea asked Chavez’ party PSUV to withdraw the candidacy in order to stop the impunity on these cases.

Last Sunday, Roger Cordero Lara was elected as a Deputy for Circuit 2 of Guarico State under the PSUV party and now has immunity from Prosecution, unless the National Assembly and the Venezuelan Supreme Court removes it. This led Proeva to send this letter to Hugo Chavez and his party, noting the incoherence of backing Cordero Lara, as well as the precedent of impunity that this constitutes. Chavista groups have also raised their voices to protest, to no avail.

In the case of the Cantaura massacre, much like in other similar cases, military courts exonerated those involved, including General Cordero Lara in the Cantaura case, but the General Prosecutor has reopened the cases with the Cantaura case, being opened at the request of Hugo Chavez, but has yet to rule on any of them, which Provea suggests is due to the fact that many of those exonerated are pro-Chavez retired high ranking military like Cordero Lara. So much for the caring revolution!

But given that Chavez and PSUV did nothing when they could remove him as a candidate, it is highly unlikely that they would go through the complicated process of removing Cordero Lara’s immunity and impunity on the case will continue to prevail.

So much for the revolution…