The Devil's Excrement

Whenever something like the deplorable homophobic spectacle of the National Assembly two nights ago occurs (The details here, here and here), I prefer to stand back and allow it to sink in before I write something. In this case, I have found (and find it) it hard to verbalize my reaction to the whole thing. Because in the end, it is not only about the homophobia,  but there has always been in Chavismo a very mean streak, that bars many of its leaders from exhibiting any compassion or respect for others. Call it lack of sensitivity or simply lack of scruples, Carreño, Cabello, Maduro and their combo, seem to have no moral foundation to their ideals. The end not only justifies the means, but there seems to be some joy in the means, however perverse, whether we are talking about the murders when the opposition used to march, allowing Franklin Brito to die, jailing Judge Afiuni, the Tascón list or using material obtained by the police in the National Assembly to express your most homophobic and hateful feelings against your opponents.

But if the spectacle was deplorable, the reaction to it, whether Carreño trying to say he was sorry, or Diosdado saying they could jail Capriles, or Maduro accusing Primero Justicia of promoting orgies and prostitution in Miranda, is as despicable as the original hateful speech by the ever absurd Pedro Carreño. Carreño’s attempt to be contrite, simply showed he meant every word he said that night, as he only apologized for the words he used, but made sure to explain that he thought long and careful about what he said. There was simply no remorse.

It is simply just another version of Chavez’ “The show must go on”, when faced with the Amuay tragedy twelve months ago. No sense of compassion, no sense of responsibility, no civility, no humanity, no feelings for others and their rights.

But the real tragedy is not that we have become accustomed to this without realizing it, but that there will be no moral punishment for Chavismo for their behavior. That this lack of humanity and compassion has become a pervasive and accepted attitude. That some actually cheer what happened.

A terrible and tragic statement about what Venezuela has become.

People still want to defend the Bolivarian revolution. The poor they say, the Justice they dare mention. Democracy, they claim, simply making me laugh.

But the following two graphs sum up why the Bolivarian revolution is simply the biggest scam in our history. Simply indefensible, I just wish I could quantify corruption in a similar graph, to make it three.

1) The inflation rate in Venezuela, either reported by the Government or the implied inflation rate, defined as that measured by the change in the black market rate, is worse than in war ravaged Syria, and only beaten by that of North Korea, as show in this graph ripped off from the Wall Street Journal.

Hat tip: JSB, thanks!

2) The fourteen years of the Bolivarian revolution have made Venezuela a very unsafe place to live, with homicides jumping by a factor of 4, making Venezuela one of the most dangerous countries in the world, whether you believe the 73 murders per 100,000 inhabitants of the official statistics (black line) or the 84 of the Venezuelan Observatory of Violence. Note the poor have a higher incidence of homicides and crime than the middle class. (This graph appeared in last Sunday´s (August 4th.) Expediente in El Universal, but was not included in the digital version. Thanks VS for getting it for me.)

Two simple graphs, a Gigantic Failure…

The surprise today was not that the Constitutional Hall of the Venezuelan Supreme Court rejected as inadmissible Henrique Capriles’ challenge to the election results in a one page decision. The surprise was that besides the legal travesty, the Court fined Capriles the maximum amount for insulting authority with the challenge and accusing the Court of being partial to the Government. The Court also asked the Prosecutor to have Capriles investigated for these insults.

Jeez, the ruling was worse and more biased than I could have ever expected and simply proves Capriles’ point. In fact, every ruling along the way, from allowing Maduro to take office for Chávez, to permit him to campaign as President, doing “cadenas” all the time, simply emphasizes the point.

But I guess in this so called Chavista/Madurista democracy, free speech is not allowed and you have to agree with everything the Government says  or does, or you are being disrespectful and can thus be jailed.

Do I smell a jailed Capriles in our future?

When Adam Smith suggested or showed that economic self-interest maximizes economic welfare, I don’t think he had in mind the economic self-interest that is promoted by the arbitrages available under the so called Bolivarian revolution.

These pages have recorded billion dollar arbitrages, some with bonds, others with CADIVI; there was SITME, travel dollars, airline tickets, now Sicad and many more without going into much detail today.

What Chavismo/Madurismo has failed to learn throughout these fourteen years, is that the longer these possibilities of arbitrage become available, the more widespread their exploitation becomes. That is what made SITME eventually so inefficient that it had to be scrapped, what makes CADIVI such a nest of corruption and what is making SICAD unworkable in such a short time. People learn fast and exploit the weaknesses of systems to promote their self interest via arbitrage. Every time the Government announces something, people get ready to see how they an make some money off it.

Whenever I visit Caracas, I talk to people trying to find out more about what their reality is like. I mean, with inflation soaring and noticing how everything has gone up every time I come back, I have to wonder how people, particularly the less well to do, can make ends meet.

This week, it was a parking lot attendant I know. We started talking, he complained about the Government and I started asking questions.

For him, let’s call him Profito, things are ok. They are better, because the parallel dollar is very high. He said he makes a little more than minimum salary in his job, which must mean around Bs. 3,000. He sends his mother in Colombia a US$ 300 a month in a “remesa”, which costs him Bs. 1,890, but he sells half in the black market, which gives him Bs. 4,950, for a net of Bs. 3,060, which doubles his salary just like that.

Things are tough, so he decided to send his son to Colombia, it’s too dangerous here, plus the kid could become a malandro (hoodlum), with the neighbors he has. The advantage is that his expenses went down and he can send the kid another US$ 300, give his mother half and net another Bs. 3,090 in the process.

To round it all off, Profito, has also now entered the export business. When he discovered that “perfumeria” items are so much expensive in Colombia, he started shipping about Bs. 5,000 a month in supplies via MRW (a courier) and he makes “casi” (almost) 100% profit a month from this venture.

Oh yeah, he said, I do go once a year to Colombia and ask for the $2,000 dollars for travel, this year he will get less, there will be no money for the kid, but the black market has increased so much that he will make about the same. (Not quite, he will make more, as the parallel rate has doubled since December, but he will only pay once).

Totaling it all up, Profito makes his Bs. 3,000 from his job and from his arbitrage activities he will make this year an additional Bs. 6,180 a month from “remesas” to the family, about Bs. 5,000 (he claims) from his import/arbitrage and an additional Bs. 2,000 or so from his travel allowance, for a grand total of Bs. 16,180 a month, or at least five times the minimum salary. Not a bad monthly income in Venezuela and he has health care. Except only one of those minimun salaries comes from his job. The rest is all thanks to the promotion of self-interest arbitrage by the distortions of the revolution.

And the Government? Fixing the price of SICAD very low to promote arbitrage even more…

In one of the most intriguing, and positive, news to come out in Venezuela in quite a while, PDVSA presented a project to reactivate more than 1,000 oil wells in the Lake Maracaibo area, by asking for bids form private service companies interested in activating and running this old wells.

While details are not available on the conditions, the private companies will reportedly bid on single wells, which they will reactivate and run. Pdvsa would sell the oil and the money would go into a trust, where the private company would receive a certain percentage per barrel sold, with some incentives based on increased production.

The companies will receive historical and geological data on each well, so that they can present bids for their operation according to what they expect can be produced. Most of these wells were shut down at least ten years ago and have production levels in the hundreds to low thousand bares per day.

The proposed model is not too different from the so called “service contracts” that Hugo Chavez cancelled based on ideological reasons six years ago, claiming this was a privatization of the country’s oil wealth. But times have clearly changed and this, a privatization by any name you may think of, is the new proposal.

Clearly, this shows that PDVSA is worried about declining production and/or prices and has set aside ideology for the sake of increasing future production. The project name is “Oil well connection project by service companies”, clearly a name invented to make it look like it is only about interconnection of wells by pipes. But in reality, companies will have to work on interconnections, pump stations and platforms, as well as running the wells.

We should have more details in the upcoming days, but for now it looks like the most positive news to come out of PDVSA in a long time, with a potential to have a very positive impact on the company’s production in a very short time. In fact, it has similarities with the proposal of a certain candidate on how to jump start PDVSA’s oil production.

This could have been done at anytime in the last ten years, but ideological baggage blocked it from happening.

We welcome the change.

(Thanks to @ManoloReveron for finding the picture)

At this point, it would be better for Nicolas to just shut up. Stop talking like you know what you are saying, because, sadly, you don’t. Don’t be so silly as to say that Capriles met with Pinochet’s private secretary, because it was not a one on one meeting and, after all, even your dear idol Fidel met not with the Secretary, but with the fascist Dictator himself, in what was a fascist to fascist, Dictator to Dictator meeting. After all, the two really have a lot in common, no? Maybe you can ask Fidel why he met with Pinochet before accusing those that went to Chile as traitors. Pity, you can ask him, but he will likely not be able to talk back to you.

And you really think that the US is going to stop meeting with distinguished Venezuelans like Pedro Mario Burelli just to have relations with a questionable Government like yours? Burelli got to where he is on his own and if you are going to try to insult him, you better find a word that exists, because I checked in the RAE and its other sources and personajillo simply does not exist, carajillo. And I am sure Mr. Burelli would be much better accomplished than you in any position, from bus driver, to Foreign Minister to President. After all, you are what you are because you rode on Chavez’ back, always agreeing to anything he told you to do.

And you are not doing a great job either Nico. Face it! The wagons have circled around you and you are trying to fight them off by being more radical than the radicals, but it just does not fit your image or personality. You are no tough guy. And anytime you want to be tough, you screw up relations with another country, be it Spain, Colombia or the USA. Then you have to  spend your time trying to make up. What is clear is that you learned nothing in the only job you ever had for a reasonable period of time, your six years as Foreign Minister.

And please look up oligarchy in the dictionary, maybe it will help you realize that Chavismo represents the new oligarchy.

And you really have to spend your time on more productive things Nico. You have lots, lots of problems. Whoever told you Sicad will fix the foreign exchange problems has no clue. And Sicad started as screwed up and corrupt as your Government. If not, ask Merentes how this ¨multicriteria¨pseudo-criteria was implemented or why no legitimate medical equipment company got one dollar. And stop saying inflation is going to go down and there will be growth the second half of the year. Even if your foreign experts (French or American)  tell you otherwise , scarcity has yet to budge, and as long as it is near 20%, inflation in May was no mirage and will stay around that level. And if you don’t grant price increases, watch those numbers go even higher.

So Nico, you just better shut up, like King Juan Carlos famously told your boss. Stop improvising, you are not good at it. If something bothers you, count to one hundred, hold your breath, before saying anything. Then call Cuba, even your old boss used to do that and he was better at improvising. Understand you have a short fuse and you are illegitimate. Temper tantrums not work well for Presidents. And if you are going to get mad every time someone meets with someone you don’t like, just keep it to yourself and use it when its needed. Paranoia is not the best of traits. Ask Diosdado, he has been meeting with lots of your friends and knows who you meet with, but he says little.

And please stop using the word respect. This is something you earn, not a given. So, get to work, defuse the demons around you first, really attack corruption and maybe, just maybe, you will start earning some respect.

But I doubt it.

While Chavismo/Madurismo continues to solidly embrace controls, creating ever more complicated systems, rules and regulations, there is daily evidence that the whole thing has become a Rubesque-like system whereby the system has become absolutely ineffective due to corruption and arbitrage. Despite the daily evidence, the revolution (?) presses forward with its brainless creation of economic rules and foreign exchange systems, where common sense and logic are completely absent.

Two items caught my attention in the last two days that absolutely make you wonder if these guys even try to use their brains when designing the whole thing:

1) The Head of the Venezuelan Association of Airlines said yesterday (today’s El Nacional, page 6) that during the last three months, occupancy in international flights has not exceeded 40%, despite the fact that flights are completely sold out and all tickets have been booked.

Do you know what this means?

Easy, with the large arbitrage between the official rate (Bs. 6.3 per US$) and the black rate (about four times more) the times of Oligarco Burguesito are back! The only way that occupancy in flights can be that low, is that organized Mafias are gathering cedulas, buying tickets and obtaining Cadivi dollars for travel. Say you buy a ticket to go to Spain with Iberia. I just checked, and on October 1st, I could go for Bs. 14,857 round trip. If you buy the ticket, get US$ 3000 for the trip in your credit card and 400 euros in cash, that is about US$ 3,520, which at the black rate is something like 116,000 bolivars, subtract the Bs. 14,857 and without bothering to travel you have made a tidy profit of around Bs. 100,000. Why bother to even travel and use the airline ticket?That cost money after all. Give the credit card to someone and have them use it to get cash or whatever.

Or organize twenty or thirty people like that and you yourself could go and take care of it, paying everyone one of them a fee for the use of their cedula in your endeavours.

And clearly someone is doing that right now, in massive numbers, if 60% of the seats flew empty before the summer season began.

2) You would think that scams and “guisos” would take a while to develop under the new Sicad rules. Well, corruption is so entrenched, that in the first Sicad auction corruption was already present in full force. Indeed, 127 companies of the health sector were assigned foreign currency. This health sector was defined as “only medical equipment and parts”. If these 127 companies were assigned the “average” amount of 166,000 dollars per request, we are talking about US$ 21 million for all of them.

The problem is that the Venezuelan Association of Distributors of Medical, Odontological, Laboratory and Similar Equipment, reported that of its 137 members not one was approved a single dollar (El Nacional yesterday).

Yes, not ONE, of the ONLY association that groups distributors of medical equipment and the like.

So, the mafias were in place even before the auction took place and they were generously rewarded. Except they went overboard and somebody noticed. The Government said it will “investigate”, “hold off” giving out the dollars and the like, but pardon me for being skeptical, if the Mafias are so entrenched, I am sure the same people that decided to award the dollars to what are mostly phantom companies, will carry out the investigation and nothing will happen.

So, all that complicated system, “checks” and “balances” and in the end, the dollars went to the wrong hands.

I guess in Chavista/Madurista la-la land, it is time to create even more controls…

Seeing the data above really opened my eyes at the problems with the allocation of foreign currency in Venezuela. The Government has gone from importing US$ 7.5 billion in 2006, to importing US$ 34 billion last year. Not only that, but Government imports, which used to be 25% of all imports have not only surpassed private imports, but have now become 57% of all imports.

Think about it, if you are a manufacturer or merchant you have to go through a few dozen steps before CADIVI authorizes your imports. But if you are a Government official who wants to import some widgets, you not only get the dollars right away, but you don’t go through CADIVI, you buy from whomever you want and you probably only need one or two signatures to buy the stuff. Imagine the chain of suppliers between that Government official and the stuff that is being imported. Imagine the commissions, overcharges, fake imports (Giordani dixit!), empty boxes (idem!) and the like. Imagine how little planning goes into deciding how much to import or what to import. Obviously, it is hard to buy something locally, as local suppliers in the private sector have to go through the CADIVI nightmare.

But the most important thing is the inefficiency of the Government importing all this stuff. That is why in a country with little supply of new cars, because CADIVI does not allow the import of all the parts needed, the Government goes and imports 2,000 Toyotas at once for its own use. That is why food is found rotten in warehouses, some guy with no clue as to how much wheat or corn the country needs or consumes, decides to buy twice as much as needed and it needs to be stored somewhere or is just abandoned at the port for months.

Meanwhile the blue line of private imports is almost flat, the private sector is importing almost the same today as it was in 2008, but the average yearly price of the Venezuelan oil basket has increased significantly (From an average in the sixties to around 100 today). Thus, a voracious Government imposes controls, but nobody controls the Government and what it imports, why or at what price.

The result is more distortions. But instead of imposing controls on Government imports, the Government disappears SITME, which tripled and quadrupled prices of anything not in CADIVI’s list. And these guys think inflation will go down. Sure.

Meanwhile there is no mystery, there are plenty of dollars around, but the sinkhole of Government imports takes too much of the country’s foreign currency. And Maduro blames the oligarchs. And he is right, by definition, Chavismo/Madurismo is the new oligarchy and they are bleeding the country dry and destroying it.