The Devil's Excrement

And the people sucking up to the autocrat! My God! Where was
the opposition? Where was the “private sector”? Is everyone just trying to milk
the revolution to the last penny and leave? That seems to be the plan as a
strident silence permeated Caracas today, as things got more and more bizarre
and there seems no stopping to it:

—There was the Cemex show of course. Red shirts and empty-headed
radicals waving flags celebrating the expropriation of the cement company.
Funny, if the Venezuelan private sector could not run Cemex (then called Vencemos)
efficiently, is there any hope for the incompetent, inefficient and corrupt
Chavez administration?

Of course not. It will just be a matter of time. Meanwhile,
the Minister of Finance tries to argue that the company is
only worth US$ 400 million, because that is what it is worth in the Caracas
Stock Market. Thus, you clobber the market, violate its rules, drive away
foreign investors from it and then you try to apply “free market” rules to the
pricing, proving what a farce the whole thing is. Because Holcin,
was paid more than the US$ 400 million the Minister of Finance is quoting,
despite being a much smaller company, with a much smaller production of cement.

—Then there is the Comisión Nacional de Valores, the
defender of the small investor and supposed to defend the law they swore to
represent. They have said nothing ever since Chavez announced the expropriation
of all of the cement companies and surprise, surprise! Today they ordered
the halting of trading of the shares of Cemex “in order to achieve the transparency
of the markets”.

Hello! Did you learn about the Government’s intentions
today? Or were you on vacation, because the news has been around and the “halt”
in trading came so late, that some shares actually traded today before the news and halt came out. I guess the Comisión
Nacional de Valores was in Miami or Margarita this weekend because apparently
robolutionaries work less than five days a week.

Of course, this “transparency” did not include respecting the
country’s laws. How many times has the securities regulator stopped deals,
mergers and buyouts until the price was justified, but in this case allows the
Government to trample the law, investors and their own markets. What fools!

—And then, for those that thought the recent passing of 26
Bills is somewhat irrelevant, the “new”, “new” consumer protection agency confiscated
exactly 1,670 kilos of rice from the Excelsior Gama supermarket in Santa
Eduvigis in the East of Caracas and proceeded to sell it at the subway station
nearby. The charge? That the presentation of the rice had not been approved buy
the Government and as established by the Head of the “new”, “new” consumer protection agency, “rice
sold outside regulation will be sold directly to the public“.

These guys rally believe their BS, in fact, the Head of the
newly named agency stood at the subway station selling himself the regulated
rice to the public. Imagine his face when a very polite lady, bought a bag,
opened it and just threw it all over his face. You just don’t fool around with
my food provider seemed to be saying the lady.

—And just when I thought the day was over, I get a press
release which confirms that this is all part of Chavez’ gigantic folly. Electricidad
de Caracas, nationalized (legally!) a year ago presented its financial results
for the first six months of 2008, after the company has been in the hands of the
Government for twelve months.

In his short period of time, the robolution has been able to
turn the company form a Bs. 130 million profit, to a Bs. 13 million loss. This
came accompanied with a drop in 40% of the cash flow of the company and margins
shrank by 20%.

Now, think about it, this is a monopoly, you provide electricity,
you bill, you get paid. No payment you get the juice shut off. Simple business,
no? Well in barely twelve months we Venezuelans are already losing money.
Imagine running Cemex’ plans, or Cemex’s commercialization of cement, or very
simply, running Banco de Venezuela, in what is a very competitive business in
Venezuela.

But I do hope that now that the Ministry of Finance says
that Cemex is only worth US$ 400 million, a reporter or someone asks him why
did the Chavez Government pay close to US$ 1 billion for Electricidad de
Caracas a year ago, after all, it is only worth 319 million in the local stock market
today. Why did they overpay? Is that illegal? Doesn’t the law punish this? Shouldn’t
we send someone to jail for this?

Of course, robolutionaries go to heaven or to the Swiss bank,
while everyone else is banned or sent to jail. Get used to it!

Ask yourself now: Who is next? One day it will be you…

Which coincides with what we have not seen, except that the
Land Bill was not passed as part of the package of Bills two and half weeks
ago, but was actually approved seven years ago and in the words of the man who
created it and sold it as the best thing since warm water was invented. But
like most things in his failed revolution, seven years later not even the
autocrat can see a single result from that Bill.

In fact, if he was a little bit critical he would realize
that the Bill has been a negative for Venezuela, destroying productive lands
and leaving in shambles formerly productive farms.

But tonight, the National Guard and a bunch of Chavez’ red
guards await outside a perfectly run cement plan to take it over so that
another folly by the quasi-Dictator can be executed. And soon it will become
another failure, but maybe seven years from now, he will ask whatever happened
to the cement companies we took over, there is no cement.

And Chavez’ own personal biased could be seen today as his
Government reached agreements with Lafarge and Holderbank but not with Cemex,
as the Government made goof offers to the first two, but a pitiful one to
Cemex, his final revenge against the Mexicans he hates so much. Maybe he tried
to join the mariachis when he was young but was rejected. That seems to be the
hallmark of his life.

And thus today we have an expropriation and a blatant
violation of the Capital Markets Law, but we have not heard anything from the
President of the Stock Market, or the President of the Comisión Nacional de
Valores or from any politicians, they are probably doing more important things,
as property rights and freedom are dramatically subverted by Hugo Chavez.

Thus, another tragic event in the destruction of Venezuela took
place today. Who is next you may wonder? Will it be the food division of Polar?
Will it be another Spanish Bank? Just think, after all of those giants are
taken over, Chavez may go after your property. What will you say then?

The question is what this means for Venezuela. Venezuela’s
oil basket closed this week at an average of 107.95 per barrel, a sharp drop
from the 126.46 registered barely a month ago. The question is at what level of
prices does the country start having problems? This is not an easy question to
answer because prices can go down significantly before effects are truly felt.
Moreover, a lot of the spending that Chavez is incurring in can be cut without
it having an immediate impact on our daily lives.

But one can do a very simple calculation of at what price
does the country start losing foreign currency, which is a good benchmark for
country’s to start having problems. This is what is called the current account,
which grossly is the sum of the balance of trades plus (or minus) whatever
income goes in and out of the country in foreign currency.

Let us first look at the country’s needs in the next twelve
months:

Imports: US$ 50 billion (They are on a US$ 48 billion pace
in 2008, but Xmas will round it off to the 50 billion dollar level)

Help to Argentina (non-oil) US$ 2.4 billion

Other help abroad US$ 1.6 billion

Thus, Venezuela has needs of US$ 54 billions in the next
twelve months, ignoring the need to pay for nationalizations and Chavez’ pocket money whims.

Let us look now at the possible sources of income. Now, if
you truly believe that Venezuela is producing more oil than what OPEC or the
IEA say, then stop here, you will never agree with my calculations. I will use
2.4 million barrels a day as my benchmark for production. Then, there is the fact that non-oil
exports are expected to be US$ 1.6 billion in the next twelve months, that debt
service will be about US$ 1.5 billion and the country will issue debt for US$ 4
billion in foreign currency. This adds up to US$ 7.1 billion.

Now let’s look at oil exports that generate money.

Production 2.4 million barrels

But, for exports you have to subtract:

Internal consumption of 800,000 barrels a day

Petrocaribe subsidy of 130,000 barrels of oil a day

Chinese development fund of 80,000 barrels of oil a day

Thus, the true amount available for exports that generate
cash flows is 1.38 millions of barrels of oil a day or 507.35 millions of
barrels of oil a year.

Using the numbers above the equilibrium number for the
Venezuelan oil basket is US$ 92.63 per barrel, not terribly distant from where
we are today.

Problems will only start somewhere below and of course,
Venezuela may stop helping Argentina or try to issue more debt, which looks
difficult, but in the end there isn’t much leeway in the numbers. Venezuela
can’t increase oil production or non-traditional imports. Doubling debt to US$
8 billion (very difficult!) and ignoring Argentina, lowers the magic number to US$ 79 per barrel.
But can Chavez do the first and does he dare do the second?

The biggest measure Chavez could take to improve the
numbers?

Increase gas prices and/or reduce imports. But given his
threats to the private sector, this would latter would lead to shortages and
the former to a sharp drop in popularity.

In some sense, Chavez has been taking the worst possible
measures in terms of a scenario in which oil drops to say US$ 85 per barrel. At
that level, the country’s numbers simply don’t make it, forcing him to take
some truly unpopular measures.

While we have lost our ability to be outraged by the
corruption and the lack of ethics of the Chavez Government, few cases demonstrate how
putrid the Venezuelan State has become that the Maletagate scandal.

First of all, the facts of the case could not be denied, a
suitcase full of US$ 800,000 in cash, caught in a country friendly to Chavez,
arriving in an airplane chartered by PDVSA and filled with PDVSA employees and
Argentinean Government officials.

Despite this, the Venezuelan Government ignored the problem,
claimed there was no crime in Venezuela and only recently did the Prosecutor
move on the case.

But both Argentinean and US authorities did investigate the
case, leaving the Venezuelan Government totally naked in the case.

In Argentina, high-level Government officials resigned,
while in the US the FBI set up a sting operation that caught a bunch of the
leaders of the Chavista “boliburgeois” trying to extort the man with the
suitcase, Guido Antonini, into keeping silent.

Well, we heard little today again in the local press about the news revealed
in Miami that the lawyer of one of the defendants on the case told the paper that
the FBI had a taped conversation showing that the Venezuelan Government had offered to
pay Guido Antonini US$ 2 million to stay silent. The money, according to the taped
conversation, which will be revealed in the upcoming trial, was going to be
provided by none other than the county’s intelligence police DISIP.

Do you really think DISIP has the autonomy to make such a payment without approval from the highest levels of authority in Venezuela? Yes, including Hugo Chavez.

Of course, we will continue to get total denial and spinning
from the Venezuelan Government as all of the details of the case are quite
tangible and require little invention from US authorities.

But in the end, Antonini was part of the only suitcase that was caught
in a process where who knows how many suitcases filled of cash have traveled in
similar fashion. Billions, not millions of dollars to extend the reach of his
influence and popularity, while Venezuela decays morally and materially in the
name of Chavez’ empty revolution.

In any country with moral reserves, the Maletagate case
would have made heads roll all the way to the top.

In the shameless robolution,
we are supposed to believe it was an evil plot by the Empire.

In contrast, steel company Sidor, nationalized only a couple
of months ago, is apparently already facing problems under robolutionary
management and the
new Board of Directors asked today that the company be declared in an
emergency and receive money from the Government.

That did not take very long to happen, didn´t it?

In fact, one reads what the Board is saying and the whole
thing is simply a farce. Sidor was nationalized by Chavez on a whim (What else
is new?) when Sidor’s Board would not agree on paying the steel workers a
monthly salary above that of a Full Professor at Venezuelan Universities.
Supposedly, this was unacceptable to Chavez, who had frozen the prices at which
the company could sell its products. So, he took it over, but has yet to pay
for it or even agree on a price.

Well, today, the robolutionary management team wants prices
to be increased, because the Government has held them down for too long, which affects the company. They are discovering basic economic principles really fast!!!

Funny, how these guys now defend price increases, now that
they are managing the company while siding with the Government earlier.

But to make matters worse, these guys not only want more
money from the Government, which had not put in a cent into the company for ten
years, but actually want money because they apparently have a business plan to
open hardware stores owned by Sidor which will bypass the middleman.

So, these guys are not only dangerous because they have no
clue as to what they are doing, but they even have a business plan that needs
resources. They are robolutionaries with initiative!A sure sign that the Government will drive Sidor into the ground
really fast.

Because the first thing the government did when it took over
Sidor was to put all of the workers under contract in the payroll, so that they
will get benefits as if they were regular workers.

So, as Chavez takes over more and more private sector
companies and they fall under robolutionary management, they are managed
inefficiently and incompetently and they add to the deficit, contribute  to inflation and use resources that
could have been used to reduce poverty, improve healthcare or so many other things
that the “owners” of the country, the people, truly and sometimes desperately need.

It’s all part of the clueless robolution, under the guidance
of Chief Economist Hugo Chavez.

Otaiaza’s case is the most emblematic; as he was given a
mortgage two months after he purchased a fairly fancy home from the Government. A similar
case occurred with the Minster of Feeding who benefited from a mortgage in 2000
and now received a townhouse in the same complex as Otaiza in the Tazon
entrance to Caracas. Other high ranking military and former Ministers have also
benefited from the Government’s largesse.

As usual, those that benefited seem to find nothing wrong
with it, with one Minister saying that he is entitled to it, while Otayza says
that the mortgage was not for a residential property, but for “an apartment
where I have a library and a sort of office where I prepare talks and
conferences”

Wow! In a country with a two million home shortage Mr.
Otayza clearly shows and displays his revolutionary spirit and sensibility as well as his concern for
the poor.

Which is nothing new, as Mr. Otayza jumped from one
Government position to the other, building himself a luxurious gym next to his
office at each new position  in a clear show of his absolute disregard for ethics
or care for the people of Venezuela.

But what the reporter has not noted in his articles is the
fact that it was absurd for the Government to be involved in the building if
this housing complex in the entrance to Caracas. The complex is actually a
fairly luxurious complex of apartments and townhouses named “Bosque Valle” which
had no place in the priorities of the Government’s housing projects.

Because it makes no sense for the Government to be
subsiding, financing and building these homes for the benefit of its high
officials, while millions of Venezuelans live in shacks due to the incompetence
and inefficiency of the Chavez administration.

Because while the Government twists, distorts and fakes
poverty and literacy numbers, there is no place to hide when it comes to the
dismal record of the Chavez Government in building and providing housing for
the people of Venezuela. The numbers released by the Chavez Government
numerically prove the abysmal results of his administration: Despite the oil
windfall, the Chavez Government in its BEST year, has
not been able to build as many housing units as the Caldera Government in
its WORST year. (And that Government was terrible!)

And despite Chavez’ pressure, promises and dozens of
Ministers of Housing, the Chavez administration has been unable to build
100,000 units in any of its ten years in power (almost eleven now!), something
that Caldera almost did in 1997 and much-maligned Carlos Andres Perez
practically achieved in 1992. In fact, Chavez has never even reached the
50,000-unit level in any year, the average during the “terrible” years of the
IVth. Republic, when oil prices barely touched US$ 15 per barrel.

But of course today we get a new promise form the former
Minister of Culture Francisco Sesto, now Minister of Housing. that in eight years
he will solve the country’s housing problem by building 200,000 units a year.

Sesto is actually an architect who has never cared about the
subject of Housing or Urbanism, but after destroying the country’s culture now
plans to use his incompetence and destructive powers on housing.

And we are supposed to believe him.

Because it was Chavez that said ten years ago that he would
solve the country’s housing problem in the next ten years. But despite much
higher oil prices that he ever dreamed of, during Chavez’ tenure the deficit in
housing has actually increased and he has managed to destroy the capability of
the Government building housing through mismanagement, political clientilism and inefficiency.

But there is efficiency by the robolution in building
luxurious complexes like “Bosque Valle”, assigning the units to Chavez’ closest
collaborators and even allowing them to move and expand the units even before
they obtain the permit to occupy the units.

It is robolutionary housing at its best.

Curious because if the
idea was to block opposition candidate Julio Castillo of Proyecto Venezuela
from running, with the decision the court also reminds the CNE about the three
year rule which applies (And was not respected) to two of Chavez’ most visible candidates in the
Metropolitan Area of Caracas who are in the same situation, former CNE President and country’s Vice=President Jorge Rodriguez for
the Libertador District of Caracas and fomer multi-Minister Jesse Chacon in the Sucre District.

The Court is clear, in
reasoning the case of the municipalities, it says:

“A propósito de lo anterior, el artículo 85 de
la Ley Orgánica del Poder Público Municipal exige como uno de los requisitos
para ser Alcalde o Alcaldesa residir en el municipio de que se trate, durante
al menos los tres (3) últimos años previos a su elección”

which can be translated
as:

“Speaking of the above, Article 85 of the Ley Organiz del Poder Publico
Municipal, demands as one of the prerequisites to be Mayor to reside in the
municipality involved during at least the last three years prior to the
election… .”

What is most puzzling
is that the decision seems to go against precedents in Metropolitan areas which
are regulated by the Suffrage law which gives a wider definition of residence
to the whole Metropolitan area, while it is the Constitution which requires the
three years of residence in the city for which the person is running for Mayor.

Of course, maybe the
whole thing is a Machiavellic plot by Chavismo to get rid of two candidates who
reportedly are not taking off and replace them without giving an image of
division or dissent within Chavez’s PSUV.

In fact, a pro-Chávez
member of the Electoral Board said the CNE would have to respect the decision,
while the lonely voice of the opposition within the CNE Vicente Diaz, said that
the CNE should appeal the decision as the exception for Metropolitan areas has
been used in previous elections.

But then, just when I
am puzzling over the whole thing, out comes Jesse Chacon and saying it doesn’t
apply to “us” because they have never been Mayors, as if the residence
requirement had anything to do with the Art. 85 mentioned above. The law
happens to be the law.

But who knows, maybe
the CNE will allow Rodriguez and Chacon to run and block Castillo, since the
law is not applied uniformly in the revolution. Of course, now comes the President of
the CNE and backs Chacon’s interpretation.

Does Article 85 of the
above mentioned law only exist if the Court rules that it exists?

Not much surprises me
any more.