The Devil's Excrement

If it weren’t so tragic, I would write a parody of what the Chavez Government has become. But while the whole thing is so bizarre, it is difficult to find anything funny about what is going on in Venezuela with its Government.

First of all, last Sunday, in his Sunday variety shows, Hugo Chavez mentioned for the first time the crime problem. Yes, after exactly 86,452 homicides since Hugo Chavez took over, he mentioned a problem as important as that for the first time. Here is a guy that has found time to call Bush the devil, spent weeks and resources on rescuing Colombian hostages and has traveled all over the world “solving” the world’s problems, and he finally dared mentioned the problem that is the number one concern of all Venezuelans: Crime. I don’t want you to think that this is a problem that did not exist when Chavez took over. But, he is responsible for almost a 200% increase in homicides since he took over for two reasons: He did little about it and he put most police forces in the hands of his military buddies, who have no clue about fighting crime, other than with repression.

And while I am all for fighting crime, I can’t help but be concerned about the new man at the Ministry of Interior and Justice Rodriguez Chacin. This is a military officer that was involved in questionable military operations where innocent civilians died under suspicious circumstances. This is a man famous for being “tough”, thus I do hope his return to the Ministry is not because Chavez wants to him exhibit his toughness by repressing criminals. We shall see.

But things get even more tragic, when you hear the official TV station say today that Chavez will preside this week’s Cabinet at which “logically” his new Ministers will be there. Tragic, because while it may seem “logical” for that to be the case, what is illogical is that as far as everyone knows, this is actually the first Cabinet in over a year and a half at which Chavez will be present. That’s right, for at least the last year and a half, Hugo Chavez has been too busy with his international promotion to even go to the Cabinet, leaving it all in the hands of former Vice President Jorge Rodriguez, who may be a good political operator but certainly does not have the experience to run and coordinate a country.

And it showed, which is partially the reason why Chavez lost the referendum.

Except that nothing says that Chavez can do it either. In fact, he has shown in the past to be bored by the details and has left in the hands of others like Giordani, who had no clue as to what he was doing, and Rodriguez who had no managerial experience until he was put in charge of the CNE.

And the whole thing is so bizarre, that Chavez promotes the President of telecom company CANTV to Minister of Telecom, but ratifies her as President of CANTV. There are two problems with this, she had no experience to run a company as complex as CANTV, but all of a sudden she is put in charge of the largest telecom company in the country, as well as the telecom regulator, which hardly seems fair to the competition, no? The saddest part, is that telecom was the fastest growing sector of the economy last year, but I am sure this will not last long.

And to complete this tragedy in three acts, the new Minister of Finance decides to show either his ignorance or his stupidity, you choose, when he stated while being sworn in that the inflation target for 2008 will be 11% and the economy will grow by 6%. Well first of all he did not need to say either of them. Second, the two targets are incompatible, In order to achieve 6% growth, he will have to sustain high fiscal spending, which is certainly incompatible with that 11%. So, I will stick my neck out: Growth in 2008 will be 3%, there will be high Government spending once again and the CPI will be 28% for the year. Write it down, I assure you my error in both numbers will be less than those of the new Minister’s.

And that’s the tragedy, I am no expert. But when I hear former Minister Cabezas leave his post “satisfied” after screwing up inflation and allowing monetary liquidity to jump in 2007 and the parallel market to almost double, while imports were 44.6 billion US$ and I begin to think that while I have no clue, I have better clues than these illustrious incompetents.

Clearly, this tragedy in three acts is possible because Hugo Chavez is worried about his popularity numbers. But much like in earlier stages of his Government, expect him to get bored with these problems and frustrated, as things don’t work out in fixing them. By then, regional elections will be around the corner and politics will once again take precedence over solving the problems the average Venezuelan feels everyday.

And by then, Chavez will have been in power for ten years an we can talk again about another lost decade.

I have a lot of respect for Luis Pedro España who I considered to be the country’s foremost expert on poverty. He is extremely knowledgeable, articulate and he combines knowledge of social sciences with economics, a rare thing in this era of specialization. He also looks at a lots of statistics of what people are saying or doing in Venezuela and understands them thoroughly. I have translated some of his articles before, but today he was interviewed in El Nacional and has some insights that I thought should be shared with you. The highlights:

—The poverty of income, no matter how you calculate it, has dropped…but that does not work as a reference in a country where we can double oil income, but maintain school desertion rates, or the patterns of mortality and the lack of infrastructure.

—People can consume more because PDVSA has higher income. When the oil market gets a cold, we could die of pneumonia.

—Barrio Adentro has not changed the rate of infant mortality. Mision Vuelvan Caras has not reduced informal employment. Mision Ribas has not ended with school desertion. All of these problems attack the consequences of the problems but not their causes.

—The most emblematic thing about misiones is their political management, not their real efficacy. Almost 80% of the population knows the misiones, but only 3% have benefited from it. The Misiones have a very high propaganda value. That credibility of the misiones is dropping.

—Fundamental social problems are still intact and the worst part is that an excellent opportunity to place social policy on the forefront has been wasted. And the people are realizing it.

—People have been with Chavez but they are not unconditional. Because they make demands, they want water and the homes they were promised. I do believe there is a lot of disenchantment.

—It is very clear that the problems of the people have not been solved. The only place where the opposite is believed is in the statistics office soft the Government, But you go out in the streets and people believe that their crime problem, their housing problem, their unemployment problem, their health and their education problem have not been solved, And when you ask them why, they blame corruption And after that inefficiency.

—It is possible for Chavez to become very unpopular. And he was that for a time, even if few people remember it. I am talking about the end of 2001, when an economic crisis began which forced him to make adjustments in 2002. He was forced on February 14th. 2002 to devalue by 50% and cut public expenditures. That had a very strong effect on all of us, including the poor. The economic situation was very bad. But then came the coup and the strike and paradoxically, that helped Chavez. Today the people remember that the economic crisis was generated by the opposition and not because of the wrong policies of the Government.

—Chavez has had 118 different Ministers in his nine years in office. Of the twelve people appointed to teh Cabinet yesterday, three are woman and six out of the other nine are former military. Five of them had been Ministers previously.

—In the Caracas morgue bodies are all over the place, including on the floors. A body was actually missing for three days according to the relatives. The Head of the intelligence police blames it all on the increase on the population.

—You can actually buy things almost for free with your Internet quota at the official rate of exchange. Two days ago I needed to buy some software that cost $60 in Amazon, or Bs. F. 129. However, the software has a rebate of $20, which at the parallel  exchange rate corresponds to Bs. F.  112. Thus, I will get the software for exactly US$ 3.03 at the parallel rate of exchange once I get my rebate check.

—Five days after the monetary reconversion began, I have yet to know anyone that has seen one of the new coins. I get the feeling they are not even circulating in another triumph for the inefficiency of the revolution.

—After leading the National Assembly through a year with almost no new Bills approved and introducing 25 new articles to the proposed Constitutional change which likely doomed the proposal, Deputy Celia Flores was ratified today as President of the National Assembly for another year.

It is hard to understand exactly what game the FARC is playing with Chavez and exactly how the FARC wants to convince the world that they are the good guys in the high stakes game of the never happening return of the hostages in the hands of that guerrilla group. Since the beginning, Chavez has been saying once thing, the FARC has not delivered and has appeared to be withholding information from Chavez which eventually would embarrass the Venezuelan President. Thus, using the name of a once known website, the FARC seems to have farked (embarrassed) Chavez repeatedly, managing to embarrass him over and over without a clear purpose.

Today was no exception. After the FARC had offered to release three hostages, two women and the son of one of them born in captivity nothing happened which actually was quite puzzling at the time. Then we learned from the President of Colombia that the ki, named Enmanuel, was not in the hands of th FARC but had been turned over to the care of a Government social institution over two years ago.

Immediately the Venezuelan Governemnt questioned Uribe’s version, suggesting it had all been made up to make Chavez look bad. At the time Uribe said that his Government would make DNA tests, using Enmanuel’s grandmother’s DNA and the results woudl be made public in two or three days.

Today, the preliminary tests were out and they strongly suggested the kid found in Bogota was indeed the son of hostage Clara Gonzelez de Rojas. Immediately Veenzuelan Foreign Minister Maduro, using his characteristic and undiplomatic style of speak first and find the facts later, came out and criticized the Colombian Government for not allowing a Venezuelan expert to do tests on the case.

Of course, if the roles were reversed, the Venezuelan Government would call that an interference in Venezuelan affairs as the kid, the rebels and the hostages are all Colombian and Chavez is just meddling in all this in order to garner international attention.

But the Colombian Government paid little attention to this, instead coming out and saying they did not oppose the examination of the DNA by Venezuelan experts, as long as the General Prosecutor and appropriate social protection institutions approved it. Fortunately, Foreign Minister Maduro had no time to stick his foot in his mouth once again, as the FARC itself issued a press release soon after the statement by the Colombian Foreign Minister saying that the Colombian Government had actually kidnapped Enmanuel in order to “sabotage” the release of the hostages.

Obviously this raises too many questions about the good faith of the FARC in their promises to Hugo Chavez. First of all, if the FARC have over 3,000 hostages, how come they happened to choose a hostage that was not even in their hands? Why not release Ingrid Betancourt, for example, perhaps the most emblematic hostage in the hands of the FARC which would have made Hugo Chavez, and the FARC, look very good in front of international opinion? But once the FARC decided on those three hostages, why did they not come out clean and tell Chavez or his negotiators that the kid was not in their hands? And, once again, once Uribe came out and said they had a kid in their hands who appeared to be Enmanuel, why not communicate to Chavez that this was probably correct? Any of these acts would have at least saved the Venezuelan Government and Hugo Chavez some embarrassing moments in the last few days.

And Chavez once again got farked today, when the guerrilla group confirmed the identity of the kid was indeed Enmanuel, making Foreign Minister Maduro look bad and certainly out of he loop.

In fact, all of this has actually made President Uribe of Colombia look good. Uribe did not stage a failed show like Chavez. He gave in to all of the requests of the Chavez Government and the international observers for access to a possible exchange. While the FARC was saying that the exchange was not taking place because the Colombian military was carrying out operations in the area, it turns out they simply could not hand over the promised hostages, because one of them was not in their hands. As first stated by PMB in a private comment: What the FARC is going on here?

Which goes back to my earlier post on the subject: The FARC have their own political agenda and clearly it seems like it is not  perfectly aligned with that of Hugo Chavez. Maybe the FARC perceives Hugo as a competitor more than a colleague as both groups are fighting for political influence and control over Colombia under much different terms.

And for Chavez this has also been an unnecessary and time consuming distraction from his problems at home. While the media show over the release of the hostages plays well everywhere rom Peoria to Paris, it is likely to be of little significance to Venezuelans increasedly frustrated over the lack of response to their problems from higher inflation, to crime, to garbage collection. Meanwhile, they watch foreign politicians jetting around in fancy Venezuelan Government private planes, their President coordinating expensive military operations and most politicians away for Christmas vacation ignoring their problems.

And in the end, he does not even get his Oliver Stone documentary or his Nobel Peace prize nomination.

It’s tough to be farked like that…

Thus, last night we got on the radio the “new”, revamped version of Hugo Chavez. A gentler, softer more lovable Hugo, talking about “not letting us get carried away with extremisms” or “we have to ally ourselves with the middle class” and ” we can not propose thesis that have failed everywhere else in the world, like that stuff about eliminating private property”. This was the same irate guy of a few weeks ago after his referendum loss talking about not changing one comma of his proposal (which limited private property rights) or saying he would have armed reservists to defend the revolution.

Of course, this is the same Hugo Chavez that has alienated the same middle class over the last nine years, insulting them even when he did not need it, calling them oligarchs, lackeys of the empire and telling them to leave the country. The problem is that Chavez’ popularity is going down fast as more and more problems surface ad some advisory team in the situational room of the Miraflores palace came up with the idea that we need a more softer and gentler Chavez to prop up his popularity.

The thing is, this is so much against Chavez’ nature that is not bound to last very much anyway, much like he gentler Chavez of April 2002, when Hugo Chavez sent the Army to violently stop a peaceful civilian protest. Upon his return, he was meek and apologetic and it lasted about two weeks before the old, mean, confrontational Chavez was back. We saw him again in the 2006 Presidential campaign with his “live” ads aimed at attracting the same middle class that he thinks he can regain at this time. That lovable Hugo probably lasted only the 60 seconds of the TV ads and pictures shown of him posing in blue cloths with a big smile.

But it is difficult to believe that Chavez will change, not only because of past experience or what General Uson, that knew him quite well, tells us about that impossibility, but because the new, improved and reshuffled Cabinet named yesterday, seems to point in exactly the opposite direction. Essentially, Chavez named a more militaristic and more radical Cabinet. It is mostly composed of ineffective members of the Chavista administration, past and present, reshuffled around. But in the end, those named today seem to have been picked more for their loyalty and radical ideas, that for the need for Hugo Chavez to start governing Venezuela after nine long years.

Some changes:

Jorge Giordani is out at the Ministry of Planning to be replaced by a hard core Marxist/Communist Haiman El Troudi, one of the “idea” men of XXist Century Socialism. El Troudi has not occupied any high positions in the Government but is one of those vague ideoliogists of the revolution who is always telling us how they are redoing things to make them work this time around and how XXIst. Century Socialism is different from the Soviet Union. Not a big improvement over Giordani, much more radical.

Rafael Isea is in at the Ministry Of Finance, Rodrigo Cabezas is out. Well, Cabezas had more knowledge on economic matters but he thought he could innovate, inventing some concepts that will one day come to haunt us. Isea is a former Lieutenant, with little economic experience and certainly does not have the scope of knowledge to design the type of plan needed Venezuela to contain inflation and avoid a significant crisis in the near future. Once again, a much more radical member of the Cabinet at that position.

Pedro Carreño is out, Ramon Rodriguez Chacin is in at the Ministry of the Interior and Justice. Jeez, we changed incompetent Carreño of Louis Vuitton fame, for super spy Rodriguez Chacin, another loyal former military officer who has always been Chavez’ liaison with the FARC and foreign leftists groups. Certainly a better “operator” for Chavez, more radical, more dangerous and a man of few scruples hat should be feared by all. He will use all of the powers of the police and intelligence forces against those that oppose the Government.

Jorge Rodriguez is out, Ramon Carrizales is in. One of the few places where a radical has been replaced by someone less radical. However, Carrizales has been ineffective in many positions, including his recent entourage in the Ministry of Housing where he failed miserably at achieving anything close to Chavez’ goal of building over 100,000 housing units (less than 35,000 were built). He was appointed to that Ministry after being in charge of the Minsitry of Infrastructure and finding the solution to rebuilding the Caracas La Guaira viaduct (Hire and pay the best civil engineering firm in the country and take the job away from the Government. Sort of the anti-revolution to solve the problem)

Finally Andres Izarra is back at the Minsitry of Information, replacing William Lara. Certainly Chavez brings someone much more capable, intelligent and conniving than Lara, who was an absolute lightweight But once again, this is a more radical appointment, certainly contradicting Chavez new and gentler image.

All in all, the new Cabinet seems to be as incapable at management the country with all its difficulties, but certainly more capable in terms of playing the political game with intelligence and malice.

Thus, expect the gentler Chavez to melt away fast, the tough political moves to begin in earnest and the problems of the country and the people to be set aside once more, in order to devote themselves to the politics of power and the solidifying the power of the weakening autocrat Hugo Chavez.

This is a very good graph by Santander Investments which shows the problem that structural inflation has become in Venezuela. The gray curve shows the 12 month or annualized inflation in prices at each point in time since 2005 for items in the CPI which are not controlled.  The red curve on the other hand shows the same CPI annualized, but for items under control. As you can see, the items under control have never been able to yield an annualized inflation level of less than 10%. Moreover, you have to remember that it is precisely these controlled items that are seldom available at stores, so the “true” level of inflation is much higher. Given this, in the absence of new and effective economic policies to fight inflation, the current reconversion of the currency will become a useless exercize.

Note that for the last year the prices of items not under control have diverged from those controlled and that recently the difference is close to 20%, a huge number and while there is a suggestion that it is tapering off, the difference has only increased in the last few months.

Clearly, President Hugo Chavez needs new and more capable faces in the Cabinet to tackle these problems. One of the difficulties is that he personally pays little attention to coordinating economic policy and had left this on the hands of the Vice-President for at least the last year and a half. Rumor had it that Chavez was ready to bring new faces into the Cabinet, maybe move Tax Superintendent Vielma Mora into the Vice Presidency (He has been an effective manager, even if fairly ignorant o economic matters). Instead, Chavez has named Minister Of Housing Carrizales as the new Vice President. Carrizales managed to build less than 40,000 new housing units in 2007, while this is an improvement, in the bad old days of the IVth. Republic, 60,000 units was the norm not the exception. Thus, Carrizales has not been that effective in his position and now gets promoted to VP!

Chavez also moved Jesse Chacon to the Ministry of the Secretary of the Presidency, while moving the President of CANTV, Socorro Hernandez, to the Ministry of Telecommunications. Hernandez was thought to be way above her level of competence in CANTV and six months later she gets a promotion to Minister.

Clearly, Chavez is still shuffling people around, rather than looking for experts. He wants loyalty more than effectiveness and management capability. This bodes badly for him (and us!) in the near future, as there are significant problems that need to be resolved and tackled with true expertise. The most important positions that needed to be filled were the Vice Presidency and the Ministry of Finance, we shall see what the latter brings.

Politically, Chavez needs a good economist as Minister of Finance, who may (tough job!) be able to remove the strains in the economy slowly and stop inflation. From the looks of it, he will go for another crony in this all important position.

Yes, it is the economy silly, not the FARC that matters, but in the end it seems to be secondary to the Government’s plans, as those in charge appear not to have much of a clue as to what to do.

In the latest economic tidbits from the revolution:

1) Today was the first real day of the reconversion process and there was a lot of frustration everywhere. It is still hard to tell how well it went, as most people are still on vacation and many stores did not even open. I went by the supermarket where I shop and to my surprise it was closed as the systems were not ready yet. The ever optimistic Minister of Finance called it a success only to say right after it that 75% of ATM’s are working. Sounds low to me, but he has never been one to have ambitious goals (see below on inflation).

In terms of the banking system, most online statements seem to have the right balance, but charges seem to be in old Bolivars, so that people who had a few million old Bolivars, now have only ten thosuand or so, but were charged one thousand for Internet use or the like. They will eventually get it right.

The sad thing is that given current conditions, the whole process has been futile and it will do little to slow down inflation at a very high cost.

2) Inflation was bad in December. The CPI for the full year was 22.5% after December came in at the high end of expectations at 3.3%. Basically, between the new tax and too much money chasing too few goods, inflationary pressures are still around and growing. For the Minister of Finance Rodrigo Cabezas, the numbers are proof that he has been a total failure in the policies he implemented. Every time he announced a new policy he would say that it was not inflationary and he has said all along that high Government spending could coexist with low inflation. Now he calls the inflation for December “moderate” and says policies need to be changed. Jeez, I guess he never goes shopping and he certainly should read this blog for some pointers from a non-expert.

But if the 12 month number of 22.5%, twice the Government target of 12 % per year, as recently as July of this year, it was worse for Food and Beverages, which reached 4.7% for the month of December and 38.6% for the year. Items under control, many of which can’t be found in the shelves, were up 10.7%, while those without control went up 32.7% in 2007.

3) GDP numbers for 2007 are in and it is a case of good news and bad news. The good news is that thanks to high Government spending the economy grew by 8.3%, the bad news is that the oil GDP contracted by more than 5%, continuing a very worrisome trend. Moreover, imports for the year were close to US$ 45 billion, which is clearly unsustainable.

In a day which should have been “slow” in terms of news, a couple of items should be noted:

—Chavez’ Amnesty Bill turned out to be much less than expected, as its wording left out many if not all of the most emblematic cases of political persecution, such as Henry Vivas, Forero, Nixon Moreno, Enrique Mendoza, the PDVSA workers, as well as anyone in exile. Using Chavez’ words. he would say this is an “Amnestia de mierda”… (Or in colloquial Spanish, Amnistia Chimba)

—The Minister of Finance called the “reconversion” of the currency, by which the Venezuelan Bolivar will have starting today three fewer zeroes a total success. Funny, I have accounts at two banks. One I can’t see yet, the other one is correct unless I try to see my credit card, it tells me I am not authorized to see it. But, he should be careful, as today all stores were closed, thus to claim that all systems are working has no statistical significance. The true measure of its success will be if it helps control inflation which I doubt.

In any case, it’s the New Year, a day to relax, maybe you should go visit my post on how I grow my orchids, which may be useless if you live in a wintery place, but that is exactly how I do it here, explained in detail. Enjoy!

And have a great New Year!!!

For some as yet unexplained reason the delivery of three hostages in the hands of Colombian guerilla group FARC to the operation staged by President Hugo Chavez has collapsed. After Chavez himself had given a deadline of last night, the international group of personalities present in the Colombian town of Villavicencio to guarantee the integrity of the hostages has left that town, including former President of Argentina Nestor Kirchner and movie Director Oliver Stone, who made absolutely stupid comments about who the FARC are and what they stand for.

The FARC blames the Colombian Government for staging military operations in the area, while the Colombian Government is suggesting that the FARC may not even have the kid in its hands as it may be a child in the hands of Colombian social workers for over a year. Thus, once again, the FARC make President Hugo Chavez look very bad, the same way that they did in November when they even failed to provide proof that some hostages, such as former Presidential candidate Ingrid Betancourt were even alive. After that failure, Colombian police found such proof in the hands of some guerilla members in the city of Bogota and the proof was dated at least one month before the talks collapsed at the time.

Hugo Chavez had created a whole media circus surrounding the handover of the hostages, making it seem like a complicated military operation which it did not have to be. Chavez kept talking about “search” and “rescue” when it was just a matter of the FARC finding a way to leave the hostages at a safe place to be picked up by the Venezuelan helicopters flying under the Red Cross flag. But something was clearly wrong, as the handover was postponed repeatedly without explanation. Reports are that former Argentinean President Nestor Kirchner, a Chavez ally, was so upset yesterday with the operation that he was ready to leave and had to be stopped by “panicky” Venezuelan diplomats. President Uribe had stayed away from the operation until today when he met with the international observers and agreed to allow a corridor to be opened for the hostages to be handed over, after extending the Chavez deadline yesterday. The FARC meanwhile, contends that the Colombian military was staging operations near where the handover was supposed to take place and made it unsafe.

As I have suggested before there is no reason for this to be so complicated, but the diverging goals of those involved: Chavez, Uribe and the FARC made it complex as each group wants the other to look bad. What is a mystery is why the FARC have so far left Chavez out in the cold each time he has tried to mediate the handover of some hostages. In the past, the FARC has broken truces with the Colombian Government, failed to return hostages when promised and once killed eleven Deputies who were in captivity and were supposed to be about to be returned. The Colombian Government recently released the Foreign Minister of the FARC to the French Government as a goodwill gesture. There has been no reciprocal gesture from the FARC, who had only agreed to release these three hostages, two women and a kid, despite having thousands of hostages in their hands.

For now, the whole thing has collapsed and made Hugo Chavez look very bad, after he tried to raise his national and international stature after the loss in the Dec. 2nd. referendum. For now, the whole thing has collapsed and it looks as if it will be a while before the same show can be staged again with everyone’s cooperation.

So, we are getting the “soft” and “lovable” Chavez now. After his “humanitarian” effort in Colombia looks like is failing, Chavez signs an Amnesty Bill that he had refused to consider as recently as last Christmas, when it would have been more appropriate for people like Henry Vivas and Lazaro Forero so that they could spend that time with their families. I wonder if the decree implies that PDVSA will return its lifetime savings and severance pay to its former workers, since none of them were ever even tried and PDVSA confiscated their property illegally. The list for the Amnesty cases decreed is here.

As General Uson suggested yesterday, Chavez does not change, this is probably part of his new strategy to regain popularity by being more gentle and human, let’s see how long it lasts. In any case, he needs to start running the country and so far, none of his moves imply that. Meanwhile, I obviously welcome the decision as the rights of so many had been violated by the travesty that is the Bolivarian revolution. It is indeed a belated Christmas present for those involved that have suffered so much because of the whims of the autocrat.