The Devil's Excrement

Denounce the hoarders by Teodoro Petkoff in Tal Cual

Speaking about inflation, shortages and the measures announced by The Government, we heard Minister of Finance Cabezas refer to the responsibility of “previous Governments” in all of this. Has Cabezas perceived that the “previous Government” happens to be that of Chávez? If you can point someone as being responsible of the tribulations that we are living today, is to I, the Supreme, whose acts, were, on top of that, all validated by Cabezas himself from parliament

For eight full years, Chavez and his underlings have devoted themselves to sow the winds of these economic gales.

But in the same way as his colleagues before him, I, the Supreme is looking for dust in somebody else’s eyes, instead of looking at the beam him own eye has inside. Not for one moment do these Government officials consider their own faults. Faithful to their conspiratory vision of life and history, repeating the old adage of previous governments-as impotent and wrong as those of today- they have pointed to the scapegoat, that mysterious “bad guy”, with a mask over his face, who they call “speculator”

Inflation is then, blamed on small corner store owners. The only thing that this could produce as a result of this massive propaganda campaign-a Goebbelian feature for which this Government does have the copyrights to-is that some of those cheated could think of looting the small corner stores in the barrios or beyond.

The lack of effective anti-inflationary action is not casual. The reason is purely political. On the one hand, the Government is prisoner of its own fiscal excesses. It has been spending in such an exorbitant mode and acquiring and pledging such compromising obligations, that it cannot stop. Even worse, many of those expenditures that will have to be repeated each year are under the risk that medium term, the income to cover them will not be sufficient.

One of the roots of inflation is fiscal irresponsibility. The reason is purely political. The reduction of the VAT, just as an example, may lower prices but not inflation. It is not a paradox. Inflation is not the simple increase in prices, but the rhythm and speed at which it goes up. Inflation will continue to go up because for the Government a fiscally responsible policy is not part of its arsenal.

On the other hand, the exchange controls and the indefinite extension of the foreign exchange anchor, which also have a considerable inflationary potential, will also not be subjected to review because its persistence is also political. They exist because I, the Supreme uses them as a mechanism for political control. As long as Chávez is president we will have permanent exchange controls –even if they are not necessary-with its consequential and inevitable parallel market (and the corruption that the whole structure segregates) and with prices of consumption goods strongly determined by the not controlled exchange rate—black or gray, as you may like it.

All of this has a boring air of having seen it before. It is the repeat of the first CAP Government, it is Lusinchi part II.

Watch the fascist autocrat at Daniel’s blog live!

Can it be any clearer than that?

In the short span of a week, the ugly head of censorship and disregard
for the basic right of freedom of expression guaranteed by the
Venezuelan Constitution, surfaced in Venezuela, this time in two cases
covered by this blog before. First, Teodoro Petkoff’s newspaper Tal
Cual was found guilty of violating the privacy of the President’s
daughter and fined (Posts here, here and here
on this case). Then, physicist Claudio Mendoza was punished by the
Board of Directors of the Venezuelan Institute of Scientific Research
(IVIC) for daring to express his opinions (posts here, here and here on that topic) and refusing to back down or apologize for what was considered as “a disrespectful article” by the authorities.

But
in both cases, what we are seeing, once again, is simply an attitude
ingrained in Chavez’ Government, that they are the holders of the truth
and anyone who dares step over the line will be punished sufficiently
to induce fears in others, thus limiting freedom of expression in a
very broad way. Either you are with them, or you are punished, they
know the truth and you have to adapt to it, as easy as that.

The
case against Petkoff is quite emblematic, because in a sense, he has
been very outspoken against the Chavez Government and the quirks and
faults of the revolution. And Petkoff is unlikely to back down from the
position he has defended, because he probably still thinks that he is
somehow still untouchable, until the day he ceases to be. But the
signal to less powerful media outlets, who will not receive the attention that
Petkoff’s Tal Cual received, is very clear: Either you stay within the
bounds of what the autocracy wants or else! That message had already
sent to the broadcast media, some, like Venevision and Televen, decided
to confine and limit themselves and are thus protected, other like
RCTV, continued their fight and outspokenness and they will be punished
in May by having their license revoked. Even worse, while Chávez today claimed private property would be respected,
the Minister of Communications has clearly said that unless an
agreement is reached to buy RCTV’s equipment, it will be expropriated.
What a strange concept this Bolivarian private property is, I guess it applies to their property, but not that of their enemies.

So, it is
now time to go directly against the print media, now that the broadcast
media is under control. And the Tal Cual case clearly shows it. The
judge simply responded to a public request by Hugo Chavez. Ironically,
it was Chavez himself who violated his daughter’s privacy by telling a
nationwide TV audience how she had advised him on changing the
country’s coat of arms. This led to a humorous and very non-intrusive
piece by Laureano Marquez, which, if anything, treated Chávez’ daughter
with a certain level of endearment. This led to a fine against Tal Cual
and Marquez by a judge’s decision, which is so confusing an
unprofessional, that the Prosecutor is asking for clarification of what
it implies.

Claudio Mendoza’s case is closer than many think to
that of Tal Cual. Claudio’s opinion article in El Nacional was a
serious description of what it takes to build a nuclear bomb, but much
like Laureano’s it also used wit to point out the total disregard for
experts’ opinion that this Government has. I have covered the case
extensively, but essentially Mendoza was asked to “prove” what he was
saying and threatened with being fired, even if in the end he was only
removed from his position as Head of the Computational Physics
Laboratory at IVIC.

One could argue that holding such a position
should be a decision of the authorities of that institution and thus
Mendoza’s removal is a non-event. That is far from being the case.
First of all, being Head of a Laboratory has always been considered an
academic position and thus not subject to political or
administrative changes. But the suggestion that this was a
non-political or “normal” decision simply unravels, when the Director
of IVIC said in an interview in El Nacional
that the “punishment was soft”. Thus, it is clear that Mendoza was
“punished” for his personal opinions about the country’s disregard for
“experts” in all fields, as well as its possible nuclear intentions. This is simply censorship and there is no way to hide. Remarkably, they don’t even try!

The
first question is why was the punishment, in the end,  so “soft”? I believe
the answer lies in the fact that a large group of researchers from
IVIC, led in Claudio’s own words to Adriana Villanueva in today’s El Nacional by
“the scientific women who are braver than most”, signed a petition
questioning the investigation of Claudio’s article by IVIC’s Board and his firing would
have led to an even larger confrontation within that Institution. However, the impact of
censorship was felt even in this petition, when many refused to sign it
so as not to get into trouble. Indeed, it is not easy when you are
academically insecure, to sign a petition against the body that decides
your promotions, your tenure, your budget and who you may hire or not to work with
you.

But there was likely a second reason for the restraint in
the punishment. Venezuela has many distinguished scientists who are
well respected beyond its borders and many of them contacted
Associations and Journals abroad and, had Claudio been fired, there would have
been significant international repercussions that at least for now, the
Board of IVIC was not willing to face.

But the attitude is
there. Claudio was supposed to be “disrespectful” against his own
institution, which was curiously never mentioned in the text of his opinion piece
and much like the case of Chavez’ daughter, it was Chavez himself who
stated publicly in 2005 that Venezuela had a right to explore the use of nuclear
energy, signing cooperation agreements with Iran, who is not precisely
on the side of only peaceful uses of nuclear energy.

But it is not a
matter of disrespect as the interview with IVIC’s Director reveals. He
clearly shows his ignorance or disregard for the freedoms granted by
the 2000 Bolivarian Constitution, which unequivocally says in its Art.
57 that “all people have the right to express freely their thoughts,
their ideas or opinions in a loud voice, in writing or any other form
of expression and make use for it of any communication or broadcasting
media, without the possibility of establishing censorship”. But, in the
opinion of the Director of IVIC, handpicked by Chavez despite losing
the election to that position:

“Nobody can give an opinion
freely without having responsibility for the opinion. Freedom of speech
has limits, so do researchers…We thought he would back down, but he did
not do it. That was the drop that overflowed the glass and we did not
dissimulate it”

There you have it, as clear as water, a fascist
statement in black and white and at its best, going as far as stating
that they did not even try to fake it. Can it be any clearer than that?

The
whole thing is so ridiculous, that the IVIC Director in his own
opinion, incurs in the same “disrespect”, but this time against the
Foreign Policy of the Government he serves with such servility. He
clearly says:

“He can not say that the country is on its way to
manufacture nuclear weapons. If that is said by a physicist from a
scientific institution it is something serious and one cannot be deaf or
mute. He (Claudio) placed Venezuela together with Iran and North Korea, something that would question the country internationally”

Say
what? This statement would seem as disrespectful to Venezuela’s leader
and his foreign policy as Mendoza’s article was to IVIC. Iran and North
Korea, more the former than the latter, are considered to be good
friends of Venezuela and the autocrat and at a time that Iran is not complying with
international nuclear regulations, Venezuela and Hugo Chavez have
signed agreements with Iran on nuclear cooperation. Chavez has hosted
Iran’s President Mahmoud Ahmadinejad at least three times in the last
two years, so that suggesting that Mendoza’s naming of Venezuela in the
same context as Iran, is as much of a “disrespectful” opinion on the
part of IVIC’s Director towards his almighty boss, as Mendoza’s charge
that Chavez interest in nuclear energy goes beyond peaceful uses is
disrespectful towards his scientific institution..

And this is
in the end the question: Why is it that Chavez revives the nuclear
question? Has he been advised that this is a priority? Or is it simply
a repeat of the Venezuelan military’s fascination with nuclear matters?
It is always the military that have wanted to promote nuclear research
and development in Venezuela. That’s how it started in the 50’s and it is
periodically revived. But the scientists have never been big promoters
of it, unless it led to some funding for esoteric use of nuclear technology. But like a boomerang, the topic is revisited periodically
whenever some military officer who thinks he knows what he is talking
about, brings it up again. And much like all members of the nuclear
club or those that aspire to be part of it, at the beginning, only
peaceful uses are mentioned or suggested as the words “sovereignty” and
“self-determination” are also thrown into the discussion.

But
the truth is that there is no valid reason today to make Nuclear
Physics or its uses a priority in Venezuela and it certainly collides
with the broad outlines of that absurd contraption called “Mision
Ciencia”. But in the back of the minds of ignorant military officers, a
nuclear weapon is the ultimate power trip, a toy to beat and replace all military toys, a sublime ego booster, a possible geopolitical catapult for the all-mighty leader.

And that in itself simply proves that Mendoza was absolutely right in what he said.

It is all part of this crazy militaristic folly called the Bolivarian revolution and that, my friends, is simply my opinion.

Because the revolution loves the people:

Venezuela spending on arms soars to world’s top ranks (NYT)

(In Spanish here)

Most people know little about Roman Emperor Diocles or Diocletianus. While drawing parallels across 1700 years of history is certainly perilous, some of the similarities to our current Autocrat/Dictator are simply uncanny.

Like Chavez, Diocles sought his fortunes in the Army, rising through the ranks and becoming Emperor in 285 A.D. Diocles did well in establishing order within the military, establishing a military despotism, but failed at ordering the economy. He printed money like crazy (sound familiar?) and failed to restore faith in the currency. Then, like so many before and after him, he established price controls, as well as social controls. If you were the son of a farmer, you had to become a farmer, as simple as that. But more importantly, he established some of the strictest price controls by imposing the death penalty on violators.

Diocletianus issued the “Edict on Maximum Prices”, which contained 32 sections and established price limits on over 1,000 products. These included maximum prices on beef, grain, beer, transportation and wages. Despite the harsh penalty, this simply did not work. Merchants simply stopped producing items under control or sold them illegally above the controlled prices. Eventually he had to withdraw the decree as shortages and inflation increased, the opposite effect of what was intended.

Diocletianus story is not the only one; there are dozens of examples of failed price controls no matter how harsh the penalties. From the Code of Hammurabi in Babylon, to Egypt, to the US Civil War, to the French revolution, to World War II, to Nixon, to Venezuela, to Venezuela and now again, to Venezuela, price controls just don’t work. In fact, history shows that they always have the opposite effect to that intended. There isn’t a single case of successful price controls and many books and papers have been written in order to prove it.

Which brings us to Venezuela today. After setting price controls three years ago, printing money like crazy which does not help and then watching inflation rise, as expected, President Hugo Chavez issued a decree last week to attempt to create fear in agricultural producers. While I discussed the decree last week, it is only now, upon my return from vacation that I have had a chance to look at the decree. And it is even worse than I expected.

To begin with, the decree is clearly illegal, given that Article 112 grants Venezuelan extensive economic rights which can not be controlled by the Government. In Spanish:

Artículo 112. Todas las personas pueden dedicarse libremente a la actividad económica de su preferencia, sin más limitaciones que las previstas en esta Constitución y las que establezcan las leyes, por razones de desarrollo humano, seguridad, sanidad, protección del ambiente u otras de interés social. El Estado promoverá la iniciativa privada, garantizando la creación y justa distribución de la riqueza, así como la producción de bienes y servicios que satisfagan las necesidades de la población, la libertad de trabajo, empresa, comercio, industria, sin perjuicio de su facultad para dictar medidas para planificar, racionalizar y regular la economía e impulsar el desarrollo integral del país.

Which translated means:

Aticle 112. All people can dedicate themselves freely to the economic activity of their preference, with no more limitations that those contemplated in this Constitution and those established by laws for reasons of human development, security, health, environmental protection or others of social interest. The state will promote private initiatives, guaranteeing the creation and just distribution of wealth, as well as the production of goods and services that will satisfy the needs of the population, the freedom to work, to form companies, industries, without prejudice to issue measures to plan, rationalize and regulate the economy and promote the integral development of the country.

The decree issued this week, violates both the spirit and the letter of the freedoms and rights guaranteed by this article. While the Government may establish certain limitations, it cannot limit it all, like the decree certainly does or pretends to do. And even worse, it cannot bar anyone from “dedicating themselves freely to their economic activity of their preference”. In fact the decree says that anyone found in violation of the decree will not be able to participate in commerce for ten years. The Constitution certainly does not allow that and if it is ever applied it will violate the Constitutional rights of those punished.

But let’s look at some of the texts of the decree to see how it goes beyond what is legally reasonable in defining the scope of the decree:

Art. 24. Anyone who individually o as a group, carry out acts that block, in direct or indirect manner, the production, manufacturing, import, storage, transportation and commercialization of foodstuffs or products subject to control will be sanctioned with prison of two to six years…

Note how diffuse the definition is. Not only does it allow for you to be punished if you participate directly or indirectly, whatever that may mean, but also the product does not even have to be subject to controls! If it’s food you are handling, directly or indirectly, you can be in for a long prison term and if sentenced, you are barred for ten years from getting involved in commerce.

I wonder if we should have a similar decree for politicians that allow inflation to rise above a certain point, directly or indirectly, due to their negligence, ignorance or incompetence. We may not have sufficient cell space for all of Chavez’ economic Ministers if this were the case (or those before them!). But under the autocrat, penalties are a one-way street. Everything they do seems to be always fine and dandy, there is no self-criticism or use of knowledge in establishing policy.

In Article 4, the Government gives itself the ability to declare of public use or social interest the activities of production, manufacturing, import, storage, transport, distribution and commerce of foodstuffs or items under price controls. This simply allows the Government to expropriate or intervene any part of what probably represents a huge fraction of the Venezuelan economy, given the vague, ample and discretionary definition of what it covers. It’s actually hard to think of an area not covered, which is of importance. Is beer food? Gas prices are under control. Some car prices are controlled. Food is food at all levels for the whole chain. Just imagine!

And then it simply get Dictatorial with a capital “D”: The Executive branch, without mediating any formalities ma initiate the expropriation by decree for reasons of security and food sovereignty

In Art. 12. the Government allows itself to “takeover and temporary occupation, confiscation in order to begin selling products again”. While this happens “salaries will continue to be paid”, insuring that you perform a sort of financial hara-kiri or sepuku on yourself.

Of course, never have these guys stopped to think that they are the problem. That much like Diocles, it is their money printing and controls that leads to shortages and inflation. That the more controls that they impose, the more shortages and higher the inflation will be. That fear of confiscation or expropriation will not work, because the fear of death could not stop the same phenomenon in either in Babylon or Rome.

Modern economic history did not begin with Adam Smith, over three thousand years of history have shown that price controls exacerbate the problems and Hugo Chavez’ controls, handled by a corrupt and inefficient bureaucracy are even more likely to fail than in most
of the prior cases in history.

Yesterday it was Argentina, today is Bolivia, tomorrow…the world!!!

(In Spanish here)

So, today President Hugo Chavez proudly
announced that once again Venezuela will buy Argentinean bonds to sell to
Venezuelans as a way of reducing local monetary liquidity. This time it will
be to the tune of US$ 750 million.

This operation is simply indefensible,
there is no justification for Venezuela acting as a bridge for Argentina,
just because that country acted irresponsibly when it defaulted in its debt.
This is simply a subisidy for that country b the Venezuelan people.
Moreover, other than political, there is no benefit for Vemezuela or its
citizens by doing this. In fact, if the whole Bono del Sur issue announced
by Chavez of it were to have all Venezuelan components, would decrease costs
for the country in the future in its debt service.

The Government could, for
example, issue the same US$ 750 million as a new Venezuelan bond with lower
coupon and use the proceeds for the sale to buy outstanding bonds of the
Republic which are more expensive. But clearly no such luck, the goals of
the autocrat/dictator are more important than the future of the Venezuelan
people who are once again cheated of what rightfully belongs to them. A
poorer country subsidizing a richer one, only this stupid revolution could
even think of that. Argentina’s GDP per capita is almost triple that of
Venezuela, as simple as that.

The most laughable part of the issue is to say they will give priority to “small investors”. I know nobody who would be interested in an Argentinean US dollar denominated Sovereign bond and a Bs. denominated bond (TICC) indexed to the US$ that yields 5%, which is what the Venezuelan part is all about. Only banks can be interested in the latter. Most “small investors” simply view this as a cheaper way of investing in greenbacks, they buy the Bono del Sur, sell the Argentinean bond in exchange for US dollars and sell the TICC at a profit. In the end they bought dollars at a cheaper rate and take the money to their account abroad. There are also speculators, they buy the bond sell the parts, including the dollars in the parallel market and make a tidy profit.

Yeap, it is all definitely very revolutionary, what a disgrace!

Quote of the day from the newspapers before going to the beach:

“Since 2003 the efforts of the Government have been focused mainly in production plants for milk, sugar, coffee and refrigeration plants for meat and processing ones for fruits and vegetables. It is precisely  these basic items that now present shortages, thus official intervention has not improved the insufficiencies of the economy.”

In fact, shortages follow the efforts of the Governmnet. That is, the top priorities for the Government have shown the most intense shortages: Sugar, milk and meat in that precise order. This is nothing new, it is the history of Venezuela, where sectors where the Government participates are always lacking.

Watch out now electricity and phone service, you can bet the Government will be forced to nationalize the other cell phone companies when they clobber the “new” , “old” CANTV in the marketplace. More Government has never worked as a solution to these problems, least of all in this silly revolution where corruption is all over the place and ignorant and inexperienced miltary (pardon the redundance) believe they can run everything.

We have seen this movie before.

In another giant cynical admission, the Mayor of the Libertador District of Caracas, said today that he did not “recover” the Sabana Grande Boulevard earlier, because “it was not the momemnt to advance” and that it was only after “the consolidation of power by Hugo Chavez that he “started to rescue this urban space”.

Thus, in one sweeping statement, this cheap populist leader tells us exactly what is behind the silly revolution: It was Bernal that allowed the same urban spaces to be invaded and taken over by street vendors six years ago, in the name of populism, telling us how they deserved to earn a living and it was not humane to push them out. Today, six years later, when studies show street vendors no longer support the Government and Chavez has “consolidated his power” it is fine to remove them, also in the name of populsim.

Just another lesson in how fake the “love for the people” of the revolution is. In a few months, when the new Constitution needs to be approved, maybe the revolution will need the vote of the street vendors and will allow them back into these same urban spaces that today Bernal claims to love and desires be free of them.