The Devil's Excrement

Politicians in Venezuela have always been fairly
ignorant about economics. In fact, it does not appear as they ever had a clear
idea about the difference between economics and economic policies, believing
you can violate well established economic principles in order to implement their
creative economic policies. Time and time again, one mistake in policy is built
on top of another leading inevitably to an economic crisis in the country.

Such is the case of the exchange controls currently in place
in Venezuela.
What should have been a temporary measure has now introduced so many
distortions that they become harder and harder to remove. The Government has
increased spending by over 40% from 2004 to 2005, and so has the monetary
liquidity, all of the circulating money in the country, creating problems of
various sorts, such as pressure on inflation and liquidity that has nowhere to
go as there is no demand for it.

Thus, this week, the Government resorted to a solution that
has been used already a few times in the last two and a half years, which
represents nothing but a huge gift to the wealthy of the country, the issuing
of a dollar denominated bond sold to local investors in Bolivars.

The idea is quite clever and simple: issue a bond in dollars
with a low coupon and offer it to Venezuelans who are hungry for foreign
currency which is restricted. Sell it to them at the official exchange rate of
Bs. 2150 then they turn around and sell the bonds to foreign investors, hedge
funds and the like at a discount, effectively purchasing dollars a rate
somewhere between the official rate of Bs. 2150 and the “parallel” rate which
is around Bs. 2650 at this time.

In the other bonds, not all conditions were clear when the bonds
were announced or the parallel rate and the official rate were sufficiently
close that there was an element of risk to it. Not so in this case, which is in
reality a combo of two bonds, one maturing in 2016 and the other one in 2020.

Because there is a Venezuelan sovereign bond which matures
in 2018, then it becomes very easy to predict what yield foreign investors
would want from the new ones being issued. From this, it is equally easy to
know at what discount you will be able to sell the dollar denominated bonds in the international markets. In
this case it is somewhere around 87% for the combination of the two bonds,
which tells you will be buying the foreign currency at Bs. (2150/.87) = Bs.
2471 per US$ or so.

While many companies and individuals will use this simply as
a mechanism for purchasing cheaper foreign currency, for many, this is simply
free money courtesy of the Venezuelan Government. You either have the money,
like the banks, or you borrow the money to purchase the bonds. You get the
bonds, sell them and turn around with the US dollars and sell them in the
parallel market at a tidy profit of 7.2% in just a few days using the numbers I
gave you above. Thus, the revolution is simply giving a gift of money to the
rich as a way of solving an economic problem they face.

Of course, the ideal solution would be to remove the
controls, which would simply reduce liquidity by itself. But because the
controls have been in effect so long, there are too many distortions in the system
and removing them would imply that some banks would be in trouble, interest
rates would have to go up to be above inflation and last but not least, the
Government would lose an important weapon of control over the people and the
private sector.

The example I gave above in terms of profits for the transaction will likely be even better than
described for those that buy the bonds. Because there are rumors that the
Government plans to use the funds raise in part to repurchase some of the
country’s debt, Venezuelan bonds went up after the announcement. If this rise
is sustained thru Monday then people will likely make more like 10% in this
quick, riskless and profitable trade. Nice gift, no?

This gift is well received by the banking system, which has
so much money from depositors, but can’t lend it all, so they use that excess
to participate in this as well as to lend to clients to purcahse the bonds. The other big players are obviously speculators.
Curiously, other distortions also help others in purchasing these bonds: The
Government regulates the rates at which banks lend money to agricultural and
tourism enterprises below market artes, some of them have excess credit which they are tapping this
week to make a little money in the side.

In the meantime, Venezuela’s external debt goes up, yearly
interest payments go up in foreign currency and the distortions in the economy
increase. Of course, this also means that one day it will blow up again and the
longer it goes on, the less oil prices will have to drop to create a crisis. Only
this week, President Chavez announced a five year US$ 100 billion investment
program to be financed by PDVSA (US$ 10 billion a year) Pequiven (US$ 2 billion
a year) Fonden (US$ 2 billion a year) and the Miranda Fund (US$ 3 billion) a
year. These are funds additional to the excess spending that is being carried
out by the Government in the regular budget which is an all time high in the
country’s history in real terms as well as a percentage o GDP..

Where the money will come from for this plan obody knows, what is clear
is that distortions and expenditures are being stretched to the limit, which
bodes badly for the country were oil prices to drop by even a relatively small
amount.

And as usual, it will be the poor that suffer with another
crisis as the rich can save these easy profits given to them by the revolutionary
Government for a rainy day. The poor just can’t.

Two days ago there was a somewhat distressing Editorial in the Boston Globe
entitled Venezuela’s largesse, thanking Venezuela for the cheap oil given to the poor of
Massachusetts. Distressing because we were surprised that that paper
could be fooled by Chavez’ strategy of self-promotion. Well, a Globe
staff reporter was not fooled and while I have yet to see any of the
letters written to the Globe that have circulated through my email, it
was quite satisfying to see that someone does get and was allowed to get
his point across in the same pages that praised Chavez ‘ donation in a sort of rebuttal entitled “Cost is high for largesse”. I
found two of the arguments quite compelling, one, that of the
differences in per capita income between Venezuela and some of the
beneficiaries of Chavez’ largesse, the second one, the examples of how
people would react to similar donations from poor African countries
which the average American understands quite clearly are too poor to give gifts to rich Massachusetts:

“We appreciate the help, of course. But Chavez has
plenty to do at home rather grandstanding in the United States.

For instance: Venezuela’s per capita income is
$4,768. Massachusetts, the object of Chavez’s largesse, has the nation’s
second-highest per capita income, $41,801.

According to the World Bank, 49 percent of all
Venezuelans lived in poverty in 2000 — meaning they got by on household income
of less than $2 a day. That’s $2 a day, the price of a gallon of gasoline here.
About 24 percent lived in extreme poverty — or on less than $1 a day. The
poverty numbers are up substantially from a decade ago.“

“Maybe Congressman William Delahunt could arrange
for Somalia to send discounted beef, the desperately poor African country’s
leading export. Its poor neighbor, Ethiopia, could help out by sending cheap
coffee. And Afghanistan could send heroin. (But, then, it already
is.)”

Despite denials that this was possible by the CNE since the recall vote, technicians from the opposition showed

international observers from the OAS and the European Union that it is
indeed possible to know the sequence of votes from the voting machines
used in Venezuela. This had been repeatedly denied by the both the CNE
and Smartmatic the company that makes the machines. Given that
separately there is a fingerprint grabbing machine,the two together
would allow for the identification of the voter.

The OAS and EU have sent a letter to the CNE asking to insure that this
may not be done. Sure, but what happens to the “old” elections done
under this same security leak? I hope they send their findings to the
Carter Center, maybe they may learn something useful for the future.

Could not help but post this new version of Venezuela’s coat of arms
which accompanied today’s article by humorist Laureano Marquez in his
letter to Chavez’ daughter. You see, last Sunday in his Sunday program
Chavez said he was thinking of changing both the flag and the coat of
arms. The flag by adding an eighth star to symbolize Guyana (which
Venezuela claims half of) and the shield to change the horse, because
his daughter Rosines told him that the horse looked dull, so he wants a
more dynamic looking one, turning “left” (Chavez’ words)

In the article, Marquez first suggests a Golden Retreiver, but
later suggests why not a turtle, since Chavez had said she had a turtle
and in Marquez’ own words : “It would be emblematic of how slow we are
for everything”

It is
characteristic (or endemic?) of the current state of the Venezuelan Justice
system, that political cases of interest to the Government deserve all the
attention, but things like murder, torture, human rights violation and disappearances
seem to have little importance to the higher members of our Justice system.

Such is
the case of the strange accusations by the President of National Assembly
against Nelson Mezerhane, who has been accused and detained for participating
in the assassination of Prosecutor Danilo Anderson. Maduro said that Mezerhane
had tried to bribe the judge in the case with three million dollars in cash at
a meeting a week ago Monday attended by Mezerhane, the President of the most
anti-Chavez TV station (maybe because it is an all news station) and the main
financier of Chavez’ electoral campaign in 1998 and 2000. The problem is that
Mezerhane had turned himself in the same day at midday, while the meeting was
supposed to have taken place in the evening. Moreover, the President of
Globovision was at a meeting with all workers of the TV channel. Thus, we are
talking he had some 200 witnesses to his whereabouts.

Now, I
could believe that Mezerhane tried to bribe the judge, I could even believe
that he bribed his way out of jail just to be at a meeting, but I simply can
not believe Maduro’s story because it would not make sense of Mezerhane to turn
himself in at noon and then do all sorts of contortions and bribes to be able
to go out to a meeting that night.

Despite
this, the Vice-President says
that despite the imprecisions this needs to be investigated. The President of
the Constitutional Hall comes
out and demands that the Prosecutor’s office accelerate its investigation
of the charges and today the President of the full Supreme Court comes out and says he backs the
demands by the President of the Constitutional Hall.

This
happens when the accusation appears to be groundless, inconsistent and simply
not truth. Meanwhile, the parents of Antonio Lopez Castillo have yet to hear a
single piece of evidence linking their son to the murder of Anderson,
for
which their son was killed by police days after the Anderson assai nation. In fact, they themselves
were jailed that day, treated shabbily and have received an apology for their
treatment and erroneous arrest, but they have not been told about any
investigation involving their dead son. And it has been a year.

The same
could be said of the murder of Juan Carlos Sanchez, also killed by police
in the days after the Anderson
assassination, initially
reported by high Government officials as a confrontation, but now the
Prosecutor General says that he was set up. But we do not hear anyone calling
for an acceleration of that investigation either! Or the April 11 deaths. Or
corruption in a scale never seen in Venezuela. Or the disappearances by
the Police in Cojedes. (Oh, sorry those were investigated, Chavez talked to the
Governor and that was it!) and so on and so forth.

But
amazingly, the Head of the National Assembly, in the middle of his campaign for
reelection, with the vote a week away. With such serious and apparently
groundless charges made in such an important case, is holding up the
investigation because he is traveling. Official Business? Nope. Family
Emergency? Nope? Assembly representation? Nope.

It turns
out Maduro left to attend the celebration of the 80h, birthday of his “spiritual
guide”. Hopefully, the taxpayers are not paying for it.

Such are
the ways of the noveau rich and the bolibourgeois in this robolution

A year
ago, the Chief Head of Homicides of the investigative police (CICPC), the Chief
Prosecutor of the region of Lara and the Governor of Lara state said that Juan
Carlos Sanchez, who was being followed by the police in connection with the
Anderson case, was shot dead when he did not obey the order to leave the hotel
room where he was with his hands up. The police described how Sanchez was being
tracked via his cell phone and followed to the location where he was killed and
in that shooting a cop was also injured. At the time, the cops also said Sanchez
was getting ready to leave the country, had weapons, some C-4, money and a
passport.

His family
argued that this was not true. Sanchez’ car had a GPS protection device that
indicated he never left Caracas and one of those
charged in the case, Juan Guevara, said Sanchez was tortured in Caracas, he could hear
the screams while he was being detained. Guevara happens to be the person that
was also “detained” last year on Nov. 20^th. with the Prosecutor
General confirming it that day, only to deny it later, saying he made a
mistake. Guevara “disappeared” for a few days according to his wife, only to be
detained (again?) in Southwest Venezuela.

Sanchez’
family has charged all along that his death was a “set-up” by the police and
that his body had evidence of torture, which was always denied by the
authorities…until today.

Well, the
Prosecutor General said on a TV interview today that Sanchez’ death was a
“set-up” and that he was killed in order to protect the identity of the main
people behind Anderson’s
asssination. According to this new version by the Prosecutor General, those
behind the explosion thought they had control of the police and may have sent
the cops to simulate Sanchez’ death in a confrontation.

This “new”
version, which seems to have come out of a movie, is made more incredible by
the fact that those that announced and described how the confrontation took
place where high ranking officers of the police, together with the Governor of
the state. Why did they lie? Were they involved? All of these questions are
left now up in the air.

Here is
Petkoff’s take of the same topic in today’s Tal Cuela

Another one from the Prosecutor
General by Teodoro Petkoff

Well Hugo,
this mini reporter believes that it is time to tie up your nutcase before he turns
the Anderson
case into an episode of The Three Stooges. Now Isaias comes out with a version
that Juan Carlos Sanchez was ordered killed by the Guevaras, manipulating the
intelligence police. I don’t know if this is the truth or a lie, but then, what
happens now to the first version, handed out by the National Homicide Chief of
the Investigative Police, the regional prosecutor and none other than Governor
Reyes Reyes, according to which Sanchez died in a confrontation? All those
gentlemen were in cahoots to present what now, according to Isaias, was simply
a set up? If it was set up, these gentlemen did not commit a crime and shouldn’t
Rodriguez the bard, be opening an investigation against them to charge them for
simulating a punishable crime?

Or is he
going to come out and tell us another one of his typical ones, assuring us that
he read “sincerity” in the eyes of all of those officials and that is why he believed
them? On top of that, Isaias should reveal to us how come the Guevaras could so
easily manipulate the “revolutionaries” that directed the intelligence police
at the time and take them to get rid of Juan Carlo Sanchez. Maybe Colonel
Miguel Rodriguez Torres, chief of the intelligence police then, may have
something to tell us about this comic strip.

To add
fuel to the questioning of all of the actions and words by the Prosecutor General Isaias Rodríguez
in the Danilo Anderson case, today pro-Chavez General Jaime Escalante went
to the Supreme Court to ask for an injunction against the Prosecutor
General, to stop him from damaging his honor, his reputation and his rights.

You see,
according to the Venezuelan
Constitution in Article 266, high ranking military officers can not be tried unless
the Supreme Court reviews the evidence against them and decides whether there is sufficient
merit or not totake the officer to trial on the charges. Well, like so many things in the Danilo Anderson
process, the Prosecutor General Isaias Rodriguez, has done an abominable job. In
the case of General Escalante, he accused him and named him publicly of being involved in the Andetrson murder almost a
week ago, but has yet to file the case and provide any evidence with the Supreme Court to review
it and decide whether there is merit to the charges. In the meantime General
Escalante’s image and reputation has clearly been damaged by the accusation
that he did have something to do with the assassination of Anderson.

In fact
the whole case has been really strange, with the Prosecutor General giving almost
daily press conferences at which he reviews the case in public and says things
like: “I will accuse four people, one of which will surprise nobody”. Then last
Friday he said he would charge three more people, two of which were quite well
known. Or one of my favorites: “From the testimony of the star witness, I could
tell that 80% of what he was saying was true”. Jeez! 80% truth, anyone that lies 20%
of the time is very unreliable in my book, but I guess Isaias must regularly
meet with some really untrustworthy and seedy people if these are his standards!

He then
accuses the press of trying the case in public, while he is the one that daily
has come to talk about the case, answered questions from reporters about
whether so and so, may or not be involved in the case and has never explained
while certain leads have never been followed. I looked over the book by the Pablo
Medina on the Danilo Anderson case today and if half of what Medina
says is true, then
there are too many leads that have not been followed and too many
inconsitencies. It simply can not be
incompetence, it has to be either negligence or deceit. Take your pick,
in
either case Isaias Rodriguez is the man that has the mandate by the
Constitution to defend and uphold the law! There is no rule of law in
Venezuela as long as that man is in charge of the Prosecutor’s General
office.

Can any of
the readers of this blog imagine if in any their respective countries a high ranking
General was charged with being involved in an assassination of a Government
official and a week goes by without a single piece of evidence presented by the prosecutors
accusing him in any court? Do you think that this General’s reputation can ever be
restored as long as this Government remains in power? Can this General’s military
career ever be resumed?

Such is the
state of the rule of law in Venezuela,
not even those close to the center of power are immune to being destroyed, if
someone decides to do so. And to think that some people actually think they
will never be affected by all of this and that there is some redeeming value about this
silly and random revolution.

The ad
below represents in all of its extent why I think this autocratic Government is
indefensible, deceitful and arrogant. As I detailed in my
post a few days ago, the
law is very clear, at least the number of ballots in ALL boxes have to be
counted on Election Day and their total compared and matched with the number of
voters tallied by the electronic machines. This has been noted by Sumate and studied
by others that were not aware of it who reached the same unavoidable conclusion.
In fact, if the number of “paper ballots deposited” (As stated in the law) is
not the same, ALL of the votes from that polling station are simply invalid according to the Suffrage law!

Now, you have to understand that this was not done with
the recall vote, or in the Governor and Mayoral elections in October 2004 or in
the regional elections this summer. And it will not be done in the upcoming
elections either! In fact, the CNE intended to audit only 8-10% of all ballot
boxes, made a “big” concession (we should all be so grateful) and then said it will do 33% of them and via the
mediation of the OAS last week, will now audit 45% of all ballot boxes. Note
that an audit is more extensive in that the actual votes for each candidate are
also counted, which was my point, if you have to count the number of ballots,
why not count the votes while you are at it? All of them. This would make the
whole process transparent; people would trust it and our democracy would be
better. (Even the OAS, which just got here noted that there was someything fishy because the CNE has not released the electoral registry)

Instead, the CNE agrees to audit only 45% of the ballot boxes, which
statistically is a good sample of course. But this will not be a hot audit.
This vote count will not be matched to the actual machine results, but sent
under separate cover to the CNE, who will have five weeks to compare them. I am not making this up; it is in the
instructions for the vote process on Dec. 4, very clearly stated. It is a long
document, so please trust me, it is there spelled out in detail. By the way, in the
August election the comparison was instant in the limited ballot boxes where the audit was performed.

But the truly arrogant thing is this in your face ad by the Electoral Board, in which they imply there is
some sort of magnanimous concession in its part by agreeing to look at 45% of the
ballots, while bypassing and disobeying the law. This Goebbelian ad, represents
the dishonesty and travesty that the law has become under Chavez, which is supported
by eunuchs like the President of the CNE, who only aim to please the leader and
gain indulgences for future promotions. This is possible, only because the Electoral
power has been kidnapped by the Chavez administration, thanks to its control of
the Supreme Court, which named the CNE and even named Board members when its
President was named to the Court for conducting a very biased recall process. You
see, according to the Constitution it is the National Assembly that names the
Board, which has not been done because it requires a qualified majority,
something the autocrats do not have and were not willing to find someone
impartial, since they need and want to control everything. Such is the way of fascists!

So my friends laugh at the existence of the rule of law or the
possibility of a level playing field, when after all of this is done,
the CNE publishes the following
ad translated below, which I find is simply an insult to the
intelligence of
Venezuelans, as well as a clear demonstration of the rule ofthe outlaws
in this
poor country:

Strengthening guarantees45% of the protecting boxes will be
audited in front of your eyes

This December 4^th. we
will offer you one of the most secure and reliable processes in the world. Once
the vote is finished, we will initiate the opening of 12,266 ballot boxes and in
public fashion they will be audited in the presence of national and international
observers.

CNE promotes protagonical and
democratic participation

Well, fist of all, the law says 100% should be counted
which is not being done (Do I hear rule of Law from any of the Chavistas
readers?). Second, there is no audit, this is simple counting of the votes,
nothing is being checked for accuracy, comparison or verified, which is what
the word “audit” means and implies. Third there is a claim this is secure, why? None
of the “security” aspects were checked or have ever been checked, by anyone, anywhere.

As for claiming this is one of the most secure and reliable
processes in the world, please don’t make me laugh, nowhere in the world do
they count only a fraction of the paper ballots, period.

So, please don’t give me any BS, the CNE promotes no
democratic participation and the fact that the CNE is not looking for
transparency can only raise doubts about what they really intend to do on Dec. 4^th.
Follow the law, at least count all of the ballots in all ballot boxes.
As we have said every single time, there is only one way that
there can be transparency the CNE claims should have and the trust will follow:

Open
all of the boxes and count and compare all of the ballots with the
automatic results, only then will there be trust in the veracity
of the outcome!!!

Somehow Daniel posted
this picture of the march yesterday, but posted it on such small scale
that it did not show how small it was, more people showed up at the
end, but hey Patricia Poleo before she was charged was gathering as
many people as this, every single Saturday. Without paying anyone to show up! The picture is the best one
the Agencia Bolivariana de Noticias could find!

I did not write
much about the statements by the President of the National Assembly Nicolas
Maduro, charging that The President of TV station Globovision was at a meeting
with banker Nelson Mezerhane, where they attempted to bribe the judge in the
case to the tune of US$ 3 million. The charge seemed preposterous because
Mezerhane had turned himself at noon on the same day that Maduro had charged
the meeting had taken place in the evening. Moreover, the President of
Globovision was at a meeting at the station with some 200 people organizing the
sale of ads for the 2006 season. When a reporter asked Maduro about the fact
that Mezerhane was in jail that night, he was certainly taken by surprise.

But lost
in the shuffle and the noise, was the fact the accusation was broader than this.
What Maduro had actually said was that Mezerhane, the President of Globovision and Tobias
Carrero were reportedly at this meeting.

Who is
Carrero? Well, that is where it gets interesting:

Tobias
Carrero is the owner of one of the largest insurance companies in the nation,
Multinacional De Seguros, as well as hotels, radio stations and newspapers. Carrero
was in fact, the main financer of Chavez’ Presidential campaign. Carrero is
from Chavez’ Barinas state and went to the same high school as Chavez. Chavez
went around Venezuela in Carrero’s car, had offices at Multinacional de Seguros
during the campaign and Carrero and Luis Miquilena were in charge of collecting
funds for the campaign including the infamous illegal campaign contributions by
Spanish bank BBVA and Santander to the tune of a few million dollars.

Once Chavez
won, Carrero’s empire blossomed as the Government contracted with his insurance
company and awarded him licenses to radio stations without competitive bidding.
Lawyers from Carrero’s companies were named to the Supreme Court after the
Constituent Assembly (and are still there, dominating the Constitutional Hall).
Carrero has seldom appeared with Chavez in public and has kept a low profile,
but I doubt they are no longer close.

The
question is then why did Maduro included Carrero in the accusation, given that Carrero is close to Chavez? Moreover,
why has the media played down this inclusion, deciding instead to simply ignore
it? It certainly sounds like this was a political move on Maduro’s part,
including Chavez’ financial buddy for a specific reason. The question is why? And why is
the media ignoring it? Simply Fear?