The Devil's Excrement

You know, it used to be that Hugo Chavez would say that PDVSA workers were over privileged, they made so much more than the average Venezuelan. Well, it is now six years of the Chavez Government and:

–I find out the President of the Venezuelan Supreme Court just retired with a monthly salary of US$ 10,000 adjusted anytime the Court’s salaries are adjusted.

–And former Vice-Minister of Finance Bermudez tells a US Court that he made US$ 146.666 in 2002, which I thought not even Chavez made that much.

–And from PDVSA’s budget I discover that the average PDVSA worker makes today US$39,000 a year, versus US$ 30,000 before the strike.

All of this despite the fact that the currency has devalued from Bs. 700 per US$ to 1920 per US$ in the last three years.

Thus, I have to wonder, poverty is up but the salaries of the privileged Government workers are up significantly in real terms since Chavez got to power. Something is wrong with this picture, no?

I still remember, the former Head of the budget office Guiacaipuro Lameda in 1999 (he later became head of PDVSA) talking about the fact that he was bothered by the fact that he was making Bs. 2 million a month as  a General and Head of OCEPRE, while so many people went hungry in Venezuela. He said every time that he had to make a budget decision he thought about this dichotomy and how unfair it was as a way of deciding on the issue. I understood exactly what he meant. Why did Chavez drop people like Lameda from his side?

You know, it used to be that Hugo Chavez would say that PDVSA workers were over privileged, they made so much more than the average Venezuelan. Well, it is now six years of the Chavez Government and:

–I find out the President of the Venezuelan Supreme Court just retired with a monthly salary of US$ 10,000 adjusted anytime the Court’s salaries are adjusted.

–And former Vice-Minister of Finance Bermudez tells a US Court that he made US$ 146.666 in 2002, which I thought not even Chavez made that much.

–And from PDVSA’s budget I discover that the average PDVSA worker makes today US$39,000 a year, versus US$ 30,000 before the strike.

All of this despite the fact that the currency has devalued from Bs. 700 per US$ to 1920 per US$ in the last three years.

Thus, I have to wonder, poverty is up but the salaries of the privileged Government workers are up significantly in real terms since Chavez got to power. Something is wrong with this picture, no?

I still remember, the former Head of the budget office Guiacaipuro Lameda in 1999 (he later became head of PDVSA) talking about the fact that he was bothered by the fact that he was making Bs. 2 million a month as  a General and Head of OCEPRE, while so many people went hungry in Venezuela. He said every time that he had to make a budget decision he thought about this dichotomy and how unfair it was as a way of deciding on the issue. I understood exactly what he meant. Why did Chavez drop people like Lameda from his side?

The Venezuelan Central Bank announced that GDP went up 17.3% in 2004, the highest such increase recorded by the Central Bank. The increase in oil activities was 8.7% and 17.8% in non-oil activities, while the public sector grew by 11% and the private sector by 18.6%.

This is a very good bounce off the 2003 low and is needed if the standard of living of Venezuelans is to rise significantly. We hope growth continues, although such a high pace is clearly not sustainable. This growth was driven by higher oil prices and strong Government spending. Construction led the growth with 32% increase, after some terrible years of -19.8% in 2002 and -37.4% in 2003.  This is by far the best economic year, in terms of GDP growth, for the Chavez Government which has had the following track record, but it only takes the economy back to the levels of 1997 and below the highest year of economic activity which was 1998:

1999          -6.1%

2000          +3.2%

2001          +2.8%

2002          -8.9%

2003          -9.4%

2004          +17.3%

The Venezuelan Central Bank announced that GDP went up 17.3% in 2004, the highest such increase recorded by the Central Bank. The increase in oil activities was 8.7% and 17.8% in non-oil activities, while the public sector grew by 11% and the private sector by 18.6%.

This is a very good bounce off the 2003 low and is needed if the standard of living of Venezuelans is to rise significantly. We hope growth continues, although such a high pace is clearly not sustainable. This growth was driven by higher oil prices and strong Government spending. Construction led the growth with 32% increase, after some terrible years of -19.8% in 2002 and -37.4% in 2003.  This is by far the best economic year, in terms of GDP growth, for the Chavez Government which has had the following track record, but it only takes the economy back to the levels of 1997 and below the highest year of economic activity which was 1998:

1999          -6.1%

2000          +3.2%

2001          +2.8%

2002          -8.9%

2003          -9.4%

2004          +17.3%

It is indeed very sad, after seen how the Government paid homage to murdered prosecutor Danilo Anderson for political reasons, to see that the tragic death of Venezuelan Olympic medalist Rafael Vidal has not earned even a mention by any Government official.

Vidal won a bronze medal in swimming in the 1984 Olympics in Los Angeles, the only swimming medal ever by a Venezuelan. A Florida paper had this to say about this terrific individual:

“Rafael Vidal, the pint-sized Venezuelan who shocked the swimming world by winning the bronze medal in the 200-meter butterfly in the 1984 Los Angeles Olympics, died Saturday in a traffic accident in Caracas. He was 41.

Vidal was possibly the greatest swimmer in the world for his size. I detailed his Olympic effort in an August 2004 column, and feel fortunate to have met him a few times while I lived in Caracas. He was a good guy.

According to news reports, he was killed when a drag-racing Hummer struck his sedan.

It was unclear if anyone else was hurt in the wreck.

Vidal, a University of Florida graduate who worked as a radio and television sports commentator, leaves behind two small children.”

Vidal did what he did, through his own personal efforts and very hard work. After swimming he had a professional career and had a radio program on sports and individual efforts. He was a true hero, killed by irresponsible kids drag racing in a Hummer. His Corolla was dragged 40 yards by the speeding Hummer, killing him instantly. His death is a true loss for Venezuela, a man of values in a country with so few of them

The Minister of the Interior and Justice Jesse Chacon said today that the Government would audit the funds used for the reconstruction of Vargas state. Chacon also argued that the funds used in the reconstruction were cut, which explained why all of the public works were not completed. I must say that I am truly disappointed by these statements by the Minister. It simply sounds too mild and simplistic to talk about audits when what the Government should be doing is a complete, full and immediate investigation of the misuse of funds. Moreover, arguing that the budget was cut sounds like a lame excuse for what I consider to be one of the most corrupt executions of a public works project in the history of Venezuela. In fact, I am concerned that this simply indicates that the Government is getting ready to cover up the corruption associated to the reconstruction of Vargas.

First of all, there is no evidence that the budget was truly cut, the two most important sources of funds for the reconstruction projects were international contributions which were not cut and the US$ 1 billion approved by the National Assembly which could only be cut by that body, which was never done either. So if Chacon’s statements are true they refer simply to the smaller amounts in the table I showed a couple of days ago.

The truth is that not only have huge amounts of funds been squandered on these projects, but this led to loss of life and material property of people from all levels of Venezuela’s life, poor and rich alike. Even today, a week after the rains, towns in Vargas have no water and the people living there are going through a living hell. Many people may not know it, but Venezuela has one of the most advanced legislations against corruption,  where it is not only a corrupt act to steal, but also to not act on time cut corners or be negligent. Problem is, we have too many laws and not enough enforcement.

Nobody can deny the level of corruption, inefficiency and negligence associated to the Vargas reconstruction projects. Only yesterday local newspaper Tal Cual (by subscription) carried an interview with an Austrian engineer that I think is worth translating partially, since it is the words on a foreign expert that actually participated in the design stages of the project, as well as its evaluatiosn after they were built.

 Josef Hopf is an Austrian engineer who worked for 43 years at the Austrian office for Torrents and Avalanches. In 2000, he approached various Austrian organizations to fund a visit to Venezuela after the Vargas tragedy. He came with three colleagues that participated in the projects. Hopf had been in Venezuela in the 70’s where he was an invited Professor at the University of the Andes. He came back once again in 2003 when the Ministry of the Environment held a Conference on the subject.

He participated in 2000 in the evaluation of the design of the systems for the control of torrents, specifically those for two of the 23 rivers in Vargas state. What he found in 2003 was that while some of the public works had been built and some preventive measures had been taken, the projects recommended by the experts in 2000 were not completed or changed.

According to Hopf, the use of stone and metallic mesh, instead of concrete with steel was contrary to the recommendation of the international visitors. In general, says Hopf, the projects developed by the commissions and international advisors were not taken into account.

Hopf syas that the international missions made projects for nine of the twenty three torrents, which were the most important ones in Vargas state; the estimated costs at the time were US$ 57.7 million, of which US$ 18.8 were for the two torrents studied by the “Austrian commission”. Only three of the nine were built and concrete was never used!

Hopf continues: “The projects presented by the Austrian team were designed to resist large scale events, like what happened in 1999. The problem with the type of structure used is that they can not withstand the expected kinetic impacts, even if they are well built.” He adds: “That is part of the disillusionment of many of the specialist that participated in the projects”.

Note the type of negligence that this implies, the nine most important torrents could be controlled, according to Hopf, with “only” US$ 57.7 million, using what he considers to be very expensive structures. Instead, there is not only no explanation for where the US$ 1.6 billion of the two largest contributions went to, but the dams were built using much cheaper designs in the three cases in which the work was actually completed.  

It always amazes me how some of these Government figures can express their outrage at political trivialities, but when outrageous acts of corruption and negligence take place, they can use such bland words or be as evasive as Chacon was today.

I must say that when Chavez won the 1998 election I actually naively believed that corruption would be one of two areas in which he might accomplish something, given his popularity and his military background. I am still amazed how this issue has not even been addressed by the President, as he could have used the fight against corruption as an extremely powerful issue to increase his popularity.

Instead, this Government has been responsible for creating quite a few incredible sources of corruption, which stand out even to the untrained eye:

-Public deposits in the banking system have increased from 5% of all deposits in 1998 to 40% today, as banks pay commissions for official deposits, making bankers, intermediaries and Government officials extremely rich in a very short period of time.

-The exchange control office (CADIVI) has become another huge source of corruption as over US$ 4 billion have been approved for the payment of foreign debt of private companies. On the previous two exchange controls systems in the 80’s and 90’s, which were quite corrupt too, funds were never approved for external debt due to the difficulties establishing the veracity of the debts and their true ownership. Similarly, the Government has approved via CADIVI, foreign currency at the official exchange rate for imports that either never took place or are outrageous. All of this is obviously obtained by the payment of commissions to intermediaries and CADIVI offivials.

-The Vargas reconstruction funds

-The sale of Government debt in non-transparent fashion.

-The Bolivar 2000 projects. Even the Comptroller (who sometimes is not clear whether he is alive or not)found corruption in these cases, but none of the Generals was ever charged or convicted for it.

There are many others, but I think I made my point. The problem is that this seems to be an ever increasing problem that I don’t think would be solved by changing Governments.

It is my impression that the ethical levels of the average Venezuelan from the very poor, who believes it is entitled to Government handouts or to take private property from others, through Government officials that charge commissions or steal money outright, to the people in the private sector that pay commissions or partner with Government officials to make money without doing very much, is an all time low in my beleaguered country.

And I really don’t see any way out of this. The attitude is simply too prevalent at all levels of our society. People are so dependent for their livelihoods on this, that anyone trying to fight it openly would risk his/her life trying to get rid of it. This was truly Chavez’ lost opportunity in 1998, when he won the Presidency. He had the goodwill, the popularity and the mandate to reduce corruption. But he did nothing about it. In fact, when the first corruption scandals of his administration broke, he chose to get rid of the accusers and not of those being accused.

As a Venezuelan this is very sad. The moral decomposition of a society may take decades to recover from. And given the lack of leadership on this issue and the lack of interest on the subject from all sides of the political spectrum, I am not sure we are even close to starting to discuss the need for such a recovery plan as a modern society.

The Minister of the Interior and Justice Jesse Chacon said today that the Government would audit the funds used for the reconstruction of Vargas state. Chacon also argued that the funds used in the reconstruction were cut, which explained why all of the public works were not completed. I must say that I am truly disappointed by these statements by the Minister. It simply sounds too mild and simplistic to talk about audits when what the Government should be doing is a complete, full and immediate investigation of the misuse of funds. Moreover, arguing that the budget was cut sounds like a lame excuse for what I consider to be one of the most corrupt executions of a public works project in the history of Venezuela. In fact, I am concerned that this simply indicates that the Government is getting ready to cover up the corruption associated to the reconstruction of Vargas.

First of all, there is no evidence that the budget was truly cut, the two most important sources of funds for the reconstruction projects were international contributions which were not cut and the US$ 1 billion approved by the National Assembly which could only be cut by that body, which was never done either. So if Chacon’s statements are true they refer simply to the smaller amounts in the table I showed a couple of days ago.

The truth is that not only have huge amounts of funds been squandered on these projects, but this led to loss of life and material property of people from all levels of Venezuela’s life, poor and rich alike. Even today, a week after the rains, towns in Vargas have no water and the people living there are going through a living hell. Many people may not know it, but Venezuela has one of the most advanced legislations against corruption,  where it is not only a corrupt act to steal, but also to not act on time cut corners or be negligent. Problem is, we have too many laws and not enough enforcement.

Nobody can deny the level of corruption, inefficiency and negligence associated to the Vargas reconstruction projects. Only yesterday local newspaper Tal Cual (by subscription) carried an interview with an Austrian engineer that I think is worth translating partially, since it is the words on a foreign expert that actually participated in the design stages of the project, as well as its evaluatiosn after they were built.

 Josef Hopf is an Austrian engineer who worked for 43 years at the Austrian office for Torrents and Avalanches. In 2000, he approached various Austrian organizations to fund a visit to Venezuela after the Vargas tragedy. He came with three colleagues that participated in the projects. Hopf had been in Venezuela in the 70’s where he was an invited Professor at the University of the Andes. He came back once again in 2003 when the Ministry of the Environment held a Conference on the subject.

He participated in 2000 in the evaluation of the design of the systems for the control of torrents, specifically those for two of the 23 rivers in Vargas state. What he found in 2003 was that while some of the public works had been built and some preventive measures had been taken, the projects recommended by the experts in 2000 were not completed or changed.

According to Hopf, the use of stone and metallic mesh, instead of concrete with steel was contrary to the recommendation of the international visitors. In general, says Hopf, the projects developed by the commissions and international advisors were not taken into account.

Hopf syas that the international missions made projects for nine of the twenty three torrents, which were the most important ones in Vargas state; the estimated costs at the time were US$ 57.7 million, of which US$ 18.8 were for the two torrents studied by the “Austrian commission”. Only three of the nine were built and concrete was never used!

Hopf continues: “The projects presented by the Austrian team were designed to resist large scale events, like what happened in 1999. The problem with the type of structure used is that they can not withstand the expected kinetic impacts, even if they are well built.” He adds: “That is part of the disillusionment of many of the specialist that participated in the projects”.

Note the type of negligence that this implies, the nine most important torrents could be controlled, according to Hopf, with “only” US$ 57.7 million, using what he considers to be very expensive structures. Instead, there is not only no explanation for where the US$ 1.6 billion of the two largest contributions went to, but the dams were built using much cheaper designs in the three cases in which the work was actually completed.  

It always amazes me how some of these Government figures can express their outrage at political trivialities, but when outrageous acts of corruption and negligence take place, they can use such bland words or be as evasive as Chacon was today.

I must say that when Chavez won the 1998 election I actually naively believed that corruption would be one of two areas in which he might accomplish something, given his popularity and his military background. I am still amazed how this issue has not even been addressed by the President, as he could have used the fight against corruption as an extremely powerful issue to increase his popularity.

Instead, this Government has been responsible for creating quite a few incredible sources of corruption, which stand out even to the untrained eye:

-Public deposits in the banking system have increased from 5% of all deposits in 1998 to 40% today, as banks pay commissions for official deposits, making bankers, intermediaries and Government officials extremely rich in a very short period of time.

-The exchange control office (CADIVI) has become another huge source of corruption as over US$ 4 billion have been approved for the payment of foreign debt of private companies. On the previous two exchange controls systems in the 80’s and 90’s, which were quite corrupt too, funds were never approved for external debt due to the difficulties establishing the veracity of the debts and their true ownership. Similarly, the Government has approved via CADIVI, foreign currency at the official exchange rate for imports that either never took place or are outrageous. All of this is obviously obtained by the payment of commissions to intermediaries and CADIVI offivials.

-The Vargas reconstruction funds

-The sale of Government debt in non-transparent fashion.

-The Bolivar 2000 projects. Even the Comptroller (who sometimes is not clear whether he is alive or not)found corruption in these cases, but none of the Generals was ever charged or convicted for it.

There are many others, but I think I made my point. The problem is that this seems to be an ever increasing problem that I don’t think would be solved by changing Governments.

It is my impression that the ethical levels of the average Venezuelan from the very poor, who believes it is entitled to Government handouts or to take private property from others, through Government officials that charge commissions or steal money outright, to the people in the private sector that pay commissions or partner with Government officials to make money without doing very much, is an all time low in my beleaguered country.

And I really don’t see any way out of this. The attitude is simply too prevalent at all levels of our society. People are so dependent for their livelihoods on this, that anyone trying to fight it openly would risk his/her life trying to get rid of it. This was truly Chavez’ lost opportunity in 1998, when he won the Presidency. He had the goodwill, the popularity and the mandate to reduce corruption. But he did nothing about it. In fact, when the first corruption scandals of his administration broke, he chose to get rid of the accusers and not of those being accused.

As a Venezuelan this is very sad. The moral decomposition of a society may take decades to recover from. And given the lack of leadership on this issue and the lack of interest on the subject from all sides of the political spectrum, I am not sure we are even close to starting to discuss the need for such a recovery plan as a modern society.

Only Bush was missing from today’s meeting to make the whole thing totally fake. Thus, we had a stiff Uribe joining a sophomoric Chavez, coming out to say they love each other, we are all Bolivarian and Granda was a silly mistake on both parts. Left behind were the insults, the accusations and the charges and we are all buddies now. It is a pity Bush (played in the picture on the right by Chevy Chase) could not join them, so that Chavez would have told us how much he admires the US and how we are all brothers and he was only joking about disliking capitalism. Instead, we heard jokes from Chavez about promising not to invade the US and praise for Pancho Villa as the only one that dared do it. Uribe did not apologize, as expected, and looked a little uncomfortable, while Chavez adapted himself to today’s role with his customary ease. Perhaps the only news to come out of the diplomatic lovefest was Chavez statement that he will fight terrorism “wherever it maybe”. We now await for the next incident, which we are sure will take place before the end of the year. Diplomacy at its best!

-President Hugo Chavez announced yesterday the creation of a committee to prevent and manage the follow up to disasters, which will become a permanent committee and will be presided by the Minister of the Interior and Justice Jesse Chacon.

My take: I wonder if its members will be the same as those that were supposed to come up in forty days with a plan to end poverty. By the way, it has been fifty four days and we have yet to hear from them. In fact, it i fifteen days overdue!

-And then there is the member of the Board of PDVSA who said today that in March the company will present its audited financial statements for 2003 and those from 2004 will be turned in July of this year.

My take: I remember the same thing being said in March of last year, that they would be handed in June. Then in June they said September, then in August they repurchased US$ 2.5 billion of PDVSA’s debt to save the asses of PDVSA’s Board for their failure to file under US laws. Should we believe them his time. Nah!

-And our esteemed President announced that the Government will “order” reducing the concentration of people in Vargas state. Chavez said that in 1999 they tried to do this, but they could not. This time, said Chavez “we can’t fail, at whatever cost”

My take: Another brilliant strategy, take people who live in a state with jobs and failing infrastructure and take them to another state with no jobs and no infrastructure. What do you think will happen? They will come back the same way that they came back to Vargas after the 1999 tragedy. Vargas is a state with the conditions to develop a spectacular tourist industry with thousands of jobs. The problem is that you need good management to fix the current infrastructure and then develop the new one. Too scary a thought for an incompetent Government!

Today Tal Cual published the above table with the funds approved for the reconstruction of Vargas state. These are Bolivars at the exchange rate at the time. The first line is the US$ 1 billion assigned by the National Assembly (ANC), then there is the international funds at the same exchange rate of Bs. 697 per US$. The rest are smaller amounts for expropriations, building housing, the famous “sobremarcha” to reactivate the economy in 2002 and special assignments to Vargas in 2002 and 2003.

These numbers are very similar to those given out today by Deputy Pedro Castillo in today’s El Universal. According to Castillo these were the funds:

-US$ 1billion or Bs. 697 billion approved by the Constituent Assembly and published in the Official Gazette of February 2^nd. 2000. The first President of Corpovargas said in August 2000 that the reconstruction would take three years and it would cost Bs. 650 billion.

-International aid, which in a newspaper insert on December 15^th. 2000, the Government said amounted to US$ 656 million.

-Funds from the “Sobremarcha” project, which the Government said amounted to Bs. 80 billion.

-Bs. 20 billion from the Venezuelan Investment Fund (Fondo de Inversiones de Venezuela)

According to Castillo most of these funds ended up being used to repurchasing public debt bonds, using the arguments that the capital would increase. “We all know such operations are only good so that you receive a spread under the table and somebody make a bunch of ill obtained gains”, says Castillo adding: “ They invested part of the funds in building the “Vargas Solidarity” suburb in front of the airport, where half or more of the apartments were assigned to members of the military, the Mayor of Vargas and even councilman Carlos Herrera pointed out that the President of the Urban Development Fund gave (murdered) Prosecutor Danilo Anderson two apartments which he later sold.

This my friends is the blatant corruption of the pretty revolution! Of course, it is easier to blame Bush, the strike, the coup or whatever than face reality.