The Devil's Excrement

Well, it is hard to know what is going on. After inviting to a debate, which a group of the visitors to the Cedice Conference accepted, Chavez seeemed to backtrack, but later accepted again. But now that he has heard that the debate will be him versus Mario Vargas Llosa, Chavez backtracks again. He apparently wants to debate all of them at once and not Vargas Llosa, so he claims the intellectuals backtracked.

I can blog again, since Chavez also backtracked on his four day Alo Presidente. It is just the usual, Chavez going on TV anytime he feels like it, but not continuously

Will update with any changes…

People thought I was kidding when I said that Chavez was planning to celebrate the ten years of his program Alo President with a four day program. Well, it has started. To top it all off, it is not Alo Presidente, which is carried only by his party’s TV channel VTV, but it is in “Cadena”. For those who still don’t know what that means, it means that all TV stations have to broadcast him (chained!) as long as the “Cadena” is on. Democratic, no? Of course, there is no right by any opposing group to speak afterwards and reply or anything like that. That would be destabilizing propaganda.

If Chavez does indeed speak for four days in a row and keeps the forced broadcast on, it will be another milestone in his dictatorship. The Devil has no plan to post until the Cadena ends. If it goes into VTV alone, that is fine, only fanatics and empty minded people can watch VTV for more than five mniutes.

Chavez began his program criticizing the garbage problem in the West of Caracas. Funny, his party has ruled over that district for the last ten years. What’s his excuse? He also complained about the plants that are not watered. Maybe he can have cameras installed all over the country so that he can report all the things that don’t work to his subordinates. He may also notice that way that blackouts are common and maybe he can call the police every time he notices a crime on camera. Can you imagine the cops laughing at him when he calls and asks them to go over and check the crime out?

What he is saying is a tribute to the incompetence and failure of his Government.

My five minutes are up!

–Iris Varela urges the President to name a regional Vice-President for Tachira state and all other states that have an opposition Governor.

Jeez, wouldn’t it be easier to not let them run?

–After Chavez said yesterday Brazilian companies were exempt from nationalization, Aregntina’s Cristina Fernandez complained about the discrimantory treatment between the two buddy countries. Venezuela explained there was no discrimination and Argentina said it was “satisfied” with the explanation.

I guess Cristina was reminded by Canciller Maduro that Venezuela paid Techint for Sidor over twice what Chavez said the company was worth and assured her the recently nationalized Argentinean pipe and briquette companies would be equally overcompensated.

–And the Head of the consumer protection agency is asking for someone to be jailed in the case of the cars owned by Globovision owner Zuluaga. Meanwhile Minsiter Assami assures us that something crooked was going on.

I don’t know if Zuluaga violated some rule or regulation or not, but what these guys don’t seem to understand is that they only go after opposition people. Clearly, if the Government only allows colonoscopies on opposition members, the incidence of colon cancer on Chavistas will drop to zero. I mean, whatever happened to the investigation on the Maletagate cases? The Citibank building? Papi, Papi in Sucre? Shoudl I go on or you get the idea?

–But in any case the problem will be solved next week, when according to Deputy Sanguino the National Assembly will approve a Bill to regulate the price of cars.

Fantastic! Cadivi approves no dollars for making cars, forcing companies to import parts at the swap rate price and companies will be forced to sell the cars as if they had imported parts at one third the price. These guys really get it!

–And in State owned company Bauxilum, Chavismo lost its control over the union to former Causa R leader Morocoima who is now an independent, just when Chavismo has called for an offensive to take over all unions in Guayana.

I wonder if Chavez’ threat last week to the unions to fire them all like he did in PDVSA if they gave him trouble had something to do with this.

–And when a third case of food poisoning took place this week in the Ministry of Education’s food program this week, the Minister immediately came up with an explanation: “Sabotage!”

Fortunately, half of Venezuelans oppose the Government so that they can always find someone to blame for their incompetent management.

–And to celebrate ten years of his program Alo Presidente, Chavez threatens to talk for four days in a row.

Too many questions surrounding this point. Will he go to the bathrrom? Will there be commercials when he does it or just an empty chair? How many nationalziations will he announce in those four days? Does the whole Cabinet have to attend all four days? Who will be running the country? (Sorry, dumb question, nobody, as usual…). If Chavez drinks only coffee for four days, what will he be saying at the end of four days?

Well, if you thought you had seen and heard it all, now comes the National Assembly and changes the law very quickly to allow Chávez to mortgage the country. It is insufficient for him to receive loans from the Chinese in exchange for oil, which is a different  form of mortgaging the country, but now Venezuela will get a loan from Brazil’s development bank Bndes in the amount of US$ 4.3 billion, guaranteed by Venezuela by fields from the Orinoco Oil Belt. 

Even more clever for the Brazilians, the money will be used to finance projects (and pay debts!)  being built by Brazilian companies in Venezuela and the first beneficiary will be Odebrecht, the Brazilian firm building subways systems around the country and which is owed a lot of money by the Chávez Government. 

So, you can see who is the greater fool here. Certainly not the Brazilians, who take advantage of Chavez’ tightening cash flow to lend him money to pay for their own projects and in the worst case scenario, Petrobras will have (actually own!) a nice chunck of the Orinoco Belt. But, Brazil also gets an added bonus that the Argentineans buddies were denied: Chávez said that he will continue to nationalzie private companies right and left, but Brazilian ones will be exempt from nationalizations. 

This is thus like a mafia deal, where you not only get the money, but also get protection in exchange for it. Not a bad working day for Lula in meeting with our President.

The deal clearly is bad for Venezuela, as it will allow Chávez to continue his spending spree and the continued destruction of the Venezuelan economy. Because it is clear that there is no plan surrounding the nationalizations either, it is just a matter of Chávez wanting more and more control over the economy. Chávez said yesterday that he still had money to nationalize more companies (now that he got 4.3 billion elsewhere), but gave no hint as to where his voracious appetite will take him this time. 

Chávez actually thinks that he is making money by nationalizing companies and gave the example of CANTV, where he claims he made the purchase price in the three years since the nationalizations. Sure, because he did not buy CANTV, he stole it by forcing Verizon to take his offer, even if there was a higher one on the table.

But if he thinks that Banco de Venezuela will continue making US$ 100 million per quarter as he suggested earlier, he better get off that cloud. He should think more like Banco de Venezuela will be Banco Industrial in three years. 

Because clearly Chávez fails to understand that economic growth and jobs can only be generated if you invest your money in new enterprises and he somehow thinks that by buying these enterprises he is generating profits for his Government. In fact, medium and long term he is destroying them, as the current state of Cemex and PDVSA already attest. 

In the end Chávez is acting like organized crime does, making offers people can not refuse, buying protection and in the end guaranteeing the survival of the capo at the expense of the country.

But he thinks he is being smart, while the Brazilians are laughing all the way to the bank.

Lots to tell after a month away, but perhaps what has surprised me the month is the proposed new Electoral Bill which reduces minority representation and gives the Electoral Board (CNE) the ability to redesign voting districts at will.

I don’t plan to go into the details, it is really boring by now that this dictatorship still bothers itself with the formalities of preserving the idea that somehow there is a democracy in place in Venezuela. Who is Chavez sending a message to? Who belives him by now?

Whe  you control institutions the way Chavez does and when the law is reinterpreted at will, why even bother? In fact, the most affected group is not even the opposition, who by now is used to the abuses, but pro-Chavez party Patria Para Todos (PPT), which will be seriously affected by the changes and will likely lose many of its Deputies if the new law is approved, which led the party to threaten to propose a referendum of the electoral Bill.

Clearly, Chavez care less about PPT. He tried once to force them to merge PPT into his party PSUV and gave in, maybe he will not give in this time around and will tell them to leave the Government if they don’t like it. Just think, bad enough to get used to ahving Ismael Garcia on the oppositon, who woudl want to welcome Aristobulo Isturiz or some of the other PPT leaders?

But this is much like lying day after day about everything: The Government is not happy controlling 99%, it wants to control everything, just in case. And what motivates this Electoral Bill is the thought, God forbid! that the opposition could get some 30 or 40 positions and debates in the National Assembly could get noisy, after four years of total control of discussions and Bills.

Ths, make some small chnages, give the CNE even more power to manipulate than it does and voila!, the opposition will not get more than 15 or 20 positions if the votings districts are redesigned properly.

But why bother? How long does Chavez want to maintain the charade that his  revolution has anything to do with a democracy? And what for? Chavez always had Dictatorial intentons, which he has only expressed fully in the last few months, but somehow he thinks someone somehwere needs to be convinced that he is not.

So, we will be distracted with this Electoral Bill, PPT will put up or shut up and in the end Chavez will do whatever he wants like he has done in the last few years. The same minority representation that allowed all of the parties that backed Chavez in 1998 to thrive in the much derided democarcy of the IVth. Republic will be dead, insuring that Chavismo will be even more permanently encroached in power for years to come.

(Chavez from his plane: “Equality, equality, equality, the whole country equal to all of you”)

While some may think the above cartoon is a a parody, it isn’t. When you create no value all you do is redsitribute the wealth in such a way that everyone in Venezuela will be poor. Chavez is not only not creating wealth, but destroying it and the end result will be what the cartoon lampoons.

I am back home, will take time to get up to speed…

The Venezuelan Government announced yesterday that it had agreed to buy Banco de Venezuela for US$ 1.05 billion, a waste of money as the Government is likely to slowly destroy the capabilities of the institution as revolutionary managers are put in place. The amount is in fcat much higher as the Government will also give Banco Santander US$ 122 million in dividends at the official rate of exchange of Bs. 2.15 per US$.

Banco Santander makes out like a bandit in the deal, the Venezuelan baking system is not worth ten billions dollars as the transaction suggests. Additionally, Santander paid for the bank in its privatization some three hundred million dollars and in the Chavez years, it was making 50%-plus returns on equity.

Thus, despite what The Economist says that Venezuela is ranked 81 out of 82 for the enviroment for businesses, some businesses do better than others and Santander and its shareholders certainly did well getting out early. Well, hopefully getting out, as Santander will receive US$ 630 millions in July and the rest in two IOU’s for 210 million payables in October and December.

But perhaps Santander’s best deal is that it is getting money out, something that will get more and more difficult if oil prices do not rbeound. Were Chavez to nationalize the whole financial system, for example, you can be sure nobody would get paid. Of course, Santader leaves now in the hands of the revolutionary Government all of the databases of the bank, which will certainy make some people very nervous. I would be too, fortunately, I have not had an account there for years.

In another indication of either the incompetence or the corruption of the Chavez administration, CITGO and PDVSA were defrauded in the amount of US$ 200 to 560 million, depending on the source, by brokerage firm FTC Capital Markets. Both companies sent funds to FTC to be invested in fixed income securities and certificates of deposits, but instead the money was used to cover losses in FTC’s operations and/or invest in higher risk strategies.

Reportedly, Citgo has sued FTC Capital Markets to recover the funds, as FTC gave the company fake statements in order to hide the fraud. The company does not have the capital  to respond for even a small fraction of the amount missing.

Where is the incompetence in all this? Simple, as noted by website Venepiramides, at the end of 2008 FTC Capital Markets had equity of barely US$ 1.1 million and it incurred in losses for 2008 of over four hundred thousand dollars. What was Citgo doing working with such a small outfit and sending hundred of millions of dollars to it? Either those managing the funds were extremely stupid and incompetent or they were getting paid to do so. Obviously, a lot of people failed to do their job and perform the required due diligence. Even local brokerage firms are required to have more capital than FTC did.

This is another example of what happens when there are no checks and balances. Chavez has allowed Rafael Ramirez to run PDVSA at will, losing the old controls and supervision. From suitcases to cases like this, Venezuelans get ripped off by the revolutionary Government everyday. Of course, nobody will be punished for this, so that the corruption, waste and mismanagement will continue.

As if he did not have enough on his plate, Hugo Chavez announced yesterday that he will nationalize all of the hot iron briquette companies, including Orinoco Iron and Venprecar, as well as pipe planta Tavsa and Ceramica Carabobo.

Hot iron briquettes are a substitute of steel scrap used worldwide. Essentially, iron ore is processed and produces a more uniform substitute for steel scrap used largely in the automotive industry. Venezuela is one of the main producers of such briquettes. The companies producing these were owned by Venezuelan, Japanese and Argentinean companies. One of them Sivensa, owner of Venprecar and Orinoco Iron, which trades in the Caracas Stock Exchange. Chavez said he would create a large briquette producing company. That seems to be the only plan.

A Venezuelan state owned company, Ferrominera del Orinoco, produces the raw iron ore for the production of briquettes. The Orinoco Iron plant has been plagued with problems since inception, it has never worked up to its full capacity.

Producing and selling briquettes is complex. Prices can gyrate wildly and it is a technically difficult process. Currently, Ferrominera can not supply these companies with all of the iron ore required, forcing some of them to import the raw material.

This is of course another liability for the Chavez Government. Another legal problem. Another future arbitration process in the horizon.

What’s next?

The accusations by Minister of Interior and Justice(?) El Assami yesterday and today, outrage opposition readers with the cynical ability of the Minister to shift the blame for the violence on the opposition. The video speaks for itself on who caused the violence. The problem is that what does not play well for the opposition, plays well in places like Altagracia de Orituco, our equivalent of Peoria in US terms.

Because for the average Altagracian or Barines, the budget problems of the universities are as removed from their daily reality as those of the Hubble telescope, to take advantage of Daniel’s story today. Thus when fascist El Assami comes on TV, those in Altagracia likely believe him.

Because the country is sharply divided in two and the Government takes advantage of that divide at every step. When Chavez talks about golf courses in El Marquez, we laugh because there are none, but the man in Altagracia, who has never been to Caracas may actually believe him and imagine rich oligarchs playing golf in that area of Caracas.

Anybody that has been to the interior of Venezuela recently or has looked at electoral results realizes this dichotomy. Chavez and his Government not only ignore the opposition, but are not even trying to attract those against it to their side. The whole media and economic deployment of resources is oriented towards the pro-Chavez or past sympathizer. Much like the way the Government overwhelmed the media last February, it overwhelms it with its daily message through its own media outlets.

Go to the interior and you can go miles without listening to any radio station that is even mildly anti-Chavez. The propaganda in his favor which hails the unknown achievements of the revolution is simply impossible to counteract by the opposition. Thus the shutdown of RCTV.

This is a lot like the satellite problem, if the Government says the Simon Bolivar satellite is functional, it is for the Chavista mass and pro-Chavez people will try to overwhelm opposition chat rooms to counteract the truth. But I bet if any pollster asked the average Altagracian whether the satellite was functional, an overwhelming majority would say yes!, after all, Chavez told them that he was speaking to them a few Sunday’s ago through his satellite boondoggle. Either he lied through his teeth or someone was lying to him, but the truth is no longer relevant in Venezuela.

It is in the end a very clever strategy. Hardcore and soft-core pro-Chavez people are bombarded daily with the good news and the announcements of the gizillion projects that the Chavez administration starts every week. But none of these ever go much beyond the announcement and most of them have little impact so far in their daily lives from them. If PDVSA takes over 65 oil servce companies, even if the Government shut them down tomorrow, the average Altagracian would not feel it for quite a while.

It is much like the lie surrounding the country’s oil production. Pro-Chavez people want to believe Chavez and if he said Venezuela was producing 5 million barrels of oil a day, they would believe it.

That is why Chavez will be solidly in place until inflation soars to unmanageable levels or shortages hit the everyday Altagracian. And that is also why there is no devaluation, so that the Government can limit inflation as much as possible.

It is in the end a Machiavellian strategy of maintaining the support of the core pro-Chavez sentiment at the expense of everything and everyone else in the country.

We may cringe when Ministers or Chavez lies. We are outraged when education, culture and knowledge are trampled or ignored. But in the end that is the strategy: They are playing for Altagracia de Orituco, not for us. And so far, it has played to well for our comfort.

(It may be that Chavez lost in Altagracia de Orituco in the last election, I just picked it at random as an example of Chavista territory)