The Devil's Excrement

Blackouts Jorge Giordani by Teodoro Petkoff

These guys that govern Venezuela don’t seem to convince themselves that they have spent almost eleven years trying to destroy the country. They always speak as if they had taken over barely last month. This mini reporter was listening to Minister of Planning Jorge Giordani and he could not help but jump when the Professor explained that the crisis in the electric sector and the avalanche of blackouts that is flooding the country was the result of a lack of investment. He was saying that this was part of a plan by the “IVth.” To dismember CADAFE and sell it in parts to the private sector. Imagine that, cried Giordani

Even if we suppose that such plan had existed, which never did and doubly never existed and that it was true that there was no investment at all in the electric sector in the twenty years before Chávez and that dams like Macagua Uno and Two had been born by spontaneous generation and that it was the Paez Government and not Caldera´s, the one that contracted the Caruachi dam, let’s imagine that Electricidad de Caracas never invested a cent in expanding its generation capacity, and even then- Haven’t eleven years been sufficient to revert that behavior of prior Governments? Where were you eminent planner, all of these years? Are you coming now, like a country fair charlatan to invent the wheel? You have been in charge of Cordiplan (The Ministry of Planning) for a bunch of years and it never occurred to you to to point out what you are pointing out now? Eleven years, Giordani, eleven years is what this bunch of useless and incompetent of whom you are part, have been governing the country and you still have the gall of blaming previous Governments for your own irresponsibility! No, my dear Jorge, you guys are not only responsible for the holes in the streets-that you now ant to baptize with the names of the Mayors that Chacumbuele* has put there. But the blackouts are also yours.

In fact, the blackouts have, among others, your own name, Blackouts Giordani, like Potholes Jorge Rodriguez are those that exist  in the vicinity of the street where this mini reporter is your neighbor.

*Chacumbele is a nick name Petkoff uses for Chávez , in the song Chacumbele killed himself after falling in love with a woman.

Somehow it is difficult to adjust to the fact that the reference frame for the revolution is not that Venezuela succeed, but that the “Empire” fail. Minister Giordani, for example, spent the first half hour of his economic press conference on Thursday, telling us how out of 250 million people in the US (wrong!), 50 million had lost their homes (wrong!) and how they are now living in “tent cities”. Then he tells us how in contrast with the US where less than half of the population have social security (wrong!), in Venezuela 95% of the population does (wrong its around 20%).

But it really does not matter. These guys are proud of 27% inflation, while they predict the demise of the US$ or the US economy, while the Bolivar has done worse in the last five years than the US$ and the US economy is likely to grow more the last quarter of 2009 than the Venezuelan one and ditto for 2010.

And then the People’s Ombudswoman Gabriela Ramirez, the same one that rarely shows up to defend the “people” of Venezuela, holds a press conference minutes after Obama gets awarded the Nobel Prize, to tell us that this is an insult to human. rights. The truth is, she is an insult to human rights in Venezuela and organizations like Provea, who have been at defending rights for years and this is what they get. Because in the nine years since the creation of this position, Venezuelans have had two “Ombudsmen” who were more devoted to defending the Government than the rights of the people. And are quick to hold a press conference to attack Obama, but seldom talk about the horror of the daily homicides in Caracas and Venezuela.

Or take health care, for example. Chavez has revived his “Barrio Adentro” mission, because there are elections coming up. He brought 2,000 “Doctors” from Cuba to fill the empty space in the modules he installed in 2004-2004. The question is where did 7% of the GDP of the country go for three years, if so much money went to Barrio Adentro and it wasn’t even working properly. Do I hear Cuba anyone? Yes, Cuba seems to be more important than Venezuela. Or its people.

And funny how this is the same week that the Government announces electricity rationing for Caracas, for the first time in a long time, we hear that the Venezuelan Government will spend US$ 80 million in producing electricity in Bolivia.

And obviously, Chavez was too sick to hold his variety show Alo Presidente, but had to take a poke at the Nobel Peace Prize for Obama. I mean, this is not the Physics Nobel Prize, that has gone to the best physicists most of the time. This is the Peace Prize, the same one that Arafat and Jimmy Carter won. And Kofi Annan. And Al Gore. And Oscar Arias and Rigoberta Manchu.

And yes, Nelson Mandela did win it. And Aung San Suu. But Gandi did  not, nor Havel. So how can I get upset about Obama winning it, with that track record?

Clearly, neither Chavez nor Piedad deserved it. They left their Prize in the jungles of Colombia. Uribe had a lot to do with that.He didn’t deserve it either.

But what hurts is not whether Obama won it or not. It’s that a US President did. Because the US is the enemy, the same way that China will be the enemy for Chavez in 50 years when that country becomes the most important power in the world and the most capitalist at that. Or that Cuba with its gigantic failure in 50 years, is a friend. Nobody is asking for results or consistency, just ideology.

Because what Chavez fails to understand is that Brazil and Chile in Latin America and China, Korea, Malasya, Hong Kong and all those Asian countries are becoming powers, not by following hair brained ideologies, but by embracing capitalism from A to Z, going through the H of hard work and the T of taxation.

But don’t tell our socialist brainiacs that. The President of our Central Bank, a math Ph.D. told us last week how next year they will have a priority list for CADIVI outflows by needs and by sectors. Brilliant! It has taken XXIst. Century Socialists leaders five years of exchange controls and a couple of Ph.D.’s being in charge to come out with the bright idea of having a budget. How did they ever think of that!

Maybe they should be awarded the Economics Prize for thinking of the revolutionary idea of using an Excel spreadsheet to establish priorities for giving out billions of dollars. I bet this guy gets the Venezuelan National Science prize. And I am not kidding. Write it down.

But these are the people ruling and running Venezuela. Incompetent fools concerned more about the failure of others than our own success. The same ones that justify getting rid of 27 scientists because they are retired despite the fact that they are all younger than all of the Nobel Science winners of this year, all of whom are all still active in their own countries.

But they sing the demise of the “Empire” as the local subway system has not been running in its entirety for days, electricity is going to be rationed in Caracas for the first time in decades, inflation is going to be 27% in 2009, 45 of the Venalum cells are down when the standard used to be that four was bad, two of the three most important highways going into Caracas were shut down for hours last week, the largest maternity in Caracas is running at 20% of its capacity, homicides will run at almost 15,000 in 2009…

Should I go on?

But they talk about wealth redistribution, while they all send their kids to private schools and their families to private hospitals. And they have bodyguards and fancy cars (and wish for Ferraris) and use fake statistics to prove that poverty has remained the same in the ten years of the revolution. Yes, it has improved since 2004, but did you hear oil prices went up? Or that the country’s debt soared. And all they have accomplished is to take us back to 1998. And they call it a revolution!

Meanwhile they celebrate the demise of the US as a world power and condemn Obama’s Prize.

But refuse to acknowledge their dramatic failure.

I had set aside the time for tonight to write about the economic plan. The opposition did not invent it. It was first announced around the beginning of September. Both Merentes and Ali Rodriguez said that it would be announced in a week. But then Chavez went on his Dictator’s tour and everything was postponed.

Chavez was away almost two weeks, came back and said that 40 measures would be announced the week after.

Then, Hugo himself “announced” stuff that was more of “wishful thinking” than measures. I recall these:

1) An employment plan

2) CADIVI would be more efficient

3) Barrio Adentro would be reactivated

4) A bond would be issued (This one was done)

5) The swap rate would be lowered

6) Housing would be built

7) PDVSA would pay its suppliers

But Chavez also said that the number of measures in the “plan” had been upped to 54 from 40.

Then, it was announced that the plan would be announced last night, but we had another postponement. Thus, today after about 38 days, we finally saw the Ministers of the Economy together ready to announce their plan, but in the words of the Minister of Planning:

“Those waiting for a package of measures were left with their guayabera on”

Well, sorry Jorge, I did not even wear one…I don’t even own one, but I do have a wedding at the beach soon, so I will buy one.

But hell, why did they have the press conference , then?

Because all I heard was some false statistics about the US (Giordani did not even get right the population of that country and told us about the millions living in tents there). He also said that 75% of Venezuelans had social security coverage (hello?). And then he went into la-la dreamland about how wealth redistribution has improved (Did he understand the bond?) and how now people don’t take their money out of the country but reinvest it (Hold laughter please). We also heard about the GINI index, loved by Gioradnu and the Government and which has as an input the minimum salary at the official rate of exchange.

Measures on the plan?

-There will be a PDVSA bond before the end of the year.

-They will make a budget for CADIVI (after 5 years of  controls, I can only say about time)

The rest was wishful thinking and predictions for  next year’s economy and excuses for inflation.

That’s it!

There are 45 measures to go, but they may never happen at the rate we are going…but they are laughing…

Today in announcing the economic measures (none were truly announced), Minister of Planning Jorge Giordani expressed that his dream was to have not one Ferrari but three, one yellow, one blue and one red, as you can see in this video:

and then he proceeded to blast the three former and current pro-Chavez Mayors of Caracas: Freddy Bernal, Juan Barreto and Jorge Rodriguez, because his dream is frustrated by the potholes of the streets of Caracas.

Jeez, ten years in office and they have not even been able to find a Mayor that would allow Giordani’s Socialists dreams to come true.

I thought I would give a bond issue reading list and include all of the excellent articles available on the many angles of this incredible scam:

The Preamble:

Should you invest? (By the Devil)

We have a bond (or two) New Issue 101

New Bonds 101 part II: Looking Good!

On the implication of issuing the debt (by Juan Cristobal):

Selling bonds, selling our future

On the scam, stew, guiso:

Quico:

The Bonos Soberanos Scam for dummies

The Devil:

An Andorran Stew: Making millions in the robolution

Venepiramides:

El guiso de las asignaciones de los bonos 2019 y 2024

The title of this post should make  no sense to most people. The word “stew” in English, does not have the same connotation that the word “guiso”, it’s Spanish translation, has in Venezuela.

Guiso means, besides stew,  scam or swindle. And that is exactly what the robolution did this week with the sale of the 2019 and 2024 bonds.

The way the whole thing was handled makes absolutely no sense, unless the whole point of the issue was to have the revolutionaries recoup their losses from the accounts frozen recently in Andorra. Thus the title “An Andorran Stew”.

Recall that the issue had two objectives:  One, to have the Government raise money for its expenses. Two, to help lower the swap parallel exchange rate.

Let’s see how well these goals were met:

Obviously the Government raised money. What began as an issue of US$ 3 billion ended up being increased to US$ 5 billion, sold at a price of Bs. 3.01 per US$. (Bs. 2.15 times 1.4 times 5 billion dollars).

The problem is that these bonds are selling at an average of 68% of its face value today (Dropping fast!). Thus, if you bought US$ 1000 of the bonds, you paid Bs. 3,100 for $680, so you really paid Bs. 4.43 per US dollar. This is 19.4% below where the parallel swap market was today.

Thus, you may ask: Why did the Government sell it so cheap if one of its goals was to raise lots of Bs. for its expenses? This clearly makes no sense whatsoever. People would have been willing to buy the bonds at a much higher price. In fact, the Government sold the bonds at auction, with prices between 135% and 140%. But it could have easily thrown in some uncertainty and made the range higher. This would have given it lots more Bolivars, after all, people just want to buy dollars and they would do so even at a small discount to the parallel swap market. 19.4% is simply absurd!

Thus, the first goal was met, but the Government could have generated lots more Bolivars very easily, rather than giving the bonds away on the cheap.

But if the first goal was met only half way, the second was simply missed completely. The biggest buyers in the swap market are corporations. They are the ones that move it. Not individuals, not small corporations, but the large importers. Thus, you would expect them to be treated at least equally well in the allocation of the bond. Or even treat them better if what you want is to lower the swap rate.

This is what happened in the allocation:

a) Individuals with orders below or equal to US$ 499,000, received 100% of their orders. Individuals with more than this amount received US$ 500,000.

b) Companies with orders up to US$ 999,999 received the full amount. Companies with orders above that received zero, nothing, zippo.

c) Orders from banks up to US$ 20 million received 100%. Orders from brokers up to US$ 8 million received 100%. Above that, zero.

These allocations make absolutely no sense if your purpose was to provide dollars to importers. They were completely left out!

In fact, banks and brokers have no need for US$ other than sell them to their clients, so by giving them such large amounts you gave them about Bs. 1 for each dollar they received. Nice profit if you knew what to ask for. In the past banks and brokers have usually been left out. As it should be.

By giving 100% to orders below half a million dollars for individuals, speculators, and of course, those in the know, maximized their profits. And this is they key, the allocation was so unlike the objective of the bond, that this had to be designed so that those in the know made a lot of money.

Add to that the fact that not everyone deposited the money, as required by the Government, and the profits can simply be staggering if you were in the know. And it was a great deal for everyone. If everyone sells their bonds today at current prices, the total profit was around Bs. 5 billion or about US$ 680 million dollars, about US$ 27.2 per Venezuelan inhabitant. To finance capital flight? Huh?

If you did have the money, as I suggested you do to go to the bond, you made 19.4% in about ten days. Those that didn’t put anything made, of course, an infinite return, and those in the know, surely made up at least part of their Andorran losses, when their account were frozen.

And remember: don’t hold on to the bonds too long, with a US$ 5 billion issue flooding the market (and more coming?), I would be very surprised if bond prices held up. You did not buy the bond to hold onto it, you bought it to purchase foreign currency. Don’t fall in love with the bonds!

Oh yes, and the country’s debt increased by US$5 billion so that all of this could happen…

With 54% plus of the vote Chavista Wills Rangel, a former Adeco and Carlos Ortega aid, won the oil union elections representing Chavez’ PSUV party via the FUTPV union slate.

And you have to love the symbolism of Rangel, a former Adeco, sitting in front of a terrible Chavez painting, talking about socialism.

But note on the lower left he has a little Chavez figurine, with someone that I have yet to clearly identify (Any help would be appreciated) and then…that symbol of the peculiar bolibourgeois socialism: A picture of his race horse winning at the La Rinconada race track in Caracas.

Those are the values of XXIst. Century Socialist union leaders in Chavista Venezuela…

Do I need to say anything more?

I have been busy. I am transferring one by one all of my orchid pictures from my old website to the new one and it takes time. I actually spent like three evenings doing that and I did about a year and a half. I am now up to summer of 2007, so I am closer, but it is a lot of work.

Yesterday evening was quite cool. First, I watched the “Bienvenido Dudamel” concert over the Internet from the LA Philharmonic website. Did not watch it all, but managed to see good pieces of it, even if I missed Red Hot Chili Peppers. I will try yo see that part again. According to the website, they will have it by video on demand soon. Even more interesting, once the Red Sox game began, I managed to watch using my CANTV ADSL both the concert and the game (with the game on mute) over the Internet at the same time. Yes, the Red Sox game was meaningless, since they are going to the playoffs already, but there is a difference between fan and fanatic, I am the latter.

In the middle of both of these I went to have dinner with some good friends and my brother and his wife at what is probably the best value/quality meal in Caracas: I went to eat at Sumito Estevez’ cooking school in Chuao. You get two choices per course (you can see what the menu is on the website early in the week) and there is no charge for opening bottles of red wine. (It is quirky, as there is a charge for drinking white winr!). All of this, including dessert and a guayoyo coffee for only Bs. 150 per person. You get a first class meal with excellent service in an informal atmosphere. Try it! (Disclosure: Sumito is a friend of mine)

Last night I had a ceviche tasting to start, a Beef Carpaccio with confit mushrooms, pepper mustard and tempurized spinach as the first course and Seafood Chowder as the main course, with a cold cus cus salad. For dessert we got Mulberry sherbet with a cream of green apple. Excellent!

Then I went home and arrived just when the Ninth Symphony was starting in the concert, directed by Dudamel and watched the whole thing and the fireworks at the end. What can I say? Simply spectacular.

A nice and relaxed day!