The Devil's Excrement

There was a very strong tremor in Caracas this afternoon. It actually felt stronger than the 4.2 being reported, probaby because of its proximity to the city (offshore 10 Km. from Caracas). I was actually taking a nap and the vibration of the building woke me up, very eerie feeling waking up like that and recognizing what was happening. Here is the image of the epicenter right of the Coast and a map (The webpage of the Venezuelan Foundation for Seismological Research is down, how timely!):

Direct from the thugs mouths, Hugo Chavez (El Nacional page A-4) on the sentence of the policemen (italics are mine):

“It is not that I want someone jailed (yeah, sure), but I was in jail and accepted it (But was never sentenced to 30 years in prison for the killing over 200 people, a silly old democrat pardoned me). Each person has to assume his responsibilities (Even if I never assume any?), I think there is sufficient evidence to condemn not only the captains, but for many others that are going around freely calling for rebellion  and a coup (like I did for many years)

Here in my soul I am pleased (My orders were thoroughly obeyed) Not because of the personal tragedy of some, because this is not a feeling of revenge (only want to create fear)but because justice wins (general laughter) to guarantee the peace and development of the country. (So I can stay in power forever)

I think that there is lots to be done to achieve justice on April 11th. (Yeah! We still have to try Hugo Chavez). There are many other guilty ones (Get ready!)”

In a carefully plotted week of repression and suppression of dissent, Hugo Chavez completed his pre-Easter sweep of the opposition when after the overdue sentencing of the heads of the Metropolitan Police during the stormy days of April, 2002 events took pace and they were found guilty and condemned to 30 years in jail.

It was certainly a day for infamy, as the Simonovich, Forero and Vivas were found guilty and in a clear message to all Venezuelans were given a 30 year sentence, the maximum possible, despite the fact that the Prosecution could not connect the men charged with the terrible deaths that day. In his closing statement, the Prosecutor revealed the perversity of the whole thing as he stated: “None of the weapons carried by the accused fired the bullets that injured the people..” Evidence was so scant that it took five years for them to be able to orchestrate a trial.

Despite this and the flimsy evidence, the whole process was manipulated for years and was resolved this week as part of the orders by Hugo Chavez to deal with the opposition this week while he was away and as Venezuelans got ready to take next week off as part of Easter week. His underlings obeyed, as his biggest political contender of the last ten years, Manuel Rosales was persecuted even in the absence of an arrest order, his former buddy and current enemy Raul Baduel was jailed today and the April 11th. 2002 deaths were pinned on the metropolitan policemen in charge of protecting the peaceful march that was first shot at that fateful day.

The almost five years of their trial, full of violations of the most elementary principles of Venezuela’s laws, contrast with the trial of the pro-Chavez supporters caught on camera shooting at the march. These men were given a quick trial and despite the much stronger evidence against them, were quickly found innocent, tried and allowed to go free. Their picture that day:

was much stronger than any of the evidence against the men sentenced today.

But this process was not about justice, but about establishing who rules Venezuela at will and decides what the law should or not do.

And the whole charade was carefully orchestrated to isolate and distance Chavez from it in his characteristics cowardly way. While he was in the Middle East traveling and supporting murderers, his orders were carried out with an efficiency reserved only for the repressive acts of his Government, but never for anything constructive.

And there seemed to be many messages for both Chavez’ buddies as well as his enemies: If you are against me, don’t try to lead the opposition and if you are with me, never dare turn on me or you will never see the light of day. Justice is no longer a valid word in Venezuela, the Hugo Chavez Government has no scruples and no intention of talking or reaching a truce with the opposition, let alone a meaningful dialogue with those that are against him. He is the President of the 5o-plus per cent that votes for him, the rest are men without a country, enemies of the State, oligrachs that want to oppose the only political project in Venezuela: The perpetuation of Hugo Chavez in power.

And it is indeed a sad day, as people are shocked at what many expected to happen. Anyone that thought there would be leniency did not follow the trials of Uson or General Rodriguez or the persecution of General Gonzalez Gonzalez, all institutional men that worked with Chavez, but when they had had enough, either left or confronted the Dictator, were in turn confronted with the full force his power and the police and military forces he controls.

And by the time most Venezuelans come back home from their Easter vacation ready to fight, Chavez will change topics and initiate a different war somewhere else. And like the Teflon Dictator he is, nothing will stick to him among his supporters, that adoring quasi-religious crowd that despite their hardships, continue to believe the lies and excuses of our devious and  incompetent President.

And Venezuelans will be left to wonder who will be next and how will the next confrontation develop. And those that think that violence and death will not be part of our future have short memories. Hugo Chavez and his peons have no morals, no scruples and no limits to what they will do to preserve his power and protect their newly found wealth.

It was a day that will be remembered in Venezuelan history if what is to come does not completely overshadow the indecency and immorality of this week’s events.

A very sad day, even if expected, when justice became an empty word in Venezuela and fear was driven into the minds of all Venezuelans who believe in rights and freedom. But a day that we will see repeated in the future, as we have allowed Hugo Chavez and his cronies to steal and rape our country, appointing him as the only ruler of the new oligarchy, which in the end appears to be the only force capable of removing him in the future.

Venezuelan President Hugo Chavez has clearly decided to set aside any pretense of democracy as it intensified a campaign against opposition leaders, apparently aimed at isolating and removing anyone that could become a visible head of the country’s opposition. While earlier Chavez had used more subtle ways of neutralizing opponents, such as the disqualification of candidates from the opposition from running for office, this time the subtlety has been left aside and the Government has displayed a ferocious attack against opposition leaders.

The first victim of this wave was former Presidential candidate Manuel Rosales, who was investigated by the National Assembly and in the end was charged with corruption by an examination by the Comptroller of Rosales’ own statements throughout the years of his personal assets, which the Comptroller deemed to not be justifiable based on his salary.

Rosales has been accused in the media by Chavismo leaders and in the last few days has been treated  as if he is avoiding an order to be captured, while in reality no arrest warrant has been issued.

I am told that the Judge that was supposed to sign such an order declared herself to be ill and the Government has not found anyone that would sign the order for Rosales’ arrest. Rosales has been in hiding and has an audience with the Prosecutor on April 20th., where charges will be presented against him. Adding to that, today he was denounced for attempted homicide  by some workers injured in a riot in front of the office of the Maracaibo Mayor, which Rosales heads.

The second victim today was retired General Raul Baduel, a member of Chavez’ inner circle for many years and the man that single handedly brought Chavez back to power in 2002. Baduel retired in 2007 as Minister of Defense and opposed Chavez Constitutional referendum that year, helping the drive to defeat that proposal. He was charged with corruption, accusing him of administrative irregularities as Minister.

Baduel was arrested forecfully today by military police and there was no arrest order as required. According to his son, the path of his car was blocked and he was placed in a station wagon at gunpoint. Baduel had been to all audiences in which he was charged and had been allowed to be tried while in freedom. It is unclear why this was reversed and his lawyer says there will be an audience tomorrow.

Finally, today a pro-Chavez Deputy Iris Varela, called for an investigation of Teodoro Petkoff’s mother, who died in 1974. Petkoff, a vocal and forceful opponent of the Chavez administration, said it was unbelievable that the Government was bringing up his mother’s probate tax statement, saying the only objective was to disqualify opposition leaders.

The Chavez administration has also been very aggressive taking away responsibilities from opposition Governors and Mayors, which are assigned to them by the Constitution. Last month, the Government removed all ports and airports from their administration and today the National Assembly approved a new Bill for the Capital District of Caracas. In the words of some of the Deputies proposing this Bill, it is needed to limit the action of the opposition Mayor of the Metropolitan Mayor of Caracas if we are to have a “socialist city”. Clearly, this Bill violates the will of yhose that voted for Mayor Ledezma in November, a victory that Chavez went out of his way to avoid. Previously he had disqualified Leopoldo Lopez who was leading the polls by having the Comptroller find him guilty of administrative irregularities and banning him from running for office for seven years.

Thus, Chavez’ anti-democratic roots have surfaced clearly as he represses dissent, creating fear in those that oppose his now dictatorial regime. His total control over the institutional framework of the country attempts to disguise his true intentions, but there is no longer an attempt to even maintain the pretense of legality, it is an all out media campaign to hide the facts and find opposition leaders guilty of corruption even before they have been tried.

Curiously, as has been the case during his cowardly regime, this all fronts attack is made as Chavez is traveling and his loyal cronies follow his orders, allowing him to distance himself from the fray.

Expect this attack to continue against the media and other opposition figures as the economy deteriorates and Chavez continues his only real project: The preservation of Hugo Chavez in power forever.

Caracas is abuzz with expectations for the upcoming Miraflores Ball with Sudan’s President and revolutionary hero Omar al-Bashir. al-Bashir has not confirmed his attendance yet, but other guests are being contacted and offered movies and support to attend, among others (picture take from here):

al-Bashir will dance with Campbell, kiss Penn, hug Spacey and call Glover “my bro”.

They are all invited to the book burning ceremony afterwards. Mugabe is not coming, with inflation rampant in his country, he can’t get his credit card limit increased. Saddam is dead. Pity, he would have come…

One will get a Simon Bolivar sword in absentia, the other one posthoumously.

Chavez will take cheap shots at the elegant President…

A grand time will be had by all.

Clooney, Spielberg and other smart people are not coming…

And just to make a point as enfant terrible of international politics, President Hugo Chávez today invited Sudan’s President Omar al -Bachir  to Venezuela as a way of showing his support for the Sudanese President. The International Criminal Court ordered the detention of al-Bashir, over the death of 300,000 people in Dafour. He had created more controversy recently expelling aid workers from his country.

With his statements, Chávez adds al-Bashir to his portfolio of support for criminals, such as Iraqi former President Saddam Hussein,  Zimbabwe’s Robert Mugabe and terrorist Carlos The Jackal. Quite a portfolio for the Venezuelan President who broke realtionships with Israel over the recent conflict there with Hamas.

I guess he thinks he may follow in the path of such champions of human rights violations and wants to make sure there may be some support for him.

While I thought that the Rosemont story would go away fast, the more that one learns, the more one realizes that this story has legs and will be around for quite a while. Finally the MSM realized that this was not simply that the DEA caught Mr. Vyasulu during a wire transfer via Rosemont to or from an account related to money laundering, but that the DEA set up a sting operation against him and as can be read in the indictment: “involving property represented by a law enforcement officer to be proceeds of specified unlawful activity…”. That is, a DEA agent presented himself to Mr. Vyasulu and told him the funds came from an illegal activity, drug trafficking and he agreed not to reveal the deatils which is obviously against the law. Since these sting operations are not set up at random, I have no doubt that there was a suspicion that justified this and the authorities simply wanted to have a clear cut case before they moved on it.

And while Mr. Vyasulu made the transfer via Rosemont, of which he is a principal, the only action so far has been against him personally and the freezing of Rosemont’s  accounts. But I am sure, there will now be a long process of investigating all of the accounts and looking at all suspicious transfers that originated the sting operation. Whether the suspicions had or not something to do with Rosemont’s business in Venezuela is hard to tell, but we will know more in the next few days, as more announcements are made.

Because Rosemont was definitely acting as something more than a simple money or fund transmittal service which is oriented to small amounts and certainly does not usually have the elements of settling accounts between account holders and the like. Rosemont was being used both as a bank and as a settlement system at the simultaneuously and this is clearly not within the scope of Florida legislation for money transmittal. In fact, Florida legislation states that any funds received have to be transferred out within ten days of receipt, which means that Rosemont had to be very careful to have all account holders remove funds periodically to be in compliance with this. And this money transmittal business was intended by the legislator to be used for smaller amounts, as it required the funds to be held in deposit in sub-accounts at “FDIC protected” institutions. Since up to last summer this protection any extended to US$ 100,000, it is clear that this type of license was not meant to be used for moving the large amounts that have been reported.

But if the El Nacional reporter was able to spot the sting operation, the small headline in the front page is absolutely wrong: “Local dollar swap market continued suspended”. I don’t know where they got this information, but the market was functioning Friday. In fact the reporter could have checked either bonosvenezuela or Venezuelafx and noted that prices were changing and had changed  during the day. Obviously the market was not as active, after all, 40% of the participants had funds in Rosemont, but prices were changing because someone must have been trading something. In fact, the same article quoted other news sources out of context, telling you how far the reporter went in getting the information.

And I am sure by Monday the market will be even more fluid.

And there is no doubt in my mind that this Rosemont Saga will not stop here and we will revisit the topic in the next few days.

First off the bat, I want to  clarify that I did not raise the stir in the swap market with my post last night, the stir was coming anyway. All I wanted to do with that post was warn people that the swap market that everyone follows so closely was likely to be complex for a few days, due to the freezing of accounts in the US of a few dozen local brokers.

Obviously, I knew more than I posted, but that was not the objective of what I wrote, but it clearly became that, as I seemed to have the only published rational explanation as to why the swap market opened at Bid: Bs. 6 per US$, Ask Bs. 7 per US$ even if few transactions were being done at either end.

Some of that information is now public, so it is easier to write about it.

Essentially, banking will never be the same in the post 9/11 world, as the Patriots Act imposed very stringent conditions on money flows, particularly when there is a suspicion of money laundering, corruption or terrorism behind it.

The consequences for those that live or operate a business abroad, is that opening an account has become ever more difficult, as many institutions know that they will have a hard time checking you out and at the same time checking out where the money moving into your account is going or coming from.

As the swap market in Bolivars developed, many people set up new brokerage houses, which either because they don’t have capital, or a track record,or  systems, or goodwill or whatever, were having a hard time finding a bank that would open an account for them, particularly for the swap business, where you have to know your client well, particularly with respect to money laundering or politically exposed persons in a country with the risks of Venezuela.

In the swap market, you swap (i.e. exchange) securities (bonds) in both Bolivars and US$ and in the end deliver either the securities or the money at either end. Each transaction requires the receipt of, for example, foreign currency to buy the bond at your account. If you do retail business (small individual clients), this could mean many transfers into and out of your accounts every day. Many banks simply don’t like that, particularly if they are all small, as the banks have no way of checking the source of the money. Other brokers work more at the institutional levels, with companies, where if you are careful, it is much easier to check that the proceeds come from legitimate business operations.

Since the exchange controls were implemented, the smaller brokers in the market have had accounts in various banks in the Caribbean, but since these are mostly frowned upon by the authorities, they are not the best solution.

Then, some time in the last couple of years, I am not sure of the time frame, but think it was last year, a company showed up, willing to provide these services. The name is Rosemont, aw Florida company with a wire transmittal license, and a friend was kind enough to send me their presentation when selling their services, which you can download here, as a Powerpoint presentation.

Essentially Rosemont provided these local brokers with sub-accounts, in Rosemont’s name at a US bank, to move the flows from the swap business when they sold the securities or received funds to buy them. Rosemont would even provide settlement services, if my understanding is correct, such that if brokers did business between them, they could net their accounts there.

Apparently, the DEA was tracking the activity of an account that made some transfers in or out of Rosemont (I have no idea in which direction). This had been going on for a while, but it was not until two days ago that an indictment came down, of all places in Massachusetts, against one of the principals of Rosemont. (Note that if you have a wire transmittal license, you are not supposed to keep cash in deposit on a regular basis, so I am surprised people thought this could work)

What the indictment charges is that one of the principals in Rosemont somehow collaborated with this money laundering, which amounted to US$ 900,000 in three tranfers.

When the indictments came down, all of Rosemonts accounts were frozen until the whole thing can be investigated. The result is that those brokers that had their accounts there can not move their funds and if they don’t have another account (with money!), they can not pay the bonds and/or trades agreed on.

Thus, today, nobody was willing to swap with anybody until you saw whether people delivered or not the bonds or the money for operations, not so much because you don’t trust your counterpart, but because you don’t know who they were trading with down the line.

So, as I expected the market opened with a huge spread and most people did very little. With time, the market will normalize, people will look more carefully who they work with from now on and life will go back to normal.

In the meantime, there were a lot of nervous people in Caracas today and the effect will be felt tomorrow, as swaps take two days to be completed.