The Devil's Excrement

But it hasn’t…it represents another black list and abuse of
power by this Government which is only efficient at violating people’s rights.

Absurd, because the procedure used to disqualify a person is
so ridiculous and simple and so dependent on a single person, the Comptroller,
that if the legislators had meant to it to be that way, they would have
realized what a mess it would be.

Just so that you understand the process, let me describe how easy it is to be disqualified. The procedure can be as simple as this:

-Someone from the Comptroller’s office or a citizen detects
or accuses someone of doing something improper.

-The Comptroller has the lawyers that work for him interview
the accused (without a lawyer being present), you are asked at the end to sign to certify that you said what is in the minutes typed by the lawyer interviewing you. 

-The case is reviewed and at that point new questions may
arise which require a new meeting with the lawyer, at which point they will ask
additional questions and/or clarifications about the case. The lawyers will
then say what sections of the administrative code were violated and the case
goes to the Comptroller for a final decision.

-The Comptroller, alone and singlehandedly, decides whether
you have committed a fault and decides what to do. It can be as simple as a
fine or disqualifying you from being appointed to office for a certain period.
Up to a few years ago, it was never interpreted as you not being eligible to be
a candidate.

That’s how easy the process to “disqualify” you is in this
new revolutionary interpretation.

How do I know this? Easy. A few years ago, I was on the
Board of a Foundation associated with one of the universities in Caracas. We
signed a letter of intention to buy an office for Bs. 250 million (at the time
around US$ 300,000) and asked for a mortgage from a bank. On the day we had to
pass papers, the mortgage had not come thru, so the seller pulled out unless we
paid more, I don’t recall how much more but it was something like Bs. 20 or 30
million. The case came to the Board and we approved it because we could not
find anything cheaper and the location was perfect for the Foundation.

A couple of years later, someone went to the Comptroller’s
office and denounced that there had been a payoff of some sort and that was why
a higher amount was paid. The Comptroller opened the case and all eight members
of the Board were investigated and we all went to the Comptroller’s office
twice to testify or be interviewed. The lawyers conclusion was that we were not
guilty of what we were accused but we were in violation of the law for
attempting to borrow money without the Cabinet approving it (Despite the Foundation
not having received any Government funding since 1970). Thus, we were charged
with this different accusation and the penalty was a fine of what was then
about $700-800 and two years of disqualification from being named to any
Government position.

The case went to the Comptroller (Russian, the current one)
who decided we were not guilty. We never knew why he ruled that way; we were
just sent letters of good behavior, saying the case had been closed.

This is the first reason the whole thing is absurd, you cannot
have such a process dependent on one person and subject to manipulation. Yes,
you can appeal, but in the appeal, you just write why you are innocent and the
Comptroller once again decides what to answer back.

The fact that this is the case can be seen in the statistics
which show that 80% of those disqualified from running for office are
opposition in a country where the opposition holds less than 30% of the offices
in the country between Mayors and Governors. That extreme asymmetry is no
accident.

In fact, the Comptroller is not a judge, he can disqualify
someone from being appointed to office, but he can not stop them from being elected. The only way to take
away your political right to be elected is if a Judge finds you guilty. This is
not even just Venezuelan legislation, this is part of the Interamerican
Convention on Human Rights (The San Jose pact) which in its Article 23
clearly says that your political rights can be limited by a number of reasons
such as age, nationality and…”sentence, by the competent judge, in a penal
process”.  Article 65 of the
Venezuelan Constitution establishes a similar limitation, which I still find it
hard to interpret in any other way, and takes precedence over any legislation
below it. But in any case, Venezuela signed the San Jose pact, which will
clearly delimit how anyone’s political rights can be taken away: Only by
sentence of a judge in a penal process.

Thus, we are once again facing a gross miscarriage of
justice by the Chavez administration, which has simply disqualified those
figures of the opposition that were a threat, while at the same time using
similar arguments to remove pro-Chavez figures from office in the case of those
Chavistas who were a nuisance to Chavez’ plans and desires, such as the
recently removed Governor of Yaracuy State.

If the rule of law existed in Venezuela, this would be
easily and readily fixed with a ruling from the Constitutional Hall of the
Venezuelan Supreme Court, but despite numerous injunctions submitted to that
body, the Court has either ruled against them or denied the injunctions on
technicalities.

All of this has been helped by the absolute obedience of the
Electoral Board, who despite the fact that none of them are lawyers, reached a
decision on the matter without even asking for an opinion from its legal
counsel.

I have no hope that this new black list by the Chavez
Government will be revoked. It is a Government for which the wholesale
violation of human rights represents no problem if they are in the way of the
empty political project of the Chavez revolution.

From the PDVSA workers, to the Maisanta list and now the
black list of the “inhabilitados”, it is a way of life for Chavez and his
comrades to perversely violate the rights of those that get in their way.

Then, at the beginning of this week, someone explained to me
that the transaction would simply be a hand off of the structured notes
denominated in Bolivars in the hands of BOD. Such notes are worth slightly above the half of the US$ 2.4 billion registered on the books. Santander would receive them and
ask the Government for the dollars at the official rate of exchange.

While I haven’t seen the numbers, it made some sense if the
regulator (the Government) allowed the transaction like it has allowed the
others that have taken place. For Santander, it would be an elegant way out of
the country (the bank has been rumored to be for sale for ages) and BOD would
get rid of the notes in its balance sheet, acquiring a very healthy bank with
the largest branch network in the country. Of course, the purchase would still
be suspicious in the sense that those notes were purchased with depositors
money.

That si why I started this series.

But then on Thursday there was a bombshell, the Government
issued a very strict resolution essentially banning any bank or financial institution
or even anyone currently owning more than 5% of any such institution from buying another
one, reaching an agreement to buy another one, without prior permission from
the Government. Moreover, the resolution bans the transfer of the structured
notes without the financial institution having prior approval from the
Government.

Lawyers are still arguing whether the resolution banks the
BOD/Banco de Venezuela acquisition as described, but most think the
Government’s resolution is airtight. But whatever interpretation anyone may
give it, to me it expresses in no uncertain terms that the Chavez
administration does not want the transaction. Thus, unless Chavez himself gives
the green light I don’t think the acquirer or the subject of the acquisition
will go ahead with it.

The puzzle is why it was blocked. All sorts of rumors are
flying around Caracas about this. There are basically two ways of thinking:
One, that blocking the transaction originates, as has become customary in the
robolution, in some parallel racket (guiso) being set up by someone else who wants to
by the same bank. The second one is that this reflects the arrival of the more
fundamentalist Ali Rodriguez to the Ministry of Finance and that he stopped it.
I would lean towards the first explanation, because it has always worked so far
when you are trying to find a rationale to some act by the Government that does
not make sense.

But the same resolution contained what to me is a somewhat
worrisome proposition: It orders auditors of banks to reflect as of June 30^th.
2008 the quantitative impact of the notes being valued at its true worth.
Additionally, it bans any bank from divesting itself of the notes until the
Government approves it.

The problem with this is that June 30^th is this
week and I doubt any bank is ready to divest. This means that the auditors will
look at he notes and calculate their value at the only exchange rate accepted
by the Government Bs. 2.15 per US$. But these notes are worth more than that
since the guarantees behind it are US$ which can be sold in the parallel swap
market currently around Bs 3.4 to the US$.. So, if you look at what the auditors will say, it will exaggerate the
loss incurred by these banks to the point that many will look absolutely
bankrupt.

Today the Minister of Finance complained
about this situation, saying bankers will have to capitalize their
institutions because they bought the notes with the depositors money. (Will all
of them?) And he is right. However, he fails to say that it was Chavista
Government officials that allowed this to happen without any action.

For a Government that likes to blame the 40 years of the
Fourth Republic for everything, this time around, it can’t use that excuse,
exchange controls have been in place since 2003 and all of these structured
notes were created since then.

Who is to blame?

I am pretty sure that not only will the Government not do
anything about prosecuting those buddies responsible for it, but I am sure all of them can run
for office in the November regional elections.

And will we see if the “guisos” continue now that Rodriguez
Araque is in the Ministry of Finance? He is supposed to be extreme radical, but
a straight arrow. His tenure at Finance will tell us if the latter is true.

More guisos, as they show up. Stay tuned.

In the Chavez revolution, Guisonomics has truly become a
science thanks to the wonders and arbitrage provided by foreign exchange
controls. Simply put, the fact that the Government has access to or decides who
has access to foreign currency, allows it to generate huge amounts of profits
from the artificial arbitrage between the official and the parallel swap
exchange rate.

In fact, hiding behind the exchange controls, corrupt
Government officials can obtain illegal profits in magnitudes never seen before
in Venezuela’s history of corruption. Sometimes, there is not even enrichment
involved, just the ability to use creative accounting and the artificiality
of the exchange rate to help the revolution and/or its friends without most
people noticing or even realizing what is going on.

In this first installment of Guisonomics 101, I will
describe the simplest transaction there is, in order to prepare you for some
transactions that I expect will be in the news in the next few days.

If you have been following the news lately fo example, Argentinean
bonds have
been dropping like a stone in the last few days as the conflict between the
Kirchner Government and the farmers has intensified. In fact, talk of a second
Argentinean default in this decade have also
intensified as that country’s debt levels reach historical highs once
again.

But if you have been following the news, it has been Chavez
and Venezuela that have been saving the day for Argentina buying close to US$
6.5 billion in the last three years of the countrys’ debt.

Only three weeks ago, Venezuela bought about US$ 1.4 billion
of that country’s bonds the so called Boden issue, of which between US$ 400 to US$ 600 million has
been sold by the Government in order to lower the parallel swap rate. Thus, there is about US$ 800 million left and their prices have been dropping.

But, you may wonder, has Venezuela lost money because these
bonds have dropped in the international markets?

The answer is no, because thanks to some of the elemental
principles of Chavista Guisonomics, for the Venezuelan Government it is very
difficult, if not impossible,  to lose money in
these transactions.

Say what?

This almost magical trick is possible, because
accounting-wise, for the Government all Bolivars are valued at Bs. 2.15 to the
US$, while it can manage to sell dollars at a much higher rate in the swap market.

Let’s look at an
example:

Suppose the Government buys one million dollars of
Argentienan bonds. From an accounting point of view, only the exchange of
Bolivars is registered, thus, the US$ 1 million cost Bs. 2.15 million.

Let us assume, that the Venezuelan Government bought the
bonds at a price of 100% and that they drop 20 points to 80%. (These prices are
faked for illustration purposes). How can the Venezuelan Government make money
if they have dropped so much?

Easy. It can sell these bonds to a local bank at 110% of its
value, but at the official rate of exchange of Bs. 2.15 per US$. Thus, the Government bought the bonds
at 100% and sold them at 110% for a tidy 10% profit of 215,000 Bolivars, even as the
bonds dropped in price.

But why would the local bank buy them? Also easy. The local
bank paid 110% for them at the official rate of exchange or Bs. 2.365 million
(1.1×2.15).

But then it turns around and sells the bonds at 80% of their
value in the international markets. Thus, it receives US$ 800,000 for them.
Thus, the local bank paid in the end Bs. 2.956 (Bs. 2.365 million divided by US$ 800,000) for each dollar
it receives.

But since the swap rate is somewhere between Bs. 3.4 and 3.5
per US$, the local bank makes roughly half a Bolivar per dollar or 16.9% profit
in the sale of those US$800,000 to the swap market.

Thus, the Government makes money, the bank makes money and
there is indeed such a thing as a free lunch in Chavista Guisonomics.

Or is there?

More in Part II

The charge are not new, exiled reported Patricia Poleo made
similar charges with even more details last week in her column in Nuevo
Pais. Poleo gave names of people who come to Venezuela to train Venezuelans as
well as Venezuelans who travel to Lebanon to train in guerrilla warfare. Poleo
also linked one of the men designated by the Department of the Treasury as
being linked to badass Chacin’s Vice-Minister Tarek el Ayssami.

The Treasury Department froze the assets of the two
Venezuelans. One of which is actually a new era diplomat for our country, who
was in charge of the Venezuelan office in Syria and is now at the country’s
Embassy in Lebanon. As I noted a few days ago, it was the new Minister of
Finance Ali Rodriguez who took charge of destroying the country’s diplomatic
service, replacing professionals with only supporters of the revolution with no
qualifications.

I am sure that tomorrow we will have Minister of Foreign Relations
Maduro call this another attack on Venezuela and the usual empty garbage the
thugs spew out when they are caught red handed, but I wonder whether Maduro
will address such issues as:

—The Venezuelan diplomat Ghasi Nasr al Din is also known
by eleven different names in the best tradition of badass Rodriguez Chacin. Maybe
we can learn who was in charge when this guy was nationalized Venezuelan or how
many ID cards, names and the like he has.

—The other character in this plot, Fawzi Kan’an is known
by about seven other names, with a variety of birthdates and birthplaces. Maybe
his ID number is fake, as the number is simply too low for someone who claims
to have acquired the Venezuelan nationality in 1997. Maybe Maduro can also
enlighten us on this. Kan’an or whatever his name is also accused of funneling
money to Hezbollah, as well as setting up its office and community center in
Venezuela.

Of course, in a Government with no accountability or checks
and balances, all we will get are denials by the same thugs and hoodlums that
we have by now all gotten accustomed to.

In any serious country there would be at least an investigation,
but in “revolutionary” Venezuela, impunity rules if you are a friend of the
process.

Remember suitcases full of cash? Remember sugar concerns in
Barinas? Remember structured notes?

Thugs and hoodlums run and rule in Venezuela!

During his various tenures as Minister, Rodriguez Chacin has
assumed multiple identities, used them for personal enrichment, allowed FARC
leaders to come to Venezuela legally, nationalizing them and even allowing them
to vote, as he has flirted with the worst elements of the FARC, who impressed
with his personal destructive qualities and inhuman nature, labeled him a badass.

But he is much more than a badass, he is simply an
irresponsible bastard, who has no respect for human rights and who does not
assume the responsibility he has to share in the failure of the Hugo Chavez
Government to stop the growth of crime and homicides during the last ten years.

Because it has been ten years since Hugo Chavez got to power
and for nine of them Hugo Chavez did not even acknowledge the crime was even
close to a problem. He can ignore that the homicide rate had tripled in those
nine years, he can ignore that he had promised to fight crime when he was a
candidate in 1998, he can ignore that more Venezuelans have died in the last
ten years than Iraqis in the war in Iraq, he can ignore ten years of absolute
disregard for the human rights of Venezuelans, but neither Hugo Chavez neither
his Minister of Interior and Justice can ignore their responsibility for the
pain, the sorrow and the sadness that with their negligence they bring to so
many Venezuelan homes everyday.

But rather than accept that responsibility, like so many
other failures of the empty Chavez revolution, instead Rodriguez Chacin shows
what a miserable human being and “leader” he is when he begins classifying
crime as relative, telling us last week that weekly deaths in Caracas were down
to zero, but backtracking this week and acknowledging that there are 40 deaths
per week in this city, absurd for a city of five million. But then he shows he
is a man to be despised when
he states that deaths between gangs are not part of citizen safety¨ and that
“crimes of passion” are
also second-class homicides, not worth his time or his tears.

What´s next? Dismissing crimes against old people? Or opposition members?

Give him one more week and this misery of a man maybe will tell
us that stray bullets should also be ignored when compiling crime statistics
and well, I guess suicides are also not his responsibility and cab and bus
drivers are also asking for it by driving late at night trying to make a
living. This is a socialist society after all…

Because it has been ten years of total irresponsibility
where all problems, whether inflation, shortages, crime, garbage, unemployment,
kids in the streets, poverty and the like, are always the responsibility of
some long forgotten Governments or people, who nobody remembers or cares for
any more. People who had many faults, but at least there was respect for human
rights and the law and while there was corruption, it was kept in check by the
rightful institutions, which have been destroyed by Chavismo to protect their
stupid project.

Remarkably, Chavez, who claims to care so much for the
people, not only brought back this man that should be in jail for stealing and
killing fellow citizens, but keeps him in his all powerful position even if he
legislates at will on his shadow the most absurd bill to control the population, while
creating his own “badass” hierarchy of crimes.

But “badass” Chacin is in the end just a poor soul who
through his friendship with Hugo Chavez has managed to impose his non-existent
system of values and his disregard for human life and rights on all
Venezuelans. Who has managed to reach dozens of levels above his Peter
principle, where death is irrelevant, human rights just a vague concept and
playing at being soldier and guerrillas and being a tough guy, are more important
than assuming the responsibility of running and managing his Ministry or upholding the laws of the country.

The fact that this irresponsible Minister remains in charge
today, is simply another sign of the tragedy that the Chavez Government has
become for our beleaguered country.

And Chavez and him are responsible for the deaths of close to one hundred thousand Venezuelans in ten years.

A record for the type of miserable, irresponsible hoodlums they represent…

Which actually puts him in a difficult position, as the end
of the Enabling Bill is coming soon and Chavez was supposed to take advantage
of his special powers to legislate by decree and put a framework to his “XXIst.
Century Socialism”. Except that
project seems to have been diverted by Minister of Planning El Troudi, combined
by Chavez’ dwindling popularity.

El Troudi’s theory seems to be that the Government needs the
private sector (duhh!) as investment has reached ridiculously low levels for
the private sector, while Chavez spends too much money on imports and current
expenses and no real investment takes place. Thus, despite high oil prices, the
economy is actually cooling off under the effect of inflation, high interest
rates and the surprisingly low Government spending in the first five months of
the year.

But even if cooling off is what Chavez needs, the question is
whether he can afford to pass up the opportunity to legislate on important
economic matters before the July Enabling Bill deadline. Reportedly, there was a new Commercial Code ready
to replace the one that has been around for over a century and a half, and
people expected it to redefine property and to have elements in it that would
force the private sector to “integrate” more with the public one, whatever that
may mean.

This is no longer expected because it may raise an outcry,
but I find it very hard to believe that this is the case. As witnessed by the
nomination yesterday of Ali Rodriguez to be Minister of Finance, Chavez has not
changed one bit, he just has had these lapses of trying to convince people he
is a good guy, while he plots how he will manage to implant his vague
revolution on our country.

People are so complacent these days in Venezuela that I
actually heard people call Ali Rodriguez a pragmatist a couple of times today.
That is how much Chavez and his cronies can abuse Venezuelans without them
realizing what a masochistic bunch they have become. This “pragmatist” was
responsible for the firing of 20,000 PDVSA workers, whose severance and
pensions, whether voluntary or not, were simply confiscated, as he destroyed
Venezuela’s oil science and technology center, sending hundreds of the most
competent engineers and scientists to work for the competition everywhere else
in the world. And once Ali Rodriguez was done with this “pragmatic” solution,
he went to the Ministry of Foreign Relations where he repeated his act,
except that he just recalled any diplomat not with the process and has kept
them in a room doing nothing for the last three years. Of course, this requires
naming former military and loyal supporters to diplomatic positions, also
destroying the Venezuelan Foreign Service in the process. Costly? You bet, but for Rodriguez, the ends justifies the means.

Let’s see what his pragmatism does in Finance this time around!

Meanwhile, the Venezuelan Supreme Court “approves” the decree
that will allow the Government to take over the cement industry. Nobody knows
what this means, whether the Government will bypass the capital markets laws that
says there has to be a tender for these companies. Who cares? I bet nobody
complains if they do, much like the Government gets away with mosth of what it
does and says.

Somehow, it just seems as if people are immune to the fact
that the Government is taking advantage of them, bypassing the laws and the Constitution
so that Hugo Chavez can push his undefined program and revolution.

Opposition candidates are not only banned from running, but
the Chavez appointed and controlled Comptroller seems to come out daily to
defend this gigantic abuse of power, which is being ratified by the same
Electoral Board that has failed to finish counting the votes from the December
referendum. But of course, we are supposed to trust these same guys to count
the more easily manipulated results from the November regional elections.

Sure, just look at
this graph in esdata and tell me you really trust them.

But those are the guys that will count the votes in November
and that is the Court that will decide controversies if there are any.

But somehow, people are optimistic and I am not sure about
what…