The Devil's Excrement

In the traditional structure of a Government, the Vice-Minister or Under Secretary plays a key role in that he or she runs the Ministry or Department, while the Minister or Secretary, a more political appointment, takes care of the political side, going to public functions and the like. In Venezuela, it used to be the same, the Vice-Minister was a more managerial, less political person, who would run the day to day administrative aspects, while the Minister attended functions, Cabinet meetings and the like. The Vice-Minister also took the place of the Minister when the Minister was away. Under the Vice Minister, there were the “Directores”, who ran each area of the Ministry. Obviously, Vice-Ministers have more perks than “Directores”, higher salaries, cars, body guards and the like.

When Chávez came to power, he began “inventing” Vice-Ministries, mostly to reward buddies who had done something for him, but could not be named Ministers or Vice-Ministers at the moment. I clearly remember when Merentes lost the race for President (Rector) of Universidad Central de Venezuela His grand ambition) and I heard he had been named Vice-Minister of Finance, which made me wonder who would run the Ministry in the absence of the fairly competent person who was Vice-Minister. But there was no problem, Merentes was actually appointed to a new Vice-Ministry, created by Chávez just to thank him for services rendered. Later, when Maduro became Minister of Foreign Affairs, he created three Vice-Ministries, each in charge of different regions of the world. The funny things is, in time, his close friend and confidant Temir Porras, now disappeared from the Government, began covering two of the three, as Maduro trusted him and could not find someone else to fill the third Vice-Ministry.

And now, in a clear sign of how clueless Maduro is about management and how to run a Government, he creates 111 new Vice-Ministers to accompany the thirty Ministers that accompany in his Cabinet. The hilarious thing is that the decree creating these new positions (Decree 730) actually says that this “optimizes” the structure of Government, not once, but twice.

Just imagine, now some Ministries will have as many as six Vice-Ministers, who will have to be coordinated by the Minister, the same guy who will have to spend half his day listening to Maduro, attending formal occasions and going to other meetings and functions outside the Ministry. The Vice-Ministers will be fighting for territory and budget and none of them will be in charge of administration, legal department and many others. Just not very efficient or “optimizing”

Even worse, each of these guys will spend the first month finding an office, getting bodyguards, cars and support staff for the new position. But hey! Everything is working so well in Venezuela that there is really no urgency to do things. Like there is a two month backlog at the Puerto Cabello dock, but there is now no wheat flower, so bread rationing has begun.

Wonder which Vice-Ministers (it overlaps many) are in charge of solving those two problems.

You can have fun reading the list of Vice-Ministers. You will be happy to know that the Vice-Ministry for the Supreme Social Happiness of the People (1.3) survives this restructuring. Or you may wonder why we need a Vice-Minister for Economic Cooperation in Foreign Relations (3.1), if we have one for each region of the world. Or how the four Vice-Ministries in Planning separate their responsibilities (5.1-5,4). Or what Socialist Industries (8.1) are all about. And what exactly does a Vice-Minister for International Tourism (9.2) do? Travel? And really, the Postal Service (20.3) is part of Science and Technology?

But nothing, absolutely nothing, will prepare you for the new Vice-Ministry for Social Networks (21.5). What does this person do? Create more failed “socialist” social networks?  Surf all day? Tweet all day? Monitor and spy on the “people” who use social networks? Block us?

We will soon find out.

But the message is clear: Maduro is so clueless, that he thinks somehow things will work better if each Minister has more and more Vice-Ministers under him or her, as if the number of people at high level can help solve problems, instead of people with the required knowledge. Or if they are chosen not for the loyalty but for their abilities.

But I am sure many of these new positions will be filled with current or former military officers, insuring that nothing will be done better or “optimized”, so the record of Chavismo remains unblemished in its inability to run and manage the country. They wll do exactly the oppite.

Maduro is simply, Clueless in Miraflores.

Institutionality. Such an easy word. But so easy to destroy, so difficult to build up. And therein lies the biggest conundrum facing Venezuelans in the future, whether in a year (not likely), or five (probable) or even later (Can God be so mean to us?), we can attempt to rebuild what has been destroyed by Chavismo. Because it is easy to think anything will be better than this, but when you face an avalanche of crime or economic distortions, you need more than change, you need the required institutionality to create the appropriate culture at each institution, whether part of the Government or of the decentralized Government.

And that is the problem. The sad thing about the loss of institutionality at the Venezuelan Central Bank, is not the clowns at the top, it is the technical professionals that will be hardest to find when (and if!) things change. Because while the exodus at the monetary authority may just be beginning, it has had a long run elsewhere in the country under Chavismo. How do you convince a former Intevep researcher working in Canada to come back?. Where do you find a Venezuelan Professional policeman (with a capital P) willing to come back from abroad and face the myriad of problems our cities face? Or medical doctors? Or Judges?

That is the problem. Chavismo has managed to destroy institutionality at all levels. From the Electoral Board, to Cantv, to PDVSA, to the Comptrollers office, to the Judiciary, those still inside have given up, left or sold their souls to the revolution in exchange for money.

The tough part will not be changing the Government, it will be rebuilding it. Like the picture above, it will take many bricks and many guarantees for people to want to help. As the saying goes: Once burned, twice shy. While some will be willing to come back and help rebuild, many will think they already paid their dues and are not wiling to come back at low salaries and with few guarantees to build an uncertain future.

And uncertain it will be, because unless Chavismo steps over the line badly, once out, they will try to claim they are democrats and they will fight you every day. They will blame crime, low scientific production and even PDVSA’s failure, on the opposition, the economic war, the US or whatever.

Which leads me to the origin of this post. While the murder of a former Miss Venezuela last night, her husband next to her killed in the robbery and their four year old girl surviving the episode is terrorific, this has become daily life for most Venezuelans. By now, a couple of dozen more similar homicides have taken place since this incident last night. Except you don’t know about their lives, whether they were valedictorian, or studying for their Ph.D. or simply  completing high school or university, all useful for a country like Venezuela. Or winners of the Miss Joropo contest…

Except that the destruction of institutionality is such, that the successful ones, the ones that can come up with a plan to fight crime, develop technology or fixed the complex problems associated with health care, are all abroad, developing the same dreams they had, but paid in foreign currency and with their kids going to wonderful schools.

Do you really think many will come back?

And that is the tragedy. Chavsimo thought that the most incompetent, undereducated, corrupt group of Venezuelans, the military, could do everything. And in the process the military got rid of those that had the know-how, the experience and the ability to fix the problems. And unless you get rid of the same military, it will be an uphill battle to get rid of these former, current and active military officers, that have no clue as to how to run anything. And they will try to keep their positions.

The reality is that the sharper Chavismo’s drop, the better the chances at change and institutionality being restored and rebuilt. Unfortunately, the country’s down fall, unless oil prices drop precipitously, is likely to be just a muddle through, with the usual suspects surviving and managing to live another day.

The only positive note I can give you, is that the radical wing of Chavismo is trying to push everyone out, guaranteeing that little is done to fix economic distortions and accelerating the so called collapse of the economy, increasing the chances for a change for the better.

But if Venezuela continues its slow motion downfall, it any not be until at least five years from now, that some form of institutionality can be rebuilt, except the country will not count with the brightest and the best, but with whatever is left. A different picture form what was available before Chavismo came to power.

A long road ahead for recovery. Likely too long for someone my age. Restoring institutionality may take the same thirty or forty years that it took to sort of build it up. Meanwhile the world moves forward, thinking about technology, ideas, know how, globalization and the like. Which Chavismo barely even thinks about.

And on that note, I end this post for the New Year, apologizing for the somber tone, but somehow hopeful that I am completely wrong.

While not wholly unexpected, yesterday’s bimonthly inflation report was a disgrace, which signals a change in the institutionality that the Venezuela Central Bank had managed to maintain during the last fifteen years under Chavismo. In some sense, the surprise was that it did not happen before, that for better or for worse, the technical side of the Central Bank had managed to prevail somehow in demanding that the data be fudged as little as possible.

And the data for November for November and December was a terrible 4.8% for Venezuela’s CPI in November and a “projected” 2.2% for December that the monetary authority takes to signal a change in direction and a slowing of inflation. Never mind the dreadful 7.5% for Food and Beverages in November, nor the 56% inflation for the year, nor the hiding of the fact (in a graph in page 2) that the scarcity index was at the high for the year.

But whether the data is believable or not is irrelevant. It is the language of the communique, the irresponsibility of it all that is simply unbelievable. The institution most responsible for the current levels, via its lonas to PDVSA, of inflation passes the buck, blaming the economic war and politics and failing to assume its mandate as being responsible for controlling prices.At the same time, it sucks up to Maduro, by suggesting that the supposed improvement in the numebrs for Decemebr is thanks to the actions of the Government on Commerce.

But it is the ideology and the politics of the language that is shameful, that reduces the Central Bank to a tool of the Government, as the Central Bank suggests that some nebulous sectors of the opposition took advantage of Chavez’ death to “artificially deteriorate economic variables” as an “authentic economic war” was waged on the population, which was only stopped by the “Government’s offensive” in November.

But there is no mention of the irresponsible lending to PDVSA and other Government institutions, nor of the dramatic and doubly irresponsible growth in monetary liquidity, nor of the continuous deficit spending by the Government, nor of the decimation of the productive sector and the total failure of the Government in its attempt to substitute it.

The whole report is simply a disgrace, a shameful yielding to politics and ideology and a refusal to admit the crass errors of the mediocre economists (and other strange professions) that today occupy the Board of the Venezuelan Central Bank.

It was the day that the Central Bank joined the dark side, after fifteen years of attempting to avoid submitting to the political pressures of Hugo Chávez, they now become servile to his fake substitute.

Who will the blame when the numbers deteriorate once again in 2014 in violation of the mandate given to them by the Constitution? How will they hide the upcoming scarcity and even higher levels of inflation? Or will they also blame the coming devaluation on these mysterious forces that are nowhere but in the midst of the Government and the sadly dependent Central Bank?

Another tragedy in Venezuelan history and a disgraceful chapter in the history of what was once a very professional Central Bank.

Added: BTW, Maduro was almost right on the magnitude of inflation, he suggested -5%, but he got the sign wrong, the magnitude almost right. Shows how clueless he is.

Moody’s Investors Services downgraded last night Venezuela’s dollar denominated debt to Caa1, the equivalent of a CCC level for other credit raters. This is the first credit rater to downgrade Venezuela to this level, which means the debt has gone from having “substantial” risks to being “highly speculative”. To add insult to injury, the company keeps Venezuela on “negative watch”, suggesting it may downgrade it further at any time.

Moody’s cites increasingly unsustainable macroeconomic imbalances, as well as a higher risk of an economic collapse.

While I am not on the economic collapse side of things, I think the Government still has a lot of leeway in what it can do, I do think that the country’s debt will go lower than where it has been. Since the Mayoral election, bond prices have risen because analysts really think that the Government will become more pragmatic. I disagree, the Government will devalue and raise the price of gasoline a bit and that will be the end of the “adjustment”, but it will continue on its radical agenda, spending money like there is no tomorrow and controlling more the private sector. I will write more on what I think will happen in a post before the end of the year.

While some of these credit raters are usually late to the game and people tend to ignore the news, they are important. In particular, this lowering to CCC or Caa1 in Moody’s system, represents the first time Venezuela goes this low since when oil production went down right after the 2002-2003 oil strike. Investors will take notice and this will reflect in higher interest rates for the country and fewer investors being interested.

As I said, I think prices of the debt will go lower as investors realize there will be little pragmatism and more radicalism. To start, the inflation number, which by law has to be released in the first ten days of the month, has yet to be released and it is Dec. 17th. I hear that it is not the inflation number that looks bad, but the scarcity number which went up 50%. Thus, while investors want to hear the good news, they seem to be ignoring the bad ones. While inflation numbers have been doctored in the past, they have been manipulated using new formulas and weights, but this time we don’t even know the number and whatever is announced will have less credibility.

So, hold on to your seats, the movie gets interesting. Never a dull moment in Venezuela!