The Devil's Excrement

Judge Alcy Viñales, the one that freed the 29 people accused
of helping former Governor Lapi escape form jail, valiantly
spoke up yesterday, not only challenging the Government to prove she is
corrupt, which she was accused of by the Minister of Justice, but also turning
around and accusing that she was pressured to rule a different way and naming
the person.

Judge Viñales said that the day before her ruling she
received a phone call from the President of the Judicial Circuit Dario Suarez,
who told her that she should know what she had to do, that the order was to
keep these people jailed. She added: “I knew what was coming when I made my
sentence public. My decision did not satisfy any of the sides, I did not qualify
the detention as flagrant, because there were no punishable facts, nor elements
for conviction. The only person who was denied the right for a defense and was
exposed to public scorn was I.  I
challenge the President, the Minister of Justice and the Head of the National
Assembly to prove I am corrupt” demanded Viñales. She added that her decision
did not please the prosecutors nor the defense.

Funny how fast things can change when you go from being
Government to owner. It was only September of last year when CANTV started
paying pensioned workers minimum salary to abide by a Court decision. Despite
this, President Chavez would regularly come on TV and threaten that if the
company did not pay the pensioned workers what the Court had ordered, he would
nationalize it. Essentially the workers were protesting, because they wanted
the company to pay more than just minimum salary as well as interest on the
back pay owed them since the new Constitution went into effect.

Well, CANTV paid them the minimum salary and what the Court
ordered, but the workers continued protesting and asking for more. Then Chavez
announced the nationalization of the company and the workers started to
complain also about the price they were getting for their shares. You see, the
CANTV workers paid over US$ 4 per share when the company went public, but the
tender for the shares is only for US$ 2.12, so they feel they did not do too
well in the deal. 

Then day before yesterday, the Minister of transport and
Communications essentially
said that he did not have to deal with the company’s union as the pensioned
workers had accepted the minimum salary for their pensions. This led to a protest
yesterday by the pensioned workers who not only say the union is their only
representative, but also that they continue to demand higher pensions as well
as a higher price for their shares.

And then last night, Chavez himself fustigated
the union, saying that they wanted to destabilize the company from within.
Chavez claimed that these unions have been passive while the company was
private, but now that the Government was about to take it over, they were
starting to talk tough and blackmail the state.

How fast things change! These unions that were not tough are
the same ones that fought for years in the courts on the pensions to get the
decision that Chávez hailed so much in the last two years, but now that the
Government will become the owner wants to tone down. Moreover, CANTV’s unions
have fought the company at every step, obtaining a very generous collective
agreement. In fact, I find it remarkable that the workers have been so passive
on what they will get for their shares.

The workers have a spot on the Board of Directors, which
last year, when Mexican telecom magnate Carlos Slim offered US$ 21 per ADR (US$
3 per local share), paid Goldman Sachs to do a valuation of the company because
the Government’s representative on the Board, did not think it was high enough.
The valuation exists, but it has been kept secret as the Chávez Government
offered even less than Slim, at US$ 17.7 per ADR (US$ 2.51 per ordinary share
before a dividend).

Thus, much like in every other Government enterprise in the
country, the CANTV union has now become the enemy to the leader of the XXIst.
Century Socialism, since unions and workers rights are not a priority of this
novel tropical version of socialism that Chavez purportedly is proposing. He
talks about “social ownership”, but this apparently means the state owns and
decides everything in classical Soviet style.

Because what the defenders of the revolution never tell
people is how worker rights have taken a backseat in the Chavista revolution.
Most collective bargaining agreements are at least two and three years behind,
simply because the Government refuses to discuss them and there are no legal
instances that workers can appeal to because the Government controls them too.
In the case of Electricidad de Caracas, the company had negotiated an agreement
with the workers and was ready to sign it, but the Government asked management
not to sign it because the Government was taking the company over. The workers
have protested, as they fear that they will not get their agreement once PDVSA
becomes the owner of Electricidad de Caracas.

Thus, Chavez pulled another “Ethanol Shift”, switching sides
on an issue at his convenience, simply because his old position is no longer
aligned with his own personal power grabbing interests.

There is little waste in today´s Veneconomy Editorial, judge for yourslef

Yet
another black mark by PDVSA by Veneconomy

One characteristic of the Bolivarian PDVSA is the lack of transparency in its
management owing to the absence of credible financial statements and also to
the recurring reports of corruption. The $7.5 billion bond issue involves the
state-owned company, once again, in irregular, unclear operations.

Irregularities involving the bonds started to come to light last week, when
PDVSA announced that it had “detected duplication of orders by investors” and
that, therefore, it would proceed to cancel those orders and would not allocate
bonds to the people involved. However, the measure seems to be unfair, as many
of the people whose orders were cancelled claim they placed their order through
just one company. In the April 11 edition of El Universal, the journalist
Víctor Salmerón commented that, according to his sources in stock brokerage
firms, “a group of financial organizations apparently somehow used the identity
card numbers of some people without their consent to place orders.”

In addition to these irregularities, there are reports in the press of the
existence of a large volume of orders placed as a result of investors “selling
their quota” to other investors. Diario de la Economía, for example, cites the
case of an official of Banco Industrial de Venezuela who, at the eleventh hour,
filed 3,000 orders, apparently irregularly. Then there are the cases of people
who say they were offered as much as Bs.400,000 for the use of their identity
card. In the opinion of Oscar García Mendoza, the president of Banco Venezolano
de Crédito, the much trumpeted PDVSA bond issue is a “mega sham” whose only
purpose is to benefit a tiny group of the government’s richest and closest friends.

As García Mendoza quite rightly says, if the government’s true intention was to
reduce the money supply by Bs.17.01 trillion, all it needed to do was to sell
$4.7 billion at Bs.3,600:$ on the parallel market.

However, events point to the true objective being quite different. The PDVSA
bond issue magically generated fast returns for a few in the order of $2.8
billion (i.e. Bs.9.99 trillion), 20% more than the Bs.8.3 trillion earned by
the entire Venezuelan financial system in the three years between 2004 and
2006. (These Bs.9.99 trillion are the difference between the Bs.17 trillion
obtained from the sale of the bonds and the Bs.19.8 trillion that the holder of
the bonds would realize upon selling the bonds at 75% of their face value and
exchanging the proceeds from the sale into bolivars at the exchange rate of
Bs.3,600:$).

Should the government wish to refute Dr. García’s assumption, all it would have
to do is to publish the names of those who purchased $1 million or more of the
bonds.

What is perhaps worse is that Venezuela’s coffers could end up shrinking by
some $7.5 billion if the intention to use the bolivars from the bonds to buy
dollars from the Central Bank announced by Finance Minister Rodrigo Cabezas and
Energy and Oil Minister Rafael Ramírez pans out. (The orthodox thing would have
been to sell the bonds for payment in dollars, so avoiding this potential drain
on the reserves).

There is another irregularity worth mentioning. According to the Gaceta Oficial
of April 10, enrichments from these bonds will be free of income tax for only
five years and only for individuals resident in Venezuela and companies domiciled
here. In other words, a foreigner who buys the bond in Europe
would, in theory, be liable to Venezuelan income tax. That being the case,
buyers will be thin on the ground.

And remember the tax free status of the PDVSA bonds that we were told about? Weel, it turns out they are and they aren’t. Using some unnamed power that the President has to give tax free status to the earnings of sectors that are considered imporatnt to the national economic development, a decree was issued yesterday giving tax free status to the PDVSA bonds for only five years and only for residents of Venezuela.

Strange for bonds issued for 10,20 and 30 years, most of which will end up in the hands of foreign investors.

It was a day for the worst type of cynicism and farsical statements to come out of the Government:

—Minister of Communications Chacon: “Those who are not in agreement will have to leave CANTV”

I guess the ethnic cleansing of CANTV has begun, in the spirit of Chavista democarcy: Dissent is not allowed! Why not use th Maisanta/Chavez list, it will be faster and more efficient.

—Former Vice-President Jose Vicente Rangel on the impunity of the deaths of April 11th. 2002: “The characteristic of Venezuelan Justice is impunity”

Said with the true irresponsability of a man that spent seven and a half years in the Chavez Government, inclduing being the Vice-President when the “Truth Comission” to determine the responsabilities of the deaths of April 11th. 2002 was squashed by the Government in which he was second only to Chavez.

—Deputy Tascon: “the media will be investigated for the events of April 11, 2002”

I think that he wants to investigate the the wrong type of shooting.

—Hugo Chavez: “On April 11th. 2002, the dead one had a name and it was me”

Sure Hugo, dream on! They had so many chances to kill you, remember you wanted to leave the country and they did not let you? You wanted Cuba, Fidel suggested Mexico? Remember the name of the Cardinal and Bishop you called and they went there to protect and “confess” you? The “dead ones’ have names and they are buried, so do the injured, but all we know is that you were the force driving the killings, you activated fascist Plan Avila, but nobody has been found guilty of these crimes, even those taped shooting at the crowd.

—Luisa Ortega, Director of the Prosecutors Office: “We did not investigate Lucas Rincon, because nobody denounced him”

Jeez, how cynical can you get! The man that told all of Venezuela on national TV, backed by the Army Chiefs of Staff, that Chavez had resigned, the man who got the ball rolling that night, the highest ranking military in the Chavez Government that day, who later surfaced as Minister of Defense, much later as Minister of Justice and today is an Ambassador for the country and he was not investigated because “nobody” denounced him? Gimme a f…. break!

When Employees Attack. Editorial in Nature, Vol 446, 702 (2007)

Government scientists should be able
to comment publicly — within reason.

Badmouthing one’s government is a
fashionable pastime in some parts of the world. Many US climatologists, even those who
receive federal funding, have grave reservations about the White House’s
continued neglect of international climate agree­ments, and they aren’t shy
about saying so. In Britain,
meanwhile, scientists as well as political analysts have been quick to
criticize the government’s plan to spend billions on renewing the national
fleet of nuclear-weapons submarines.

Roll those two examples together, and
transplant them into a soci­ety where freedom of speech is often seen as being
under pressure from several directions, and you get the case of Claudio
Mendoza. Until recently the head of a government physics laboratory in Ven­ezuela, Mendoza has been demoted after making
sarcastic comments about the government over what he regards as its tendency to
ignore scientists and their advice (see page 711).

What infuriated Mendoza’s paymasters most was probably his
suggestion — made in a newspaper article promoting a play about nuclear weapons
— that president Hugo Chávez might want to pur­sue a nuclear-weapons programme and
that, if he did so, he was liable to fail because of this alleged disdain for
expert advice.

Mendoza’s comments
were not made in any official capacity (his article was signed, with no
affiliation given), raising the fraught ques­tion of whether senior government
scientists should be free to make disparaging public comments about the state
institutions that they serve, when they are away from work.

On a facile level, this is a
disagreement about whether it is accept­able for someone to be fired because
their bosses can’t take a joke. In many countries, acerbic comments about the
machinations of politics are a valid and effective mode of public discourse.

But, of course, a line has to be
drawn somewhere. It is hard to escape the feeling that, in this case, it has
been drawn in the wrong place. Many civil servants in other countries might
expect a dress­ing-down if they behaved in this way, but might justifiably argue that
they have a right to express a grievance. The message coming from Mendoza’s bosses
within the Venezuelan national research institute is an unsavoury one. His
removal from a management position implies that someone who voices contrary
opinions is not fit to be a lab head. What’s more, Mendoza has been warned that he had better
clam up if he doesn’t want to lose his job altogether.

The play that Mendoza was writing
about was Michael Frayn’s Copenhagen, the
international hit that deals with a crucial 1941 meeting between Niels Bohr and
Werner Heisenberg, and their struggle to comprehend the feasibility and consequences
of devel­oping nuclear weapons during the Second World War (see Nature 394, 735; 1998).

One of the reasons for the play’s
success was general interest in what physicists of Bohr’s generation thought about
the issues surrounding nuclear weapons. Of course, these thoughts
only became public some time after the United States had built and used
the bomb. But times have moved on, and people in Caracas, as elsewhere, would benefit if their
scientists were be able to participate openly in public debate on nuclear
policy.

The prestigious scientific journal Nature had double coverage of the case of Venezuelan scientist Claudio Mendoza, which I have talked about a few times here. I will make two posts with the material from Nature, in this post I will post the news item reported by the Journal and in the next one, the Editorial which was obviously prompted by the news itself and the clear threat to freedom of speech implied by Claudio’s removal or the words of the Director of IVIC, who clearly threatens Dr. Mendoza in his last sentence, no?

Venezuelan Free Speech Row goes Nuclear in Nature by Michael Hopkin, Vol 446, page 711 (2007)

Freedom-of-speech groups have
expressed concern at the treatment of a prominent Ven­ezuelan physicist who has
been fired as head of a government research lab after poking fun at the
government over nuclear policy issues.

Claudio Mendoza was stripped
of his posi­tion as head of a computational-physics lab in the Venezuelan
Institute of Scientific Research (IVIC) in Caracas
because of comments he made in an article written to promote a science-related play. He sarcastically suggested that Venezuelans should not worry about their country’s growing alliance
with ‘rogue’ nuclear states such as Iran,
because Venezuelan officials do not listen to experts and so would not be able
to develop nuclear technology anyway.

Although Mendoza
is still a researcher in the lab, his
dis­missal as head after 10 years raises fears that his right to free speech
has been infringed, says Juan Carlos Gallardo, chair of the American Physical
Society’s Committee on International Freedom
of Scientists. The com­mittee has written to Venezue­lan
officials to request details of the case. Although no other
scientists there have reported similar harassment, the government has been
accused of waging a campaign against freedom of speech in the media, and the
fear is that similar repression is now extending to the research community.
Gallardo has pledged to monitor the situation and take further action if Mendoza
is sacked outright.

Mendoza says he has been accused of
treason, even though his comments were meant to be witty and
he was not writing in an official capa­city. His remarks were published on 13
Septem­ber 2006 in an article to publicize a production of Copenhagen by
British playwright Michael Frayn. The play
dramatizes a discussion between physicists Neils Bohr
and Werner Heisenberg about the feasibility of
developing nuclear weap­ons. Addressing fears that Venezuela might seek to join the nuclear club, Mendoza
wrote: “Here bridges are built without engineers, diagnoses are made without doctors, oil is refined without petroleum experts, one can teach without being a teacher, you can govern without being a states­man. We will therefore explode nuclear energy while
ignoring the physicists.”

But it seems that nuclear policy is no joking matter. Although Venezuela has no nuclear
pro­gramme of its own, it has significant reserves of uranium ore, and in 2005 Venezuela announced that it
would join forces with Iran
to develop domestic nuclear power. Venezuela is also thought
to have endorsed Iran’s
controversial uranium-enrichment programme, although without a seat on the UN
Security Council, it was unable to influence the
council’s unanimous vote in December 2006 to ban
the project.

Four days after the article
was published, IVIC’s board of directors removed Mendoza
as lab head, and gave him 30 days to provide evidence of his apparent insin­uation
that Venezuela
might be planning to enrich uranium. Mendoza
submitted a dossier of newspaper articles but this was rejected as sufficient
proof. When asked to retract his arti­cle, he refused.

The article was “the last
drop” in a series of altercations in which Mendoza
has criti­cized his paymasters, says IVIC director Máximo García Sucre. In
2003, for example, Mendoza complained
that the govern­ment was not giving enough
financial support to IVIC — a claim denied by IVIC directors (see Nature 422, 257; 2003).

“He has manifest many times
his noncon­formity with IVIC decisions,” García Sucre told Nature. “In a
certain sense he is an activist. In this situation it is not possible to be
head of a lab — there must be a minimum of affinity with scientific politics.” He adds that such personnel changes are routine, and that Mendoza
still has all the rights of any IVIC staff member.

Mendoza says that he is unsure whether he
will be dismissed entirely. “I don’t think I will try to get reinstated as head. I am just basically trying to survive as a researcher,” he says.

“I hope he will understand that the measure that has been
taken is a mild one,” says García Sucre, adding that in making fun of
government officials, Mendoza
has indirectly criticized pres­ident Hugo Chávez. Asked whether Mendoza
will be fired outright, García Sucre says: “He should start to work in his lab
instead of being in the newspapers all the time saying he is being victimized.
Then I don’t see any problem.”

So, who do you root for when it is your country´s up and coming baseball pitching star, against your favorite teams news star from Japan?

And with the same speed that judges reverse decisions when the Government asks them or forces them out, the accident statistics during the past Easter week also suffered from remarkable shifts as the week went along. First, the Head of Civil Defense Antonio Rivero told us that accidents were up 38%, which to him showed that the prohibition was a success, but he failed to explain how. But then, faster than a speeding bullet, the number of accidents was announced to be down by 11% by the Minister of Interior and Justice Pedro Carreño, who certainly can work miracles, even if his statistics seemed to mysteriously differ from those by the fire departments. And indeed if you look at the handy chart below from El Nacional, accidents were indeed down:

And so were the number of those injured in accidents too, but in another mystery, the number of deaths in these accidents was actually up 28% compared to last year, a curious result in a country whfrere accidents and injuries may be hidden, but cars can’t even be moved from the road until the medical examiner shows up at the scene.

But I can’t prove the numbers were fudged, but in any case that is not the main point of the post. What I found intriguing were the explanations given by Mr. Rivero about why the number of deaths were up. According to him, the New Man of the XXIst. Century, the new Venezuelan of the revolution has some sort of kamikaze wish inside and the high number of deaths arose due to a “psychosocial factors”, which he denominated “the revenge”, or “rejection of change”. Thus, Rivero explained, Venezuelan vacationers expressed their opposition to the prohibition by driving fast. Thus, he concluded: “People drank less, but drove faster”

Jeez, I don’t know where to begin in responding to this pseudo scientific research by Mr. Rivero. I guess it means, as I suggested last week, that we may have to experiment with having people be allowed to drink more, see if they go slower or drive better. That would follow from Rivero’s remarkable statement. The truth is that the ability of some Chavista officials to lie, twist the truth or simply invent the most far fetched concepts, has no limits and even Minister Carreño’s “we are being spied by the CIA via the Direct TV set top boxes” may soon be toppled as the all time worst.

Today began the tender by the Venezuelan Government for all of the shares of two well run companies, Electricidad de Caracas and CANTV. By May 8th. these two companies will become Government owned, will begin to deteriorate and will be a burden on the Government’s finances. Thus in a country with huge crime rates, poverty rates at 40%, a failed state health system, malnutrition and all sorts of problems, ideology domiantes reality and the Government will spend some US$ 3 billion in purchasing two companies it does not need (That is $ 120 per citizen). Meanwhile, the prison observatory reports that the institute that trains people to run the prison system is being shut down, at the same time that the number of prisoners is increasing rapidly and that deaths at prisons are running at one a day. Funny, no? Makes you wonder how priorities are set by the revolution. Well, we know, it is what Fabre called Government by witticism, that of the autocrat.

So, Chavez woke up one day and decided to “nationalize” CANTV and Electricidad de Caracas, just because he felt like it. The Ministers scrambled and explained to him that Venezuela has lost all arbitration cases in international Courts, owns CITGO in the US and the Government could not “nationalize” anything without creating problems all over the place. So, the Government negotiated a high price for Electricidad de Caracas and a cheap price for CANTV, the latter indicating Verizon wanted to get out of here as fast as possible. Funny thing was, the Government ended up paying less that Mexican Carlos Slim was willing to pay for CANTV, about 18% less. Who gets hurt? First, international investors who held the stock and will be paid less. More interesting, the second largest chunk of shares after the international investors is owned by the company’s workers. So, in this era of “shared-ownership”, “coops”, “Co-management” and the like, the revolution is buying back the workers shares at around $2 per ordinary share. Funny things is, the workers paid around US$ 4 for them in 1996 and some of them had to pay financing. You got to love the workers paradise of the XXIst. Century!

The Government will not only pay US$ 3 billion for these companies, but the money will leave the country (Uups, there go those international reserves again!). You see, Electricidad de Caracas was 84% owned by Virginia based AES and a fraction of the remaining 16% traded in the US in the form of over the counter ADR’s. A similar thing happens with CANTV and Verizon. While Verizon owned only 28% of the shares, most of the shares traded in the US market under an ADS registered in the New York Stock Exchange. In 1996, when the secondary offering of shares was made, 95% of it was placed in the international markets, only 5% here in Venezuela and these shares have been migrating slowly over the years as people converted them to ADS’s. The rest of the shares are in the hands of the workers and Bandes. So, most of the US$ 3 billion will leave the country, so that the appetite for control of the Lt. Colonel can be satisfied, rather than spending it on the numerous problems the country has, generate jobs, build schools, improve hospitals and silly things like that.

In time, the service of these companies will deterioarte, after all, the Government’s electric company is the pits and Electricidad de Caracas and its affiliates have better service and fewer blackouts than the Government’s companies. CANTV is in my mind in even bigger trouble. In contrast with Electricidad de Caracas, which has no competition, CANTV does and slowly Movistar and Digitel will erode its hard earned market share. People forget that CANTV used to be a distant second to Movistar (then Telcel), but over the last three or four years it really went after the market and is now tied with Movistar for first place. I don’t think this will last, between good management, quick decision making and use of the latest technology, the two competitors will surely gain market share very fast. In fact, the two companies are already raiding some of the better executives at CANTV and both have better technology (GSM) deployed already.

And then there are the workers, besides getting a raw deal (Electricidad workers bought shares last year and are most likely to sell them back to the Government), the Government has refused to talk to the unions and in the case of Electricidad de Caracas, decided to stop the new collective bargaining agreement which had already been negotiated with the company. In the case of CANTV, the workers union said that they have tried to talk to the Government about co-management, buying more shares and the like, but not once has the Government received them, thus they plan to sell their shares in the tender. In fact, at the recent shareholders meeting, Bandes proposed delaying the dividend until after the tender was completed which led to a revolt by the union representatives and the proposal was withdrawn.

Thus, an era ends for Venezuela’s capital markets. Electricidad de Caracas, one of the oldest and most succesful private companies in the country’s history, which has traded for decades in the Caracas Stock Exchange and CANTV, the only Venezuelan stock that traded in the US markets. After this, foreign investors will have no access to the local market, due to exchange controls and current rules for buying and selling shares in the local exchange. This is what led Dow Jones and Wilshire to drop the country from its equity indices. Morgan Stanley can not be far behind. Thus, as the world opens up, Venezuela shuts itself out, as if the country had the wealth and resources to give its inhabitants a much better life. Eight years have gone by and little has changed in that respect. How many more years and billions of dollars will be wasted in the follies of the witticism of the autocrat before people wake up to reality?