The Devil's Excrement

And today we got point #8 to my earlier post on the travesty of Justice on the Lapi escape, when the judge named to replace the one fired this weekend by the Government because it did not like that it released the 29 prison workers, changed the earlier ruling , and jailed them again until they can satisfy the conditions for bail. The problem is that this new Judge ruled only to please the Government and forgot to check what the law says about what she could or not do.

You see under the Codigo Organico Procesal penal, the so called COPP, which regulates such decisions, the judge could not change the ruling by the prvious judge, because she was ocuppying that same position and had the same hierarchy. Under the COPP, only a higher instance can change decisions. Thus, once againg, the decision is illegal and the judge rushed to suck up to the Minister of Justice. But I guess she will not be removed for ignorance, miscarriage of Justice or making a political decision.

Oh! Mis-Justice in the revolution!

In the meantime, the Minister accused the previous Judge who freed the 29 prison workers of beong bribed or ” a bribe was coming”, I guess he was watching her via the Direct TV set top box or something screwy like that. You have to wonder how Lapi convinced all 29 to let him go, how they kept it secret and how come the Government had no proof that even one of them was involved.

(In Spanish here)
Just before the blog went on the blink for a few days I wrote about
the PDVSA bond issue that was announced first on March 22^nd., but
the details of which were not known until Monday the 25^th. As I
suggested when the final details were announced, it turned out to be another
gift to those that can afford to buy them, as the implicit exchange rate at
which the bonds were bought turned out to be around Bs. 2900 per US$, giving
“investors”, if we can call them that, a tidy profit, since the parallel
exchange rate closed on Wednesday at a bid price of Bs. 3480. Thus, if you
already sold your bonds in the “when and if” market and sold the dollars, you
made a nifty return of 20% for each dollar you purchased. Initially it looked
that there was going to be some risk, but by increasing the coupon of the
bonds, the risk was removed.

There were a few surprises: First, the allocation was
supposed to be announced last Monday, but when the time came for the
announcement, all people got was a press release, saying that there was such
demand for the bonds (surprise, surprise!) that PDVSA and the Central Bank
needed another day for assigning them.

While this was going on, rumors began suggesting that PDVSA
may increase the amount of the bonds to US$ 7.5 billion, which would make it
the largest corporate bond in Latin America’s
history. This made the bonds drop in the informal “when and if” market even if
it seemed unlikely that it would be increased. There were two reasons to think it
unlikely, one, it may be too large for the international market and two, the
prospectus called for a “maximum” of US$ 5 billion when you added the
maximum for each type of bond. But such minutiae don’t stop a revolution, who
would dare sue the Government for lying? After all, the chance of getting a
ruling in your favor would be minimal anyway.

And indeed PDVSA appeared to decide to take advantage of the
opportunity and increase the size of the offering to US$ 7.5 billion. Of
course, the Government hailed it as “the confidence of the Venezuelan investor
in its oil industry”, which was pure hogwash and an outright lie. Estimates are
that more than 90% of the bonds in previous issues have been sold by the local
“investors”, as three types of people buy these bonds: i) speculators who buy
them, sell them immediately and sell the dollars in the parallel market for a
quickie profit. ii) Individuals who want to protect their savings and these
bonds offer a chance to buy dollars at a cheap rate and iii) Corporations, mostly
multinationals, who have tons of cash in local currency and find this a good
way to either repatriate, keep their money in hard currency or use it abroad
until when and if, the Foreign Exchange control office CADIVI gives them
foreign currency. Of these, a very small fraction of the individuals may keep
the bonds, but this is rare, Venezuelans are famous for not trusting investing
in Government bonds. In fact, they have an irrational belief that their money
may be safer in a local bank than in a Government bond.

But the Government kept the pretense, even having PDVSA run
ads thanking Venezuelan investors for “trusting” their oil company and
investing in it. The disinformation was so huge, that some of the PDVSA ads
even said that for the first time, Venezuelans were becoming partners of PDVSA,
as if owning a bond gave you any right to owenership, even if the company
belongs to us in the end.

There was, of course, no real answer to the question of why
PDVSA increased the offering to US$ 7.5 billion. After all, the company never
said what it was raising the money for when it said it would be US$ 5 billion;
it had to give no explanation for increasing the size of the offering. In fact,
the whole documentation was a charade: The prospectus
had unaudited 2006 financial statements, which differed from the previous three
financial statements issued by the company so far this year, including those
handed to the National Assembly. In fact those used for the offering were the
best ones (financially) so far, with the company paying the smallest amount of
taxes of them all, no dividend to the Government (despite the Government saying
it got one) and thus the highest profits. Additionally, the production figures
in the prospectus were those of 2005 not 2006.

But even 7.5 billion US$ is not too much new debt for a
company with PDVSA’s revenues, which only had some US$ 3 billion in debt at the beginning of the year
and now has US$ 15 billion. And that may be the concern, that in the last three
months PDVSA has increased its debt from US$ 3 billion to US$ 15 billion with
little explanation. Thus, the amount of debt is not a concern, but the rate at
which it is being increased has raised concerns about the financial status of
the company.

If we believe the 2006 financials presented with the bonds,
PDVSA spent almost 90% of its EBITDA, it’s earnings before interest taxes and
depreciation, which measures a company’s earnings capability, on “social
programs”, but the truth is that PDVSA has become Chavez source of petty cash
for his pet projects, whether social or not. Thus, PDVSA now funds what people
thought the regular budget or the development fund Fonden was funding. Last
year, as an example, PDVSA funded the troubled Government airline CONVIASA to
the tune of US$ 60 million dollars, funded infrastructure projects like the Tuy
railroad for US$ 272 million, the Barquisimeto subway for 250 million,
Argentinean cooperation for US$ 188 million, Uruguay for US$ 149 million and
paid Cuba US$ 1,347 for Barrio Adentro II, which is separate from the daily oil
subsidy given that Nation to pay Barrio Adentro I.

Thus, Venezuela now seems to have three budgets with some
transparency in only one, The National Budget, the development Fund Fonden and
now PDVSA which appears to fund anything, even a foundation with the last name
of the Minister of Energy and Oil.

Thus, it would seem as if the money could be spent on many
things, but we just don’t know, in line with the lack of transparency the
revolution has accustomed us to. Personally, I think PDVSA may simply be
accumulating cash to fund the acquisition of a majority stake in the heavy
crude partnerships, Cerro Negro, Petrozuata, Sincor and Hamaca. That may
explain the US$ 7.5 billion in bonds, the US$ 3.5 billion in a credit line from
a consortium of Japanese companies and the US$ 1 billion from BNP Paribas, all
of which took place this year.

Of course, there are other intentions with these bonds.
First, monetary liquidity is reduced because basically locals buy the bonds
with Bolivars and get US$, thus these Bolivars are taken out of circulation,
which reduces the pressure on the parallel market. The problem is that even
this is not clear from the information given out. Here we can assume that since
PDVSA is a net receiver of dollars, these funds will go back to circulation. If
true, this will have little impact on the parallel rate. On the other hand, assume
they use all of it for buying US$, then they buy US$ from the Central Bank and
international reserves would drop below US$ 25 billion, which is right about
the point where foreign investors begin to get edgy. In fact, last week some Wall St. banks were
telling their customers to watch reserves and switch to PDVSA if it gets
foreign currency with the bonds proceeds. The argument is basically that PDVSA
owns CITGO and you can always sue in the US
if PDVSA does not pay, that would be a more direct way of recovering your money
than if Venezuela
stopped paying.

But the size of the issue shows how the Government has
little room for maneuver. If it removes US$ 7.5 billion from monetary liquidity
with this huge issue, liquidity only goes back to where it was on Nov. 10^th.
2006, but international reserves go down significantly and they have not
increased since August of last year. Unless oil prices go up significantly,
which may or not happen, this could get you into dangerous territory. At the
same time, by going to such a huge issue, it bars the possibility of going to
the markets anytime in the next three to six moths, since international markets
will have to digest the equivalent of 33% of what was outstanding for Venezuela in
the international markets since the new issue. This limits the range of action
of the Government, which may be forced into only issuing Argentinean bonds or
those from any other Latin American country to reduce liquidity.

And this brings us to another issue: the allocation. When I
first heard they were increasing the size of the bond to US$ 7.5 billion, I
thought this meant they were going to give corporations, which are the main
drivers of the parallel market, a large allocation. But this was not the case,
for amounts above US$ 500 thousand, you were given only 20% of the amount
requested and never more than US$ 20 million. Thus, corporate demand for
parallel dollars has not been satisfied which should keep that rate up after
wild gyrations the next two weeks as small investors return their US dollars to
pay for the bond.

As I suggested, small investors were assigned much more than
in the previous bonds which may lead to some defaults as they may not be able
to come up with the money to pay next Thursday. But those that can pay came out
really well in another strange capital markets operation by the revolution. Extreemely well, 20% return in one week is a return more in accord with ultra savage capitalism than that of a so called socialist revolution.

And by the way, the bonds are still tax free according to
the Minister of Finance, even if there is no legislation that grants them such a
status.

Is this the hallmark of a democracy?:

1) Former Governor charged with misuse of funds is jailed and after one year has not been brought to trail and all his requests to the Supreme Court are ignored.

2) After a bloody riot at the jail where he is being held, the former Governor escapes.

3) The Prosecutor charges 29 people of a group of 49 workers at the jail between civilians and National Guardsmen.

4) A Judge frees all 29 people saying there is no evidence proving that they were involved in the case.

5) Minister of Interior and Justice says that he will bring “all of the weight of the law” on the judge for ruling that way.

6) Judge is removed from her position.

7) Seven of the 11 civilians ordered freed by the Judge are held in the intelligence police headquarters and are not let go. El Nacional reports all 29 were not freed, El Universal reports the National Guardsmen were allowed to go home for the weekend.

From the dictionaryof the Royal Academy of the Spansih Language:

Dictadura (Dictatorship)

3. f.
Gobierno que, bajo condiciones excepcionales, prescinde de una parte,
mayor o menor, del ordenamiento jurídico para ejercer la autoridad en
un país

Government which, under exceptional conditions, prescinds of one part, whether minor or mayor, of the judicial order to exercize it authority in the country.

Well, this is becoming a daily ocurrence, not under “exceptional conditions”, that the law is set aside to follow the whims and desires of the Dictator/Autocrat.

Can it be any clearer than that?

Jose Rafael Lopez Padrino is a Venezuelan scientist who considers himself a true socialist and thus is against the fake Chavez revolution. Recently he has written a few letters to local daily Tal Cual explaining why Chavez so called revolution has little to do with true socialism. I thought it would be interesting to translate the latest one comparing what a socialist state would do with what is going on in Venezuela.

Socialist revolution
or State Capitalism? by Jose Rafael Lopez Padrino

The Lt. Colonel has
continued his verbosity about the anti imperialist and socialist character of
his political project. An immense shadow of doubt is spread over the Venezuelan
geography, because what little is known about his political proposal points not
precisely towards establishing a socialist experiment, but more towards a
project of a state capitalism.

Certainly what the
Lt. Colonel is proposing as “socialism” is in reality state capitalism, in
which the dominant and production relationships of the past are preserved. The
economic measures recently adopted by the Government (nationalization of CANTV
and Electricidad de Caracas, the creation of mixed companies in the Orinoco Oil
belt) have been put in motion in order to widen the bases for sustaining the
state capitalism that the regime promotes under the mask of a fake socialism
(socialchavismo). These nationalizations (not expropriations) have allowed the Venezuelan State to take control of them, but not
the workers, as it would correspond in a socialist state. The regime has
demonstrated that it does not have the smallest intention of modifying the
social relations of production and the forms of ownership with a true socialist
sense. In effect, the forces and social relations of production, which act in
Venezuelan society, have remained identical since about the midpoint of the
XIXth. Century. Let us recall that it is the relations of production, which
constitute the economic structure of a society, over which the political and
legal superstructures lies upon.

Of which socialism
can we speak about if this regime has allowed the rise of an ostentatious and
spendthrift boli bourgeois class, as perverse and exploiting as those linked to
the Adeco/Copeyano Governments? On top of that, it has allowed a
flexibilization of labor rules (cooperatives and other forms of management
sharing at companies) which area aimed at lowering costs of production and thus
at increasing the rate of return of the profits of the owners.

How can anyone speak
of a revolution that denies the stellar role of the working class (the social
subject of a true socialist revolution) in its political project (“five motors
of socialism”) and which continues its predatory practices on the already damaged
labor conquests and in making illegal the existence of unions? How can one
affirm the anti-imperialist and anti capitalist nature of the process, if you
have handed over our energy resources to the imperial multinationals (Exxon
Mobil, Statoil y Conoco-Philips, Petrobrás, Repsol) and it favors financial
capital devoting multimillion sums of dollars to subsidize bankers with bonds
with high interest rates, while the real economy of the country is in a grave
crisis.

These are all samples
of the true features of the “national socialism of the XXIst. Century “ whose
ideological substrate has nothing in common with the scientific socialism
postulated by old man Marx. These evidences clearly show that this revolution
is not socialist, nor is it going towards socialism. Exactly the opposite! That
is the problem of the gullible and the naïve that still believe in the kindness
of the messianic process of the Lt. Colonel.

As if accusing 29 people of conspiring to aid former
Governor Lapi escape from jail was not ridiculous enough, Minister of the
Interior and Justice Pedro Carreño, said today that he
would apply “all of the weight of the law” to the judge who freed the 29 people
jailed because of lack of evidence.

Minister Carreño appears to think he is the law, but he is
not. He is the man that pays the salaries of the Courts and coordinates the
judicial system but it is the Courts who impart the law, who in the end are
really the law and the Prosecutor’s office is supposed to enforce the existing
laws. But Carreño, of “the CIA is spying on us via the Direct TV set top boxes”
fame, has no clue how the Government functions and thinks he is the law. Of
course, the poor judge that ruled there was no evidence will now feel the full
effects of the autocracy, her career will be destroyed and they will suggest
she is opposition, despite the fact that Chavismo has loaded the Courts with
the faithful.

That is the travesty that justice has become in this country
under Chavez, that even the absurd massive indictment of everyone who was
working at the jail where former Governor Lapi escaped from are indicted “just
in case”, but even a pro-Chavez judge knows how stupid the whole thing is and
rules against them, which unleashes the ire of the autocracy.

When you think you´ve heard it all from the revolution…

Even during Easter week, called Holy week in Spanish, the revolution never stops in surprising us with its use of logic:

—The head of Civil Protection, the same one that said yesterday that accidents this year were running 38% above last year’s levels, said today that the alcohol prohibition had reduced traffic accidents. I guess the logic must be that if they had not prohibited alcohol, they would be running at 50% more than last year. Well, I propose the following improvised experiment next year to see if Venezuelans drive better under the influence: Let alcohol be sold 24 hours a day, if accidents drop, we know the answer, if they don’t, we can try a different improvised experiment two years from now.

—And a Court let the 29 jailed suspects of helping former Governor Lapi escape free, because the Prosecutor could not provide any evidence that they were involved. I think the Court was wrong, I am sure at least one of them had something to do with it, they should give the Prosecutor time to come up with the evidence like in the Anderson assasination case, where after two and a half years there is still no evidence, but there are a few people charged for the crime and even in exile. By the way, did you hear that the star witness in that case was caught with an illegal weapon and with a fake credential of being a member of military intelligence? This is the guy that never lies…

—Finally, Gral. Francisco Uson, who was jailed for five years for expressing a technical opinion, which somehow is not a violation of free speech for this autocratic Government, had his rights violated again yesterday when the Head of the jail where he is interned denied him visitation rights for writing a letter to TV station RCTV supporting them in their case against the Government that wants to revoke its concession. I guess Gral Uson has not learned his lesson and know that only Chavistas are allowed to have opinions. Recall it was only a week ago that the Prosecutor General said there was no crime by the Deputies who called for ignoring a Supreme Court decision, as this was simply an “opinion”. Uson’s lawyers went to the People Ombudsman, where he got no support. I guess the meaning of the word “people” is as restricted as that of “opinion” in the revolution.

In December President Hugo Chávez announced that the Government would
not be renewing the concession for TV channel RCTV, after more than 50 years in
the air. It was the end of years of threats against the media, including very
direct threats such as the day Chávez pointed a rifle at the RCTV camera and
suggested he could shoot the camera down at a large distance.

While I have outlined the legal arguments before, I thought it would be interesting
to go over them in detail in simple fashion, given the recent events against
the TV channel and the approaching date for the cancellation of the concession.

The Government argues that the concession of RCTV was renewed in 1987
for twenty years under a decree ( No. 1577) published in May of that year and
thus it can simply let the concession expire. This is the only legal argument
provided by the Government. However, article 4 of that same decree says
explicitly that after the first twenty years, the concession will be extended
for another twenty years “as long as the regulations on telecommunications
matters have been fulfilled”

Thus, not renewing the concession would require that CONATEL, the
telecom regulator, prove that RCTV did not fulfill all of the requirements of
the regulations and give RCTV the chance to defend itself. This has not occurred, nor has
the company been sanctioned for violating either the Organic Law of Telecommunications
or the Social Responsibility law.

In fact, application of the 1987 decree to RCTV can not be justified, if
it is not applied to all TV stations, since it should be equal to all of them
that the 20 years expire for RCTV, the Government’s TV station VTV or any other
station. It would also apply to all radio stations in the country. Why the
differentiation?

But on top of that there is the fact that a new Telecom law came into
effect in 2000, which required all TV stations to convert their concessions
before September 2002, by requesting the conversion in front of the regulator
and the Ministry. RCTV as well as all other TV stations submitted all of the
paperwork, but only one of them (Venevision) has been informed of the
conversion. However, they have all operated for four years, paid the required
taxes under the telecom law and has participated in all of the activities
required by CONATEL as a holder of a valid concession.

Fulfilling the requirements for conversion under the 2000
Telecommunications bill implies that RCTV’s concession was automatically
renewed for twenty more years or until 2002. Under Venezuelan legislation, since the change was manadtory, a reason had to be given for not coverting the title of the concession, thus not replying in itself could be legally interpreted as the change being approved, not only for RCTV but for all TV stations that did not receive a reply (All but Venevision).

Thus, the conclusion is very simple from a legal point of view, if
decree 1577 from 1987 is applied, there has been no formal proceeding against
RCTV that would justify not extending the concession and it is an outright lie
that the Government is simply letting the concession die. If, on the other
hand, the 2000 Organic Telecommunications Bill is applied, the Government has
allowed RCTV to switch its concession title not only by the fact that it never
responded to the company’s submission of the required paperwork, but also by
the fact that for four years after the deadline for the conversion, the
Government ahs recognized RCTV as having a legal concession.

Thus, the Government the decision by the Government represents a
violation of RCTV’s rights to due process, it is being discriminated against
and it represents a violation of freedom of speech as it represents an abuse of
official controls as typified in the Inter American Human Rights convention.

Thus, the Government of Hugo Chávez hides behind a smokescreen,
encouraging its hoodlums to attack that station as
detailed in Publiuspundit and even
“invites” them using the official TV channel to go and participate in these
acts of fascism.

No rule of law, human rights violations, no due process and state
sponsored fascist attacks on the media.

Not precisely the definition or hallmarks of a democratic Government, no?.

Many things happened while I was off the air, some, like the PDVSA bonds, I
will write about later, but I can’t help but put my two cents into the following
stories:

—Former Governor Lapi escapes from jail: Daniel has covered this in detail here,
here
or here,
but the case it’s truly a reflection of the lowlifes of this robolution. He is
first called a coward for escaping from a jail in a jail system that is famous
for deaths among inmates and riots; with close to a death per day in the country’s
jail system. A couple of days before Lapi’s escape, eight people were killed in
a jail riot where he was being held and a grenade exploded within the jail. Of
course, he has been in jail for misuse of funds for a year, but the Prosecutor
has yet to bring him to trial, in violation of the laws. Moreover, all of his
injunctions at the Supreme Court have not been heard by that Court, which is also
illegal since there is a limit to how long they have to decide on them. Despite
this travesty of Justice, the Head of the Supreme Court publicly speaks on a
case she might have to rule later, saying that here is another crime committed
by the former Governor. Even more unethical is the fact that she happens to be from
the same state of Yaracuy where they have been political enemies for
years. How is that for political hate! But the laugher has to be that the Government jails 49 people who
work at the jail for helping the former Governor escape. This seems to suggest
that they have no clue who helped Lapi. In a country where three people can’t
keep a secret, a conspiracy of 49 is unheard of. Gimme a break!

—Improvised prohibition or dry laws: Here is the Government which for eight
years has shown its total disregard for human life, allowing homicides to
triple in that period and all of a sudden they become fundamentalists and
prohibit public drinking everyday after 5 PM for the whole of the Easter
vacation. (Kathy has
covered this in detail) This was so improvised, that it was announced the day
before the vacation was to begin, catching bars, restaurants and discos off
guard, they already had stocked up for the holidays, particularly in resort areas where
Venezuelans congregate for the holidays. (Imagine a disco with fruit punch!) Even funnier, it is all blamed on
capitalism which puts “profit ahead of human life”, as if the badly maintained
roads and highways of Venezuela,
which are responsible for a good fraction of all accidents, were maintained by
extraterrestrials and not by the Chavez Government itself. And then there is of
course the problem of wishing it won’t make it so: enforcement. Last night I
looked out my window to the barrio next to my building and the corner store was
selling beer en force and the people drinking it, under the watchful eyes of
the police, who would not dare interfere with the fun of their own neighbors.

—Giving away assets of FOGADE: And then there was the biggest improviser of
them all, Hugo Chavez, asking that FOGADE, the institution that guarantees the
deposits of the banking system, give away all of its properties to the
“people”. Way to go Hugo! Take the “people’s” guarantees to
give to some other “people”. As long as you sound like you are a good guy, who
cares if the “people” are the same or not? This is part of the
Government by witticism that Fabre talked about. The properties of FOGADE were
acquired in the 1994-95 financial crises in exchange for the depositor’s money
and have been sold slowly to strengthen the weak equity of FOGADE. Why not just
give the all the money away too? Who needs a guarantee for deposits? Nothing can go
wrong in the revolution, Hugo won’t allow it. Yeah, sure!

—RCTV: And how about funny guy Jesse Chacon the Minister of Communications
appearing on TV and saying how RCTV had submitted its renewal under the new Broadcasting
Bill in 2002 on time and providing legal ammunition for that station to argue
its case? Of course, in his world with no logic, the conclusion of his speech
was that the license had to be revoked because they felt like it.

More on PDVSA and RCTV later as I catch up.