The Devil's Excrement

And the revolution bypasses classical road signs between San Carlos and Acarigua with this somewhat atypical road sign, which uses a word “arrecha”, meaning tough, difficult, which could be considered to be coarse. The sign says that the curve ahead is “arrecha” and people’s carelessness kills them when they take it. I wonder if they have thought of hiring an engineer that could make the turn less arrecha and fewer Venezuelans would die. Traffic accidents is the number one cause of death in Venezuela.

From a CANTV internal e-mail, CANTV Roja, Rojita…

Ever since last Monday I have been suspicious of what hides between Chavez’ proposal to nationalize telecom company CANTV and electric company Electricidad de Caracas. The whole thing makes little sense. These two companies have become the center of attention but are not and should not be that critical to Chavez’ so called socialist project in Venezuela. It certainly makes no sense to use much needed funds on nationalizing these two companies, while there are so many needs elsewhere. Even philosophically, neither of them are that important in Chavez’ project, after all, except for Valencia, Caracas, Nueva Esparta and Puerto Cabello, the Government already controls the rest of the electric sector via power comapny CADAFE and power generating and transmission company EDELCA.

The same with CANTV. What is the point in calling it strategic, when you have competitors in all fronts, with CANTV’s cell phone subsidiary Movilnet having only 35% of the cellphone business? After all, fixed line penetration is barely 11% of the population, while cell phone penetration is above 50% of the population.

The same thing happens with data, while CANTV certainly has the best network in the country, if it is badly managed in the future, like it was in the past, it will just give an opening to competitors to take business away from it. Yes, CANTV has 85% of the Internet access business, but it does because it has executed so much better in terms of quality of service and price that it managed to prevail. But will it be able to continue to prevail in Government hands? And if it doesn’t, will the Government then tell us that it needs to privatize the rest? In fact, if the Government were sincere, it would nationalize the fixed line operations of CANTV (which are regulated) and let the company keep it’s cell phone subsidiary, which are not. But can the Government keep up the same quality of service?

I doubt it.

I doubt it, because the first thing that will happen is that good managers and technical people will certainly migrate to Movistar and Digitel as CANTV becomes a political operation with ever changing managers and Presidents, much like the Ministers and the General Directors of the Ministries, which last on average less than one year in their positions.

Thus, the key seems to be what unannounced changes Chavez will be able to sneak by us using the Enabling Law, which now is supposed to last for two years. The experience is not new. In fact, Chavez had a long honeymoon with Venezuelans when he was first elected in 1998: the call for the Constituent Assembly, the approval of the new Constitution and Chavez first reelection. But people began to get worried when in 2001, Chavez asked for an Enabling Bill and a scant ten days before the end of it, it presented 44 Bills that were quickly passed by the National Assembly, including the infamous Land Bill. Less than two weeks after that there was the first major protest against the Hugo Chavez Government on December 10th. 2001.

There is not much information about what will or not be included in this Enabling Law or how open or close ended it will be. It will certainly include a new Law for a National Police, various laws to restructure the Armed Forces, a law for nationalizations. But beyond that it is not clear.

Will a new Sports law be part of it? Will that law ban professional sports as has been suggested by various Chavista Deputies? Will a new Health Care Bill also be part of it? Will that law nationalize private hospitals and health care facilities? How about Education? Will the new Higher Education Bill be part of the Enabling Law and take away the autonomy of public universities?

The same thing can be asked about Constitutional reform. While Chavez has chosen that route, some of the changes he is proposing seem to go to the heart of the still young Bolivarian Constitution and would seem to require a Constituent Assembly for its approval. This in turn requires a referendum calling for it, as well as another calling for its approval. From the change of the country’s name to include the word socialist to the political restructuring of the country, these appear to be more than just adjustments that would require more than a simple reform by the National Assembly. But of course, since Chavez has 100% of the National Assembly, he does not want to have a Constituent Assembly with even the minimal voices of dissent present in it. Autocrats are not democrats, they act according to their desires and interests, not democracy and the law.

The so-called restructuring and redistricting of the country is what bothers me the most. In the name of more decentralization, which Chavez has certainly gone against during his eight years in power, Chavez is proposing the elimination of municipalities and Mayors and their substitution with “communal boards”. What Chavez proposes is a sort of federal system for cities in which communal boards make up its components. In this manner, Chavez will not only eliminate the rise of possible political opponents, but his more militant supporters will overwhelm these boards, giving Chavismo total control of the country at all levels.

It is these changes, which seem to be critical to the progress of the fake revolution and acquiring control of the political and social system in Venezuela. So far, they have not been given the prominence that they deserve. The average Venezuelan could care less if CANTV is or not nationalized, but education, sports, and his/ her political representation are indeed of importance, but by focusing the debate on the more confrontational nationalization processes, the Government may simply be masquerading its true political objectives.

The new Vice-President Jorge Rodriguez started his tenure in his new position with the same cynical attitude as when he was the President of the Electoral Board. After the 19% plunge in the Caraca Stock Market, he told the press:

“There was no “desplome” (sharp fall or plunge) of anything, the Stock Market is more solid than ever, the economy is more solid than ever…”

Well, if the trading of the stock of Electricidad de Caracas had no been halted yesterday after the first 20% drop, I am sure the index would have fallen even more than 19%. Moreover, the nationalization of CANTV and Electricidad de Caracas represents a severe blow to the exchange, since two of the most important stocks in the country will no longer trade, shrinking the size of the stock market capitalization to a puny US$ 5.5 billion  from an already small US$ 8.2 billion.

I guess that much like the reality of what is happening in the country, the strategy is that if Government officials say something a sufficient number of times, it magically becomes the truth (1992 coup, conspirancies, plots to kill Chavez and the like). In that spirit, the the devil ratifies that the stock market did not drop yesterday and the parallel exchange rate did not reach Bs. 4,000 to the dollar for the first time in history.

Oh! I forgot, there is no inflation in double digits either.

Brutal Power by Teodoro Petkoff in Tal Cual

It is curious, but the person that is going out of his mind the most with the case of TV station RCTV is Chavez himself. His reaction to the proposal by OAS Secretary General Jose Miguel Insulza, besides the brutal and unacceptably inconsiderate on the personal level, speaks about his psychological impossibility of carrying out a debate in a civilized tone.

The President does not tolerate the smallest disagreement. At the first sign of one, his fuses blow up.

Insulza, who should be congratulated for the pertinence of his words, made a moderate statement, alerting about the political repercussions (which he did not even qualify) that a measure like that of canceling the concession of RCTV would have. Obviously, it is not a threat; it is the ratification of a fact. Only the paranoid interpretation of Chavez can conceptualize it that way.

Or is it that Chavez imagines that liquidating a TV channel is not an action full of consequences? Chavez who meddles in everyone’s affairs, who gives opinions without blinking and on occasions, with lots of ignorance, about the policies of others countries, immediately covers himself with the national flag and thunders against a supposed interference of Insulza in our internal affairs. The person who made the statement was not Bush but someone of whom Chavez said in April of last year that “we have powerful reasons” to back him to be Secretary General of the OAS.

The Venezuelan Government lobbied for a “viceroy of the Empire” as he now qualifies the man that he voted fro? Insulza called for reflection and to review the decision. An understandable proposal which did not even enter into the legal or judicial aspects of the matter, but it simply stopped at the political consideration of the matter, and which, nevertheless, was responded to with a personal offense and with it the well-known “pseudo patriotic” argument. Chavez, of whom it is said understands that he put his foot in his mouth at the UN, will surely perceive soon how counterproductive his insults against Insulza will result. Give time to time.

The RCTV matter is not simply an “internal” matter, The repercussions of shutting down a TV channel go much further than our borders and pertain to all countries. It is not a matter only of defending a TV channel but of rejecting an authoritarian style, autocratic and brutal in its exercise of power. If the Secretary general of the OAS did not give his opinion on that, that would be out of the ordinary.

A Government like Chavez’ which is advancing an international policy as interventionist as the current one, can’t go later and rent its clothing when from the outside someone criticizes it or comments on its actions. If the Secretary General of the OAS of today, which is not the one of the sixties, could not “interfere” in matters as grave as the closing of an important TV station in any of our countries, then we certainly would have to dissolve the interamerican organization.

Integration and multilateralism have a cost, which all countries pay, of a relative reduction of their national sovereignty. Now, all countries have something to do with all countries. Even if Chavez is not pleased with this, he has to respect the rules of the game.

Markets in Venezuela plunged and the effect was felt elsewhere, as investors were reminded of why these markets are called “emerging markets” and how politicians’ whims can change and turn the direction of the markets in no time.

What was clear was that Chavez’ remarks on Monday were improvised and reflected conversations within the administration, but they were certainly not ready to announce anything But, as usual, the autocrat can not contain himself on a stage and besides his insults to the church, the OAS Secretary General and anyone that opposes or disagrees with him, he also let out plans that were apparently not ready to be revealed.

And it was the lack of detail about the plans for nationalization that shook the markets. First of all, Chavez was only specific about the telephone company CANTV, which he ordered nationalized. CANTV is 29% owned by US based Verizon, which had reached an agreement with Mexican telecom magnate Carlos Slim to sell its stake at US$ 21 per share traded in the New York Stock Exchange. That sale was being held up since June by the Venezuelan telecom and anti-monopoly regulators, which kept asking for more information without reaching a decision. Under Venezuela’s market laws, an offer like that had to be extended to all shareholders of the company under the same conditions, which had driven the price of the company’s stock near the $20 level.

But Chavez did not say anything yesterday about compensation to the shareholders, or even if they would be compensated, which dropped the stock from US$19.83 to US$9.50 in early trading, before it bounced back above US$ 12.1, certainly below the US$ 21 promised by Slim’s group.

But if there was confusion about CANTV, Chavez’ others threats of nationalization were even less defined. He stated broadly that everything that was privatized had to go back to the Government, which would involve all sorts of companies, including steel maker Sidor, which is owned by Ternium. Even more confusing was his mention of Electricidad de Caracas explicitly, which was purchased by US based AES, but was never owned by the Government since electricty came to Venezuela. It was simply a private transaction in which AES offered to buy shares from all shareholders willing to sell. Even more ironically, Chavez made it sound like that transaction took place long ago, in the evil days of the fourth Republic, but this was initiated, approved and completed during the Chavez presidency and he once hailed that same transaction on the steps of the Presidential Palace as he hugged the President of AES. Which simply goes to show that eight years later, Hugo Chavez still is improvising and planning what he wants to do and that the project is simply about Hugo Chavez.

One immediate impact of the measure is simply the almost certain death of the already moribund Caracas Stock Market. Curiously, it was the Government itself which helped revive it last year, first by changing the savings plans of companies and Government institutions to allow investments in stocks, as well as hailing, authorizing and promoting a secondary offering of Electricidad de Caracas shares in the amount of US$ 90 million, which was purchased mostly by small investors in July 2006.

Shares of both CANTV and Electricidad de Caracas were halted from trading today for 48 hours as the the former military officer that was put in charge of the Securities Commission asked investors to remain calm, “don’t sell” and wait for more details to be announced tomorrow by Chavez. In any case, the Caracas Stock Exchange dropped today 18.6%, after Electricidad de Caracas was halted after a 20% drop. If the stock had been allowed to trade it would have dropped even more, pushing the index even lower. The parallel rate jumped near Bs. 4,000 to the US dollar, almost twice the official exchange rate.

Chavez’ desire for control has now been extended to these two companies (and who knows what more!) in a clear sign that the President does not understand how times have changed. When CANTV was privatized in 1990, it was a fixed line operator with some 2.2 million lines. Today, the company has 3 million fixed lines and over 5 million cell phones. But there are two more cellphone operators which combined with CANTV reach 50% of the Venezuelan population, thanks to prepaid cell phone cards. Thus, CANTV is no longer the monopoly it was in 1990 and, if and when, it is run by the state it will become inefficient and badly managed and the two competitors it has will simply clobber the company in the market place, rendering CANTV worthless in the hands of the Government. The same is true for trunking, data and Internet services. Competitors will see the nationalization of CANTV as simply a business opportunity in the face of a company which will certainly become politicized and slow under the new revolutionary management. (Just imagine Chavistas jockeying to be on CANTV’s Board or “participate” in an equipment contract)

And in Internet services, I am told half of the traffic leaves the country via routes different than CANTV so that fears of Internet control are largely exaggerated.

What is clear is that rather than going towards a “new” model, Chavez seems to want to go to a model that is so IVth. Republic that one does not know whether to laugh or cry. Chavez’ idea of XXIst. Century Socialism seems to be longing for how Venezuela was run in the days of his youth, ignoring the effects of technological advance and globalization, as well as its total failure.

Thus, in a country with more than 50% poverty and a collapsing infrastructure, Chavez chooses to spend money elsewhere in his continued belief that we are such a rich country that we can do all things at once. Ironically, oil was down sharply today before recovering partially at the end of the day.

But what is perhaps more worrisome about all the announcements is that Chavez has asked for extraordinary powers, his second enabling law since 1998. Worrisome, because one does not know what will come out of it. One has no clue as to what Chavez can come up with during that year where he will have the ability to legislate at will.

Meanwhile, the whole episode clearly proves, not shows, that Chavez is not only not a democrat at all, but he is not even interested in talking about the issues with his own supporters. The National Assembly members will become a decoration for one year, as he legislates for them. They have not been allowed to discuss these issues, they were told what to do, in the same manner they were told they will have a single party from now on. And if you don’t like it, well, good riddance, as the Chavez praying mantis effect has had a great run during the last week.

Thus, for all the mention of the “people”, “participatory” democracy and the like, in the end, it is all about Hugo Chavez and what he thinks and wants. The model is whatever it may be today or tomorrow in Chavez’ mind, but nothing can be assured beyond that. Yesterday it was Venevision that was conspiring against him. Today it is RCTV. Tomorrow who knows, it may be this blogger. What is clear is that Chavez means less democracy, less freedom of speech, more state control, less power to the “people”, less respect for human rights or international law or institutions. Autocracies are like that and Hugo Chavez’ is not going to be an different. Today markets plunged in Venezuela and so did the country’s democracy.

And the mos unfortunate comment yesterday had to come from the new Minster of Finance Rodrigo Cabezas, who said that:

“Venezuela will not be governed in the second term by economic groups, particular interests, but the people will govern”

I certainly hope Cabezas will tell us which economic group ran Venezuela in the first eight years of the fake revolution led by Chavez. What did he mean?

And then in the afternoon, the autocrat Hugo Chavez announced that he will ask the National Assembly for extraordinary powers for one year so he can legislate by decree and at will, essentially anointing him as the King he wants to be. Chavez said he would use these powers to change a few things in Venezuela such as;

–Nationalizing the telephone company CANTV, which is 28% owned by Verizon but was the subject of a takeover by a group of companies owned by Mexican Carlos Slim at $21 per share. Chavez did not say whether he would pay for it or not.

Clearly, after dumping more than US$ 200 million in trying to start a state telecom company and not completing many phone calls, Chavez has decided to short circuit the process and go back to the wonderful system of having an inefficient state run telephone company. I guess he misses the times when olny one in three phone calls could be completed and it would take at least a year to get a telephone.

–He said he would nationalize the electric companies that were privatized. I guess nobody told him that Electricidad de Caracas was not privatized, but change from one set of private hands to another. (By the way that sale took place under the Government of ….Hugo Chavez himself!!!) The only electricity company that was indeed privatized was the Electric company of Nueva Esparta in Margarita Island and maybe the US company that bought that will be very happy to give it back anyway.

–He said he would abolish the commercial code which regulates legally how transactions are made in the economy.

–He said that he would remove the independence of of the Central Bank (which is almost non-existent) which he put into his own Constitution in 2000.

Finally, Chavez used his best Idi Aminesque diplomacy to call the Secretary General of the OAS a “pendejo” which benevolently can be translated as dumbass. Just to makes sure it was understood Chavez said that Inzulsa was a pendejo from the p to the o. Chavez also asked for Inzulsa’s resignation. For once, I may agree with the epithet used by Chavez given the customary position by the OAS on Venezuela’s affairs.

Just another day in the fake revolution!