The Devil's Excrement

Today President Chavez once again
told foreign oil companies that are part of the service agreements that if
they don’t convert before the end of the year to a partnership, they can leave
the country.

As way of background, in the 90’s PDVSA sold off the rights to exploit certain
oil fields in an auction that brought in over US$ 2 billion to the country.
These agreements, were “service agreements”, the company would produce
oil and sell it to PDVSA. In order to give these companies and incentive to
invest, PDVSA fixed benchmarks above which the service companies would be paid
an extra amount.

Chavez campaigned against this so called “oil opening” claiming that
the country was giving up its sovereignty in the process. In May, the
government called on all these agreements to convert to a partnership under the
new hydrocarbons law. In these partnerships, PDVSA would hold at least 51% of
the company and the company holding the service agreement would have a
percentage based on how much it invested in the field since the original
agreements were signed.

Problem is, PDVSA has no money. So how would PDVSA capitalize its stake in the
company? The amazing answer is that the companies will OWN the reserves
in the field. For the first time since the oil nationalization bill of 1976, a
Government is giving away what that bill says is 100 percent owned by
Venezuela
and the Venezuelans. Talk about sovereignty!

This is only happening to please Chavez’ ego and get rid of the agreements
under the oil opening, as promised in his campaign. But what this represents is
truly giving up sovereignty as these oil companies will be able to register
their reserves in their balance sheets and Venezuelans will lose ownership of
their oil from a Government that claims to defend “their” interests.

So, why is it that these companies don’t want to convert to a partnership?
Easy, in order to convert, you give up your rights to the earlier contract which
the companies won in an auction and paying a bonus which ran in most cases in
the hundred million dollar level, and sign another “interim”
contract, which no longer contains a clause of international arbitration. Then,
you will negotiate with PDVSA how much your investment is worth and the
percentages of the new partnership will be decided. Thus, some companies don’t
want to take the risk of losing arbitration and have PDVSA determine a
percentage of the partnership that would be worse financially than the current
arrangement.

Remarkably, one of the
companies that has refused to sign the agreement is none other than Petrobras,
the oil company of what Chavez considers to be his friendliest state after Cuba.
But more remarkably, is that the law in Venezuela
does not require that you adapt retroactively to a new law, the new law only
applies to events after it is enacted.

In the words of oil expert from
Central University Mazhar Al-Shereida “I do not understand who is the
genius that reached the conclusion that it is better to convert some companies
(..) That have simple service contracts, where you pay them for the work done,
but has to hand over the oil to its owner who is the Venezuelan state, into
partners of 49% of the oil produced. Sovereign control in Saudi Arabia and Kuwait is 100% and we that are
searching for a new form of socialism are facilitating these multinationals
conditions that they can not find anywhere”. Adds Al-Shereida: “What
does the country gain from this? Why isn’t this being debated like it used to
occur in the IVth. Republic. “He also says that Caldera’s oil opening was
preferable, because no sovereignty was given up.

Similar thoughts are given by Heinz
Sonntag, the former Head of the Sociology
Center at Central University,
who questions the “opportunism” of the “brain” behind all
this, Vice-Minister Bernard Mommer. Sonntag claims Mommer told him he changed
nationalities in order to become Vice-Minister and says Sonntag: “If we
have to talk about an assault on the oil industry, which Mommer opposed in the
opening led by Giusti, the current maximum leader of the Bolivarian revolution
appears to be committing one of a more compelling gravity than the one proposed
by Luis Giusti (the former Head of PDVSA)”

Thus,
the revolution, led by Chavez
denationalizes the oil industry for no reason other than fulfill
Chavez’ dream
and promise of getting rid of the oil opening. Of course, how it is
done is
irrelevant, even if it goes against the principles of those that
support
Chavez. That is the way autocracies work, the autocrat does what he
wants, as
long as he can get away with it. Unfortunately for all, he can get away
with it
in this case. And those that follow him, accept it because Chavez
wants it, even if they disagree with it. They will tell us later, they
did not understand. But we do.

On Friday from Brazil, Hugo Chavez said
that Venezuela had withdrawn US$4 billion from the US and moved it to
Europe because of the “threats”. Yesterday Cenbtral Bank Director
Domingo Maza Zavala said they had not approved
that and that it was their resposibility to make such decisions and
Chavez had no say in it. Maza even said that such a decison would be
based on profitability.

Another lie for the ignorant gallery who will never know that Chavez is playing them for fools.

Chavistas temblad!

Caracas Chronicles is back!

Yesterday the Head of the Polar Group outright rejected the expropriation of its plant in Barinas state. Lorenzo Mendoza said
that the act was unfair, baffling and unconstitutional and he had no
plans to negotiate but simply defend the groups’ rights in the Courts.
He stated that as deterrmined by the National Assembly, the plant was
operational and the Government had gone back on the agreements that had
been reached.

Later, the cynical Minister of Agriculture, who had been part of the
agreements mentioned by Mendoza and had said the expropriation was an
“indepndent” act on the part of the Governor of Barinas stare, who
happens to be Chavez’ father, described the future plans for the plant,
proving that the action was in concert with the Central Government, no
matter what these liars try to say.

But the best performance award had to be given to Chavez himself,
who gave his assurances that the State would not tarmple the rights of
the Polar Group, as if an illegal intervention, followed by an
agreement which was violated within a week and an unheard of
expropriation by a Governor of the Polar plant was not trampling
enough. To make the performance even more cynical and threatical Chavez
told Mendoza that they could not break the links, that they could not
throw stones at each other, as if the man with the daily multiple
catapult was not Chavez himself. Chavez’ performance was so incredible,
that I watched it in disbelief wondering if this guy was manic
depressive or what. How can he posibly talk about links when it is his
Government that has acted in its best autocratic style, with total
disregard for the law and the use of military force? The Constitution,
the law and procedures established by it have been bypassed, using a
style calling for negotiations and acting like bullies trying to see
how far down they can push and abuse the other side.

The whole episode is certainly one of the most ominous and threatening
ones in recent Chavez autocratic history. Private property rights seem
to be defined at will by the President himself, without the
judicial power providing the required defense of the Constitution and
the people. The President of the Supreme Court was more concerned
yesterday with criticizing Human Rughts Watch, than with saying
anything about how the law in Venezuela is non-existent, how the rights
of Venezuelans, of all levels, are trampled daily and he stands there
like a mute-deaf-Chavez-puppet allowing the Bolivarian Constitution to
be trampled with, bypassed and ignored by the dictatorial designs of
the only authority he recognizes: Hugo Chavez.

The only saving grace is that Mendoza did not bidge, much like Azpurua
on Sunday. It is time to take a stand before we lose all rights, before
this fake democrats decide they are tired of acting. Who is next? You?

Well, the Law of the Jungle continued en force in Venezuela, this time in my own municipality.
The story is quite simple and this time there are videos to prove it. A
guy in a Motorcycle, wearing no helmet is stopped by the police of the
Chacao municipality. The guy has a gun which is not of police issue,
identifies himself as a metropolitan cop, but when he is going to be
arrested, escapes. He actually goes in a one way a street in the wrong
direction.

(On the right and left you see the armed “cops”,
brought in by Eduardo Semtei to rescue the cop that the Chacao police had detained. You
can see Semtei, the guy with the Lacoste shirt in the middle picture,
giving orders and you can hear him ordering his cops to shoot the
Chacao cops in the video)

The
local police (Polichacao) pursues him and captures him and they take
him to the headquarters of Polichacao. As they are booking him a
contingent of 60 cops from the metropolitan police shows up, well
armed, led by the Secretary General of the Metropolitan District, the
former infamous former Head of the CNE Eduardo Semtei. They attempt to
take the guy, who is supposed to be a cop by force, when the Chacao
cops refuse to Semtei i.e. heard on the video telling the metropolitan
cops to shoot! Fortunately, they had better sense and did not obey this
nuts commands. (All of this, from the time the cops arrived in
Polichacao was shown in video).

As Lopez told it, this could have created a tragedy and fortunately nothing else happened. Lopez said he would sue
Semtei. Lopez added that had nothing else happened and the cops not
arrived led by Semtei, the Metropolitan cop would have left with a fine
for not wearing a helmet and driving the wrong way in a one way street.

Lopez
also said that he was sure that if he had done something like that, the
Government would intervene his municipality and make a big scandal of
it. Instead, the Minister of Interior and Justice questions what
Polichacao did, for not releasing the cop when he showed the ID from
the Metropolitan Police. Of course, he fails to mention why he escaped,
why he was armed with a non-issue weapon and the fact that he was in
violation of the law for not wearing a helmet. But you see, this is the
law of the jungle, if you are with the Lion King, you do what you
please.

You can see parts of the viedo here.

Today’s Editorial of Brazilian newspaper O Globo

The price of a barrel of oil has increased more than four times in the
last six years and Venezuela (One of the largest oil exporters of the world), earned
billions of dollars more of what the most optimistic projections could have previewed,
Despite this, there has never been so many poor Venezuelans-more than half the population-
and in no other period of its history did poverty grow at such an accelerated rhythm.
This is demonstrated by studies by the United Nations for Development (PNUD)
and the Instituto Nacional de Estadisticas of the country itself.

Colonel Hugo Chavez assumed the Presidency in 1999 with the argument
that the existence of poverty in a rich country was inadmissible and with the
compromise of making a social revolution (Baptized later by him as the Bolivarian
Revolution), to end with poverty in record time. Chavez, as is well known, concentrated
himself more in obtaining more powers than his predecessors and the international
circumstances could hardly be more favorable. Then, what went wrong ?

It is clear that the Bolivarian revolution, a mixture of assistance, populist
rhetoric and certain notions of social justice, far from being the solution to the
problems of Venezuela,
is today the biggest obstacle to for production and the distribution of wealth.
The extra money that has come in, is being misspent in propaganda programs that
at the most guarantee the needy daily survival, from the hand to the mouth, but
do not alter his living conditions.

Chavez selected as his guru Fidel Castro and as compass the anachronic
example of Cuba,
not exactly a model of prosperity and democracy. As if the victory in the ballot
box was a blank check, he, speaking in the name of the Venezuelan people, uses the
executive power to coerce the judicial power, configure the legislative one in
his own image and similarity and intimidate the press

The result
is a country that preserves the institutions as façade, but where the will of
the President prevails over the Constitution. Not by chance, does the Venezuela
of Chávez live in crisis; with freedom threatened and the private sector
fearful and inhibited, even with the price of oil at these heights. It is a
scenario radically hostile to investors, who are horrified at the unexpected,
but that, in a global economy, are the guarantee for the continuous production
of wealth.