The Devil's Excrement

The Venezuelan National Assembly completed the approval on its second
discussion of the Credit card, debit card, prepaid card and other
Electronic Instruments Bill. The Bill as proposed represents another
significant intervention in the activities of the financial sector
which will simply elevate costs and decrease the quality of service.
While the intent is to protect the consumer, the articles approved so
far indicate that it is likely the consumer who will be most affected
by it.

To begin with, the bill as proposed, will ban banks from
charging commission for ATM withdrawals and services. This will clearly
reduce the scope of the current networks which are for profit systems
shared by many banks. Banks will likely being dismantling these
networks if they can not charge for services.

One of the most
difficult and complex parts of the Bill is that it requires banks to
charge a different interest rate for goods which are part of the so
called “basic basket” of goods. The rate for these goods would be 50%
of the prevailing credit card rate. It is unknown how the banks will be
able to distinguish the different types of goods purchased, as well as
the complexity introduced in separating these two types of items in the
Bill.

The Bill also would require banks to install cameras and
fingerprint grabbing machines at all ATM’s in order to reduce fraud and
protect consumers. This has an absurd cost, more so in a country with
average deposits per account which are much lower than international
standards and most of these machines are imported. Clearly, the
consumer will end up paying for this in the form of higher interest
rates for credit. Additionally all ATM’s will have to have Braille
characters on them for the blind.

The bill also prohibits banks
from charging interest on interest, which was expected after the
Government, has prohibited this for a number of financial instruments.
The Bill includes penalties for violations, including fines and jail
time in the case of interest charges above those mandated by law.

The
part about the interest on basic goods being half of the usual interest
is not only absurd because of its difficult implementation, but also
because credit card penetration in Venezuela is very low. There are
some 800,000 Venezuelans with credit cards or only 3.2 % of the
population, so this type of implied subsidy simply makes no sense.
Moreover, I can already see people lining up to buy liquor and have it
billed as meat, so that it gets half the interest. What’s next, the
interest rate discount police to stop that?

Imagine this story in revolutionary Venezuela:

Someone starts a
newspaper with a US$ 3 million investment. According to Venezuelan law,
if a company has more than a certain number of workers they can form a
union. This paper exceeds that number. In the case of newspapers, they
join the umbrella union called the “Sindicato Nacional de Trabajadores
de la Prensa”, which may mediate between the workers and the owners.
But in this case, the owners refuse to negotiate a collective
bargaining agreement.

The workers go to the Ministry of Labor,
which issues an order for the owner to sit down and negotiate with the
workers and the umbrella union. The owner refuses to sit down and
pressures workers into signing a contract written by the owner (after
the order was issued) or they will be fired. Some are actually fired.
The union refuses to recognize the contract, so does the Minister of
Labor and the owner continues to refuse to recognize the order by the
Ministry.

A case of exploitation by oligarchs? A case that
proves why the revolution is needed? A violation of the rights of the
workers? Human rights abuses by the wealthy?

Well, the
confrontation described above is taking place at Diario Vea, a
pro-Chávez newspaper, led and owned by the former leader of the
Venezuelan Communist Party Guillermo Garcia Ponce, who held the post of
Director of the Revolutionary Political Command for Chávez’ MVR party.

Amazing,
no? These are the revolutionary leaders. The ones who care for the
people, the poor, blah, blah, blah and etc, etc, etc.

And
please, don’t even ask where the former President of the Venezuelan
Communist Party and Director of the MVR’s political command got the US$
3 million to start the pro-Chávez paper. You don’t ask such questions
in the revolution.

I will be gone for a few days to go to a sort of family reunion, you
could call it the mother of all Mother’s Days. I will probably have a
connection to Internet, but my mind will be elsewhere, so expect
posting to be light. I have asked Jorge Arena to give a hand on things
that may happen while I am away. In the mean time I leave you with three
thoughts, unrelated:

–More irresponsible politicians: Primero Justicia candidate Julio
Borges, joined the ranks of the irresponible politicians in Venezuela
when he suggested that the Government should distribute 25% of all oil
income directly to the population. This comes out to Bs. 2 million per
inhabitant per year (about US$ 900). This is populism and demagoguery
of the worst kind. He should read Uslar’s writings. In fact, I would
ask him: Why 25%, why not all? Hey! Let’s eliminate Government and we
will all simply collect at the beginning of the year and see what
happens! Sad, very sad…

–Funny article in the papers today. Some guy wrote that if one
applied the criteria for expropriation that the Minister of
Agriculture is applying to companies, basically that they are not
operating at the peak of its potential and they are of social interest,
then the Ministry itself should be expropriated since it has a huge
cost, has a horrible track record and it is full of workers that do
very little. In fact, the article says the Ministry has yet to generate
a single idea to reduce hunger in Venezuela. The Ministry is so
incompentent and useless that Chavez created a Ministry of Foodstuffs.
Well said!

–Good News, bad news department: PDVSA auctioned off gas fields
yesterday. One was won by Chevron, the other by Russia’s Gazprom in
what will hopefully become the first important foreign investment since
Chavez became President in 1998. The Bad news? Five fields were
auctioned off, all bidders withdrew from the other three.

It’s sort of hard to know what to make of this story. This morning, roughly 70 skeletons were seen hanging around Caracas,
as a form of protest over the Government. The police immediately
suggested that this was a terrorist act and the skeletons contained
some form of toxic substance that intoxicated two cops. Well, a group
calling itself “Cambio” (Change) took responsibility this afternoon for
it, saying this was a non-violent protest and that the charges of a
toxic substance being present “could only be understood as the attempt,
typical of Cuban intelligence of neutralizing, taking legitimacy out of
a form of democratic struggle, which is non-violent and original
against the tyranny and as another episode in the strategy to seed fear
and shut up any voice of protest

The
group claims represent the young and be protesting against the way the
Government treats young people. They say that young people between 15
and 24 are the most affected by shootings with handguns. They point out
official Government statistic saying that 2,500 people have been killed
by security forces since Chavze took over, but there are more than
3,550 cases denounced to the Prosecutor’s office. The group argues that
the Government says that this ahs always happened in Venezuela,
but they note that in the four years prior to Chavez’ election there
were only 540 such cases. “These skeletons that we plant all over Caracas today are only a reflection of what the policies of the regimen have done to Venezuelans. We experience death and misery. Venezuela requests a change”

Well, it is hard to tell if the skeletons were toxic or not, but the
police have not explained how come only two cops acting together
suffered from this. If they were not toxic, this form of protest
represents an interesting and novel form of protest against some very
valid and relevant issues.

You have to give credit when credit is due. In july I wrote this post about the strange manipualtion
of the case of the accident in which the former head of the Land
Institute Eliezer Otaiza was involved. Evidence was apparently being
manipualted, procedures were not followed and the police suggested
there was some sort of “phantom” car that nobody saw involved. But
soemthing happened, there were too many witnesses or someone cared
sufficiently and today Otaiaza was charged with voluntary manslaughter by the Prosecutor’s office.

Whatever the reason, hats off to the Prosecutor’s office and hopefully
there will be justice for the woman killed in that accident.

If the ancient Chinese proverb “A picture is worth ten thousand words”
is correct, then a Weil cartoon with pictures must be worth 20,000
words.

The text says: “And while they criticize the work in New Orleans…”

On August 21st. of this year I reported how the brother of the Minister of
Justice Jesse Chacon, had recently purchased an investment bank called
Bankinvest of which he is now President, despite the fact that in 1997 he
was not a wealthy man, having participated in the 1992 coup attempt, for
which he spent sometime in jail.

Well, Mr. Chacon seems to be doing quite well in the robolution as reporter
Patricia Poleo published today a letter from milk producer Indulac accepting
Arne Chacon’s offer of US 10 million for the plants the milk company owns in
Machiques and Barquisimeto.

How can Mr. Chacon justify his sudden wealth and power? In 2002 he was a
lowly employee of the tax office Seniat from where he went to the Banc
Industrial de Venezuela, a Government bank, despite having no finance
experience of any sort. Well, Mr. Chacon is all of a sudden buying
properties right and left with his new found wealth.

Onwards the pretty revolution!

A while
back I read for the first time the article by Arturo Uslar Pietri which gave
rise to the famous phrase “To sow the oil”. I felt compelled to translate it
because of its clarity and foresight. A while later I saw another article by
Uslar written reaffirming the validity of that phrase twenty five years
later. Today, I found a paid ad in the papers by something called “liderazgoyvision” with an article
written by Uslar in 1992. Once again Uslar’s clarity is remarkable and the
article seems very timely, as the country revisits the same failed roads of the
past. Uslar was a visionary, he said the same thing for seventy years, when
will we listen?

Not sowing the oil by Arturo Uslar Pietri in Golpe y
Estado en Venezuela,
Editorial Norma (1992)

If recent
history shows anything, both in Europe or the Third World, it is the failure of
an economic model founded on the utopia that the State can distribute the
wealth produced by a nation in a better and more just manner that the simpler
and surer ways of the markets. The crumbling down of the soviet bloc, from the powerful
Union that seemed to challenge the world, to the satellite states among which
there were some of the most educated and capable people of the old continent,
this has its basic explanation and foundation on the failure of the state-intervened,
directed and controlled economy, in flagrant contrast with the case presented
by the developed countries of both the Western world and Asia. While the
countries that maintained the essence of a market economy managed to convert
themselves into the most prosperous and powerful countries of the world, the
countries with Statist economies have failed both economically and politically.

Despite
the simplicity that the lesson appears to have, there is a lot of resistance to
admit it fully and renounce to those abstract promises. While the socialist
republics proclaimed the elimination of the private property of the goods of
production, the disappearance of social classes and the abundance and well-being
for all, in the most happy of equalities, the market economy, which nobody ever
invented, nor was it the product of great thoughts from any ideologues,
created, by virtue only of its
spontaneous correspondence to the psychological mechanisms of human beings,
conditioned a prosperity for all, that had never been known before. The truth
is that we are not dealing with opposing thesis or contrary ideologies, but of
a historical fact, produced in the real circumstances of social life, as is the
market, against those that rose in the search for more justice and equality, utopian
projects that ended up contradicting human reality.

It has
become a common place to say that the 80’s turned out to be the lost decade for
Latin America and that statement has a lot of truth in it, but it is necessary
to make the criteria a little more fine in order not to fall into the
simplicity of attributing the failure to possible inferiorities of the
inhabitants of the region or geographic or historical fatalities of dubious
validity. What has failed is a model for economic policy that was adopted by almost
all Latin American countries and that became part of a fundamental program of
the parties of the left in the whole region. It was a model that found its
basic expression in the policies for the substitution of imports that was
proposed at the time by CEPAL and the result of which was to condemn to artificiality
and isolation, the economies of each of the countries.

What is
being proposed today is the difficult and necessary answer to this failure,
which is not easy to formulate and carry out going forward because there are
too many loyalties cast in favor of the old principles and because, in some
way, it has become customary to fall for the dangerous and paralyzing situation
of confusing that anti economic policy with the mere notion of nationality and
sovereignty. It is going to take a lot of courage, more clairvoyance and a lot
of objective effort to opportunely adopt the rectifications and corrections
that the circumstances currently require.

The case
of Venezuela
is one of the most pathetic ones in the picture. Everything was given to this
country to realize the most complete economic and social development of Latin America. In the inventory of its assets there were
a number of advantages: a positive geographical position, a variety of climate
and scenery, great natural resources, a then scant population and a growing and
well educated leadership that would appear to predict a very rosy future. As
basis for all this there was the exceptional and overwhelming presence of an inordinate
wealth in gas and oil.

From the
beginning of the oil price increases, at the end of 1973, for almost fifteen continuous
years and due only to the cause of activities related to this resource some 250
billion dollars flowed into this small country. There is no limit to imagine
what may have been done with that immense amount of resources in this small
population, if there had been realistic and practical criteria to rise, over
that base, a prosperous and productive
economy and society.

Not only was
it not done that way, but at the brusque end of that period the country ended
up in a more pitiful situation of economic and social inequalities, with an
enormous marginal population, with bad public services and with a heavy
external debt that lacks any justification. At the bottom of this backwards
miracle is the fundamental fact that it was the Venezuelan state which received
directly that immense wealth and who distributed it according to the
criteria that it was the State, and not
society. who should be in charge of executing the social and economic
development of the country, turning it
into, deliberately, into a parasite of oil wealth, with limited productive
capacity of its own with little competitiveness, with ever deficient services,
with growing and offensive social inequalities. The rentist state turned the
whole country, because of its wrong policies, in a society totally subsidized
in all of its forms and with very limited productive capacity of its own.

More than
half a century ago, when one began to perceive the importance that the oil
wealth was going to have in the future of the country, I had the good sense to
launch a slogan that could have saved us: “We have to sow the oil”.
Unfortunately, it was not sown. The State, evermore powerful and richer, tended
to substitute all of the mechanisms for a normal economy to take away from the
population the possibility of creating an economy and a modern society and
subjected it to a damning dependence on that all powerful and providential
state.

What needs
to be done today, without any possibility of eluding it, is a profound rectification
of all those errors, that needs to have as its basis, to reduce the state to its
true role and transform, in all of its aspects, the abnormal situation of a
society and an economy subsidized onto the stable and sure reality of a productive
and developing economy.

There are
many the things that will need to be changed and will require the will of
shared sacrifice, the need to renounce to unsustainable privileges and to put, definitely,
all of society to life off its own work and creative effort. For that, we have
a favorable possibility, which constitutes at the same time a threatening risk.
Venezuela
continues to be a country endowed with exceptional resources. Only the value of
current proven oil reserves represents an amount close to a trillion dollars,
something that few countries can count on. On the basis of these immense
resources one could carry out, with the least possible trauma, but with the
contribution of the sacrifice of all, the needed transformation, but there also
exits the danger that this same notion of wealth lying around will induce us
still, irresponsibly, to continue the comfortable and ruinous dependency that
has taken us to this tragic situation

Weil’s genius strike again! Great humor on the story I posted yesterday, using the Government’s ad that you can read about at the bottom of this post in Daniel’s blog.

A year ago President Chavez announced that his Government was starting
a new Government airline called Conviasa, that would start flying in
November. November came and went and nothing happened. Then in January
Chavez announced Conviasa again. Then in March I wrote an article called “Venezuela Inc. is back”,
making a parallel between what happened in the 70’s in Venezuela when
oil prices shot up thru the roof and now, with Chavez starting dozens
of Government owned companies doomed to fail, much like those created
by CAP in the 70’s.Well, today I learn that Conviasa’s only airplane a
Boeing 737 is broken down in Margarita island,
passengers were stuck in Aruba and other airlines had to cover the
routes. Today it was announced that it should be flying tomorrow. Would
you reserve in this airline?