The Devil's Excrement

Venezuela does not have a soccer tradition. In fact, it has never even
come close to qualifying for the World Soccer Cup. Despite the Italian
and Spanish immigration of the 40,’s and 50’s, Venezuela has remained a
baseball country, due to the influence (and organization!) of the
American oil companies in the oil fields. Venezuelean soccer had improved
a little bit, but it was not until a coach named Richard Paez took over
about four or five years ago, that Venezuela really began improving.

In fact, the team improved so much that this is the first time that the
Venezuelan team has not been eliminated this early in the
qualifying year, with surprising victories against Paraguay and Uruguay.
Venezuela, for the first time ever has a chance, but….

The problem is politics,
even if this does not involve the Government at all, except that the
Supreme Court is involved. Basically, two groups are fighting for
control of the Venezuelan Soccer (Futbol) Federation. The 20 year old
President of the Federation saw his rule threatened and the Board
issued electoral rules that were not approved by all the members of the
Federation. Those opposing the current President went to the Courts and
the Electoral Hall (!) of the Venezuelan Supreme Court suspended the
elections. The problem is the FIFA has given the country until March
19th. to elect its new authorities. If it does not, Venezuela will not
be eligible to participate in the World Cup and the dream will be
shattered. This is because FIFA has rules that prohibits local
federations from resolving their conflicts via the Courts. The
Constitutional Court will hear arguments on the 12th. and if elections
are not held before the 19th. the two World Cup matches against Colombia and Bolivia that will take
place before the end of the month will be forfeited.

I have said it before, bunch of amateurs!

A reader and friend sends this in, wonderring if this was self-censorship or a simple change of mind. On the left you have the cover of the “printed” edition of El Nacional which appeared in the website of that newspaper. The main healine is a fairly scandalous one in which General Baduell, the same one that said the military movements the other night were routine, says that the Inspector General of the Armed Forces is investigating the troop movements. This was later replaced by a milder vesrion on the right, in which it was switched with the news of the statements by the Attornety General of the “perverse” inflirtation of the country’s police at all levels. The second one was the one that appeared in the actual printed edition. Given that the muzzle law came into effect yesterday, one can only wonder if the Editor thought the first version was “too strong” given the new law, or if he simply had a change of heart. I guess we will never know.

Attorney General/Prosecutor Isaias Rodriguez appealed yesterday to his
literary background and produced in the best stylie of literary
“deus ex machina” a dramatic development in the Danilo
Anderson case, when prosecutors went to the beach apartment
of the parents of lawyer Antonion Castillo, searched it and found an
arsenal of weapons. According to Rodriguez, there was enough C-4 to
blow up “all of Venezuela” and they also found , anti-tank mines, home
made explosives, weapons and police uniforms from the Chacao
municipality.

Interesting, three months after Castillo was killed, they search this
apartment without any witnesses or lawyers (which violates the law) and
find all of the evidence to prove Castillo was involved in Anderson’s
murder. This after months of no evidence of anything that linked
Castillo to Anderson, while all testimony indicate money was involved.
How convenient! This really gives a new meaning to the term Deus ex
Machina!. At the same time the Prosecutor says they now have “precise
evidence” about the intellectual authors of the crime. I think I
remember hearing the exact same thing in late November. Hope we can
learn about it soon and not hear in June that they know exactly who may
have done it.

Once in a while, President Hugo Chavez can say exactly the right things
if he puts his mind to it. That was the case of his statements in Qatar
about the crisis in Bolivia. Surprisingly, the local news outlet has
not given much space to it, but here is exactly what Chavez said in
reference to what is happening there:

“I support Mesa.We don’t want destabilizing movements in the region”

All I can say, his first words on the Bolivia subject are exactly what one would expect from a
statesman. Will he speak again on the issue and ruin it?

(Yes, this is a positive statement by me, about Chavez, what can I say)

Everytime the Government of Venezuela issues a new bond, something
truly out of the ordinary happens. Today, Venezuela issued a euro
denominated ten year bond in the amount of euros 1 billion, which
matures in 2015 and has a yield of 7.1%. What was peculiar this time
around is that it was an amazing rush job, it was announced early this
morning and orders had to be in by 8 AM EST, which is 9 AM in Caracas.

What is strange about this? Easy. Imagine you want to place a bond (or
sell anything), you want as many people as possible to put orders in
for it. Well, it is hard for someone to place an order if that someone
does not know the bond even exists. No? So, what is typically done is
to announce the bond and receive orders at least for a couple of days,
give brokers time to call their clients, give the clients time to
evaluate the terms and decide whether to participate or not. The more
orders you receive the more “expensive” from the point of view of the
buyer you can sell it.

Well, last night there had been no announcement about the bond.
Sometime during the night, European brokers found out about it and US
and Venezuelan brokers found out this morning at 8AM EST. They had only
an hour to run and get orders. Not much time, no? In fact, many
corporations and institutional investors are incapable of deciding on
such short notice whether to make any investment, particularly
Venezuelan ones.

Some might say only Europeans would have been interested in this
because it was in euros, but even for these investors time was simply
too short. Bu no matter what your target investor may be, you still
want as many orders and investors as possible. A Government spokesman
said that there were orders for 2.8 billion euros. Well, I am sure they
could have recieved orders for even more, maybe as much as 4 billion
euros. You see, 7% yields in euros are hard to come by. As an example,
Mexican bonds in euros with similar maturities as this issue yield
about 5%, way below this issue.

The issue came out at a price of 99.3% and was instantly trading at
100% of its face value and it looks like it will inch up in the next
few days.Those that “knew” about teh bond ahead of time will certainly
profit handsomely.

By the way, Venezuela issued today this bond and the Minister of
Finance confirmed that Venezuela will invest US$ 500 million in
Argentinian bonds because it is attractive and to promote
integration. Thus, the Government that declared itself against
“capitalism” two weeks ago and said it will promote “socialism”, turns
around and borrows 1 billion euros of which it will pay 500 euros for a
bond maturing this month, use US$ 500 million to make a
profitable investment and subsidize a richer country and it will
have about US$ 300 million leftover to use in Venezuela. Of course, it
will have to pay about US$ 100 million in interest by October, so all
the “people” get in the end is a meager US $200 million this year. Is
this is a Government that “cares”, God save us from those that don’t
care!

In typical
Chavez style, today he makes two statements that are difficult to understand
together. In one, Chavez
blames Bush for the price of oil going up because of the invasion of Iraq and threats to Iran. He even laughs at Bush and
says that Bush has a plan called “mister Bush” to get the price to US$ 260 per
barrel, because Bush and Condoleezza Rice have oil interests.

But then
he turns around and says
that the world can forget about cheap oil and that oil is searching for its
equilibrium price around $40 to $50 dollars per barrel. So, I ask, which is it?
Did Bush increase it or is the price correct?

But maybe
Chavez did it, at least that used to be the canonical explanation around here
until recently. This is typical Chavez versus Chavez, not long ago, Chavez took
the credit for making oil prices higher, saying that it was his decision to cut
production down in 1998 that brought prices to their correct level. While
Chavez may have been more hawkish on cutting production, the truth is that Venezuela was already
cutting production down to help prices before Chavez took power in 1998.

Chavez
clearly is now fixated with the US
President and Mrs. Rice. Many interpret this to be a strategy to gain
popularity. But as a good friend and reader reminded me today, polls last year
showed that attacking the US may be popular in Cuba, but not in Venezuela. Maybe
that’s the problem, Chavez has too many Cuban advisors.

So, Bolivia’s President Carlos Mesa offers his resignation after the
leader of the coca growers and Congressman Evo Morales threatens to
block all roads unless oil taxes are raised. Mesa, who remains popular,
may have his resignation rejected by Congress. Essentially, Mesa does
not want to use force to stop either Morales or the peopel of El Alto,
where another crisis is brewing over the privatized water comapny.

Venezuela’s politicians are so far silent on the matter. If Mesa
resigns, will they call it a coup? A triumph for democracy?
Participatory democracy? The imposition of popular will? Whatever
they say, I am sure that they will be in favor of Mesa’s resignation or
maybe they will suprise us alll by saying that thye will not interfere
with the affairs of another country, but I doubt it.

But that is exactly what Chavez has done in the past. Only a couple of
weeks ago, Chavez had the same Evo Morales in his Sunday radio program,
Chavez said that there should be a Constituent Assembly in Bolivia, but
the “oligarchs” opposed it, in a clear violation of the same soverignty
that he defends daily in Venezuela. There have always been rumors thta
Chavez provides funding for Morales, but there has been no proof that
this the case.

Excellent link with all the details here in Publiuspundit

The story on the attempt on Chavez’ life gets more bizarre. Now
the Venezuelan Vice-President says that it was the former US Ambassador
to Venezuela Charles Shapiro that warned him
about a possible attempt on Chavez’ life. Rangel says that for v”legal”
reasons the US Government had to tell the Venezuelan Government about
it.

OK, let me think out loud what is going on. The US Government decides
it needs to get rid of Chavez, but because of legal reasons that
prevent the US Government from killing a foreign President, then the US
Government tells the Venezuelan Government to satisfy the US laws. I
guess now that they have fullfilled the legal steps, now they can go
ahead and do it, no? Interesting system!

In the same statements, rangel says that the result of the meeting
between Chavez and Cisneros, who owns a TV station, is that now that TV
station has stopped “conspirring” against Chavez. I gues they mean, has
stopped saying bad things about the Government, which is called censorship anywhere else. Another achievement for Carter!

To complete the bizarre statements, General Baduell tells the Cuban press
that the US has created an unbalnace of power and disequilibrium since
the “Patriots Act” went into effect. Well, I have read the Patriot’s
Act, and Baduell has clearly no clue what that Act is all about, since
its has nothing to do with funding or combat power in the world.

But hey! How much more bizarro can it get that Jimmy Carter is on
vacation in Venezuela
this weekend with none other than Cisneros. Celebrating the
implementation of censorship or getting paid? I
sure hope the sharks are qutte active this weekend in Los Roques, they
will only scare him, they know better than not to eat him, they could
get indigestion.

The Chavez
admisnitration has passed a bill that makes mortages a not for for profit
business, by fixing the mortgage rate at 65% of the average lending rate of the
banking system, which today would be 11.65% in an economy with 20% inflation. There
is clearly no free lunch, the existence of this rate implies that others arre
paying for it, banks are simply going to translate the costs to the customners
on both side, the savesr and the borrowers. Additionally, banks have to lend 3%
pf their credit portfolio at this rate.

But less
than one month after the new mortgage protection bill came into effect,
President Chávez announced an even newer rate structure for the financing of
mortgages for those that make less than a certain monthly salary. Banks were
still calculating the adjustments and waiting for new regulations to implement
the changes, when they were hit by the new rate structure. So much for careful planning!

There were
two changes made: First, the Government issued a new decree that creates two
additional categories under the so called housing policy, by which those that
make less than Bs., 588,000 will have a special subsidized rate of half the
rate of 5.68% and those making between Bs. 588,000 and 1.61 million a month
will have to pay a rate of  8.52%, or
three quarters of the higher rate. Chavez seemed to suggest that the Government
will subsidize this difference, but banks have no clue as to whether this is
true or not.

Separately,
the Housing Council approved that banks should devote 3% of the financing to
mortgages and an additional 7% to builders.

While the
rates are clearly very attractive, well below the current inflation level of
nearly 20%, the truth is that the subsidy is hard to use for those in the
lowest ranges of the salary structure. The law limits monthly payments to 20%
of the monthly salary, implying that a worker could only pay a maximum of Bs.
117600 per month. Since loans will for 20 years, this implies that someone in
that salary level will only be able to borrow Bs. 18.000.000.

Given that
the most economic housing unit available is above Bs. 40.000.000, it will
require a down payment of at least Bs. 20.000.000. But recall that the
Government is now considering increasing the minimum salary to Bs. 400,000 a
month. To those making the minimum salary this is simply hopeless, as they have
no savings capacity and will be unable to purchase anything in the market.

In the end,
it is another populist measure which will benefit more those at the higher end
of the salary scale. So far, the Government has not announced who will pay the
difference in interest rates. Chávez’ speech seemed to suggest that the
Government will do it, but so far there are no firm indications that this is
the case. In any case, 3% of the credit portfolio of banks will only finance
some 17,000 housing units at the lowest price range, a drop in the bucket in a
country with a shortage of some 2 million housing units.

I find it
remarkable how the Chavez administration is looking for economic solutions in
areas where there are careful studies (by pro-Chavez people) that show that
what you need is a Government plan to build housing in a massive scale. The
problem is a US$ 50 billion problem, not an US$ 80 million problem as this
decree makes it. This is once again improvisation and populism at an
irresponsible scale. Maybe it is better that way, one day people will simple
get very tired of the repeated empty promises of the revolution.