The Devil's Excrement

About ten days ago, I quoted from an article by Francisco Faraco, a bank analyst on the financial time bomb facing the banking system. Today, Victor Salmeron, without any doubt the best local reporter of the economic beat, interviews Faraco in El Universal, touching up on many subjects. This post may be a little long, but I want to make sure people understand all of the implications of what he is saying.

The article begins by pointing out that the Central Bank on January 23d. said referring to the controversy about the Central Bank handing over US$ 1 billion to the Government: “the public sector has deposits in the banking system that amount to Bs. 13.47 trillion”

Now, let us first understand this number. Bs. 13.47 trillion is US$ 8.41 billion at the exchange rate that prevailed for much of 2003 and was in effect on the day the Central Bank pointed this out. Now, the country’s budget in 2003 was US$ 22.8 billion and all of the deposits of the banking system amount to US$ 33.8.Thus, as the article points out, the public sector maintains in the banking system 37% of the 2003 budget and 25% of all of the deposits in the banking system.

Let’s continue the logic. This means that 37% of the public budget was not spent. Moreover, last year the Government had to issue Bs. 10 trillion in binds at 25-30% interest, in order to finance its spending. Get it? The Government has US$ 8.41 billion in the bank getting interest rates of 13-16%, while it borrows at 25-30% rates to be able to give money to the same institutions that have those deposits. Would you do that?

Historically, the ratio of deposits to budget, according to Faraco, has been around 2-3%, now it stands at 37%.

The first question to Faraco is why is it that the Central Bank talks about Bs. 13.47 trillion (US$8.41 billion), while the balance sheet of the banking system says it is only Bs. 4.4 trillion (US$ 2.75 billion). Faraco answers that a lot of the money is under trusts or securities endorsed to the public institutions.

Let me explain this point. The Bs.4.4 trillion is that deposited directly under the name of public institutions at banks. Additionally, these public institutions may open a trust for a public institution or have the bank endorse a public debt bond over to the public institution. This is done to be able to pay more interest, as neither trusts nor these endorsed securities force the banks to have special reserves, at no interest, at the Central Bank which is imposed on public deposits.

Now, let me explain something else. The world of public deposits is a world of corruption via commissions. Many banks have to pay part of the spread somehow in order to capture these deposits. This means that these US$ 8.41 billion generate huge amounts for those that receive these commissions. Note also that these are paid regularly, as most of these are short term deposits rarely above thirty days.

If you have a dirty mind (God forbid!) you may even think that the only reason for the dramatic increase in public debt was simply to generate these commissions. You will probably be right. The only thing I don’t really know is whether some individuals are getting rich or the revolution is being financed. My guess is that it is actually both, but I have no way of knowing it or proving it.

If you think this is too perverse, listen to what Faraco literally says: “it has been the State that has funded the banks so they can buy its own debt and hang on the country an over issuing of debt, this loots the country and I propose the Comptroller….the external auditors that never reflected anything, the Finance Committee of the Assembly as well as the bankers, give an explanation”

If by now you are not outraged enough, then Faraco continues referring to the fact that the Government now wants to swap this Bolivar denominated debt for US dollars: “They over indebted us and now they want to swap that for debt in hard currency?”

Note that that of one of the main beneficiaries of this perversity is the banking system, which is presided by the same “oligarchs” that the Government and some readers of this blog are always blaming for all the country’s problems. Some people in both the Government and the banking system are getting VERY rich, but the supporters of the revolution say nothing. Why? These are the same perversities of the IVth. Republic, except that have been magnified in size by three orders of magnitude!

This is what the impunity of this Government has led us to. This is what happens when a country has no checks and balances. This is incredibly obscene. The country is being sold, looted and mortgaged for a fistful of dollars or bolivars. Long live the “pretty” revolution!

When things look bleak, I like to read Teodoro Petkoff. If he is also feeling bleak I worry, if he is not, I feel slightly better. Thus, today’s Editorial made me feel slightly better and seemed like a quote from it would go well with the pictures above of Saturday’s march sent in by Jose Gregorio. These images are actually like a Kilomter from the end of the march. Some quotes from today’s Tal Cual Editorial (by subscription only):

“The giant rally last Saturday left two un-buriable bodies on the side of the road: the coupsters and the self-coupsters. Still not buried, it’s true, but now more difficult to resurrect”

“The opposition is stepping on, without ambiguities, on the terrain of constitutionality and legality, while Chavez slids towards the field of unconstitutionality and illegality. The rope of constitutionality is asphyxiating him with greater and greater strength. “

“There were CNE witnesses in all poll booths, pro-Chavze witnesses and the presence of the military. In whose head can it fit that such an operation could be done without anyone noticing? The itinerant signature collectors were accompanied by people from the other side. They did not notice that they were copying different names? But let’s imagine that with the advice of David Copperfield, such an act of magic was performed. Then, it would be quite probable that many of these same names transcribed in the same signature forms (planas) would correspond to people that did sign in real life, in which case, they could be easily detected by the computers. Anyway you look at it the argument of these forms can not be sustained.

“There is no reason then to lose your head or your patience. Of the Constitution, one can say what they say about God: It punishes without a stick and without sending anyone. Chávez is beginning to feel it in his ribs”

Hope he is right; at least he made me feel a tiny bit better about things!

When things look bleak, I like to read Teodoro Petkoff. If he is also feeling bleak I worry, if he is not, I feel slightly better. Thus, today’s Editorial made me feel slightly better and seemed like a quote from it would go well with the pictures above of Saturday’s march sent in by Jose Gregorio. These images are actually like a Kilomter from the end of the march. Some quotes from today’s Tal Cual Editorial (by subscription only):

“The giant rally last Saturday left two un-buriable bodies on the side of the road: the coupsters and the self-coupsters. Still not buried, it’s true, but now more difficult to resurrect”

“The opposition is stepping on, without ambiguities, on the terrain of constitutionality and legality, while Chavez slids towards the field of unconstitutionality and illegality. The rope of constitutionality is asphyxiating him with greater and greater strength. “

“There were CNE witnesses in all poll booths, pro-Chavze witnesses and the presence of the military. In whose head can it fit that such an operation could be done without anyone noticing? The itinerant signature collectors were accompanied by people from the other side. They did not notice that they were copying different names? But let’s imagine that with the advice of David Copperfield, such an act of magic was performed. Then, it would be quite probable that many of these same names transcribed in the same signature forms (planas) would correspond to people that did sign in real life, in which case, they could be easily detected by the computers. Anyway you look at it the argument of these forms can not be sustained.

“There is no reason then to lose your head or your patience. Of the Constitution, one can say what they say about God: It punishes without a stick and without sending anyone. Chávez is beginning to feel it in his ribs”

Hope he is right; at least he made me feel a tiny bit better about things!

Everyone should read this piece about how the National Institute of Land has ripped off poor people in Barlovento. Not only is the town doing worse, but people have actually had their property taken away. Some were asked to move to new houses, except the new ones would not be theirs, so they preferred to stay in their old mud houses. A true horror story from the revolution.

Everyone should read this piece about how the National Institute of Land has ripped off poor people in Barlovento. Not only is the town doing worse, but people have actually had their property taken away. Some were asked to move to new houses, except the new ones would not be theirs, so they preferred to stay in their old mud houses. A true horror story from the revolution.

For a lighter (or not so light depending on your weight) moment, read this article about Venezuela’s chocolate, sent in by Maruja

I think the answer is a resounding yes, for quite a number of reasons.

First of all, it is Chavez who has already said he will not accept a decision to go forward on the recall by the CNE. This is bad for him internationally, as both the OAS and the Carter Center will get much more vocal than they currently are if he acts like outside of  the law and the decisions by the CNE. Additionally, the Supreme Court, even if manipulated by Chavez can only use “reasonable” constitutional arguments in blocking the recall if someone’s rights have been violated or electoral rules have not been followed. Both seem far fetched to prove even if Chavez controls the Court.

I know international opinion is not that important short term, but it is important in the end. In fact, Chavez has been able to survive in large part because of the largely positive opinion by the international community that he was the constitutionally elected President of Venezuela. But were he to step so far outside the law, this would definitely help the opposition. I emphasize, it will not get rid of Chavez short term, but remember Fujimori!

Today’s move by Sumate to give out certificates to people that signed, was much cleverer than people give it credit for. The CNE really would have to stretch the rules to eliminate one million signatures from the Reafirmazo by the opposition. By handing out these certificates that people signed, Sumate has added a significant unknown variable into this equation.

If Sumate distributes five hundred thousand to a million of these certificates (On Sunday Lara and Zulia will have similar drives and there could be a dozen in the days to come), this will create a huge uncertainty for the CNE. Read article 31 of the regulations for recall referenda. It simply says you have five days to show up and say your signature was good and was somehow disqualified. If a person shows up with a copy of his/her signature even if it comes from a “plana”, the signature is simply good according to the rules. Thus, the CNE would need to disqualify 1.4-1.5 million signatures to really feel comfortable about it. This would require outright (and outrageous) fraud by the CNE.

By revealing that he would go to the Supreme Court, Chavez might have relieved some of the pressure from the CNE Directors themselves. They could simply argue that the decision was taken out of their hands when he said that and the TSJ will decide for them

Finally, there was no violence today, which is Chavez’ game…Definitely much better off.

(P.S. That things are better for the opposition, does not mean things will get better.  If you can, read today’s interview in page A-6 of El Nacional with someone that knows Chavez quite well, Captain Luis Valderrama, who was in charge of taking Valencia in the 1992 coup attempt. Just in case, should my blog dissapear sometime in the future, look for it to surface somehere else in the blogosphere under the name Satan’s Poop. Only the paranoid survive)

I think the answer is a resounding yes, for quite a number of reasons.

First of all, it is Chavez who has already said he will not accept a decision to go forward on the recall by the CNE. This is bad for him internationally, as both the OAS and the Carter Center will get much more vocal than they currently are if he acts like outside of  the law and the decisions by the CNE. Additionally, the Supreme Court, even if manipulated by Chavez can only use “reasonable” constitutional arguments in blocking the recall if someone’s rights have been violated or electoral rules have not been followed. Both seem far fetched to prove even if Chavez controls the Court.

I know international opinion is not that important short term, but it is important in the end. In fact, Chavez has been able to survive in large part because of the largely positive opinion by the international community that he was the constitutionally elected President of Venezuela. But were he to step so far outside the law, this would definitely help the opposition. I emphasize, it will not get rid of Chavez short term, but remember Fujimori!

Today’s move by Sumate to give out certificates to people that signed, was much cleverer than people give it credit for. The CNE really would have to stretch the rules to eliminate one million signatures from the Reafirmazo by the opposition. By handing out these certificates that people signed, Sumate has added a significant unknown variable into this equation.

If Sumate distributes five hundred thousand to a million of these certificates (On Sunday Lara and Zulia will have similar drives and there could be a dozen in the days to come), this will create a huge uncertainty for the CNE. Read article 31 of the regulations for recall referenda. It simply says you have five days to show up and say your signature was good and was somehow disqualified. If a person shows up with a copy of his/her signature even if it comes from a “plana”, the signature is simply good according to the rules. Thus, the CNE would need to disqualify 1.4-1.5 million signatures to really feel comfortable about it. This would require outright (and outrageous) fraud by the CNE.

By revealing that he would go to the Supreme Court, Chavez might have relieved some of the pressure from the CNE Directors themselves. They could simply argue that the decision was taken out of their hands when he said that and the TSJ will decide for them

Finally, there was no violence today, which is Chavez’ game…Definitely much better off.

(P.S. That things are better for the opposition, does not mean things will get better.  If you can, read today’s interview in page A-6 of El Nacional with someone that knows Chavez quite well, Captain Luis Valderrama, who was in charge of taking Valencia in the 1992 coup attempt. Just in case, should my blog dissapear sometime in the future, look for it to surface somehere else in the blogosphere under the name Satan’s Poop. Only the paranoid survive)

It was a good day today. The opposition marched to protest the fact that the CNE should have, by law, decided yesterday whether there would be or not recall referenda agaisnt President Chavez and both opposition and pro-Chavez Deputies to the National Assembly. It has been so long since the law has been enforced in Venezuela that our rights can be violated without anyone saying much about. We did not hear all week from the “Fiscal” the Attorney General/Prosecutor whose name is Isaias Rodriguez, who is in charge of upholding the law and defending the rights of the people. In fact, the only thing we heard from this shameless personality of this stupid revolution was when he came out to complain about the attacks on the Electoral Board. But he said nothing when Chavez said he would not accept a favorable decision by the CNE for his recall.

But it was  a good day. People marched, peacefully, cheerfully and protested once again against the injustices that are taking place day after day.  There was no violence whatsoever. Even if we were not allowed to reach the CNE, demonstrating the inequality under the law prevailing in Venezuela, a huge number of people went out as shown in the pictrure above. At the end of the march, Sumate, the ONG that organized the petition drives, set up tables with volunteers to hand out digitized copies of the forms in which people had signed. The copy had the form in which you signed, digitized with the other nine names fuzzied out. Th copy would include te number of the form, the line, the “Acta” number and the box in whichit was handed in to the CNE. The objective of this was to have people be able to prove they signed if their signatures were to be disqualified. Thus, a very clever move against the tricks of the Government.

I actuall worked as a volunteer handing out thee forms to the marchers. I missed the march, but I had a great time watchng people’s emotions when giving their copy of their signature. I saw just about everything everything in terms of emotions. People would turn happy, solenm, some would get teary eyes. Others thanked us profusively for a job well done. Others shook hands. Some screamed in joy. It felt good, really good!

Since I was working, I was unable to take many pictures. I took most at the beginning of the day, when the lines were light. I hope they convey some of the emotions I felt ans saw.

People setting up early on the morning. The boxes with their signs, ready for the people. The team I worked with before we started.

On the left a true victim of the violence and the impunity of the Chavez era, Mr. Mohammed Merhi, picks up his copy that he signed in favor of the recall against Hugo Chavez. Mr. Merhi’s son was killed on April 11 2002. To this day Venezuelan justice has been unable to tell him who killed his son.

In the middle a very happy nun picks up her proof she signed. On the right, this girl is tense as her proof is not found.

Happiness and suprise at the same time, when first seeing your signature. Very happy that she is there. Older lady with sign saying the recall will go through, waits for her copy.