The Devil’s Excrement

(In Spanish here)

To Laureano, because imitation is the best form of flattery

It is not easy being Esteban. A day in my life.

It’s not easy being Esteban day after day. To begin with, imagine living in the Palace, not only is the building cavernous and ugly, but it is really badly located if you want to have some fun. I used to be able to step out into the streets when I first became President and talked to my people, but by now this is simply impossible. First of all, there are always protesters camped right outside. This is not only a pain, but it really pisses me off, because they are all pro-Esteban supporters that have a problem and want me to solve them. I would love to, but my task is bigger than solving their mundane problems like water or electricity housing or crime, this is after all, a revolution. I am very busy all the time.

The second problem is that the area has been turned to the opposition because Barreto did such a lousy job. I wish I had never seen that fat man in my life, I can’t even jail him now; he lives in Paris, where he is studying to become an intellectual, or something like that. I am an intellectual! I don’t need to go to Paris, I am a Marxist and I have never read Marx.

And the third problem is something Bernal told me, which differs from what El Assami says, Bernal says that even if Miraflores was not surrounded by opposition oligarchs, I could not step out because crime has gotten really bad nearby since I became President eleven years ago.

My day is really boring. I have to spend the morning trying to listen to Giordani give me very complicated explanations of all of the problems. I typically fall sleep in the middle and when I wake up and realize that I no longer know what he is talking about I use one of my standard phrases, like “I will ask Fidel about that” or “Let’s create a fund to solve that problem” or “Couldn’t we create a Misión to address that?”.

Jorge is really smart and when I say any of those sentences, he knows it is time to leave. I used to call Fidel at this time, but lately every time I call, he is sleep. I no longer ask to talk to Raul then, he is not only boring, but wants to cut me off, instead of the nice two hours I usually talk to Fidel for about our “procesos”. I don’t like Ramiro either, he looks mean, he is scary. But he said he would fix the electricity problem using the same techniques as in Cuba: Wiping the problem off the media.

After talking to Cuba using Skype (which doesn’t work very well, but Jesse said it is safer than anything else, everyone seems to be tapping each other in Venezuela by now), it’s lunchtime. I grab something fast, like an empanada and another café negro and run for the helicopter to go to Teresa Carreño and give people degrees or property titles. That way I can go on cadena for a few hours and just piss off the oligarchs. I talk a lot because it is really boring when I am not the center of attention. The other day I had to give fake degrees to fake students with red shirts, but nobody noticed. Afterwards they told me the students did not return the diplomas and want to practice medicine. Since we have a shortage of doctors I said it was ok, after all I govern Venezuela like the military, anyone can do anything. Our success proves it!

I have an assistant that always gives me three outrageous sentences to say at the end of my speeches, I chose one of them ahead of time.  Today, I will piss off the opposition by saying that they are boycotting Twitter so that we Chavistas don’t have access to it. I love it! I bet the New York Times or Washington Post publishes it! After I said that, I tried to say something even more outrageous. With Saddam gone, Hitler dead and Gaddafi a good guy now, I could only think of Mugabe, so I said Mugabe was coming to teach the National Guard how to contain protests. That should go well, I bet El Nacional publishes it as its main headline tomorrow and they forget the dead students.

On the way back, I return by car, I do this to try to keep those bazookas guessing. The opposition says there have been no attempts on my life, but they happen daily, even if I don’t leave the Palace daily. I have stared into the face of those bazookas, over and over. They never let up, they say I am paranoid, but it’s not true, the oligarchs will not cease trying to kill me.

When I get to the Palace, I do like the Chiguire says “Prozac, Litio and siesta!”  except of course he says “muerte” and no “siesta”, just laughing at me. That guy is funny, even if I hate his father. Laureano is not funny by the way. Neither is Radio Rochela, the second best reason after Mr. G to shut down that station. Fidel has always said:’ Don’t let them make fun at you, if the “people” laugh at their President, you are no longer their President, ask Bush”. That is why Twitter is the work of the devil, too many people laughing at me. I have to stop @Soy_Esteban, @ElBoliburgues and @chiguirebipolar from doing it, even if I like the last one.

When I wake up I call Ramirez. I always scare him, but I just call him to ask what was oil production and the price that day. I keep it all in a notebook. This is something I learned from my grandmother: “When I give you one Bolivar write it down, then when one is missing you know one of your brothers took it. “ I do the same with Ramirez, I add all the money coming in and when they say there is no money, I tell them my numbers. The money always shows up.

After Rafael, I call someone at random, but lately I always call Merentes. That guy is getting too clever for his own good recently. He told me he was going to lower the swap rate, but instead of giving me a number, he became a Mathematician again and said to 65% of the official rate, as if I could figure out how much that would be. When we devalued in January I told him to stop playing games, I want the swap rate to go to Bs. 4.3. So far he is not doing well, it was way above Bs. 6 yesterday. They used to lie to me about the swap rate, but then Jesse (I miss him!) taught me how to use the Internet and I look at Dolar Paralelo or Venezuelafx (Why do they have the same price? Don’t they believe in markets?) and surprise them when I tell them the rate.

I then go to my office to “work” or so they think. I actually go on the Internet to play Scrabble. Jesse also taught me this. I can play until 3 AM. I use to play with this lady in Montreal, she turned out to be from Venezuela and against me. I blocked her. Fidel then assigned two Cubans to play with me daily, but they were very sneaky, always using words from their Diccionario Cubano that I did not have. I now play with members of PSUV, that is why we put in the registration form if they like Scrabble, I can then look for them in my Facebook page.

I then drink coffee and play Scrabble until the late hours of the night. It is not really that hard to run Venezuela: money comes in from oil, you either give it away or import stuff and give it to people. The rest is useless. Oil is the only thing that Venezuelans know how to produce at a profit (hate that word!). So, I don’t care about the rest. Aluminum, iron, agriculture, Bah! They are always asking for more money, Rafael always gives me good news because he found some more money somewhere. That is why I keep him in his post. Jorge always says let everything go broke except PDVSA. I agree.

And yes, I have to take care of the oligarchs and the opposition. But they scare easily and haven’t realized I do too. Show them a rifle, threaten them with the guards, throw some tear gas at them and they run away or step back. We kill one of them every once in a while, but they deserve it. Ramiro says I have to get tougher, I will, one day, I tell him, but I worry that so many kids of the generals and lieutenants are part of the protests. I don’t want one of them killed, their fathers could get mad at me. They clearly were badly educated by their parents. They were ten when I came to power, they should all idolize me, be Bolivarianos and Rojos-Rojitos, instead they paint their hands with white paint and protest. Where did their families go wrong?

Yes, it is not easy being Esteban, but I like it and I plan to be here forever.

Hugo Chavez was supposedly celebrating today, he held a march in his support, which was quite small given that even scientific institutions gave their workers a free day so that they could go:

But in reality, there was nothing to celebrate after 17 years of the bloody coup which killed so many innocent people and where Chavez led buses of soldiers under false pretenses to start his individual quest for dictatorial powers. Funny, when the dead are remembered the over 200 Venezuelans of the 1992 coups, the last true coups in Venezuela’s history, led by Hugo Chavez are easily swept under the rug:

(More than 100 dead in frustrated coup, Feb 1992)

and to celebrate, the students were not allowed to march. According to Jorge Rodriguez they did not file a formal request to do so. Funny, then how come the Urban Control Office of the Caracas Mayor’s office officially denied this “informal” reqest to march. The truth is that pro-Chavez’ marches are always approved even if nobody knows if they ever filed. This is not the first time this has happened. The Chavez repressive Dictatorship lives on. For decent Venezuelans today was a day of mourning, for Chavez it was a day of joy.

Which goes to show he only cares about Hugo Chavez and not the “people”, nor the almost 200 dead in the 1992 coups, the 24 dead in the 2002 march, nor the 120,000 homicides in his 11 years in office.

Only Chavez matters to Hugo Chavez.

(In Spanish here)

When the President of a country calls some of his citizens “stupid” because he brought as his adviser on electric matters, Ramiro Valdes, a man with no experience in the electric sector, but full of experience in repressing, killing and torturing as the Minister of the Interior of Cuba for many years.

Despised by his son and brother, Valdes is a true “esbirro” (the man who carries out executions) of the Cuban revolution, yesterday in charge of murder and torture, toady in charge of Internet censorship.

And Hugo wants to defend him and we are supposed to be the stupid ones.

Because it is Hugo Chavez who is stupid, accepting the advise of a a man who knows nothing about electric power problems, while he neglects those professionals in Venezuela who know the Venezuelan network and its problems inside out, while the previous advise of the Cubans on electric power matters has been an unmitigated disaster. It was Cubans who advised Chavez on a distributed system without interconnection which ha yielded power plants that are working at a fraction of their potential because they have nobody to deliver the power to.

And since Chavez brings up the fact that the Brazilians are also advising the country, maybe he could explain to us how Lula’s adviser and buddy Marco Aurelio Garcia, has said exactly the same thing the “stupid” opposition says, that the problem in Venezuela is not El Niño, but in Garcia’s words: “The Venezuelan system is a bit deteriorated”, which has nothing to do with weather, but with the well known incompetence and neglect of the Bolivarian revolution.

The revolution was supposed to be about progress and sovereignty, by bringing Valdes, Chavez is admitting his incompetence and his willingness to hand over to the bloody hands of a foreign country and dictatorship, the control of key areas in Venezuela’s life. From health, to electric power to identification to security, Cubans are more entrenched into our country’s power structure.

Some revolution!

With so many negative things happening in Venezuela, it is appropriate to stop, sit down and smile and enjoy the moment. German Garcia, who was kidnapped on February 25th. 2009, was liberated today by his captors, whomever they may be.

I know German, but I don’t know German, I probably know more about him through various family members that know him better than I do. And they all have always told me the same thing, the same impression I have always had, German is the veritable and certifiable nice guy, low key, hard working and responsible who lost almost twelve months of his life just because…

And those of us who wondered and worried where he was, are all as pleased and happy as could be that he is back, for him, for his family and for all decent Venezuelans that have to endure this irresponsible Government, who has allowed crime and kidnapping to thrive by its negligence.

To German, that he may return soon to the routine of his job and his family and his leadership at Fe y Alegria and all of those little details of life that I am sure he missed during his ordeal. Cheers!

I practically have to start this post where I ended last night. I said more brokers would be shut down and three were intervened today, but more importantly the Comision Nacional de Valores (CNV) decided to eliminate a popular instrument used by brokers to leverage their balance sheets by accepting deposits from the public. At the same time, the regulator gave brokers six months to lower their leverage (debt) to twice their equity. Both these measures will have an important impact on brokers and could possibly bring down some more. Let me explain.

What the Comision Nacional de Valores (Venezuela’s SEC) did was to ban the use of a financial instrument called the “mutuo”. This instrument has been around for about eight years (i.e. it did not exist before Chavez). In it, a broker sells a client bond and signs a contract the client lends the broker back the bond with some interest. In the end, what the broker is doing is accepting a deposit under the promise of some interest rate for the period agreed on. The broker can then turn around, use the client’s money and even resell the bond to another client. In contrast with a bank, there are fewer regulations, no reserves and little supervision.Thus, brokers could pay more interest than banks and leverage their balance sheet, i.e. borrow money from their clients to do other things.

The problem is that if there is no supervision, depositors don’t have their funds guaranteed by Fogade like at a bank and brokers can borrow more than they should. While many brokers used “mutuos” adequately, others, such as U21, Banco Canaria’s brokerage unit, built up mutuos to absurd levels, such that it went broke.

In recent weeks, as U21 went under and the banking crisis developed, the CNV starting looking into other brokers who had “mutuos” with U21 and found a lot of them that when U21 went under, lost all their capital. So, they kept digging and as they did, they had to intervene more and more brokers. There were rumors that the CNV would impose a limit of two times your equity for all brokers as a way of limiting the mutuos (some brokers had as high as a factor of thirty). But instead, the CNV decided:

1) To give 90 days to all brokers to eliminate all their “mutuos”

2) To give them six months to bring the leverage (debt) they may to twice their equity. They will have to do it such that in two months the leverage is down to a factor of six, in four months a factor of four and then a factor of two after the six months.

I think this decision by the Government is unfair, because due to its inability to supervise the brokers that abused the system, it is penalizing all of them.A more correct decision would have been to limit leverage to twce equity, but allow mutuos to continue, and supervise!

Minister of Planning and Finance Giordani said yesterday there was a de-institutionalization of the regulating entities, but did not explain that it was the Chavez administration that caused it. For example, the Chavez administration named two Heads of the CNV who were former military with no experience in capital markets, both of whom are currently either indicted or have an order to be captured for corruption, one when he was Head of the CNV, the other after wards when he was named President of one of the failed banks. Quite a record, no? They learned fast, but apparently not about “mutuos”.

Giordani, like Chavez, seems to talk like this was all about an out of body experience he had, the lack of supervision, the “financial avalanche”, the external treasuries of the banks at their brokers, and the lack of articulation of the institutions, were all in the end by-products of decisions made by Chavez and his Government or the lack thereof. And Giordani has been Minister of Planning and a member of the Board of the Central Bank for nine of the eleven years of the Chavez administration, so he can’t skirt responsibility. As I said earlier, the “mutuo” did not even exist when Chavez got to power and its abuse took place in the last four years. The website Venepiramides, now well known, wrote one of its first posts under the Title “The parallel financial system of mutuos” in which the author warned that the authorities did not understand the dangers. This was over a year ago, others such as Veneconomia wrote about it in their monthly (by subscription), apparently only the Government was surprised by this.

As of October 31st. of last year, there were “mutuos” to the tune of some Bs. 15 billion, or US$ 2.5 billion at the swap rate. This includes U21 which was intervened in November and is now broke (and depositors lost all their money). With the decision to eliminate mutuos, basically brokers will have to return their money to their investors, all of it, within 90 days. This could be cumbersome for some, it is not easy to deleverage just like that, some assets may be illiquid or just the act of selling them may bring the price down.

Of course, this assumes that all brokers that used mutuos, large and small, did them by the book, which may be too much to hope given what the CNV has found so far. If not, we may see more brokers going under and this post ends like last night’s.

Expect this story to continue…

Stay Tuned!

There is always something happening in Venezuela such that it is almost impossible to keep up with the news or report it all. From the lights going out at the end of both the last two games of the Venezuelan Championship (which Chavez has already said was sabotage), to Chavez calling day after day for a recall vote and the opposition ignores him, to the fact that Chavez’ Russian and Chinese buddies did not bid for the Carabobo heavy oil field, proving that for these New Age capitalists, the conditions were not attractive enough, i.e. profits did not look very good to bid for them. And how about Lula’s advisor Marco Aurelio Garcia saying that Venezuela’s electric network is quite deteriorated and Brazil would send advisors to help. Doesn’t he know this is not true and it’s all due to El Niño? El Niño Chavez, of course…

But as usual, something is happening behind the headlines in the economic front that needs to be reported:

1) Magical dual accounting

Only 21 days after the Government imposed a dual official exchange rate system, the Central Bank finally issued rules on how financial institutions will account for their assets in foreign currency. Think about it, usually you have an official rate and a parallel rate, all your assets in foreign currency, whether they are cash, bonds or even property, you account for at the official rate of exchange, i.e. until January 8th. you kept everything in foreign currency in your balance sheet at Bs. 2.15 per US$.

But now, we have a dual system and when the Government devalued it did not say how it should be done. People expected one rate or the other, but the Robolutionary Government in all its creativity and magical realism decided to have dual accounting rules, which not only make little sense, but should allow for some very creatve accounting.

So far the rules apply only to financial institutions, but we suspect they will be the same for all companies, financial or not:

i) All assets held in foreign currency will be accounted for at Bs. 2.6 per US$, except Venezuelan Sovereign bonds or other bonds issued by public entities, which will be accounted for at Bs. 4.3 per US$.

ii) The exception to the second part will be the so called TICC’s, inflation adjusted bonds which are denominated in US$, but whose capital and interest is paid in Bolivars at the official rate of exchange. The Government decided to this in order to save itself lots of money when making payment on these bonds which were supposed to “protect” you precisely from a devaluation. Thus, all companies that have no access to dollars at Bs. 2.6 per $, will have to value their bonds at this rate.

And you can bet (we don’t know yet) that dividends for those same companies will be repatraited at the higher rae of Bs. 4.3 per $ (i.e. they will give you fewer dollars). Thus, the Government as we say in Spanish “se pago y se dio el vuelto” (The Government paid and made change for itself at the same time)

But in an economy full of distortions, here is a new one, you can do a lot of creative accounting with these rules. Let me give you an example: Suppose your company lost money in 2010, say 1.5 million Bolivars, but you have one million dollars in an account abroad in cash. That million dollars is accounted for at Bs. 2.6 per dollar. Well, two days before the end of the year you buy two million dollars worth of Venezuela or PDVSA bonds and voila, you just made Bs. 1.7 million in profit by doing that since the bonds are valued at Bs. 4.3 per $.

Or suppose you are a bank and you made what Chavez would think is “too much” (i.e. a profit). Since banks have a nice portfolio of Venezuelan bonds, they can sell it and lose a bundle to “erase” some of the profits. (They go from bons at Bs. 4.3 per dollar to cash at Bs. 2.6 per dollar, weird, no?)

It’s magical accounting, courtesy of the revolution. In the end another distorsion…

2) And Giordani’s magical modelling

And Minister Giordani said that he expected GDP to gro wby 3 to 4% in 2010. Scary stuff, no? In 2009, when oil prices were low, he said Venezuelan GDP would grow by 4% in 2009, an error of some 170% given that the economy shrank by 2.9%. Well, if he is using the same spredsheet or model, then we could be shrinking by even a larger amount. Even worse, he is now Minister of both Planning and Finance!!!

3) More brokers intervened, more to come

Last week, three more brokers were intervened for losing their equity. Thus despite the assurances that the financial crisis was over, we have had three banks and four brokers intervened so far in 2010. I understand that more brokers are being examined with a magnifying glass and some may roll in the next few weeks. Additionally, I am still waiting for the bank Chavez said was in bad shape to fall.

And the guy in charge of intervening U21 said that there are no assets there to compensate anyone, but somehow nobody complains. Who had money there?

Stay Tuned!

Here is a translation of the press release by Amnesty International asking the Venezuelan Government to respect the rights of all Venezuelans to meet and express themselves as well as calling for the investigation of who was responsible for the dead and injured during the protests:

Following recent acts of violence occurring during the student protests in different cities for and against the waiver of RCTV International, Amnesty International called on the authorities to guarantee the right of assembly and expression for all people , and to ensure that the death of students Yosinio Carrillo Torres, 16, and Marcos Rosales, and the injuries suffered by dozens of other people, including demonstrators and members of law enforcement, are investigated and those responsible brought to justice.

The authorities must unequivocally condemn these serious abuses immediately and ensure that the police intervene only to protect the integrity and life of all persons seeking to exercise their legitimate right to meeting.

The state has a duty to maintain order always making sure that security forces use force, including the use of firearms, only when it is strictly necessary and in accordance with a principle of proportionality, without infringing in any torture or punishment cruel, inhuman or degrading treatment, such as specified by international standards of human rights and the Constitution of the Bolivarian Republic of Venezuela.

“The right to assembly is a fundamental right, but not a right to violent protest. Demonstrators and their leaders must ensure that no use of violence, “specified Amnesty International.

What happened during the the last few days is not an isolated event. In the past 13 months when protests have increased markedly in Venezuela about 600 protesters were injured, at least 14 with gunshot wounds, and 9 protesters are dead. According to reports, most were killed by security forces, armed groups of civilians who are government supporters who claim their actions or by unidentified civilians.

Amnesty International is extremely concerned by the deterioration of freedom of expression in the Bolivarian Republic of Venezuela. All rights, including the right to freedom of expression and assembly must be respected and society must realize that they were respected.

The non-renewal or suspension of licenses of television and radio, as happened in 2007 with RCTV and last year when it revoked the license to 34 radio stations, together with the recent suspension of four cable television channels, including RCTV Internacional, shows disrespect by the authorities to the legitimate work of the media, especially when these are known for their editorial criticism of the government.

“While the media must abide by the provisions of the law, closing a media outlet should be a last resort and a measure that should only be implemented after being given all the guarantees of due process, including the right to present a defense and appeal, “said Amnesty International.

If the Venezuelan government is committed to the values of the rule of law it must promote, protect and respect the right to freedom of expression and assembly and celebrate the importance and positive contribution in a state of law and transparency play criticism, Amnesty says International.

Reader Deanna took a stab at translating Laureano Marquez’ article in Tal Cual which is here in Spanish (see previous post), not bad at all!. Thanks! For those that don’t speak Spanish, here it is:

Venezuela without Esteban by Laureano Marquez in Tal Cual

A Venezuela without Esteban is difficult to imagine, but all the scientists agree in pointing out that the day when the President will leave the government is nearer everyday and they have made a documentary for the History Channel which will relate how Venezuela will be when the Head of State is no longer…

…FIRST DAY WITHOUT ESTEBAN: People can’t really believe it and they begin to live in a state of confusión.  Pro-former government armed groups destroy all that’s left of the country (which fortunately was very Little)…

Some who are already completely crazy continue applauding in Miraflores  and screaming UH AH…Martha Colomina and Miguel Angel Rodriguez take the plaza Bolivar with a group of motorcyclists and surround Lina Ron…Venevision declares itself furiously anti-Chavez.

…FIRST MONTH WITHOUT ESTEBAN: Some people have not reacted yet, thinking that he will return at any moment.  People stop buying dollars like crazy.  Most of the militant members of PSUV say that they never imagined that the government did all those atrocities that were beginning to be uncovered and that they didn’t know…Humanitarian aid arrives in the country…

…SIX MONTHS WITHOUT ESTEBAN: …Nicaragua and Cuba claim their monthly allowances before the Court of The Have.  The first investors arrive in the country.  The Chavista deputies begin to notice that the laws they had approved are really antidemocratic because now they are being applied to them, and they contribute in the effort to change them.  All the political prisoners who had been judged arbitrarily or detained without trial are now free.  Esteban continues living in Cuba with the excuse that without him “in Venezuela no one lives” and tries singing in the Tropicana.

…TEN YEARS WITHOUT ESTEBAN:…The first signs of economic reactivation begin to appear.  There are now foreign investors with more confidence.  Venezuela’s international image begins to improve and after two periods of political alternability without trouble, the people begin to believe in the solidity of democracy.  Venezuelans who left the country during  the government of Esteban begin to return “en masse” attracted by this good international image and by the reform of social security which guarantees a decent health system for all citizens.  Sugar can again be found in the supermarkets.

… …TWENTY YEARS WITHOUT ESTEBAN:…Fidel Castro dies officially and Raul asks Esteban to leave Cuba.  Esteban returns to the country.  Jose Vicente Rangel denounces in his Sunday program the corruption of his government and gives the names of those who bécame rich except one.  The ex-president goes for an audition in Venevision to lead Sabado Sensacional, which to this day is still without a Master of Ceremonies, but the channel portrays him negatively (¿)(le pinta una del tamaño de la colina) and denounces the atrocities of his government and the repugnant complicity of some people.  Esteban dedicates himself to the family estates in Barinas, in the middle of constant protests from his workers for better salaries and capitalist exploitation.

…ONE HUNDRED YEARS WITHOUT ESTEBAN:…The end of the Venezuelan 20^th century and the beginning of the 21^st is now only a bad memory.  The period is studied as an example of what should not be done with a country.  Many historians say that Venezuela entered the 21^st century when Esteban lost his power.  People are surprised to see the videos of how he ruled the country, how he treated the citizens and his own ministers.  Many believe that it is a joke from the oldest comic show of Venezuelan television, Radio Rochela, which is again on the air in open telepathic signal.

The ex-president goes for an audition in Venevision to lead Sabado Sensacional, which to this day is still without a Master of Ceremonies, but the channel portrays him negatively (¿)(le pinta una del tamaño de la colina) and denounces the atrocities of his government and the repugnant complicity of some people.  Esteban dedicates himself to the family estates in Barinas, in the middle of constant protests from his workers for better salaries and capitalist exploitation.