Archive for February 9th, 2004

Simply scared or are things going to get much worse?

February 9, 2004

 


One can’t help but be concerned about the authoritarian and fascist tone of many statements made Government officials and high ranking military this weekend. From the statements by two Ministers saying that there will be no recall referendum against the President, to the abusive acts and statements by two Generals, the attitude is not that of a democratic Government and only helps to unnecessarily increase tension in a country that needs exactly the opposite.


 


A Deputy from the Acción Democrática party, Edgar Zambrano, denounced that he was having dinner last Friday with CNE Director Sobella Mejias when a group of National Guards hit him and handcuffed him and took him away in a National Guard wagon. The General denies that this ever took place, saying that he does not even know Zambrano. But then he proceeds to say that he was at the Restaurant and the guards accompanying him might have done something to Zambrano.


 


The General then goes on to question what Zambrano was doing having dinner with the CNE Director as if two people belonging to the same political party can not have dinner together (besides being of opposite sexes, which is not the General’s business anyway). Moreover, Zambrano has witnesses of what took place and turned in as evidence the pair of handcuffs used on him. The General said that you can get a pair of handcuffs anywhere.


 


The second outrageous act was the announcement in President Chavez’s Sunday program that an active General would be a candidate to the Governorship of Carabobo state. General Acosta Carles, the same burping General who committed abuse of power in December 2001, confiscating and selling private property for which he was promoted by President, actually said he was already the “de facto” Governor of that state.


 


The worst part is that President Chávez continues going around the country announcing his hand-picked candidates. This violates the law in many different ways: First of all, neither active military nor public office holders can be candidates by law (Violation #1). Nor can they be candidates until the day they register (Registration is not even open yet for the regional elections) (Violation #2). Despite this, Chavez uses Government sponsored TV programs to launch these illegal candidacies, which represents misuse of public funds (Violation #3), abuse of power (violation #4) and sponsoring illegal activities (Violation #5). But of course, since Chávez controls the Attorney General (who is also the Prosecutor in charge of upholding the law), the CNE, the National Assembly and the People’s Ombudsman, all of this happens with total impunity.


 


This is what an autocratic Government is all about. Violation of the laws, violation of the rights of people, abuse of power, total impunity by the military and Government officials, limits to the exercise of democracy. While I still cautiously believe that there will be a recall referendum, the fascist and arrogant behaviour of Government officials in the last few days, tells me that they are getting nervous. Edgy because they have realized the opposition has the necessary signatures to hold the recall vote. Nervous because they know they might lose the vote. Edgy because if they ever lose their stronghold on all stages of power, a revived judicial system will prosecute them for their abuses. They should be…

Currency devalued

February 9, 2004

 


The Venezuelan Government devalued the currency today from Bs. 1600 to the US$ to Bs. 1920 to the US$. The move was not unexpected as the 2004 budget was calculated at exactly the new rate an average for the full year. Thus, it was only a question of when exactly the Government would implement it.


 


The decision will have its strongest impact on basic foodstuffs which were receiving foreign currency at the official rate as well as regulated products which, if not adjusted, will become scarce. The move will obviously add to inflation in 2004 as the parallel market exchange rate moved today from Bs. 3100 to Bs. 3200 as part of the devaluation had already been priced in last week when the foreign exchange control office CADIVI stopped the flow of foreign currency arguing that it was changing its already brand new information system.


 


As suggested here last Friday, this is likely to be a first step before the Government issues two bonds in US$ one to be swapped for local debt in the hands of the banks and the second one to be sold to local investors in Bolívars.


 


From a practical point of view, the measure will immediately have a positive impact on exporters and companies that maintain foreign currency positions. These positions are maintained in the books at the official exchange rate and will generate a one time gain for their holders. The opposite will be true for companies that have liabilities in US$, since they will have to generate Bolívars to cover their debt.


 


A quirky effect will occur in any Bolivar denominated mutual fund that has US$ instruments in its portfolio, it will generate a 20% gain in one day in those instruments. Some mutual funds I know have as much as 50% of their holdings in foreign currency instruments.


 


Additionally, the holders of CANTV ADR’s will lose as CADIVI had yet to approve the dividend paid by the company in December, so that in the end they will receive US$ 1.278 rather than expected US$ 1.535 per ADR.


 


The devaluation will have its strongest impact in the lower strata of the population, since food will likely record the highest increase of all items in the CPI and it represents the highest percentage of the budget of poor people. Of course, the Minister of Finance claims it will not have an impact on inflation because it had already been taken into account. What a cynic! Once again, the hidden tax which a devaluation represents is paid by those that can afford it the least.


 


Curiously, President Chávez did not announce the decision in his Sunday program, despite the fact that the official gazette with the decree had already been printed on Friday. Venezuela maybe the only country in the world where a devaluation is not announced by any Government official. Nobody wants to look bad?

Currency devalued

February 9, 2004

 


The Venezuelan Government devalued the currency today from Bs. 1600 to the US$ to Bs. 1920 to the US$. The move was not unexpected as the 2004 budget was calculated at exactly the new rate an average for the full year. Thus, it was only a question of when exactly the Government would implement it.


 


The decision will have its strongest impact on basic foodstuffs which were receiving foreign currency at the official rate as well as regulated products which, if not adjusted, will become scarce. The move will obviously add to inflation in 2004 as the parallel market exchange rate moved today from Bs. 3100 to Bs. 3200 as part of the devaluation had already been priced in last week when the foreign exchange control office CADIVI stopped the flow of foreign currency arguing that it was changing its already brand new information system.


 


As suggested here last Friday, this is likely to be a first step before the Government issues two bonds in US$ one to be swapped for local debt in the hands of the banks and the second one to be sold to local investors in Bolívars.


 


From a practical point of view, the measure will immediately have a positive impact on exporters and companies that maintain foreign currency positions. These positions are maintained in the books at the official exchange rate and will generate a one time gain for their holders. The opposite will be true for companies that have liabilities in US$, since they will have to generate Bolívars to cover their debt.


 


A quirky effect will occur in any Bolivar denominated mutual fund that has US$ instruments in its portfolio, it will generate a 20% gain in one day in those instruments. Some mutual funds I know have as much as 50% of their holdings in foreign currency instruments.


 


Additionally, the holders of CANTV ADR’s will lose as CADIVI had yet to approve the dividend paid by the company in December, so that in the end they will receive US$ 1.278 rather than expected US$ 1.535 per ADR.


 


The devaluation will have its strongest impact in the lower strata of the population, since food will likely record the highest increase of all items in the CPI and it represents the highest percentage of the budget of poor people. Of course, the Minister of Finance claims it will not have an impact on inflation because it had already been taken into account. What a cynic! Once again, the hidden tax which a devaluation represents is paid by those that can afford it the least.


 


Curiously, President Chávez did not announce the decision in his Sunday program, despite the fact that the official gazette with the decree had already been printed on Friday. Venezuela maybe the only country in the world where a devaluation is not announced by any Government official. Nobody wants to look bad?

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