Archive for April 9th, 2008

If it is Wednesday it must be Chavez’ day to nationalize steel

April 9, 2008


Today the Vice-President Ramon Carrizales said exactly the
opposite he stated yesterday and the Government announced that steel company
Sidor would be “renationalized” and taken over by the Venezuelan Government
from Argentina’s Ternium. Ternium is composed of a Mexican, Argentinean and
Venezuelan steel producers, which found the synergies or joining forces and
important factor in their success. Sidor was privatized in 1998 after decades
of losses and an investment of more than 15 billions dollars.

Chavez had so far resisted nationalizing Ternium so as not
to offend his Argentinean friends the Kirchners. Last year Nestor Kirchner sent
a high level and personal emissary to negotiate prices for Sidor’ steel prices
in Venezuela when Chavez first threatened to nationalize the company who
apparently thwarted the effort.

But last night Huguito seemed to have a temper tantrum
when Sidor’s board refused to accept the demands of the steel union, SUTISS,
which has been creating trouble for the Government for the last two weeks.

What are another two and half to three billion for a rich
autocrat like Chavez? Thus, Chavez added to what is now a remarkable US$ 21
billion in payments which the country will have to make in the next couple of
years when you combine the heavy crude projects, cement companies and now
Sidor. Given that Government assets including Fonden, Bandes and international
reserves are estimated at US$ 57 billion, the numbers are no longer as comfortable
as they used to look which may explain the fact that Venezuela has the highest
risk of any emerging market at this time.

Of course, since they can no longer argue that Sidor is
charging prices that are too high, this time around the arguments are that
Sidor was “exploiting” its workers, submitting them to a form of “semi-slavery”
and while the company has not violated the law, its behavior is “anti-ethical”
and “inhuman”

This “inhuman” behavior included accepting the unions
demand that all of the workers belonging to contracting companies be hired as
regular workers, which increased the payroll by 600 people, a salary increase
of 130% which has to be added to those announced by the Government every year
in May and is thus much, much larger than anything the “human” Government of
Hugo Chavez has ever granted any workers.

A Sidor worker would make after this increase, more than a
Full Professor from a Venezuelan University or ten times the minimum
salary. But you know, most of
those intellectuals are oligarchs anyway, while a majority of Sidor’s workers Chavez
believes are in his favor. They will, only if they need him.

We have yet to hear from Chavez Kirchner’s friends, who
much like the French before the Lafarge nationalization, believed that they
were immune to Chavez’ tantrums and antics. Chavez will have to give something
up in return to Kirchner’s friends to be forgiven. But politicians in Argentina
are not likely to be convinced and this may turn out to be the end of Venezuela’s
Mercosur application.

And then there is the complete freeze out by Venezuela’s
corporate sector, which now will absolutely refuse to make any investments. Why
bother if you don’t know who will be next?

And that as the talk of the town today as people wondered
whether it would be Polar, Sivensa and all or someone in the banking sector.

The amazing thing was that the
opposition’s ignorance on economic matters made them stay on the sidelines as
none of the “leading” opposition politicians seemed to be comfortable enough to
even dare criticize the Government for its recent takeover announcements.

But to me the math is very
simple: Every dollar spent in taking over perfectly functioning companies is a
dollar away from helping hospitals in a country with a decaying heath
infrastructure, or from helping someone avoid malnutrition, or from creating a
job in a country with 50% informal sector employment or buying equipment to
fight crime in a country with 100,000 homicides since Chavez became President.

It should not be that hard to
figure which all in all represents a tribute to the mediocrity of our
politicians both Government and opposition.

A bit of everything

April 9, 2008

On the left a hybrid of Cattleya Intermedia with Blc. Morning Glory. This flower won second prize at the recent Natural Sciences orchid exhibit. On the right, a Cattleya Mossiae semi-alba, which unfortunately has a funny shape.

On the left, a Cattleya Giga from Colombia, huge flower! On the right a hybrid of Cattleya Walkeriana with Blc. Morning Glory.

My faithful Cattleya Violacea. I took it today to the orchid exhibit of the Venezuelan Orchid Society and someone I respect a lot was very impressed with the size, shape and number of flowers. I thought it was an unusual plant, but I am no expert on Violaceas.

What is strong is the looting by Teodoro Petkoff in Tal Cual

April 9, 2008

I must say that when the Electricidad de Caracas bond was sold in what was clearly a blatant corruption scam, I was appalled that a US$ 100 million scam could go unnoticed like that. In some sense it is part of the climate of fear created by Chavez and his hoodlums in which many segments of the media are afraid to speak up for fear of retaliation. But I have been extremely happy to see others reporting the case. From Reuters, to Reporte Diario de La Economia to Ana Julia Jatar, the story is coming out and even though I do not expect this amoral Government to investigate anything, the record is there for all to see.

Today, Teodoro Petkoff covered the issue and it was clear that he had all of the data. But I would like to note one part of his Editorial that may go unnoticed: There is no reason for the Government to create this second part of the foreign exchange market using bonds other than to insure that some people will make so much money just in case Chavez disappears from the Venezuelan political scene anytime soon. Thus, if we saw corruption before, you ain’t thing anything yet! It is also interesting that Petkoff uses names, naming a person that had been acting in the structured note market/scam and now magically appears as an adviser to the Minister of Finance on these matters.

I wonder now where all of the cheerleaders of Chavismo are. They used to come and say so and so was corrupt and now that Venezuela has the most corrupt, unethical and immoral Government in its history they are quiet but still supporting what may be the most aberrant and corrupt Government in the country’s history.

And as Petkoff suggests, either Hugo Chavez knows exactly what is going on or he is an bumbling and incompetent fool. And by now, it is not the latter…

What is strong is the looting by
Teodoro Petkoff in Tal Cual

The looting of the country is
frankly reaching apocalyptic levels. What happened with the Electricidad de
Caracas bonds reaches new levels on matters of illegal enrichment. The
operation is as follows: Electricidad de Caracas, now in the hands of the
State, announces the issuing of a public debt bond. Amount: 650 million
dollars, ten years maturity and with interest of 8.5%. The buyer will acquire
them with a premium at a price of 105%, that is, for each one thousand dollars
in face value he will pay 1,050. While denominated in dollars the bond will be
paid in Bolivars at the official exchange rate of Bs. F. 2.15 per dollar. Up to
here the procedure follows that steps in the placements of other securities
which insure dollars at the official rate of exchange, later sold in the parallel
market and the profit is split between those that distribute it and those that
share it. But in the case of the electrical bonds, the buyer will have to
forcefully sell his bonds to an unidentified buyer, who will pay in dollars.
The repurchase price fluctuates between Bs.F. 3.42 per dollar to bs. F. 3.6 per
dollar, because the “repurchase “ price is with a discount at 62.7% and 66%.
That is, for each one thousand dollars of the bond the holder will receive 627
or 660 dollars, according to the discount.

But here is where the “kikirigüiki”*
is, the average price of the Venezuelan bonds in the secondary market is of 83%
over its face value. Thus the repurchasers, still anonymous but we can presume
who they are, will make between 170 and 200 dollars for each 1,000 of the bonds
“repurchased” with the discounts mentioned earlier.

You bought at 62 or 66 and you
sold at 83. The full issue (650 million dollars) would produce “earnings”
between 110 and 132 million dollars.

Is this what they nationalized Electricidad
de Caracas for? To transform it into a “corporate agent” of thefts to the
Nation and enrichment of the Government officials and financial operators of
the regimen? We are no longer going to ask if the President knows about this or
if this is being done behind his back. Because it is not only impossible that
he does not know of the enormous frauds that are talking place with the
placement of public debt bonds, but we can presume that having been convinced
by Moris Beracha that the mechanism to be sued to get rid of, without leaving a
trace, the structured notes, which incurred in a patrimonial loss to the nation
over US$ 3 billion, he is taking his time to personally monitor the development
of the operations.

And we have yet to establish a dual exchange rate. When that happens, the orgy
of corruption that will fall upon us will leave as only chicken thieves the famous
operators of Recadi. The moral decomposition of this regime is touching bottom,
the bottom of the pan that they are scraping given the perspective that Chavez
has an expiration date.

*kikiriguiki, slang for shenanigan

Planning in the revolution

April 9, 2008

Ramon Carrizales, Vice-president of Venezuela April 9th. 2008: “The nationalization of steel company SIDOR is not in the plans of the State”

Ramón Carrizales, April 10th. 2008, less than 24 hours later: “Venezuela will renationalize steel company SIDOR”

This is what is called long term planning under the revolution

Chavez shows off new cement technology

April 9, 2008

Chavez showing off the new technology he invented that he will use to improve the productivity of the Cemex, Holcim and Lafarge plants. He claims not only will the plants be more productive, but he will be able to give jobs to all men in Venezuela and about one third of those in Colombia to move around with this hi tech system 8 million Tons of cement a year. He may be right…

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