Archive for August, 2008

Flowering begins to pick up

August 24, 2008

Flowering picking up, hopefully not too early for the September Miranda Exhibit. On the left top, my awarded Cattleya Jenmanii, larger flowers and more flowers than ever before. On the right a nice alba, but I have no clue what it is.

On the left a very nice and out of season Cattleya Lueddemanianna and on the right a Cattleya Percivaliana Huevo Amarillo x Sonia

Where is the revolutionary gold?

August 24, 2008

Venezuelan has been filled with billboards like the ones
above for weeks saying “Gold for the sporting revolution”, trying to associate
the medals with politics, certainly a no-no in sporting circles. Cynics say
that I am wrong; someone just found a way to make money out of the Olympics,
the person or persons that sold the billboards to the robolution.

Clearly, someone convinced the autocrat that there would be
a few medals, more than the country had ever obtained in its Olympic history. But it
was not to be, as Venezuela obtained a single bronze medal in Taekwondo, one
medal less than in Athens, despite twice as many athletes.

Sports authorities had convinced Chavez that Venezuela would
obtain at least five medals and he made quite a show of it, meeting with the
Olympic athletes twice before their departure and talking about it in his
Sunday variety show Alo Presidente.

Today, Chavez is calling those that claim Venezuela failed in Beijing,
pro-Yankees and is suggesting the athletes had a brilliant Olympic Games.  Meanwhile, the President of the
Venezuelan Olympic Committee is saying that Venezuela did not meet its goals
because refereeing went against the country. The only success, besides the medal,
according to this person was that we sent 109 athletes to the games, more than
twice the number Venezuela had ever sent to the Games.This is a silly way to look at it as the IOC has been trying to relax requirements so that more countries participate and Venezuela had 39 delegates in team sports like volleyball and softball.

The truth is that Venezuela should have done better if only
because in exchange for oil, Cuba has been sending trainers to this country for
eight years. Given the success of the Cuban in international sports, this
should have had some minimal impact, which should have been visible in Beijing.

I suspect that the bureaucratic nature of Venezuelan sports
is what hinders its development.  In fact, one of the delegates to the Olympics told Chavez today that
sports had too many managers. This is nothing new, it was happening before
Chavez came to power. What is new, is that Chavez’ profound dislike for the
public universities, has distanced the sporting structure of the country from
its most natural place to harvest good athletes. Not only that, but these same
universities have been strapped for money ever since Chavez came to power.

Perhaps sports officials in Venezuela should look critically
at where Venezuela excels and ask why. They may not like the answer, but it is
the truth: Success these days comes wherever the private sector lends a strong
hand, but I am sure Chavez will not like that answer. Venezuela’s success in
baseball, soccer, tennis and Taekwondo all originates in the private sector.

Taekwondo is a very interesting case; the country has won
two medals in the last two Olympics and two in the Barcelona Olympics when it
was an exhibition sport. Taekwondo began as a martial arts practice, taught at
private academies around the country and when the sport became Olympic one,
Venezuelan women had world quality status in it (I have yet to find an
explanation why it was the woman who took to the sport) As simple as that.

The mystery is why the revolution ahs not been successful at
sports. They have plowed some extra money and lots of new trainers to it. Why
hasn’t it worked? You may argue inefficiency, mismanagement and the like, but
there should have been an improvement even if only qualitative. But it is not
there. In the end it may be like Chavez’ housing program, where despite the announcements,
money and projects, the Chavez Government has been unable to coordinate
building more housing.

In fact, you would think that the whole patriotic, socialist
speech should have generated more enthusiasm for sports. But maybe the money is
just being spent in the wrong places. A revolution that does not want anyone to
excel may be the wrong drive for Olympic success.

So, we get more revolutionary propaganda, than revolutionary
gold. That seems to be the hallmark of the revolution.

A graph of the dismal ability of the Government to predict inflation

August 23, 2008

The plot above shows how dismal is the ability of the Chavez Government to predict what inflation will be by the end of the year. In January, Minister of Planning El Trudi predicted that inflation would be 12% for the year, a value he reiterated in February, after the high number for the “new” CPI in January. By June, the 12% was a joke, since inflation had already topped it and Minister El Trudi came out with a new, and surprisingly precise, number of 19.5%. Well, with inflation at 17%, Minister of Finance Ali Rodriguez came up with a new number yesterday, saying that inflation for the year will be 27%.

Well, doing a fit with all three numbers and extrapolating to December, it looks like inflation will be 35% for the year, unless the “upturn” is real and it will accelerate and top 40%. In neither case is the end result very good for anyone, what is clear is that the Government has no clue as to what to do about inflation. Cooling the economy off and lowering the swap rate in the first half did nothing to slow down inflation. The Government has given up on the first strategy because of the upcoming elections and the second one is running into technical problems. This reminds me of the period during the Caldera administration, end of 1995, when with exchange controls in place, inflation accelerated and nothing the Government would do would slow it down. When inflation topped 120%, Caldera gave up and removed controls.

As with crime, Chavez simply ignores this problem never mentioning it. The latest strategy with crime seems to be that it has been blown out of proportion. Will they try to do the same with inflation?

The Venezuelan Central Bank is fudging the country’s balance of payments numbers

August 20, 2008

The other day, I presented a back of the
envelope calculation
showing at what price of oil does the country start
having problems in its balance of payments. I am still reviewing those numbers,
my main small mistake was only that imports are higher than I assumed.

Today, I paid attention to
this Central Bank press release
on the same subject. The first thing it
says is that the balance of payments was positive to the tune of US$ 2.93
billion in the second quarter of 2008. That sounds ok at first sight.

However, the report says that oil exports in the quarter, in
which the average price of the Venezuelan oil basket was US$ 109.9, was US$ 28
billion. Of course, such a number only makes sense if Venezuela exported 2.7
million barrels of oil a day. This does not even fit with official numbers!

The problem is that all of this data is simply fudged. They
talk about exports, but don’t mention imports of oil. Venezuela consumes at
least 800,000 barrels of gasoline a day, but Venezuela does not produce such a
large amount. Thus, the reality is that Venezuela may be “exporting” 2.7
million barrels of oil, but Venezuela is not getting paid for that many and in
the end it has to also import to satisfy the local market.

In fact, that the numbers are fudged, can be seen in the
next paragraph on the “financial account”. After telling us the country exports
US$ 28 billion, the Central Bank tells us that there was a full US$ 11.1 billion
in a financial deficit, a full 39% of the “income” from imports, which
corresponds to “the increase in the oil credits given to foreign clients which
are not related to PDVSA

What than means in plain language is that PDVSA is not
charging for a full 39% of its exports or 1.05 million barrels of oil a day.
Which I don’t believe either, it is simply too large a number. The fudging is
simply getting too absurd. We don’t give away so much. As simple as that.

But let’s look at this from a different point of view:

The Government claims Venezuela produces 3.3 million barrels
a day

The country consumes 800,000 barrels a day.

That only leaves 2.5 barrels a day for import, so the 2.7
million number given in the BCV report and calculated on the basis of the average
price of the Venezuelan oil basket in the second quarter has to be fake.

And so has to be the 11 billion in credits, we just don’t
give away so much oil.

It is just creative accounting. I am sure that these “credits”
hide the value of a lot of the gasoline imports of the country.

But we can “redo” my calculation using the final fudged numbers
given out by the Central Bank. The final numbers should be fine, they are harder to fake:

The Central Bank says that the surplus in the current
account was US$ 2.9 billion

The total for oil imports was US$ 28 billion. Thus, the “net”
surplus, including everything is only 10% of the amount from oil imports. Since
the average price for the quarter was US$ 109.9, then ten percent of this is
US$ 11, which says that if the price of oil dropped to US$ 98.9 per barrel, the
balance of payments will be negative!

Think about it, my very approximate number was too low!

A Chavez video with an incredible historical value: His ignorance and his lack of interest in democratic principles

August 20, 2008

This may be one of the most relevant videos of an Hugo Chavez tirade.
First he has his world fight and claims the revolution starts here in
Latin America.

Chávez y la oligarquía pitiyanqui
Cargado por noticias24

But, oops, here is the leader of a supposedly XXist. Century
Revolution, after calling Marx and Engels the leaders of “scientific
socialism”, Then he calls Simon Bolivar a socialist. He also talks
(minute 1:20 or so) about the “pages” and the “windows” and the
“Internet” clearly showing he has no clue about the difference between
a computer and the Internet

Then he just says what he always wanted to say, after calling a local
newspaper a pro-US paper, people with no country, because the laws he
issued allowed him to confiscate 1600 Kilos of rice, he threatens that
freedoms for some sectors will be finished and that people will have
fewer freedoms. Of course, it will be the oligarchs whose freedoms will
be restricted. Can it be clearer than that?

Some leader! He then praises the same guy I criticized last week for
saying that price increases will not lead to inflation. Another
“scientific” hero of the revolution I guess. Has anybody asked what
happened to the money he got from selling the rice at the subway
station? Is Mr. Saman depositing it in his personal account?

Such are the ways of the stupid revolution!

All recent expropriations and nationalizations are simply unconstitutional

August 20, 2008

Just a reminder in the face of the wave of nationalizations
and confiscations:

Art 115.
of the Venezuelan Constitution

Artículo 115. Se garantiza el derecho de propiedad. Toda
persona tiene derecho al uso, goce, disfrute y disposición de sus bienes. La
propiedad estará sometida a las condiciones, restricciones y obligaciones que
establezca la ley con fines de utilidad pública o de interés general. Sólo por
causa de utilidad pública o interés social, mediante sentencia firme y pago
oportuno de justa indemnización, podrá ser declarada la expropiación de
cualquier clase de bienes.

Art. 115. The right to property is guaranteed. All person have the
right to the use, possession, enjoyment and disposition of its goods. Property
will only be the subject to the conditions of restriction and obligations that
the law establishes with the public good or general interest as its end . Only
die to the public good or social interest, via a firm sentence and opportune payment
of just indemnization, can the expropriation of any type of good be declared.

Can it be any clearer than that? Each and everyone of the
steps in the nationalization and expropriation of Sidor, Cemex, Fabrica
Nacional de Cementos and Cementos Caribe are simply illegal.

Apparently, many people don’t want to defend their rights.

A day in the life of the amateur Venezuelan revolution

August 19, 2008

It was one of those days. Where do I live? Some bizarre
alternate world or simply the silly and amateurish Bolivarian revolution? And it did look
silly today, really silly and amateur. It is all smoke and mirrors; reality has nothing to
do with it. The people have nothing to do with it. It is just some warped mind
planning and thinking what in his deranged mind thinks is “good” without any
evaluation of criticism.

And the people sucking up to the autocrat! My God! Where was
the opposition? Where was the “private sector”? Is everyone just trying to milk
the revolution to the last penny and leave? That seems to be the plan as a
strident silence permeated Caracas today, as things got more and more bizarre
and there seems no stopping to it:

—There was the Cemex show of course. Red shirts and empty-headed
radicals waving flags celebrating the expropriation of the cement company.
Funny, if the Venezuelan private sector could not run Cemex (then called Vencemos)
efficiently, is there any hope for the incompetent, inefficient and corrupt
Chavez administration?

Of course not. It will just be a matter of time. Meanwhile,
the Minister of Finance tries to argue that the company is
only worth US$ 400 million
, because that is what it is worth in the Caracas
Stock Market. Thus, you clobber the market, violate its rules, drive away
foreign investors from it and then you try to apply “free market” rules to the
pricing, proving what a farce the whole thing is. Because Holcin,
was paid more than the US$ 400 million the Minister of Finance is quoting,
despite being a much smaller company, with a much smaller production of cement.

—Then there is the Comisión Nacional de Valores, the
defender of the small investor and supposed to defend the law they swore to
represent. They have said nothing ever since Chavez announced the expropriation
of all of the cement companies and surprise, surprise! Today they ordered
the halting of trading of the shares of Cemex “in order to achieve the transparency
of the markets”.

Hello! Did you learn about the Government’s intentions
today? Or were you on vacation, because the news has been around and the “halt”
in trading came so late, that some shares actually traded today before the news and halt came out. I guess the Comisión
Nacional de Valores was in Miami or Margarita this weekend because apparently
robolutionaries work less than five days a week.

Of course, this “transparency” did not include respecting the
country’s laws. How many times has the securities regulator stopped deals,
mergers and buyouts until the price was justified, but in this case allows the
Government to trample the law, investors and their own markets. What fools!

—And then, for those that thought the recent passing of 26
Bills is somewhat irrelevant, the “new”, “new” consumer protection agency confiscated
1,670 kilos of rice from the Excelsior Gama supermarket in Santa
Eduvigis in the East of Caracas and proceeded to sell it at the subway station
nearby. The charge? That the presentation of the rice had not been approved buy
the Government and as established by the Head of the “new”, “new” consumer protection agency, “rice
sold outside regulation will be sold directly to the public“.

These guys rally believe their BS, in fact, the Head of the
newly named agency stood at the subway station selling himself the regulated
rice to the public. Imagine his face when a very polite lady, bought a bag,
opened it and just threw it all over his face. You just don’t fool around with
my food provider seemed to be saying the lady.

—And just when I thought the day was over, I get a press
release which confirms that this is all part of Chavez’ gigantic folly. Electricidad
de Caracas, nationalized (legally!) a year ago presented its financial results
for the first six months of 2008, after the company has been in the hands of the
Government for twelve months.

In his short period of time, the robolution has been able to
turn the company form a Bs. 130 million profit, to a Bs. 13 million loss. This
came accompanied with a drop in 40% of the cash flow of the company and margins
shrank by 20%.

Now, think about it, this is a monopoly, you provide electricity,
you bill, you get paid. No payment you get the juice shut off. Simple business,
no? Well in barely twelve months we Venezuelans are already losing money.
Imagine running Cemex’ plans, or Cemex’s commercialization of cement, or very
simply, running Banco de Venezuela, in what is a very competitive business in

But I do hope that now that the Ministry of Finance says
that Cemex is only worth US$ 400 million, a reporter or someone asks him why
did the Chavez Government pay close to US$ 1 billion for Electricidad de
Caracas a year ago, after all, it is only worth 319 million in the local stock market
today. Why did they overpay? Is that illegal? Doesn’t the law punish this? Shouldn’t
we send someone to jail for this?

Of course, robolutionaries go to heaven or to the Swiss bank,
while everyone else is banned or sent to jail. Get used to it!

Ask yourself now: Who is next? One day it will be you…

Another tragic event for Venezuela as Chavez takes over the cement companies. Just think, your property may be next

August 19, 2008

Ironic that as I write this waiting for Chavista hoodlums to
take over Cemex pants, I also read that none other than Hugo Chavez complained
to his Minister of land and perennial Cabinet member Elias Jaua to
please start pressing on with his Land Bill because in the autocrats words
“Elias I want to see results because I have yet to see a single one”

Which coincides with what we have not seen, except that the
Land Bill was not passed as part of the package of Bills two and half weeks
ago, but was actually approved seven years ago and in the words of the man who
created it and sold it as the best thing since warm water was invented. But
like most things in his failed revolution, seven years later not even the
autocrat can see a single result from that Bill.

In fact, if he was a little bit critical he would realize
that the Bill has been a negative for Venezuela, destroying productive lands
and leaving in shambles formerly productive farms.

But tonight, the National Guard and a bunch of Chavez’ red
guards await outside a perfectly run cement plan to take it over so that
another folly by the quasi-Dictator can be executed. And soon it will become
another failure, but maybe seven years from now, he will ask whatever happened
to the cement companies we took over, there is no cement.

And Chavez’ own personal biased could be seen today as his
Government reached agreements with Lafarge and Holderbank but not with Cemex,
as the Government made goof offers to the first two, but a pitiful one to
Cemex, his final revenge against the Mexicans he hates so much. Maybe he tried
to join the mariachis when he was young but was rejected. That seems to be the
hallmark of his life.

And thus today we have an expropriation and a blatant
violation of the Capital Markets Law, but we have not heard anything from the
President of the Stock Market, or the President of the Comisión Nacional de
Valores or from any politicians, they are probably doing more important things,
as property rights and freedom are dramatically subverted by Hugo Chavez.

Thus, another tragic event in the destruction of Venezuela took
place today. Who is next you may wonder? Will it be the food division of Polar?
Will it be another Spanish Bank? Just think, after all of those giants are
taken over, Chavez may go after your property. What will you say then?

Another Government sign shows unusual creativity by its authors

August 18, 2008

This sign from Tal Cual is so oxymoronic that I am not even sure how to translate it, Gym for Gymnastics does not quite do it, even if that is what it says.

Maybe now sports belongs to all of us, but Mision Robinson is still an unfinished job. Creativity in sign writing is not their forte.

When is the price of oil a problem for Venezuela?

August 17, 2008

Oil prices have been dropping quite rapidly recently . This
is not too surprising, what was surprising was that they kept rising in the
face of a slowing economy in the US and Europe. Clearly, oil is on the rise
secularly, but it cannot be immune to the economies of those countries that
consume the most of this comodity. That there are problems ahead for oil prices is clear as
the Iranian Governor of OPEC said yesterday
that OPEC should cut its output
at the meeting next month, because there was excess demand of about one million
barrels a day at this time. Quite a change from the tight supplies supposedly
in place at the beginning of the year. Expect the correction on the downside to be overdone.

The question is what this means for Venezuela. Venezuela’s
oil basket closed this week at an average of 107.95 per barrel, a sharp drop
from the 126.46 registered barely a month ago. The question is at what level of
prices does the country start having problems? This is not an easy question to
answer because prices can go down significantly before effects are truly felt.
Moreover, a lot of the spending that Chavez is incurring in can be cut without
it having an immediate impact on our daily lives.

But one can do a very simple calculation of at what price
does the country start losing foreign currency, which is a good benchmark for
country’s to start having problems. This is what is called the current account,
which grossly is the sum of the balance of trades plus (or minus) whatever
income goes in and out of the country in foreign currency.

Let us first look at the country’s needs in the next twelve

Imports: US$ 50 billion (They are on a US$ 48 billion pace
in 2008, but Xmas will round it off to the 50 billion dollar level)

Help to Argentina (non-oil) US$ 2.4 billion

Other help abroad US$ 1.6 billion

Thus, Venezuela has needs of US$ 54 billions in the next
twelve months, ignoring the need to pay for nationalizations and Chavez’ pocket money whims.

Let us look now at the possible sources of income. Now, if
you truly believe that Venezuela is producing more oil than what OPEC or the
IEA say, then stop here, you will never agree with my calculations. I will use
2.4 million barrels a day as my benchmark for production. Then, there is the fact that non-oil
exports are expected to be US$ 1.6 billion in the next twelve months, that debt
service will be about US$ 1.5 billion and the country will issue debt for US$ 4
billion in foreign currency. This adds up to US$ 7.1 billion.

Now let’s look at oil exports that generate money.

Production 2.4 million barrels

But, for exports you have to subtract:

Internal consumption of 800,000 barrels a day

Petrocaribe subsidy of 130,000 barrels of oil a day

Chinese development fund of 80,000 barrels of oil a day

Thus, the true amount available for exports that generate
cash flows is 1.38 millions of barrels of oil a day or 507.35 millions of
barrels of oil a year.

Using the numbers above the equilibrium number for the
Venezuelan oil basket is US$ 92.63 per barrel, not terribly distant from where
we are today.

Problems will only start somewhere below and of course,
Venezuela may stop helping Argentina or try to issue more debt, which looks
difficult, but in the end there isn’t much leeway in the numbers. Venezuela
can’t increase oil production or non-traditional imports. Doubling debt to US$
8 billion (very difficult!) and ignoring Argentina, lowers the magic number to US$ 79 per barrel.
But can Chavez do the first and does he dare do the second?

The biggest measure Chavez could take to improve the

Increase gas prices and/or reduce imports. But given his
threats to the private sector, this would latter would lead to shortages and
the former to a sharp drop in popularity.

In some sense, Chavez has been taking the worst possible
measures in terms of a scenario in which oil drops to say US$ 85 per barrel. At
that level, the country’s numbers simply don’t make it, forcing him to take
some truly unpopular measures.


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