Archive for December 12th, 2008

Catching up with the revolution: Briefs on everything I have missed

December 12, 2008

—-In another triumph for the revolution, for the fourth
time in 2008, lights
went out in most of Caracas for over an hour
as another power failure hit the
system, creating a city wide blackout. Recall that Electricidad de Caracas was
nationalized in another Chavez whim in June 2007. The company had a sterling
record of maintenance with only one large blackout in five years, which was due
to a failure in the Government-run interconnected system. We have now had four
in this year and if last time they jailed four engineers, maybe the National
Assembly should jail President Chavez for paying US$ 1 billion for the company
and naming incompetent people to run it, so as to deteriorate its quality of
service in less than a year.

—-And S&P has
downgraded Venezuela
because it gets the inkling that Chavez may not do
much to attack the problems in the economy until things get worse. And they are
right, not only is the country in trouble, but now we have embarked in the
doubly illegal enmierda until at least March. At that time, no matter what the
outcome, the Government will begin deciding what to do, but by then things will
be much worse.

—-And for the fools that think things are ok in Venezuela,
overnight rates have shot up
to 50% from 5% on November 1st
.

The reason? Easy, the Government has begun withdrawing funds
from the private commercial banking system, not because it has a grandiose plan
to screw them or anything like that. The reason is much simpler. They
Government needs the money! Indeed, after using up all of the “dozavos”
(twelfths) the amount allocated monthly by the budget, in order to pay for the Government-mandated four salary Christmas bonuses for every worker, as well as spending as much as possible
ahead of the regional elections, most Ministries and Government institutions
ran out of cash to finish the year and began using their “savings”, deposited in
the commercial banks. This particularly affected smaller banking institutions
full of Government deposits which move according to who pays the highest
commission (i.e. graft!) and they had to go to the overnight market to be able to pay their
commitments.

—-And PDVSA seemed to have the same problem as it
continued selling US dollars like crazy into the parallel market so that the
Government could keep this pantomime that there is a single exchange rate in
Venezuela at Bs. 2.15 per US$, while the biggest supplier of foreign currency
in the country sells dollars at near Bs. 5 per Bs. (It is illegal to give the
quote for this market) so it can improve it s cash flow.  And PDVSA is doing this, not as a way
of intervening that market, but because it needs Bolivars.

Just think, on Sept. 28th. the Venezuelan oil
basket stood at US$ 98 per barrel. Venezuela sells most of its oil with 90-day
payment. Thus, On Dec. 28th. of this year Venezuela will still be
enjoying oil revenues at near US$ 100 per barrel, but PDVSA is having problems
with its cash flow. What will happen in March when we feel the equivalent of
around US$ 38 (my estimate) of today for the Venezuelan oil basket?

Certainly unnerving

—-And today, the National Assembly found
Manuel Rosales “politically guilty”
for illegal acts in the hiring of the
company to run the Lottery of Zulia State where he was Governor.

So, after accusing Rosales for weeks for enrichment,
claiming he has farms and the like, they only find he is guilty of  “a violation
in the procedures followed to give a Government contract to a private company
which damaged the country’s equity”.

Wow, it is truly remarkable how in a country with no checks
and balances and in which 80% of the publicly held positions are in the hands
of Chavismo, violations of these technicalities are always found to be
committed by opposition Governors and Mayors, while Chavistas are so careful
and competent that they never violate the same laws. Of course, PDVSA does not
even follow those rules, but nothing is said. To say nothing of the way Chavez
and his Ministers use Government resources for the benefit of the PSUV party.
Or the corruption charges in the Miami trial. Or Jorge Rodriguez’ visible
wealth. Or Chavez’ family, according to him always poor and now owning large
chunks of the State of Barinas. I could go on, but why bother?

There you have it, almost caught up with the news from
Chavez’ revolutionary la-la land.

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