Well, if you thought you had seen and heard it all, now comes the National Assembly and changes the law very quickly to allow Chávez to mortgage the country. It is insufficient for him to receive loans from the Chinese in exchange for oil, which is a different form of mortgaging the country, but now Venezuela will get a loan from Brazil’s development bank Bndes in the amount of US$ 4.3 billion, guaranteed by Venezuela by fields from the Orinoco Oil Belt.
Even more clever for the Brazilians, the money will be used to finance projects (and pay debts!) being built by Brazilian companies in Venezuela and the first beneficiary will be Odebrecht, the Brazilian firm building subways systems around the country and which is owed a lot of money by the Chávez Government.
So, you can see who is the greater fool here. Certainly not the Brazilians, who take advantage of Chavez’ tightening cash flow to lend him money to pay for their own projects and in the worst case scenario, Petrobras will have (actually own!) a nice chunck of the Orinoco Belt. But, Brazil also gets an added bonus that the Argentineans buddies were denied: Chávez said that he will continue to nationalzie private companies right and left, but Brazilian ones will be exempt from nationalizations.
This is thus like a mafia deal, where you not only get the money, but also get protection in exchange for it. Not a bad working day for Lula in meeting with our President.
The deal clearly is bad for Venezuela, as it will allow Chávez to continue his spending spree and the continued destruction of the Venezuelan economy. Because it is clear that there is no plan surrounding the nationalizations either, it is just a matter of Chávez wanting more and more control over the economy. Chávez said yesterday that he still had money to nationalize more companies (now that he got 4.3 billion elsewhere), but gave no hint as to where his voracious appetite will take him this time.
Chávez actually thinks that he is making money by nationalizing companies and gave the example of CANTV, where he claims he made the purchase price in the three years since the nationalizations. Sure, because he did not buy CANTV, he stole it by forcing Verizon to take his offer, even if there was a higher one on the table.
But if he thinks that Banco de Venezuela will continue making US$ 100 million per quarter as he suggested earlier, he better get off that cloud. He should think more like Banco de Venezuela will be Banco Industrial in three years.
Because clearly Chávez fails to understand that economic growth and jobs can only be generated if you invest your money in new enterprises and he somehow thinks that by buying these enterprises he is generating profits for his Government. In fact, medium and long term he is destroying them, as the current state of Cemex and PDVSA already attest.
In the end Chávez is acting like organized crime does, making offers people can not refuse, buying protection and in the end guaranteeing the survival of the capo at the expense of the country.
But he thinks he is being smart, while the Brazilians are laughing all the way to the bank.