Archive for May, 2009

Chavez nationalizes hot iron briquette companies

May 22, 2009

As if he did not have enough on his plate, Hugo Chavez announced yesterday that he will nationalize all of the hot iron briquette companies, including Orinoco Iron and Venprecar, as well as pipe planta Tavsa and Ceramica Carabobo.

Hot iron briquettes are a substitute of steel scrap used worldwide. Essentially, iron ore is processed and produces a more uniform substitute for steel scrap used largely in the automotive industry. Venezuela is one of the main producers of such briquettes. The companies producing these were owned by Venezuelan, Japanese and Argentinean companies. One of them Sivensa, owner of Venprecar and Orinoco Iron, which trades in the Caracas Stock Exchange. Chavez said he would create a large briquette producing company. That seems to be the only plan.

A Venezuelan state owned company, Ferrominera del Orinoco, produces the raw iron ore for the production of briquettes. The Orinoco Iron plant has been plagued with problems since inception, it has never worked up to its full capacity.

Producing and selling briquettes is complex. Prices can gyrate wildly and it is a technically difficult process. Currently, Ferrominera can not supply these companies with all of the iron ore required, forcing some of them to import the raw material.

This is of course another liability for the Chavez Government. Another legal problem. Another future arbitration process in the horizon.

What’s next?

What plays well in Altagracia de Orituco?

May 21, 2009

The accusations by Minister of Interior and Justice(?) El Assami yesterday and today, outrage opposition readers with the cynical ability of the Minister to shift the blame for the violence on the opposition. The video speaks for itself on who caused the violence. The problem is that what does not play well for the opposition, plays well in places like Altagracia de Orituco, our equivalent of Peoria in US terms.

Because for the average Altagracian or Barines, the budget problems of the universities are as removed from their daily reality as those of the Hubble telescope, to take advantage of Daniel’s story today. Thus when fascist El Assami comes on TV, those in Altagracia likely believe him.

Because the country is sharply divided in two and the Government takes advantage of that divide at every step. When Chavez talks about golf courses in El Marquez, we laugh because there are none, but the man in Altagracia, who has never been to Caracas may actually believe him and imagine rich oligarchs playing golf in that area of Caracas.

Anybody that has been to the interior of Venezuela recently or has looked at electoral results realizes this dichotomy. Chavez and his Government not only ignore the opposition, but are not even trying to attract those against it to their side. The whole media and economic deployment of resources is oriented towards the pro-Chavez or past sympathizer. Much like the way the Government overwhelmed the media last February, it overwhelms it with its daily message through its own media outlets.

Go to the interior and you can go miles without listening to any radio station that is even mildly anti-Chavez. The propaganda in his favor which hails the unknown achievements of the revolution is simply impossible to counteract by the opposition. Thus the shutdown of RCTV.

This is a lot like the satellite problem, if the Government says the Simon Bolivar satellite is functional, it is for the Chavista mass and pro-Chavez people will try to overwhelm opposition chat rooms to counteract the truth. But I bet if any pollster asked the average Altagracian whether the satellite was functional, an overwhelming majority would say yes!, after all, Chavez told them that he was speaking to them a few Sunday’s ago through his satellite boondoggle. Either he lied through his teeth or someone was lying to him, but the truth is no longer relevant in Venezuela.

It is in the end a very clever strategy. Hardcore and soft-core pro-Chavez people are bombarded daily with the good news and the announcements of the gizillion projects that the Chavez administration starts every week. But none of these ever go much beyond the announcement and most of them have little impact so far in their daily lives from them. If PDVSA takes over 65 oil servce companies, even if the Government shut them down tomorrow, the average Altagracian would not feel it for quite a while.

It is much like the lie surrounding the country’s oil production. Pro-Chavez people want to believe Chavez and if he said Venezuela was producing 5 million barrels of oil a day, they would believe it.

That is why Chavez will be solidly in place until inflation soars to unmanageable levels or shortages hit the everyday Altagracian. And that is also why there is no devaluation, so that the Government can limit inflation as much as possible.

It is in the end a Machiavellian strategy of maintaining the support of the core pro-Chavez sentiment at the expense of everything and everyone else in the country.

We may cringe when Ministers or Chavez lies. We are outraged when education, culture and knowledge are trampled or ignored. But in the end that is the strategy: They are playing for Altagracia de Orituco, not for us. And so far, it has played to well for our comfort.

(It may be that Chavez lost in Altagracia de Orituco in the last election, I just picked it at random as an example of Chavista territory)

Whatever happened to zero inflation for the poor?

May 20, 2009

Chavez and his cronies always come up with novel economic theories. About a month or two ago, a new one claimed that inflation was not a relevant problem for the poor, because through the chain of Government owned supermarkets Mercal, they could buy everything with zero inflation.

Funny, because increased the price of 14 items of the products sold by Mercal and now the theory is turned around and it is claimed that the increases will only have a 1.4% impact on the CPI. Of course, this is the CPI that a month ago was not felt by the poor, but now that they want to dilute the effects of the new increases into it, they use it. However, others calculate that the impact is 12%.

You may be wondering how come they have to increase the prices if most things Mercal sells at imported at the official rate of exchange of Bs. 2.15 per US$? Simple, all of these products were being sold below cost and now the Chavez administration is taking the capitalistic approach of not losing money in their “socialist” enterprises.

Which only tells us that money must be very tight if the Government has decided to resort to such measures.

And, of course, to hell with our new economic theories which have a lifetime of less than two months, if that long…

It is after all, an ever improvising revolution, with no real consistency behind it.

The Chavez bubble: The increasing probability of the country’s default

May 17, 2009

A year ago, Venezuela’s finances looked reasonable and the probability of the country defaulting on its external debt seemed remote, despite the lack of transparency of the country’s finances. With no bond maturing until 2010 in the amount of US$ 1.5 billion and then again another one until 2011, it seemed ludicrous to talk about the country’s default.

This is no longer the case.

The Chavez Government continues to act as if oil prices had not dropped and continues to acquire liabilities, despite the fact that it has issued no debt so far in 2009. But its aggressive style is simply to not acknowledge reality and act irresponsibly. In the recent case of the Government taking over the oil service companies, the Government simply decided that it could not pay a good fraction of the US$ 13 billion owed by PDVSA contractors and took them over as if this eliminated the liabilities. But it does the opposite, as the Government now has to pay for them and much of the debt owed to them is owed in return to a long chain of their suppliers.

Thus, on top of the US$ 13 billion, the Government will have to face suits and arbitration processes that one-day will come home to roost. Add to this those processes already in hand, like ConocoPhillips, Cemex and ExxonMobil (Around US$ 12-14 billion) and the numbers add up.

Then there is the increasing debt with local banks and companies, which are owed some US$ 450 million in travel expenditures on credit cards by CADIVI and some 2 billion US$ in letters of credit. It may be in the end that the solution will be the same: take over the banks and nothing is owed in Chavez’ simplistic mind.

And the Government continues to take over institutions like Banco de Venezuela, which are unnecessary and are likely to be driven into the ground much like Banco Industrial has been bankrupted three times in the last ten years.

But this is an increasing house of cards, you pile debt on top of debt, liability on top of liability and one day the whole thing will crash.

Whether the trigger will be lower oil prices or arbitration decisions going against the Government is unclear, but unless oil process rebound dramatically in the next two years, it is likely to all come crashing down to the point that Hugo Chavez will have no recourse but to decide to default on the country’s debt.

Much like the bursting of the housing bubble in the US, the hard part is predicting when this will happen. Besides the oil price uncertainty, there is that of lowering oil production, made worse by the recent decision to take over the service companies and, of course, the fact that the Government has taken few measures to save foreign currency in the face of lower income. This will one day have to be paid.

Imagine, for example, that an arbitration decision goes against the Government, as many are likely to go and a payment of US$ 2 o 3 billion has to be made to either ExxonMobil or ConocoPhillips. It will be easier for Chavez to say forget it and stop making any payments on foreign debt and arbitrations in the name of a revolution.

This will of course create a chain of events, including the seizure of CITGO in the US which will only bring joy to Chavez as he can then say he is doing this as part of his revolutionary process and against the imperialistic and capitalistic forces of the world.

A year ago, I thought the probability of such a scenario was quite low and largely unnecessary for the Government. Even three months ago, it seemed somewhat remote. But adding the new liabilities with the oil service companies, Chavez’ increasing radicalization and the total mismanagement of the country’s economy and liabilities indicate that this probability is not only finite, but increasing day by day.

Chavez’ management style (oxymoronic!) and his recent moves

May 15, 2009

Chavez

There is really no mystery to Chavez’ management style, he clearly has very little understanding of management and has total disregard for a person’s capability, knowledge or continuity in a position. Case in point is the naming of Jacqueline Farias as the new President of telephone company CANTV. Farias thus becomes the very brief Gauleiter of Caracas, spending about a month in the position to take capabilities away from Antonio Ledezma.

Clearly, Farias was barely moving into her management position, not only because she was learning the ropes, but because she had not even had the time to define it. Moreover, she is guilty of accepting a position which clearly violates the Constitution and represents her personal backing of a dictatorial and illegal decision. She should one day have to pay for it.

But even worse, Farias moves into the highly complex Presidency of CANTV, a job which requires lots of learning and management capabilities. The decisions are tough and require knowledge and experience in the area, for which Farias has none. Neither did outgoing President Socorro Hernandez, but at least she had spent some time in the position and had learned some of the ropes, if not at least some strings. Anywhere else in the world, reaching the top position at a telecom company would require either years of experience in the area or being a superb manager. Farias is neither of the two. If she retains both positions as some are suggesting then the decision is simply absurd.

But to top it all off, Chavez splits the Minister of Telecommunications and blends most of it into the Minister of Science and Technology. Of course, in Venezuela telecommunications and technology have little to do with each other, CANTV and the Government buy turnkey equipment, a la the worthless Chinese satellite or the “Vergatario” cell phone (only assembled in the country), while little is done locally to promote local engineering and/or technology.

Add to this that Chavez named a person ignorant on affairs of science and technology, Lt. Jesse Chacon, who will likely devote now his time to non-science and non-technology matters, insuring that the sector will be diminished in its importance. I always believed that Science and Technology was better off as an independent office of the Secretary of the President than a Ministry, now it has been diluted within a non-related Ministry.

We have no clue, of course, as to why Chavez made these moves. But what is clear is that the subject of illegally taking away powers from Antonio Ledezma was passe in Chavez’ mind. His political objective has been achieved, loyal Farias could be moved to a new one of his interests.

Which only indicates that Chavez has now turned his attention politically to CANTV and telecommunications. As to why, I have no idea, but it may be that he will now unleash an offensive on those companies competing with CANTV, mainly Digitel and Spain’s Movistar, which are probably making CANTV either lose market share or invest lots of money in order to stay competitive. It should not surprise anyone if Chavez decided, for example, to nationalize both in the next few weeks and he needed his two loyal, radical, political Commissars in the right place to do it.

Separately, Chavez moved CONATEL, the telecom regulator, out of the telecommunications Ministry, so that the political Commissar, Diosdado Cabello, can take over the offensive to shut down Globovision in the next few weeks.

Thus, Chavez’ management style (an oxymoronic term in the end) does not include any real world variables in it, other than moving pieces according to his political objectives. Results, efficiency, know-how, competence are irrelevant. Loyalty, radicalism, obedience and being servile are what he looks for in those that will carry his orders for each of his little whims and pet projects.

His recent moves simply show where he will be heading politically in the next few days.

Devil banned in China, hope for the “right” reasons

May 14, 2009

baned

(Picture from Caracas statues yesterday morning)

Through a friend and reader, I learn that my new website can not be reached from China, while the older one remains available. I have confirmed this through this test.

The question is why the new one is and the old one is not, while neither Daniel’s nor Quico’ s sites are banned. It may have nothing to do with politics, but the fact that “devilsexcrement” contains “sex” in its string…

We will never know…but I hope I have been banned for the “right” reasons…

(Note: For those who asked, no I am not at home, still traveling for about another week. )

Once again, why don’t we follow Norway?

May 14, 2009

From the New York Times on how Norway has managed its oil wealth well. The best sentence:

“If you are given a lot, you have responsibility”

Death penalty for media owners (as in the US)!

May 14, 2009

And the Minister of Information and Communications in that style of respect for human rights and democracy and ignorance about the world that characterizes this Government said it just like that today that in any other country like the US (Iran?) if media owners behaved like those of Venezuela, they would receive the death penalty.

Just to prove his ignorance again, he said that freedom of expression is not an absolute and Globovision is a political party. Funny, why isn’t VTV judged by the same measure?

There is no doubt that Globovision will be shutdown in the near future and who know, why not make the death penalty legal? Anything is possible in this stupid revolution.

Government agrees to buy Banco de Venezuela as it intervenes Industrial

May 14, 2009

The Government said that it had agreed to finally buy Banco de Venezuela, an affiliate of Banco Santander and it would close the transaction on May 22nd. This is not the first time the Government claims to have closed the deal, but what is perhaps most ironic is that at the same time it was announced the Government would intervene Banco Industrial de Venezuela, the state’s largest bank, after it found “irregularities” and losses of the order of US$ 90 million.

Banco Industrial de Venezuela has been capitalized twice during Chavez’ ten years in office and one of the reason to buy Banco de Venezuela is the stupid belief that if purchased, will magically run itself well in the hands of the Government. Banco Industrial de Venezuela managed these huge losses at a time when private commercial banks are making 20-30% returns on equity despite the extreme regulation by the Government.

Thus, another one billion dollar Chavez whim is completed and you can be assured that in a couple of years Banco de Venezuela will be run with the same lack of criteria as Banco Industrial.

Another billion down the drain…

Chavez orders his science and technology Commissar to tighten the screws up on oligarchic science

May 13, 2009

Given that so little works well in Venezuela these days, the idiotic Dictator is nevertheless looking for new places to use his ignorance for destructive purposes. Two Sunday’s ago he did such a thing, when he ordered his Science and Technology Commissar, Ly. Jesse Chacon, to tighten the screws (The nuts in Spanish, but I did not want to get into the symbolism of that!) on Venezuela’s premiere science institution IVIC (Instituto Venezolano de Investigaciones Cientificas).

Chavez asked Chacon to end “oligarchic”, “pitiyanqui” and “squalid” science and force scientists to do “useful” science for the “people” and to have them go to the barrios.

This is so stupid that it is even hard to get a handle on starting a discussion on it. First of all, there is no such thing as “useful” science, there is good and bad science, the rest are the refuge of the mediocre. If something can be deem to be useful science, it is beyond the science stage and into the development and/or technology. You can fund science in areas that are more likely to yield useful results, but you don’t know ahead of time what may or not happen.

But of course you cannot expect Dictator Chavez or Commissar Chacon to know any of this, the same way you know that Chavez has earned little about economics in the last ten years. It is the same idiocy coming into play, but now being used against an Institution whose role in Venezuela is now likely to be diminished into irrelevancy by the revolution.

IVIC is an institution dear to my heart. I owe a lot to it, not only because of what it gave me, but also because of its importance in my life as a person and as a professional. To see it in the hands of a Director who flapped like a seal applauding every word by the ignorant Dictator, as the institution’s final destruction was being ordered tells you a lot about how the low levels IVIC has already reached. Sad, very sad.

But it is even more ironic to hear Chavez attempt to construct a coherence sentence on science and technology, when it was Chavez that destroyed Venezuela’s Oil technological center INTEVEP just because it served his political purposes. In 2003 Chavez simply wiped out the world’s best heavy oil development and technology center located in Venezuela, but even worse, drove over one thousand scientists and engineer into the hands of foreign competitors, as he blacklisted them from working in Venezuela at scientific, technological and educational institutions.

Intevep was truly science and technology at the service of the people, helping the country improved and increase its oil production. It was replaced by a void that the so-called revolution has failed to even attempt to fill in the six years since that scientific genocide was committed.

And I am sure that Chavez is setting himself up for his own Lysenko to dazzle him with his discoveries and some arrogant and daring charlatan from Chavista science will become the new leader of Venezuela’s useful science.

Because ironically, Chavez inner circle has a number of scientists in it, most very mediocre, few in any areas of relevance to the country, but all cowards who are now silent as Chavez tramples what they claim to work for and believe in the years leading up to the Dictators ascension to power.

But now more than ever we are forbidden to forget these collaborators and insiders of the regime, who sold their souls and their pockets for a few coins to the autocrat, helping destroy what was once was a unique domain of excellence and achievement of which Venezuelans could be proud.

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