Archive for October 4th, 2010

Chavez’ Reverse Midas effect moves forward in Venezuela

October 4, 2010

The opposition is a majority. The opposition is a majority. Of course, that would only be important if I were a Democrat. True?

Some people were remarkably surprised by Chavez’ announcements this weekend to nationalize Agroisleña, arm his militia, take over land in Caracas and allowing workers to blackmail Polar’s ice cream company EFE, despite the fact that a new collective bargaining agreement was signed a couple of months ago.

I wasn’t. This is precisely what I expected.

This is Chavez’ history, he has used the ballot box only to justify being President, but he is no democrat. He showed it in February 1992 and November 1992, where he plotted and connived to overthrow and kill people. He repeated it in 2003, when he ordered armed confrontation with a peaceful march which resulted in many death. He came back contrite, but as he did, he was plotting how to erase any trace of his acts, the Truth Commission was stone walled and the “coup” tale was successfully spinned.

Then came the Constitutional referendum, which he lost, but proceeded to pass laws that approved precisely what the population had rejected, thanks to an Enabling Law that gave him legislative powers for months. The only thing he could not legislate was his own indefinite reelection, so he held an unconstitutional referendum that allowed him to run again. Finally, facing a Mayor of the Capital District that he did not like, he created a regional authority over him, removed responsibilities and funding and basically castrated the newly elected Mayor of the Metropolitan District.

None of the above are the actions of a democrat.

And neither are those taken this weekend. Chavez lost his mandate a week ago, but he only uses the ballot box at his convenience. This time around it is not convenient to accept defeat, over half of Venezuelans said they want something else, Chavez was deaf to this call.

Unfortunately, Chavez does not learn either from all of the myriad of mistakes he has made. He has tried over and over again to create parallel structures, all of which became largely unsuccessful. People don’t even remember he threw money at a Government-sponsored baseball league to compete with the professional one. That league played all of one game, which started two hours late waiting for Hugo to throw the first pitch.

Chavez also started Mercal to distribute food and once it became inefficient, he nationalized Exito and Cada in the belief that if he can’t start something that works from scratch, then taking it over from those that run a working structure can do it.

But PDVSA says otherwise, as seven years of Rojo Rojito Incredibly Incompentent Management have destroyed the company and its structure, driving the people who knew how to run it to the competition in Canada and Colombia, both of which have either strengthened their heavy oil industry or, as in the case of Colombia, come out of nowhere to become an important player thanks to Venezuelan brain power and know how. Meanwhile PDVSA languishes in its own problems, including Pudreval, falling exports and no new projexts.

It is the reverse Midas effect, anything Chavez touches turns into you know what. And he continues.

And I will not delve into the details of Agroisleña, Daniel knows orders of magnitude more than me about it, but it is the same story. The Government tried to compete with Agroisleña and it failed. Failed for many reasons, the first one being that the Government’s expropriations and take overs of land had reduced Agroisleña’s business to start with. But more importantly, Agroisleña’s success comes from its gigantic network of stores, its decades of working with people advising them technically, financing them, buying crop from them and having the good credit abroad to import seeds, pesticides and general supplies.

Imagine what will happen now when some retired sargents and colonels are mixed in with improvised graduates of Chavez’ universities and told to manage Agroisleña.

The result is terrifying, but is exactly what has happened with every institution that has had a brush with the reverse Midas effect of Hugo Chavez. Remember Sidor? Iranauto? Conviasa? Venalum? The Cement industry? The Sugar industry with Cuban processing plants? The Rice miracle? The first housing plan? The fourth housing plan? The first employment plan? The ninth employment plan?

You get the picture.

Chavez goes relentlessly forward destroying value and scaring the talent, people and values that he does not understand are necessary for the prosperity of the country. All for nothing, except for the promotion of Hugo Chavez.

And this will continue for two more years. The value destroyed will be immense, the time lost will be invaluable. But get ready for it, because that is what is in store for us for the next 27 months. Chavez has not learned anything about management or how things work in the last 11 years, he is not about to start now…

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