Archive for December, 2011

Let 2012 Be The Year Of Change and Improvement For All: The Best to You All!

December 31, 2011

The year is leaving us. The Government says we had a great year because GDP grew by 4%. I ask if with a 39.5% increase in the price of the Venezuelan oil basket and a 51.5% increase in monetary liquidity, is this supposed to be good? To say nothing of the 27.9% increase in inflation. It was only in April that Giordani was “seeing” a slowing of inflation, when the 12 month CPI stood at at 27.4% and we are closing the year not only higher, but with the highest level of inflation of any country in the world. Giordani does not see very well.

And I go back to the numbers. I like numbers. Thus, I find it curious that the President of the Venezuelan Central Bank says explicitly: “Las reservas internacionales se ubicaron en US$ 29.899 millones al 30 de diciembre de 2011″ (International reserves were at US$ 29.899 millions on December 30th. 2011). Funny, as of the 29th. of December, the day before, on the webpage of the Venezuelan Central Bank the number was US$ 2.44 billion lower at US$ 27.45 billion. Where did this money magically appear from? When accounting at the Venezuelan Central Bank becomes creative, you have to be concerned. (In Spanish is called “maquillaje”, applying make up to the numbers. That’s exactly what they did)

So, Chavismo keeps stretching and stretching the distortions so they can win in 2012. But Venezuelans will have to pay one day for all of this.

That’s the bad news. The good news is that it will not be in 2012. There is too much at stake. All adjustments will have to wait for 2013, no matter who is in charge.

Given that, after this dose of numerical reality, I can only wish all the readers of the Devil, the best in 2012. Let the year be the year of change, the year of hope, the year that Venezuela turns around and finds a path of prosperity and harmony. A year in which peace and rationality prevail and rule over all of us.

Happy New Year my friends!

A Possible 2012 Vice-Presidential Surprise and more…

December 29, 2011

A Wall Street strategist named Byron Wein, started a tradition a few years ago of making a list of “thinking out of the box” predictions for the New Year, which he called his list of surprises. This has become quite popular and by now I know of at least three such lists (One, Two and Three no yet out). The idea is to suggest events that go against the consensus and help you be prepared for it. The remarkable thing is how good these lists have turned out to be, with 50-60% of these unlikely events happening.

Ever since we learned about Chavez’ illness, I have been bothered by the question about his succession. Basically, none of the suggested names has ever satisfied me. They all have weak points from the point of view of Chavez, the military and the Cubans. Maduro may be loyal and have a good image, but he is no radical. Diosdado may be acceptable to many groups, but I don’t think he buys the Cuba angle, nor is his an real ideologue. Jaua is not liked, period.

So, in the spirit of thinking out of the box, I have identified someone who is not as well-known, is loyal, ideologically on the right side, former military, democratically elected Governor, acceptable to the Cubans and, more importantly, a man who has more influence on Chavez than many people understand.

His name?

Ronald Blanco La Cruz

Blanco La Cruz is a well educated, former military officer, founder of MVR, member of the Constituent Assembly, former Governor of Tachira, Ambassador to Cuba and more importantly, the man that crushed the Chavista bankers from Cuba, saving his brother in law’s position as Superintendent of Banks. (He is also the cousin of a high ranking General)

A powerful man indeed. Not very well-known, but Chavez has never wanted anyone to be well-known. Cabello may be well known, but he lost the Gubernatorial race to Capriles. Maduro may be popular among the powerful Chavistas, but is not a proven candidate. Rangel may be radical, loyal and a good strategist, but he has the charisma of a dead turtle.

But Ronald is buddy-buddy with Hugo, with the military, he believes in all this, trusted by the Cubans, has been a candidate.

Not well known?

Nothing that a few months as VP and a few billion Bolivars can’t fix.

So, I am going with Ronald Mac Blanco as my 2012 surprise.

It may not be obvious or probable, but it makes sense…

Would he be President Blanco or President La Cruz?

Chavez Entertains and Distracts Even at Christmas Time

December 28, 2011

While Hugo Chavez has patted himself on the back for working through Christmas, I am not sure he has really worked. The problem is that he calls talking, work. One of the dangers of talking too much is, however, that you may say absurd things as you try to entertain and distract the country from its problems. Many things he says are things that would make you laugh anywhere, but in Venezuela we have practically heard it all, from Chavez saying that men never walked on the moon, to inventing the number of housing units that have been built in the last year.

But Hugo clearly wants to close the year with a new bang in entertainment prowess. First, in a ceremony (see picture above) that looked taken out of a communist country in the 50’s, Chavez thanked his Russian friends for allowing Venezuela to have the strongest military power in its history, as if this was some sort of achievement or due to hard work and not thanks to all of the oil billions misspent in weapons, rather than on people. And the Russians, of course, have laughed all the way to the bank, with all of the stuff Hugo has purchased.

And to insure that we are all awed with is intellect, Hugo then begins speculating about the strange coincidence that four Presidents in Latin America contracted cancer roughly at the same time. Never mind that Lula was no longer President when he got his. Or that each of the cancers is different and in a different part of the body. Chavez’ perceptive mind has noted the coincidence and like everything, he wants to pin it down on the old USA, the source of all our problems, including, I guess, his terrible and ineffective Government.

And after saying he has learned to administer the resources of the country better, not bad after being thirteen years on the job, we learn that after more than 1,000 expropriations and nationalizations and eighteen cases in arbitration at the World bank’s ICSID, the Government has now issued two decrees creating advisory councils to deal with both. These advisory councils have, as their main goals, such things as “respecting the constitutional rights of people”, which have been violated right and left since Chavez began expropriations eight years ago. They would also establish mechanisms to determine the fair price to pay for expropriated properties. They would also advise on new expropriations that they feel like doing. It would also create, don’t laugh, a registry of all expropriations, because clearly the Government has no clue as to what it has taken over on the orders of the man who “has learned to admiisiter the country’s resources better”

And the Advisory Council on Arbitration is even funnier, more so given the fact that the Government itself has been saying some of these processes are close to being decided upon. But this new body will determine “strategies for the planning and coordination that State institutions have to follow to defend the country in front of foreign institutions, particularly those of arbitration”

Of course, this is all the work of the new Attorney General, Carlos Escarra, who is no dummy and realizes, a bit late, how illegal and arbitrary most expropriations have been and how the defense of the country’s position in arbitration panels has been carried out on a case by case basis and managed by various institutions. This could all be turned back, were PSUV to lose the next Presidential election, due to the myriad violations of the Venezuelan Constitution involved.

But maybe, just maybe, one day Chavez will learn that administering those resources better, should have involved appointing people who know that they are doing and not the mad whirlwind rotation of 180 Ministers (134 different people) that have “helped” him run the country in the last thirteen years.

And maybe, just maybe, if he stopped talking all the time, he could accomplish something.

Hugo Chavez’ Christmas Spam to all Venezuelans

December 27, 2011

Above is the message that most Venezuelans got on Christmas Day from Hugo Chavez (including me, I got it early on the 24th., as you can see above), it says: “Each December, we have victoriously celebrated our unstoppable march towards the Good and Pretty Fatherland…Full of happiness, justice (sic) and social equality. Merry Christmas, partners (comrades?). Hugo Chavez.

People have noted that the message is abusive, it is after all spam, much like Chavez’ forced “cadenas” where everyone is forced to listen or turn the TV off since nothing else is on. There is also the question of who paid for it. Did Chavez force the message on the telecom operators? Is the list freely available to anyone like that? Is this a violation of privacy? A waste of resources?

We will never know. What we do know is that if this had been sent by an opposition politician, Chavez and the government would have raised hell over the issue.

You can also complain about the message, not only about the use of the term “compañero” without the “ñ”, this could have been avoided choosing a better word, like venezolano, ciudadano and the like. The message is also quite partisan, as half the population does not celebrate Chavez “unstoppable march” to wherever he thinks he is taking us .

But what I want to point out and note, is that the message is quite effective. First of all, it has a high impact, as it is received by most Venezuelans, as cell phone penetration is over 100% by now (Operators do not subtract cancelled lines from their numbers). But more importantly, people are impressed that Chavez sent them a message. Of course your average opposition person does not like it, but I talked to a few people, not pro-Chavez, some who once supported him, who actually appreciated the message and told me about it not as a complaint, but more like: How about that message from Chavez!

So, much like many of the moves that Chavez makes, he got his money’s worth (or ours for that matter) sending a message that in the end earned him more goodwill with his supporters or prospective supporters, even if it was wasted on most of us who will never vote for the revolution.

Note added: The SMS was indeed a “cadena” that was sent free at the request of the Government.

Happy Holidays and Thanks For Visiting!!!

December 24, 2011

I am here in Caracas to spend Christmas with family. I wish everyone a Merry Christmas and hope you enjoy the Holidays, may you receive whatever gift, material or spiritual, you desire and enjoy a quiet, peaceful time with family and friends, forgetting for at least a while the problems around Venezuela and the world.

I would like to thank everyone for visiting the Devil, it is a privilege to have you all care for what I may have to say and many of you have become real or virtual friends in these nine plus years. This year I had the honor of having dinner with readers from as far away as Singapore, with friends from Caracas and San Felipe, with readers from Miami, a wonderful magical gift and an unexpected bonus for writing this blog, as I now “know” people wherever I may go.

Happy Holidays!

Will the Venezuelan Government Devalue in 2012?

December 24, 2011

The guessing game has begun. Will the Venezuelan Government devalue the currency at the beginning of 2012? Clearly a devaluation is needed, Venezuela has become very expensive,  liquid reserves are quite low, imports are soaring.

If it were an economic decision, the Government would devalue. Because it is not, it is all up to Hugo the almighty and the opinion of his minister of Planning and Finance Jorge Giordani. It has been reported that there is a report sent up to Chavez suggesting the currency be devalued. The question is what will be the decision.

Up to a few weeks ago, I thought that it was unlikely that there would be a devaluation. I have changed my mind. The odds are that there will be one, I put it at 60-70% probability. Why? Because of the deterioration of the international reserves and the Government’s infinite belief that they can control inflation using intimidation. Similarly, last years devaluation was dceided by Giordani and was larger than anyone expected, so an adjustment seems likely.

How much? That’s much harder to guess. I would think about Bs. 5.5 for the official rate and about Bs. 6..75 for the SITME rate.

Only a guess. We shall see how wrong  I am…

(P.S. Chavez says GDP will close at US$ 300 billion, for that to happen the economy would have to grow 26.9% in 2011, as GDP closed at Bs. 1.016 trillion in 2010 according to the Central Bank. Divided by Bs. 4.3, that gives you US$ 236.27 billion. If there is a devaluation, then it’s smaller. I wonder why that mistake was made…)

Where in The World is Hugo?

December 23, 2011

The Mercosur Summit ended three days ago. Everyone left. The question is: Where in the world is Hugo Chavez?

There was no “arrival” of Hugo Chavez in Venezuela. No announcement. No shots or video of the President arriving. Nobody has seen him since.

So, where is he? And is this anyway to run a country?

He is likely in Cuba getting treatment. He went to Uruguay not only to try to get Venezuela admitted as a full member of Mercosur, but also as a way of going to Cuba via the back door.

We will likely “hear” from him on Christmas Day, but unless he returns before Sunday or he left a video, we are unlikely to see the Venezuelan President until next week after treatment.

Some doctors had predicted this trip, but as most things surrounding Chavez, we may never know.

Such are the ways of the revolution!

No Mercosur for you, Hugo!

December 21, 2011

Despite pressures from the Government’s of Brazil, Uruguay and Argentina, as well as Hugo Chavez showing up at the Mercosur Summit, the much ballyhooed “political compromise” to allow Venezuela’s full membership in Mercosur, thankfully did not materialize. The political solution was simply to change the rules so that not all countries had to approve the country’s admission as a full member, bypassing in that way this requirement, which implies every single country is satisfied that the democratic standards are complied with by the country requesting admission.

But Paraguay would not play ball, not the Paraguayan opposition that refuses to approve Venezuela’s entry because they don’t believe the country satisfies the democratic requirements, but that country’s Government, likely fearful of the reaction by the opposition if they are bypassed.

Shame on Dilma Rouseff for backing this proposal. The Brazilian President was a victim of abusive Governments, but seems to feel naively they can not come back in her lifetime to haunt her. I hope she is right, but allowing abuses to continue in one country will simply allow all countries in the region to relax the defense of human rights and this will eventually lead to a backlash against those that allowed it.

Meanwhile, Hugo comes back to Caracas (or direct to Havana for treatment during Christmas?) having lost the battle that he decided to play with a full court press, including his physical presence in Montevideo, where he blamed power and obscure forces for the delay in Venezuela’s entry into Mercosur.

A victory for Paraguay, a small country battling giants, something Chavez would have hailed two decades ago.

A victory for Venezuelans, who at least know that Chavez will have to watch what he does to keep the pretense of democracy.

A loss for the leaders of those countries trying to make the defense of human rights more “flexible” , all “left wing” leaders who now that they have attained power have forgotten their fights when others abused their rights. But they will try it again, if Hugo’s health gives them a chance.

But for now: No Mercosur for you, Hugo!

The Venezuela Money Printing Machine is Running at Full Speed

December 19, 2011

I had not looked at monetary liquidity M2 in a few months. This number measures the amount of money in the economy, including bank deposits.

I checked it yesterday and it had reached again US$ 100 billion at the official rate of exchange, in fact, to be precise, it is at US$ 102.3 billion after reaching US$ 100 billion on December 2nd, according to the Venezuelan Central Bank.

And yes, and I say it reached that number again, for the second time in the country’s history. You see, a year ago it had reached US$ 100 billion (US$ 113 billion to be precise), but then the Government through the magic of devaluation from Bs. 2.6 to Bs. 4.3, instantly pushed it down to US$ 68 billion on January 1st.

Thus, since the first of the year monetary liquidity has increased by 49%, or 57% since one year ago.

That’s a lot of new money out there. A lot of printing. That’s why inflation is so pesky, if rather than blame speculators and the oligarchs, the Government allowed M2 to rise more slowly, then inflation would ease.

It may sound like a chicken and egg problem, what comes first? The printing of money or the inflation? Well, I can assure you that if the rate of increase of M2 is double that of inflation like it is today (inflation is around 27%), inflation is surely going to go up. More so when the amount of goods available for sale has not increased much, certainly no more than low digits, while the amount of money has gone up dramatically.

It is simply too much new money chasing the same amount of goods.

And the amount of goods can not be increased via imports much. Imports this year are running more or less at the same pace as last year and right now, the ability of the Venezuelan Central Bank (or CADIVI) to give more money is quite limited. You see, a year ago when M2 was also US$ 100 billion, international reserves were about US$ 30.2 billion, of which gold was about US$ 16 billion. That is, “liquid” reserves (reserves-gold), with some caveats, was about US$ 14.2 billion. That is about six months of imports via CADIVI.

Today, reserves are down to US$ 27.7 billion, of which gold is about US$ 21 billion, that is a much smaller cushion of US$ 6.7 billion in liquid reserves and now the gold is harder to sell or pledge, because it is here. It would have to be shipped abroad first. Thus, the liquid part of reserves is slightly more than one quarter. A little more than three months, that’s all.

The worst part, is that the Government is very unlikely to devalue in 2012, because a devaluation would give inflation a push and you know who wants to be President forever. Thus, as the Government spends ahead of the 2012 election, to give people a felling of well being, M2 will increase more and more, making the idea of removing exchange controls more difficult. A year ago, there were Bs. 9.8 for each dollar in international reserves, today there are Bs. 15.9 for each dollar at the Venezuelan Central Bank (including the gold, of course). In a year, any attempt to remove exchange controls would require a bigger devaluation and more foreign currency to be able to defend a floating rate.

Barclays estimates that inflation in 2013 will reach 36%. The Government will pull all of the stops, decrees, bills and threats in order to slow down price increases. Unfortunately, this is a very difficult game as inflation accelerates, as the private sector may decide not to sell or make goods at a large loss. Then scarcity will increase and politically and scarcity seems to carry more weight with voters than inflation.

And no matter who wins the election, there will have to be a very significant adjustment to the rate of exchange in 2013. And thus, more inflation. The mirage of lower inflation moves further into the future, while the Government ignores the fact that it is the main driver behind it.

The Arrogance of Chavez’ Foreign Advisers

December 18, 2011

Juan Carlos Monedero spews out his brand of revolutionary BS for Madrid’s ABC newspaper

The paid ideologues and advisers of the revolution, like Juan Carlos Monedero above,  are truly arrogant and superficial. After a decade of living off the failed revolution, this is all they can say about what has happened in Venezuela. Some random choices with my comments:

-Chavez has learned to think for himself.

Really? When did this miracle take place? Last Year? Does it mean he no longer needs you? Shouldn’t it be the other way around, he should have been able to think by himself before he got to power rather than learn on the job, screwing up everthing?

-A large part of the budget has been devoted to opening schools so that people can think on their own.

Funny, the record of building schools by the Chavez Government is simply dismal compared to that of the failed IVth. Republic, where did the money go?

-The advance in social terms is spectacular.

Really? Spectacular? Where? Did you read Luis Pedro España’s book on poverty in Chavez’ first ten years? And why didn’t you answer the question about the money? To compare Mexico with Venezuela just because they produce oil is simply ignorant and evasive. Why not Nigeria? Did you also advise Mexico?

-UNESCO has declared Venezuela as a territory free of illiteracy.

Jeez, you still believe that BS? You are “critical” about the world, but have failed to note that illiteracy was not high to begin with in Venezuela and that there was never any such Unesco certification? Have you ever seen this link? Or is this one more official for you? Unesco gives no such certifications! Or have you ever read Francisco Rodriguez’ work? Or you are just not that “critical”?

-The largest indices of crime are in Central America and Mexico, not in Venezuela.

Again, the question was about Venezuela, the country that pays your vacations, not about Mexico or where are  the largest rates of crime. When Chavez got to power Venezuela was not even in the radar in the top ten of crime in the world, now we compete with those countries you mention. You say ten years is not enough, sorry it took ten years to get us to where we are in crime.

-The Bolivarian Government has preferred to pay with high inflation than with 5 million people without jobs like in Spain with low inflation.

Truly pathetic, we have both, high inflation and half the work force does not have formal jobs. Have you ever thought about the effect of high inflation on the poor? You clearly have no clue.

-(Chavez’ Government) needs more time to solve the historical structural problems , linked to corruption, inefficiency and the rentist culture and clientelism as a way of life.

You must be kidding me? Chavez’ Government has promoted corruption, inefficiencies and has been the champion of enhancing the rentist culture to say nothing of clientelism.

With advisers like this, no wonder Chavez has taken it upon himself to begin to think on his own.

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