Archive for April, 2012

Chavez Predatory Appetite Sets Its Sight On Ripping Off The Workers

April 9, 2012

Since the severance pay law was modified in 1997, companies and employers have been obligated to regularly deposit the money in trust at local banking institutions for their safekeeping. Banks manage the money, generate interest and provide daily statements online to the workers. Of course, the Government did not participate in this, it paid severance out of the regular budget, always underestimating how much it needs, which means that if you quit a Government job, it can take months, if not years to get your payment.

In contrast, when a private worker quits, he calls his bank, signs a form and the money,which is well-managed, goes directly to the workers account.

But in its ever changing need for money and control, Chavez just announced that in the new Labor Bill, this will be done by the Government itself. Another day, another new bureaucracy, another rip-off.

Just think, the same Government that can’t produce a balance sheet for Fonden when it is required, will now manage, invest and handle billions of Bolivars and millions of daily transactions and will attempt to give the workers daily balances online. Dream on!

And then you tremble when Foreign Minister Maduro says that this will create a “giant fund” of “national savings” and…”also for investment”. Which simply means that the Government has set its eyes on this money for its “investments”. I imagine that they will fund housing projects, electric power stations in Venezuela (Or Cuba?) and the private workers will start having the same problems Government workers have. Some will never collect, or will be paid with Cocoabonds, the day even PDVSA will not be able to pay for things anymore.

The infinite predatory ability of Chavez and his Government now sets its sights on the workers money. As Chavez pleaded with Christ, he needs time to do “more”, sure, he wants to scrape the bottom of the barrel, before he sells the barrel itself.

Crime Has Turned Venezuela Into a Multi-Layered Ghetto

April 8, 2012

An electric door at the entrance of a neighborhood in Venezuela

I last wrote about the Brisas de Oriente barrio last year, its residents were protesting after a string of murders, the Government finally sent in the National Guard and after two months of no murders they left. Crime picked up again, but so far there has been only one murder since the Guard left.

Talking to my friend who lives at Brisas de Oriente, I was intrigued when he asked for monetary help to build fences and ramps. When I dug more into it, I discovered that poor barrios in Venezuela are now using the same techniques that fancy residential areas have used for about two decades: Neighbors are getting together, fencing around their houses and putting in a common gate to block the hoodlums from breaking into their homes or mugging them. Much like in the wealthier areas of Caracas and other cities, this creates small ghettos everywhere. In the fancy areas there are guards and electric doors and fences, in the poor areas there are fences, locks, chains and padlocks to keep crime out.

Thus, crime is turning Venezuela into a multi-layered ghetto. It began with bars in the windows and walls around homes, then came the fences around a group of houses, which my friend says is now becoming quite common in his and other barrios. everyone is looking for protection since the Government no longer provides any form of safety. After dark, whether in the barrio or the East of Caracas, there is democracy, everyone feels the problem, so you try as much to stay inside your ghetto, where you think and hope, you are safe.

The end result is terrible, a country privileged by the weather and the enviroment, but citizens have to close themselves in more and more, ugly bars on windows, huge walls that block views and stop air from moving.

Another failure by Government, from the same man that pleads for more time to do “more”. Sure, more damage.

Chavez Ends Unofficial Visit to Venezuela

April 7, 2012

President Hugo Chavez announced that he will end the unofficial visit to Venezuela tonight, when he will return to the new center of power for the country in Cuba. Apparently Chavez only came back to plead for his life with the Christ figure in his hometown of Barinas, his favorite one.

Chavez’ tone was a different one this week. He seems to be in the bargaining or depression stage, past the anger and denial of the earlier times. For those who still think this is an act, the length of Chavez’ speech is the giveaway, clearly he no longer has the energy that he used to, limits his time. I also think he was ranting and rambling more than usual, but that is very hard to measure. Mixing religion, Che Guevara, Bolivar and Darwin in the few minutes he spoke was a little bit of a stretch. Asking for Christ’s help, while criticizing the church seemed to be a little off too.

What is clear is that something must have happened while he was under treatment in Cuba. Whether the rumors that he is seeking advise elsewhere are true or not, this was a humbler Chavez, less arrogant and more pessimistic.The closeness to Christ, his favorite religious figure, increases all the time.

I wonder if we will ever know the details of what went on behind the scenes during all this time..

Chavez Government to pay debt to public workers with Petrorinoco (Petroripoff?) bonds

April 2, 2012

As the Chavez administration has given billions to other countries and received billions in oil income, imposing new taxes and a new windfall tax on oil, it failed to budget to pay public employees their benefits. Given that most of these public employees are Rojo/Rojitos and march to the tune of the all-mighty leader, the wonder is how they stay loyal.

And as if that was not enough, now there is a proposal to take money away from all Venezuelans (the usual) and “pay” these debts to these workers using an instrument to be called Petrorinoco, which in the end should be called Petroripoff. Because in the end, what the Chavez administration will do is simply to pay only part of the debt to these workers, issuing this novel instrument.

The details are fuzzy (What else is new?), but if one puts together what Chavez, Ramirez and the press (particularly El Mundo) have said, it goes something like this:

The Government will give 4% of all of the partnerships of the Orinoco oil belt to a “Fund”. Between now and 2034, when the contracts for the partnerships expire, this 4% plus 3.3% in royalties and taxes that will also go to the “Fund” will generate about $18 billion in capital plus the interest.

Thus, the Government will issue about US$ 18 billion in bonds, about US$ 1.7 billion in Bs. and the rest in US$. The Bs. bonds will matures in three or four years, but the dollar bonds will mature in 2034.

Since the Government owes public workers US$ 18 billion in benefits, including severance, it will pay these workers with these bonds guaranteed by the “Fund” (It is unclear what the money in the fund will be used for in the meantime, but you can guess). Workers will not be able to sell the bonds for two years, but they will be able to do it after that. What this means is that the workers that sell after two years will only get part of what they are owed, because these bonds will likely have a low coupon and thus will not be worth 100% but much less of what the worker will be owed.

Sure the worker can wait until 2034 to get 100%, but he may not only be dead, but who knows what other trick will be played with the “Fund” before then. Because it is a funny mechanism to have the fund accumulate the capital until maturity, who will use those funds in the meantime?

Thus, the Government creates an instrument to rip off the workers twice, once, because they were not paid, twice, because they will be paid much less. To say nothing of the fact that this “money” will come from equity in these oil projects that belongs to all Venezuelans, not only to public workers.

Finally,I wonder if anyone in this inventive and creative Government has thought about the impact of US$ 18 billion in bonds due in 2034 hitting the market all at once when millions of workers sell their bonds after the two years have expired. As the 2034 bond drops, it will offer more yield than other bonds, bringing the whole Venezuela/PDVSA curve of bonds crashing down all at once.

Not pretty…

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