Venezuela Should Increase Gasoline Prices Sharply

August 10, 2014

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I am behind on writing about Venezuela. There are so many things to write about and I do have many opinions on them. And there is little time. But the subject of the gasoline price increase is at the top today. In this supposed “adjustment” that Chavismo has claimed it will do for the last eight months, the discussion began after the regional elections in December with precisely the price of gas. But then, much like the so called “unification” of the exchange rate (now called the “convergence”), there was a lot of internal opposition within Chavismo to the increase of gasoline prices.

Now things have been turned around, there is a lot of opposition to the convergence of exchange rates internally, so all of a sudden Minister Ramirez revives the subject of a gasoline price increase. It seems Ramirez only wants to find a way to have PDVSA improve its finances, rather than improve the country’s fiscal balance.

Let me state first, that I am absolutely and totally in favor of the gasoline price increase. I find it appalling that people oppose it, condition it, question it and dilute it it in an absurd discussion of what they want or don’t want the Government to have or do.

The gasoline subsidy in Venezuela is a disgrace, it is wasteful, it is absurd, it is bad for the environment, it generates contraband, it is regressive, it is unfair, it is unjust for future generations, it generates traffic, it distorts policy making and it is simply irresponsible.

In fact, I find it amazing not only that the opposition has so many reasons to object to it, but that the Government is thinking of a small adjustment like to Bs. 2 per liter, if not half of that.

Gas is so cheap (free really) in Venezuela, that it is difficult to talk about how much a liter costs. So, we go back to a picture I posted in May 2011:

photo13

I filled up my tank down in Caracas with 43 liters of gasoline and paid Bs. 4.2 for he whole thing. Bs. 4.2 for 11.43 gallons of gas, which at the Sicad 2 rate happens to be 0.082 dollars for a tank of gas. All of 8.2 cents of a US$.

I use the Sicad 2 rate, because it is the highest accepted by the Government and the only one “real” people have a small chance of having access to it.

So, currently in Venezuela, filling a tank of gas up costs 8.2 US$ cents, let’s round up to ten cents for the sake of the discussion.

Now, as you can see in the picture above on the right, I used gas that cost 0.097 Bs. per liter. The Government wants to increase it to either Bs. 1 or Bs. 2, depending on who you believe. This means that the Government wants to increase it to around one or two dollars a tank of gas.

Ridiculous.

To me, that is the same as leaving it is where it is today. It will have no impact on contraband, waste, PDVSA, fiscal accounts, etc, etc., etc…

Furthermore, with 70% inflation the effort of convincing the population that the increase is good, doing it and implementing would be wasted very fast.

Thus I think the Government should target an increase that is large. Say to US$ 20-40 per gas tank. (50 cents to one dollar a liter, still cheap. Or FOB export price, which is the most rational to do) and maybe do it over a year. Similarly, they should schedule further adjustments whenever they devalue, so as to maintain the price at the same relative level to international prices as the adjustment.

All of the other arguments are simply irrational and spurious. That you don’t trust the Government and what it will do with the money? Nobody trusts any Government and what they do with your money. It is the same arguments why people don’t like or want to pay taxes. But the bills have to be paid and in the end it is a vicious circle. The same with the argument that the public transportation is terrible. It is a chicken and egg problem.

Finally, there is the Cuba and Petrocaribe argument. They are valid, but you can’t tie one to the other. The opposition should raise a stink and point out that we give Cuba and those countries very cheap gasoline. In the case of Cuba, the Government of that island sells it at international prices and makes money. But that should not stop us from supporting the price increase. In fact, if anything, the oppsoition should attack the increase because it is not large enough.

Until policy is not discussed seriously, Venezuela will never advance. Chávez introduced the absurdity of an overly subsidized gasoline prices, if this Government wants to take a small step into some semblance of sanity in its policy making, it is absurd in my opinion to oppose it. Otherwise you are promoting the same type of irresponsible Government you object so much too.

I know this will not be a popular post, but I do believe that in politics, one should have certain essential beliefs and principles and that one should stand by them and not turn them around and debase the nature of the discussion just for politics sake.

 


Venezuela Drifting Further Away From The World

August 6, 2014

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I was in Caracas last week. Almost did not go for the simple reason that it is quite difficult, besides expensive, to find an airline ticket out of Caracas. Venezuela is simply drifting away, further and further apart from the world.

In my case, my trip, more like a saga, began when I found a ticket Caracas-Aruba in Aserca to make a connection to a US airline in Aruba. Plenty of time between the two, Aserca was leaving at 11:30 AM, the other flight leaving at 3:35 PM. Given that the flight to Aruba is 35 to 40 minutes, there should be no problem. On top of that, I had only hand luggage.

Chop half an hour from the time between flights, thanks to now banned Chavista genius Navarro, as I did not take into account (my fault) the half an hour difference between the two countries. I did show up at the airport a three full hours before flight time. Seemed like a good precaution, as Aserca has no line for those without luggage.

Well, when I showed up, there was a huge line for the full flight and all but four passengers were in line in front of me. Fortunately (or maybe I should have worried about it) there was a sign that check-in would close at 9:30 a full two hours before the flight. That meant, that the line would only last one hour.

And it did. With about three minutes to spare.

In the line, I learned a number of things from the ladies ahead of me. For one, they bring their food to Aruba, you know, they told me, food is so much more expensive there. Thus, they bring their food, hiding it under the clothes, so that Aruba customs does not take it away. That happened to me, said a different lady. They also discussed how bringing lots of food is good, more space to bring back the stuff they buy in Aruba, which turns out to be paper products (toilet paper and diapers are favorites), food (not fancy ones, those you can get in Caracas. It’s all the stuff he government controls or imports that they bring back) and cosmetics. Cosmetics, like soap, shampoo and similar things, lest you think that they bring back expensive things like perfume. I also learned you have to stay a full week in Aruba in order to get the full US$ 700 from Cadivi. Better to go to Aruba than Miami, said a third lady, the ticket is cheaper and you get the same amount of money. Besides, I bring my kids, they don’t cost as much and I can ask for US$ 700 for each.

I trust I am not passing bad information, I haven’t checked it. But on how to squeeze the Chavista foreign exchange/travel system, these ladies seemed like true experts.

To my surprise, right before check-in there was a guy that would actually ask you if you were connecting to another flight. I thought I was the only one. How wrong I was. There were people connecting to my flight and to at least four other ones. In fact, looking over his writings on the reservation list (the only thing that was respected all day) about half the flight, including many kids, were making connections to the US and/or Europe. There were twelve connecting to my flight. I should have gotten worried when the agent told me that Aserca was not responsible for any of my expenses if I did not make the connection. I actually expressed confidence that there was plenty of time between flights, to which he answered: “Well, yesterday one passenger did not show up and it took an hour and a half for the National Guard to allow the removal of the baggage belonging to that passenger. The plane left with a three and a half hour delay.”

But I am a lucky devil, no pun intended, so I went to immigration confident that  there would be no problem.

Think again!

We were told to be at the gate at 10:30 AM, so I drifted towards Gate 22 at 10:15 AM not that I expected the flight to leave without me. Gate 22 must be the gate from hell. It is a combination of Venezuelan organizational planning, combined with Venezuelan military organizational planning (A true oxymoron).

You see, when you approach Gate 22, there are two signs: Gate 22 in the back and gate 17 in the front. If you are dumb enough to follow the Gate 22 sign, you reach a corridor, blocked by cardboard. Thus, you have to go back to gate 17. That is Gate 22. Obvious no?

There are no signs in gate 17 ( or 22). Just an escalator going down and stairs coming up. Given that there were four flights waiting to use Gate 22, the upstairs lounge was completely full, since it did not even have capacity for a  small commercial jet. Downstairs is different. It is empty, there are seats. But even though you have just passed security once, the chairs in the waiting lounge are blocked and you have to go through the National Guard security in order to get to the lounge and eventually on to the buses to the plane.

A not so pleasant looking Guardsman comes up to me and tells me to go back up until my flight is called. Up the stairs I go, not before he gives me the explanation: Your gate number could be changed (I should have paid more attention at this point), for example, and you would be down here.

Sounds perfectly logical, but I still don’t understand why flights that required a bus, need double security.

I go back up. During the time I was there, I saw some two dozen people go downstairs and then trek back up, including a pregnant lady with two kids.

Order (ha! ha!) was restored when the Aserca people showed up, roughly at the same time as the La Venezolana staff (different flight). This happened about ten minutes after the time we were supposed to be at the gate. Then began the placebo explanations of the Aserca staff. The plane is being filled with gasoline. Next customer up, the plane is in the national terminal. Next customer, if the plane is brought here we will leave from a different gate. (Told you I should have listened!)

As I am getting impatient, a passenger says: “We have to be very patient, this is Venezuela”. I feel like telling her why I don’t want to be patient, but I shut up. About an hour later, we are told the plane is full of gas (Cheers!), but it will be brought over now to the international terminal (Booo!). This means we have to go to Gate 28. (Which is actually Gate 28)

A real gate! No second National Guard check up of our hand luggage. Makes sense, no? Just kidding!

At the gate I meet a lot of fellow “conectees” worried about time. I meet a guy who is connecting to my flight. I tell him I only have hand luggage and have my boarding pass printed. I explain that the airline closes the flight 45 minutes ahead of time, thus, if we are further delayed, he will not make it. He does the check in in his phone. (He is the only other person that made the connection: “Thanks Devil” this guy should say. You are welcome!). There is a family going to San Francisco, a girl to meet her Spanish fiancee in Scotland. A guy who is moving to the US. Another getting his visa soon. Another bought a fish business. And finally, an Arubian/Venezuelan (Doctor, builder, grandfather and tool smuggler into Aruba) who clearly has done this many times and explains at the gate and on board exactly what obstacles you will have in Aruba to make the connection. (Thanks buddy!)

We finally board. A little disorganized, but hey, Germanic compared to everything what went  on before. We might yet make it.

As we are sitting on the plane, the Captain apologizes for the delay and says…we will have another delay, because the truck to start the engines is in the National terminal and has to be brought over. (Why did they move the plane then?)

It looks tough now. Very tough.

As we wait, the stewardess asks me to check if my seat has a life saver underneath. It does. Two mechanics come on board and start checking for life savers around my area. They are all there, but there is a report that one was missing. Finally it is determined, that it was the seat of the girl going to Scotland, sitting behind me, that did not have one, it was an empty bag under her seat. How would she know. She is given a life saver to put in the pocket ahead.

To my surprise the two mechanics that boarded the plane to check the life savers, stay on board. I don’t even want to ask why. They are seated in front of me, this must be the safe area of the plane, I tell myself…

We finally move at 1:45 PM Caracas time, which is 2:15 PM Aruba time, my flight is at 3:35 PM. Looks bad.

Flight goes well. I am seated close to the front. I leave the plane and start running. I get to Aruba immigration and the lines are huge, like 50 people deep. The not so considerate gentleman organizing the line tells me to get in any line, he can’t do anything for me. My new friend follows. We ask the people in the next line if we can go ahead of them. they say sure, they are vacationers going to Aruba, we look stressed. We bypass a bunch of people and when I am called, the immigration lady  I got is given a pack of eight passports to process ahead of me. “You can stay here, she says”

I smile.

And then I run. Remembering the instructions by the Aruban/Venezuelan guy on the plane, I exit the terminal, take a left. Then another left to departures. I keep running, O.J. Simpson style  (dated joke, last time I did this was in 1977, still recall the analogy). Then I do Aruba immigration and security. I keep running. Then I do US immigration and security. No lines, thanks God. Nice agent.

Then I run more, My plane is at the last gate at the airport. gate 8. I show my boarding pass. Lady says: “Mr. Octavio, I thought you were already on board”. I run, get in the plane, sweating by now, sit down and the stewardess offers me a glass of water and some paper towels (Thanks Veronica!) . She then turns around and closes the door to the plane.

I made it, but I realize that Venezuela is slowly drifting apart form the world. It is further and further away every day in all possible senses: Physically, intellectually and cronologically. And this increasing remoteness is true for both those abroad like me and for those who still live there.

What a tragedy!

 

 


Am I crazy?

August 4, 2014

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No expert, just a little bit crazy. It has now been twelve years writing the Devil


The Collective Responsibility Of Venezuelans

August 3, 2014
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I was amazed by how timeless this article is.  I do not necessarily agree with all it says, but most of it. The answer of when it was published is at the end, but there are hints in the text.

By Aníbal Romero

Some former parliamentary members of the official sector have announced that the upcoming Constituent Assembly shall initiate “popular trials” against the alleged perpetrators of our national misfortunes. Is is worth noting, once again, the lack of understanding that our novel rulers have about what it means to have the rule of law. It should also be noted that those who ask for such trials, are self-proclaimed ‘human rights defenders’. Undoubtedly, Venezuela today lives under the sign of Orwell: here the truth is a lie and the lies are he truth; white is black and black is white; demagoguery is government and government is demagoguery.

Now, who will judge who? I would not be balanced to deny the failures of the misnamed ‘elites’ of the puntofijismo as they have a fundamental responsibility for what happened, good and bad, over these past decades. But: what about the people, does the community generally lack any responsibility, any blame? Ask yourself, for example, if it is perhaps  that someone forced them to vote for Pérez in 1988, or Caldera in 1993? If I remember correctly, on both occasions many voices were raised to warn Venezuelans about what would surely mean the renewed choice of these characters as presidents. Many warnings were made, not that we lacked alternatives. However, the majority of people supported them. Does not this imply a degree of responsibility of the people in general of the national destiny? Do they not remember what we did? Or is it perhaps that we do not want to remember?

The idea that there is a collective responsibility for the fate of a community or country is not original. In our century, the reality of shared responsibility has been tested in specific cases, and the reason is simple, most especially if we are talking about a democracy: Citizens do not have the right to wash their hands of the sociopolitical processes that move history. At a minimum, life forces us to provide a balance of the outcome due to government we choose.

It is  especially absurd to not attribute part of the responsibility to a community like ours, which for more than forty years has lived with a massively overvalued currency, subsidized all over the place, undergoing massive investments in health and education (and which we were not able to take care of in both quality and efficiency). A community that, when the time to face the harsh reality of the end of the populist-rentist model arrived, chose to take to the streets (27-F 1989), behead a President who had been democratically elected, support two violent coups and bring to power in 1993 the person who sent them the pathetic ‘Letter of Intent for the people’. And to round it off, the same people ended up exalting to the leadership of our destiny, the main character in one of those military coups, the crucial negation of all democratic value. What can we expect, then?

Not understanding that collective responsibility is equivalent to conceive the ‘people’ as an entity composed of mentally, legally and morally disabled individuals. Because that is not my idea of ​​the Venezuelan people, I think that is composed of normal human beings, which is why I believe that we can not skirt the part that corresponds to us in the drama of the country. The sweet and complacent attitude towards the ‘people’ adopting an attitude which imagines them as pristine and the source of all virtue and wisdom, is nothing but a mask behind which they hide a deep contempt towards the people, which is seen as manipulable and even stupid, as people who you have to distribute cheat sheets to vote, which they aimed to deliver to electoral ballots decorated with berets, hats, caps and other playful symbols, so that they could  ‘get it right’, because they are too stupid, and may not vote for the currents saviours.

I insist: Who forced those who voted for Pérez and Caldera to do it? Who forced those who voted for Hugo Chavez to do it? Also in 98 many  warning voices rose, and nevertheless they again came back to take the easy road, that of the scapegoats, the messianic solutions, constituent illusions and other tricks of our incorrigible and systematic collective delusion. Now we claim to want to change everything, but really do not want to change anything. What we want is to go back, to that populism works, to that of a ‘strong man’ that makes decisions and leads us by the nose. Productivity? Competitiveness?? Long-term vision?? These are not the issues that beset us. Here are Danton and Robespierre emulating, retreating to the eighteenth century, minding if the Constituent Assembly will be ‘original’ or ‘derived’, happy to discharge our responsibility over any mirage that comes to mind. But it can not hide the truth forever: the Venezuelan people have given themselves the governments who they believed deserved. Nothing is left but to bear the consequences. Popular Trials? And who will judge the people?

This was Romero’s farewell article in El Universal on June 6th. 1999.

 


And One More Thing…On The Carvajal Affair

July 29, 2014

So, The Netherlands invoked an article nobody had referred to in the whole affair, to release Hugo Carvajal on Sunday evening. Basically what the Netherlands said was that Art. 13 of the Vienna Convention allows for a Consul named but not accepted to temporarily assume his or her duties. Thus, according to this, Carvajal’s arrest was valid and his release was valid.

However…

It was somewhat sneaky of the Dutch to release Carvajal on a Sunday, without going to the Judge that originally said Carvajal did not have immunity. You would have thought that in a country with Law and Order, the proper procedure and place would have been to go to Court on Monday and request Carvajal’s release.

Most likely, the Dutch Government did not want the US to show up in Court on Monday with the extradition papers, creating a conflict. The Prosecutor in Aruba had said that the extradition was now just a formality and the US just had to provide the required documentation for it to take place.

Clearly, everyone applied pressure, but the weak link did not turn out to be Aruba as I suggested on my first post, but rather The Netherlands, as reportedly even Russia played a role, exchanging concessions on the Ucraine plane for helping release Carvajal. No matter what anyone says or how this is interpreted, it was a severe blow to the US, who would have loved to get Carvajal onshore. The indictments are a doozy, they are sealed indictments in Miami and New York, accusing Carvajal in Miami of helping drug dealers and in the Carvajal Indictment Southern District of NY of :

cavnyThis is not aiding or helping, this is coordinating the transportation of “only” 5.6 Tons of cocaine to the US, quite a strong accusation, charged by the Grand Jury, no?

Meanwhile, Carvajal is welcomed in Venezuela as a hero and there are few mentions of the fact that The Netherlands declared him persona non grata. What is true according to reports is that Carvajal had been going to Aruba for months and unlikely that he was going to act as a Consul. We will never know what he was doing there, but one can suspect.

The most likely threat by Maduro on the Dutch? That Venezuela would withdraw from the Isla refinery in Aruba. The Netherlands already spends more money that it wants on the ABC islands to have to spend even more.

This story likely ends here for now. Carvajal and his buddies will likely stay away from jurisdictions with a US extradition treaty for quite a long time.

And, of course, no more Disney for you, high ranking Chavistas!


Some Questions And Inconsistencies On The Carvajal Affair

July 27, 2014

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There are too many  unanswered questions about the Carvajal affair. Too many inconsistencies. I have been wondering about them, some I have seen asked elsewhere, others not. So, here is my list of mysteries surrounding this affair:

-Knowing that General Carvajal was in the US Drug kingpin list since 2008, why did the Maduro Government name him as Consul to Aruba?

-Did the Venezuelan Government ever notify The Netherlands of Carvajal’s nomination as Consul to Aruba? El Universal says it never happened.

-Why did Carvajal, knowing about the extradition treaty between The Netherlands and the US travel to Aruba before he had been given the placet or approval by The Netherlands?

-Why did Maduro want to name Carvajal as Consul to Aruba specifically? Is it related to the island being an offshore financial center?

-Why would a legal resident of the US, lend or lease his US company’s jet to someone in the US drug kingpin list in the Patriot’s Act era?

-Why hasn’t Venezuelan Foreign Minister Jaua said a “pio” (beep) about the Carvajal detention, given that it was his underling that was jailed and a diplomatic immunity issue raised?

-People keep discussing the legalese of whether Carvajal had or not immunity, citing the Vienna Convention to argue both for and against. Doesn’t this article from that convention perfectly clear that he did not have immunity, since Carvajal could not take up his post until approved by The Netherlands?:

Article 39

  1. Every person entitled to privileges and immunities shall enjoy them from the moment he enters the territory of the receiving State on proceeding to take up his post

-Who ordered the ban on flights between Venezuela and Aruba? Who rescinded the order? Why on both?

-Was the cancellation of Rafael Ramirez’ trip to New York to meet with investors related to the Carvajal affair?

-Did Carvajal really try to cut a deal with the US in 2012, as reported,more here?

-Was it Chávez that stopped any investigation of Carvajal by the Prosecutor when drug dealer Makled made very explicit and specific accusations against the General?

-The US Government only requested Carvajal’s extradition on July 4th. 2014, 20 days before Carvajal’s detention.Was this coincidence, a change in US policy or they learned Carvajal was already going back and forth between Aruba and Venezuela?

-How does Carvajal explain the multiple passports, the $20K and the private jet he arrived in? Was one of the passports fake as suggested by a Miami newspaper?

-Is there really a connection between Carvajal’s removal as Head of Military intelligence and the fact that a number of Colombian drug dealers were captured in Venezuela following his retirement?

-Is it true that Carvajal was really disliked if not hated by the “ideological” wing of Chavismo?

-Can you be a serious General and be nicknamed ” El Pollo” at the same time?

There, if any of you have others, add them in the comments and if can clarify any, please do. Something does not make sense in this story.


US Initiates A New Stage In Its Relations With Venezuela

July 24, 2014

396772_112525_1Image from Semana magazine

One of the puzzles over the last decade, has been the timid attitude of the US Government towards corrupt Venezuelan officials, who roam around the US enjoying their ill-gotten gains. In fact, it is known that some of them, have turned evidence in exchange for being allowed to stay in the US or not prosecuted. Despite this, it just seems as if over the years, it was all an intelligence gathering operation with no follow up.

That may have changed this week.

After an effort was apparently rebuffed by the Obama administration to impose sanctions on Venezuelan Government officials, the US Government has clearly and quietly gone on the offensive this week.

First, it was former Judge Benni Palmeri Bacchi, who arrived in Miami in a private plane (like so many current and former Chavista officials like to fly) with his family to enjoy two weeks of supposedly a pre-paid vacation in Disney World, Orlando. Instead, Palmeri was charged with protecting Colombian drug traffickers by allowing them to fly cocaine shipments to the US.

But the big fish, not to say the big chicken, was General Hugo “Pollo” Carvajal, who was detained in Aruba when he arrived, also in a private plane, purportedly owned by a relative, and tried to use one of at least two, if not four Venezuelans passports he was carrying (As well as US$ 20,000 in cash, that he obtained via no official source in Venezuela). You see Carvajal was nominated to be the Venezuelan Consul in that Caribbean island, but the Government of The Netherlands had yet to approve it, making his diplomatic  immunity non-existent. And adding to his problems the US started including Carvajal in its drugpin list in 2008, as you can read here.

And if Carvajal is ever extradited to the US, he is in serious trouble. While the news concentrates on his relations to drug groups, Carvajal was involved with drug/terrorist organization FARC and in the infamous Reyes computers Carvajal is said to have offered the FARC terrorist weapons, as well as lists of prominent Venezuelans to kidnap.

And if Carvajal is ever extradited, that is where his problems begin. Once he is in US soil, the charges could quickly shift from the drug angle to the terrorism one and Carvajal could be taken away from the DEA’s hand and Guantanamoed for the rest of his life. He could be jailed in a maximum security prison for more years than his life expectancy will allow.

And I say “if”, because many things  could happen to Carvajal. Maduro has already say that he fully backs Carvajal, who was “kidnapped” by Aruba’s authorities, threatening the tiny island with economic, energetic and commercial sanctions.

So, you can bet that right now there is a many front effort by Venezuela to get Carvajal freed, just the same way there is a full court press by the US and the Dutch Government to get him extradited ASAP.

The only question is who gets to or finds the weakest link first. The weakest link could be an official that can be bought, a Judge that can be influenced and voilà Carvajal could show up in La Carlota, Miami International or Schipol.

The US is likely to be applying lots of pressure to get Carvajal off Aruba as fast as possible. The island likely has the weakest links in the process, the question is whether it can pull the required strings fast enough.

It will be a very entertaining movie to watch the next few days. But no matter what happens, it is clear that the US has initiated a new era in its relations with Chavista Venezuela and that many a Chavista official or beneficiary of Chavista corruption must be trembling today facing the impossibility of enjoying their ill-gotten gains in Disney World. Their impunity in traveling around and moving funds around is over. From now on, each step has to be watched and considered.

Or else..


Maduro’s Empty And Bizarre “Sacudón”

July 15, 2014

When I first began this blog, I overused hyperlinks. My reasoning was simple: Some of the things going on were so bizarre and difficult to believe, that my credibility was at stake if I did not indicate the source of what I was saying was happening.

This is no longer the case.

The way Venezuela is run, the things the country’s leaders say or implement, from the Ozone tax, to President’s that talk to birds to 20 billion dollars rip-offs (twice), by now people have become accustomed to the bizarreness of the revolution.

But somehow, the Bolivarians never cease in amazing and surprising us. It would be entertaining, if were not so painful. Which it is.

I mean, when a President announces that he will make important announcements the next day, which involve the Sacudón (Big shake up?) of the structure of the State, the “misiones” and the economic and social offensive, you expect something. You expect even more, given the current state of the economy, with inflation running at 60-plus percent per year, 5,5% per month, shortages, airlines leaving, international reserves depleted, daily protests, Government losing popularity and fiscal and monetary distortions killing economy activity.

I did have my expectations down. I know the various factions in Government differ on how to solve problems. I know there are no economists in or near the Cabinet. I know the Government worries more about losing popularity (and power) that about making things better. But I expected at least some form of vaporous announcements, half defined measures, watered down policies.

But I really did not expect a rambling Maduro announcing essentially nothing. Zip. Zilch. Nada. Niente.

First we had the nth. eulogy to our Comandante (“Our biggest difficulty is to have lost Him”), followed by a love fest. Love for all, but more particularly and more importantly, love for and to the military. Particularly, loveless Gen. Lopez Padrino, who apparently did not receive much love after his July 5th. speech, where he pledged allegiance to Chavismo above all. Lopez Padrino, according to Maduro, is supposed to represent the “new” Venezuelan military “thinking”. It does not get more oxymoronic than that.

Subconsciously Maduro also said how much the country misses Hugo, because he has no clue, I guess, he really wishes Hugo was here. Or there.

We then got the usual blast on the capitalists, opposition, speculators, who are responsible for inflation, shortages and all of the ills of the economy. Next sentence: But the Venezuelan economy is healthy (Never mind we have the highest credit risk in the world)

So, is there a problem or not Nico?

He seems to be in no rush to fix anything.

Next, the only “announcement”, we are ready for the fiscal revolution. Except the way it sounds is that they will control fiscal spending. Except that “fiscal” in Spanish, also refers to taxes. Thus, what it means is that they after impoverishing the productive sector, they will now try to tax it to death, so that “they” can keep spending.

Get it?

At this point it was important for Maduro to clarify: “We will make announcements”. No idea of the timeline at this point.

Then we saw the clueless Maduro: We now have to check what imports we can substitute. How Cepalese can he get? Does he understand any of it? (I don’t miss Chávez, how could he leave us with Maduro in charge?)

Again: we will make some announcements…

In between he had a guy who has been Chavista like three times and opposition twice in the last fifteen years, tell us how wonderful agriculture is doing and the VP, Chávez’ son in law, tell us how the Government will be turned inside out or outside in, don’t recall the order.

We were also told at some point and at length how wonderful and “democratic” the World Soccer Cup was. (Democratic my foot, the best team won, the rest suck!)

We then heard a blast against those that stole the US$ 20 billion via Cadivi/Cencoex.  Except that those that asked for $3,000 have been asked to prove their spending in the thousands, while not a single one of those that got the US$ 20 billion for imports has yet to be called. The Prosecutor says she does not want to interfere with the investigations, I say, she does not know who she will find behind each rip off, so she wants to be careful.

Then we come to the highlight of the day:

Maduro: “We worked really hard yesterday…like four or five hours”

He thus insulted , 95% of the working population of Venezuela, which I don’t want to guess how many Maduristas/Chavistas/Bolivarianos it includes, but it can’t be many.

By then, it was clear, there would not even be vaporous announcements like I predicted:

vaporososright after betting there would be no announcements relating to gas prices:

gasolinaBut I was very wrong. There no announcements, other than:

“We will make the announcements on August 11th.”

Yes, in the end, that was the only announcement of the “announcements”

And the we were shown a video of the one year anniversary of Nicolas’ marriage to Cilia. In another Fruedian slip, he said she was the real boss. As if we did not know…

It does not get more bizarre than that…but I will not listen on August 11th, I will be on vacation in September, when he will likely make some announcement.

Or maybe not…

 


How Chavismo Has Ripped Off The Private Sector For Years

July 9, 2014

ripoff

There is an article today in the New York Times, which while factually correct, seems to me to be a little late to the game in explaining to its readers how Chavismo has “vanished” the profits (And equity too) of private companies, whether they are Venezuelan or not.

Chavismo has never played by the rules, whether international or national. It has ripped off the Venezuelan people by claiming to care for them, while allowing inflation to soar and wasting the oil windfall of the last decade on propaganda, incurring in new debt and  simply doing whatever was necessary to preserve Chavismo in power. And it continues to do so.

But to pretend this is a new phenomenon, or that it only has to do with the most recent devaluation in Venezuela, is to ignore fifteen years of Chavismo as well as eleven years of exchange controls. Not to mention the total lack of scruples by Chavismo to steal, lie, bully, ripoff and deceive multinational and national companies, accustomed to people being honest and respecting the laws and customs of business and trade.

When Chavismo imposed foreign exchange controls in February 2003, the Bs. 1.59 per US$ rate was established as a way of protecting international reserves and the Government promised to make that rate available to bona fide companies in import and manufacturing, as well as allowing people to buy at the controlled rate for some of their needs. The system and the controls allowed companies to repatriate profits and even capital, if required, you just had to follow certain procedures to make sure your needs and requests were real.

Since the Government imposed certain limitations, a parallel “swap” market developed immediately, as people realized that the Government had not banned exchanging two properties, such as a security denominated in Bs. for one denominated in US$. This market took a while to develop, as people discussed its legality, some companies were afraid to use it and the Government and the Government kept talking about issuing a Bill that would make it a crime to exchange money outside of the official controls.

But about two years after imposing exchange controls, the Venezuelan National Assembly approved the so called “Foreign Exchange Illicits Bill” which did penalize buying or selling dollars, but actually exempted “securities” from the Bill, essentially saying that it was healthy for a parallel market to exist.

This was a critical step in the development of the swap market (mid-2005 or so), as most companies started trading in the swap market to solve temporary foreign currency (or Bolivar!) needs and even to speculate with the currency.

But few companies used the swap mechanism to repatriate dividends. The argument was that why bother doing this, when the Government, via Cadivi, was going to give them the foreign currency for repatriation at the official rate of exchange.

By the time the law was approved, the official exchange rate was around Bs. 2.1 per US$, while the swap rate was maybe 20-30% higher.

But then things got complicated. Just as Chávez began using reserves for parallel funds, squeezed PDVSA for social spending and issued debt to cover shortfalls, the international financial crisis of 2007-2009 hit and oil prices went down. Since Chavez needed more and more funding for his exploits, Cadivi became stingy, giving less and less for dividend repatriation which mostly (90%?) ended by 2007.

The Government kept promising that it would pay and companies actually believed it. But multinationals home offices began pressing for some form of repatriation. There was one problem though. if you bought at the swap rate, you had to take a loss in earnings. Some companies started doing it, others not, they were worried about their reputation, I mean, what would happen if Chavez accused them publicly of using the swap market, whether it was legal or not. Their reputation was at stake.

Meanwhile, the swap exchange rate closed at Bs. 3.3 in 2006, 5.6 in 2007, 5.6 in 2008, 5.9 in 2009, as the Government began actually intervening in the swap market, while refusing to devalue until January 2009 from Bs. 2.1 to Bs. 4.3 per US$.

By now, Chávez realized that he could rip off foreign investors without much trouble. In January 2007, he “nationalized” telecom company CANTV offering to pay US$ 16.85 per share, despite Carlos Slim offering US$ 21 per share a few months earlier. Slim’s offer was never processed by the Government and the Government kept the fiction that it would pay a dividend before the tender expired, which never happened. It also took over Electricidad de Caracas, the partners that did not agree to be a minority in the heavy oil fields and even Chavez’ Argentinean buddies in Sidor. The first two got paid fast. The oil fields are still in arbitration and the latter got paid because of the close relationship with the Kirtchners.

Nobody has gotten paid since.

And while today’s NYT article would make you believe that it was the recent devaluation that screwed multinationals, nothing is further from the truth. Each time the Government has devalued, it has reduced its revenues in US$ and its earnings and since 2007, it has all been vapor profits, monopoly money, as almost no dividend repatriation has been approved by CADIVI, now Cencoex. Only companies that repatriated via the swap market before it was shut down in 2010, managed to salvage, yes, salvage, some of their profits.

Thus, companies took a 50% cut on both revenues and profits when the Government devalued in Jan 2009, a 46% hit when it devalued in February 2013 and a 63% hit when Sicad 2 was created.

And counting…

And counting, because it is all still vapor earnings, revenues and profits. The Government is not going to pay them at the Sicad 1 rate either. Thus, some companies mentioned in the NYT article have decided to take the loss. Because they can. You see, before Sicad 2 existed, accounting rules say they had to follow the Government foreign exchange rates, even if they knew they would never get the money. Once Sicad 2 was created, serious companies, like Brink’s, decided to take the worst case and take a hit of 80% on their earnings using the Bs. 50 per US$ exchange rate, versus the Bs. 10 or whatever Sicad 1 rate is.

Think about it, wiping out 80% of your revenues and profits…

They actually could have said 100%, we will never get paid…

The things is, Brink’s is a minority and most companies are still “wishing” and lying to their home offices or simply hoping they will get paid at a rate below Sicad 2, so that it does not look so bad and their bonuses don’t suffer as much.

But if I had to guess, most of them, if and when they get paid, will get paid closer (above even) to the current Sicad 2 rate than the Sicad 1 rate they are booking their profits at today.

And note this includes earnings for 2007, 2008, 2009, 2019, 2011, 2012, 2013 and 2014 and counting. We are talking eight years of Monopoly money, virtual profits for all.

Not exactly a recent event.

Nothing has changed, I wrote an article on this last December, entitled “Virtual Profits in Venezuela” in which I warned companies that they will get screwed yet again.

Companies seem to be getting the message, but many rely on “hope springs eternal”, particularly airlines.

Airlines are a very particular animals. They are not trying to repatriate profits, but revenues. This is worse. They sell tickets in US$ at the official rate of exchange and are supposed to received the foreign currency immediately or fast, as per IATA agreements. Except they started seeing delays in payment and they decided to increase prices as a hedge. But they still have not been paid, nor do I think they will be paid at Bs. 4.3, 6.3 or even 10, look north friendly airlines, you may get part of the debt paid above Bs. 25 per US$, but not all of it. You have been ripped off. Period.

Why do companies behave like this?

It depends. If you are a multinational you really believed that BS that you are in Venezuela for the long haul. Except you never thought the long haul would last so long.

If you are local, you want to survive. And you do, until you can’t, like the many companies that the Government has not repaid for their CADIVI imports at Bs. 6.3. In January 2014, the Government said, we don’t have enough money to pay you. So, they still hope. Another ripoff.

Or the oil service companies that accept PDVSA paying them in bonds, which implies a discount. At least they get something.

But the locals are the ones most screwed by the revolution. If they are not paid, they are dead. Most that have yet to be paid, will never be. The revolution has no scruples. They already screwed them with the devaluation in 2012, what´s another one? Chavistas thinks all private entrepreneurs are wealthy.

There are other cases, but you get the point. The point is, this is nothing new, the revolution has been ripping off the private sector for eight years and counting and there are those that still think they will get paid. And the international press is starting to notice. To say nothing of the regulators that have allowed financial reporting based on these virtual profits and fake exchange rates.

Clueless.

As for the long haul, sure, it will be a long haul, but only to take what is left of your stuff back home.

If any.


Lying As A Revolutionary Way Of Life In Venezuela

July 5, 2014

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Lying has long been a way of life for Venezuela’s Bolivarian revolution. The country is still unsure of when and where Hugo Chávez died, let alone what ailed him or what complications eventually killed him. He was reelected knowing his days were counted, but it did not matter, lying, cheating and ripping off the people and the country has been institutionalized as a way of perpetuating the leadership in power. Not the revolution, because the revolution has been dead for quite a while. Only the leadership matters.

By now, the lying is so blatant, that the Government and its representatives don’t even attempt to cover it up. They just simply don’t address those issues in which they are flagantrly caught cheating, deceiving and lying. They hope that their total control of traditional media will impede the exposure of the lies reaching their supporters. And they do get away with it.

The lying and deceiving seems to be accelerating with the total impunity that reigns in the country. Comptrollers don’t control, Prosecutors don’t prosecute, People’s Defenders don’t defend, Highest Courts are lowly beings, the Supreme Command of the revolution forges and presents evidence against its enemies.

As it accelerates we see more and more cases, where the lack of scruples and deception prevail. This week as I was in Caracas was no different, with too many cases which dramatize the decrepit morality of the failed Bolivarian revolution. To wit:

–The faking of emails and evidence presented by the supreme command of the revolution.

The top members of the revolution, including the President’s wife who happens to be a lawyer, appear on TV, acting as accusers and judges, presenting “evidence” of a conspiracy to get rid of Maduro. The evidence is quite flimsy in that the texts themselves are not as explicit as suggested. The Prosecutor accuses a few days later, despite the accused suggesting the emails are fake. Then, one of those accused gets an order for Google to turn over the content of his emails in the company’s servers. Google complies. The text of the email is not what was presented by the Supreme command, others are not even present in the servers. The Venezuelan Government, all the way to the very top, has fabricated evidence as well as violating due process, the right to defense and all that.

The Government does not even bother to deny any of it.

–Ozone corruption

The Governor of Vargas State sets up a company to buy some equipment to purify air at Maiquetia airport with ozone. In order to pay for the equipment, a new tax of Bs. 127 has to be paid by each passenger. Never mind that this should be the domain of the Airport’s Administration and Institute. Never mind that Ozone has been shown to be harmful in air purification. Never mind that passengers are paying for a service that is not even in place yet. The system is implemented badly. The first day, the cash collected by the State is robbed after passengers have to wait in line a couple of hours.

Nobody explains, nobody apologizes, nobody answers the criticism.

–The Phantom buyers of El Universal

Imagine a country where there is basically no foreign investment. Where you can’t repatriate profits. There is no newsprint. Despite this, a phantom Spanish group owned by a phantom company, whose board is unknown, whose website was created recently and still is mostly empty links, decides to pay 90 million euros for Caracas daily El Universal. Never mind that owning a newspaper has become a terrible business. Never mind that the Washing Post was sold for about double this amount. We are supposed to believe that this invisible “investment” group looked at Venezuela and decided it was a good place to lose some money by investing in this newspaper. And despite the restrictive laws of Venezuela for media purchases, including a ban on foreign ownership of media, El Universal is the third media outlet, after Globovision and Cadena Capriles, to be sold with not even a Tweet by the Government.

Nor should you expect one.

–Suspected murderers go free, democratic protesters stay in jail

A student watching a demonstration is shot in the face by two National Guardsmen armed with pellet guns, similar to those banned in many places in the world to control demonstrations. The two suspects have been identified out of the group of twenty three controlling that demonstration. Yesterday, the two Guardsmen are released on their own recognizance, with the requirement that they have to show up at the Court every week. This is the same requirement that Teodoro Petkoff has because someone wrote an article in the newspaper he directs, purportedly saying that the Head of the National Assembly said something he did not. Meanwhile, according to human rights organization Foro Penal, there are still 113 students in jail for protesting since February 14th. of this year.

No one in Government will even try to explain this. It is called Bolivarian justice.


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