The Devil's Excrement

While Venezuelans assume it is the future of their country which is at stake in the October Presidential elections, much more is at stake than that. The presence of Hugo Chavez in the region not only supports dictatorial and quasi-dictatorial Governments like Cuba, Bolivia and Nicaragua, but allows other countries like Brazil, Argentina and Ecuador to pass as “moderates”, because in comparison they seem more democratic and respectful of human rights.

But the truth is that the region is hitting a new low in terms of human rights and democratic ideals. And the demise of the Bolivarian revolution will go a long way into helping the return of true human right and democratic values to the region.

It has become common to suggest that freedom of speech and freedom of choice are just some of the basic rights that people have and there is no preference for one over the other. Which is true. The problem is that the right to life or to health care or the right to an education are not only costly, but require a coordinated effort to provide them. And lots of hard work and long term planning, something lacking in many regional Governments. Meanwhile, the right to speak out, the right to choose politically have little cost, they just require the will of the Government in charge to be tolerant and understanding of what democratic principles and human rights  are all about.

Unfortunately, the region has gone backwards in the last ten years. When the leaders of the Americas restricted the participation in Summit’s to democratically elected countries in 2000, none of those leaders could have envisioned that we would have had the discussions of last week. Here are the Castro brothers, one a self-appointed Dictator, the other one endorsed by his brother, ruling a country for fifty years and we are supposed to ignore the atrocities and the human right violations, just because the Castro brothers are somehow supposed to be simpatico or spouse some idealistic goals, that they have miserably failed to deliver for more than five decades. When their participation i the Summit becomes a point of contention, you know something is trully rotten in the region.

But somehow, the rise of China and India has generated a commodity boom for Latin America that has given the people of the region some sense of prosperity such that their leaders can ignore not only what is going on in neighboring countries, but also what happens in their own.

And that is why it is so important for the Bolivarian revolution to end this Fall. What is at stake, is not simply the plight of 28 million Venezuelans, but the indirect impact of an amoral regime directly on Cuba, Nicaragua, Bolivia and more indirectly on Argentina, Brazil, Uruguay and others.

The Hugo Chavez autocracy has helped the Castro brothers extend their grip on power in Cuba, propped up Evo in Bolivia and Ortega in Nicaragua and provided billions to Argentina, Brazil an even Colombia in funds that should have stayed in Venezuela, financing our prosperity, not theirs, instead of going elsewhere to buy trinkets that give Venezuelans the illusion that things are well under the revolution.

Which is why Capriles and the unified opposition should understand that what is at stake is not only whether Venezuela will or not be turned around, but whether millions of Latin Americans will be able to enjoy in the future an open society, with choices and rights and without discrimination.

What is at stake in October is more transcendental than what the Venezuelan people seem to understand. Let us hope that Capriles, his supporters and Venezuela are up to the historic task at hand.

Chavismo has a remarkable ability to invent and create new concepts and structures that are simply unworkable or are incredibly simplistic. They legislate and legislate, without asking anyone about it and just moving forward, despite their so called belief in “participative” democracy. But only high ranking Chavistas seem to really “participate” in the truly important things. The Constitution be damned.

By now, Chavismo has created a few monsters that the country has become accustomed to. People accept these things as if  they were “normal”, forgetting how perverse the system has become.

For example, the Government imports food without control at the official rate of exchange, destroying local production which “enjoys” 25-30% inflation while the official rate of exchange is held constant. Seems logical? Yeah, sure!

Then there is CADIVI, which magnanimously presides over exchange controls. Huge bureaucracies have been created on both sides. The Government’s to stop you at each instance from importing things, the private sector to weave around the tapestry of requirements in the hope that some official dollars will come your way. If you are out of luck, you can still try SITME, where you deal with the bureaucracy of the private or official banking sector, to see if you can scrape some greenbacks your way.

CADIVI is so perverse, that the President of the Venezuelan Central Bank said this week, without being bashful: “Exchange controls will be removed when the revolution can not be reversed”. Read what he says: I restrict your rights, so that the right to choose will no longer be available in the future. At that point, I will, in my benevolence, return some smaller important rights to you, but you would have lost the freedom to choose.

Nice.

Then there is price, earnings and everything control, now encompassed under the SUNDECOP (sounds like a suppository or a fungus medicine, no?), a new bureaucracy established to control prices, costs and margins. So, in  a country with unpredictable inflation and soon, retroactive severance pay, a whole bunch of untrained incompetents, will now try to calculate everything that is so hard for you to do in the business you have worked in all your life. All to establish a regime of price controls, which has been shown not to work anywhere in the world. In fact, Venezuela, one of the few countries with price controls today, has the top or one of the three top inflation rates in the world. But they just don’t get it.

But these guys don’t understand the word “evidence”. If inflation jumped to 100% in Venezuela, they would blame everything but their idiocy. They just don’t know better.

So, in the absence of the All Mighty Hugo, who is taking care of more transcendental things, a new Labor Law has been cooked up barely four weeks before Chavez plans to enact it. This Bill not only returns severance pay to the original system, which was shown not to work, but a novel concept is once again created: Severance does not belong to the worker, but to the family.

These guys want to legislate and promote the family. In a country where practically nothing works, they want to set up a system to promote, legislate and control “family values” as a goal of a “socialist” society.

Of course, the story is told from the side of the irresponsible father. If the wife, or the kids are let out…yadda yadda yadda. But in the machista country of “ciudadanos y ciudadanas” I can already imagine what will happen when the working woman is taken to Labour Court by the unemployed, irresponsible husband. As a matter of fact, imagine also the working kid who lives at home, whose severance will now be at the mercy of his or her parents.

Not pretty.

But what Chavismo does or thinks about, has nothing to do with reality. They represent a world of ignorants who have a lot of initiative and power, but who have no clue as to how economies and societies work. Thus, in a country without practically any  functioning institutions, they create new ones to oversee how families values function.

Chavista Family Values. Look at the leaders of the revolution, who spouses them? tell me just one, please…

After giving all indications that he would be there for the Summit, however briefly, President Chavez himself said today that he may not go  due to “his medical leave”, something that is not new. This is a clear indication that the condition of the Venezuelan President has not improved and the opinion of the medical Doctors is finally prevailing for his own good.

This confirms the latest Bocaranda information that says that the Venezuelan President is not getting any better and that traveling is damaging his health. Meanwhile the country plods along without anybody running it and infighting within Chavismo to see who will replace Chavez.

This admission by Chavez proves that he can’t run the country and the conditions given by the Venezuelan Constitution to temporarily replace him are currently present. But Chavez does not dare give up his post for fears that he will never come back to it.

He did not participate in the celebration of the ten years of the 2002 events and now he can’t go to Cartagena, where he wanted to be seen once more as one of the leaders of Latin America.

Clearly, Chavez is not well, he wanted to be the center of attention once more. But he will not be able to.

Is today a tuning point in the whole story?

Diosa Canales is a soft-porn star who did this ad for PanaVota.

Do you think it works?

Do you find it offensive?

I think my answer to both is ironically: Yes!

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.

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.

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..

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…

After ignoring the issue of crime for most of his Government, President Hugo Chavez appears to be ready to create a “Mision Crimen Cero” in an attempt to convince us that crime, the number one problem for Venezuelan voters according to pollsters, is not a problem. In fact, with a very straight face, Hugo Chavez told the world that crime in the US is much worse than that in Venezuela, despite the fact that there are more murders in Venezuela every year than in the US. Never mind that the US has a population ten times larger than Venezuela’s, numbers for the Venezuelan President are meant to be ignored. (Chavez even had the nerve to say: “Look at the figures and statistics)

The problem is that it works. Last year the Government claimed to have built close to the 150,000 housing units it promised, while it is known that it built less than half that, but by including homes that were improved, the target was reached and that was that.

And too many voters seem to believe the smoke and mirrors. Witness this chart from the Consultores 21 poll:

The chart says that 52% of the families are registered or will be registered in Mision Vivienda. If each family is assumed to be composed of four members, that is over 3,.5 million families in the country, but the Government is unlikely to complete 100,000 units in 2012, less than 3% of those needed. The second chart says that 80% expect to get a housing unit from the Government. Given that no specific time frame is mentioned, the number is reasonable, it is hope springs eternal at its best. But it is the last chart that makes you wonder: Fully 48% of the same people believe they will receive their housing unit before the October election.

Thus, by election time you you would think the 45% that did not get a housing unit will be mad at the Venezuela President and will not vote for him.

Wrong!

Because by then Chavez or the Chavista candidate will be blaming the US, the opposition, obscure forces, boycotts, rains, the Gods (Catholic or not) and who knows what else, for the failure of the revolution to deliver on the housing units. We will be told not to worry, by next year they will be ready. Everyone will get one, Chavista or not.

And then they will launch “Mision Crimen Cero”, telling us that the 13,080 homicides, 3.429 deaths for resisting the authorities and 4,508 suspicious deaths which took place in 2010, are either not true or have been reduced to zero via the magic of the revolution.

And for the fourteenth year in a row, millions of people will believe it.

In the last few weeks, the Government has been promoting and distributing a bunch of polls that pretend to show that Hugo Chavez enjoys a huge lead over opposition candidate Henrique Capriles. The polls can be categorized in two groups: One, flight-by-night operations which are clearly funded by the Government to promote favorable numbers, such as GIS XXI, Consultores 30.11 and International Consulting Services. These three have been showing a 30% lead for Hugo Chavez, with the President holding between 55% and 58.7% of the vote, versus 22%-25.7% for Henrique Capriles. A second group is better “known” pollsters such as IVAD and Hinterlaces, the first one showing a 30% lead by the Venezuelan President and the second one an 18% lead.

These polls have thrown a lot of confusion among people, who precisely because this has happened in the past, are skeptical of polls, but nevertheless worry about them.

The flight by night operations clearly have little credibility. Jesse Chacon, the former military officer/telecom expert/security and police expert has now been turned into a poll expert at GIS XXI. But his track record is quite dismal, predicting, for example, an overwhelming victory by Chavismo in the National Assembly vote. The other two pollsters in this category only surfaced recently, have no track record and not even a webpage. Given that polling companies tend to make their money doing consumer, not political polls, this alone makes them suspect.

The other two are pollsters with longer “track records”, but not necessarily distinguished ones. IVAD for example, has as its main claim to fame predicting a Chavez victory in 1998 and 2000, but the details of its polls and its techniques are seldom published and somehow, the data is always “leaked” by pro-Government press and its owner Seijas, evades public presentations and speaking.

The other one, Hinterlaces, has a spotty and inconsistent track record, with its latest “miss” saying a week before the opposition primary that the race had become a two man (well, one man, one woman) race between Maria Corina Machado and Henrique Capriles. We all know how that turned out and you would think Hinterlaces would go back and review its methodology before speaking in public after that, but no sooner had Capriles been declared the winner, when Hinterlaces was talking up its poll on the Presidential race.

There are other pollsters like Datanalisis, Datos, Keller and Consultores 21, with a variety of reputations. I tend to follow Datanalisis and Consultores 21, simply because they have the better and more consistent track record. However, of this latter group, only Consultores  21 has a post-primary poll.

This poll says the following: Of the 2000 or so people polled, Chavez has a 46% to 45% lead over Capriles. However, if only those polled that say they intent to vote are included, Chavez leads becomes 51% o 46%.

Who should one believe?

Well, let’s look first at whether it is logical that Chavez has such a huge lead in the mid fifties, with the opposition only garnering 25% or so:

If there are approximately 18.5 million voters and abstention is 25%, then the total numbers of votes will be around 13.88 million. If the opposition gets 25%, it would get 3.47 million votes, barely above what the opposition got in the primary. More importantly, Rosales got 4.2 million votes in the 2006 Presidential election and the opposition got 5.7 million votes in the National Assembly election. Thus, this 25% seems non-sensical and suspect.

We could, as an alternative, look at the 2006 election, but almost everyone got that one right.

I prefer to look at a tougher one: The 2007 referendum. IVAD was saying then (Trust me, I can’t find a link) that the referendum would pass by 64% to 25% or 26%.

In contrast, in the last Consultores 21 poll right before the referendum, they published this chart:

On the left was the percentage of votes in favor (Red) and against the referendum (blue) if only those that say they will vote are counted. The result was a small edge for rejection of the referendum. Recall we never knew the final result, only a partial one, it was No 50.7% Si 49.3% on question A and No 51% Si 48.9% on question B. This is quite a good prediction. The right hand side was simply a hypothesis if voters turned out in larger numbers.

Thus, who do you trust more? Clearly Consultores 21, even if you may not like the result. But there is plenty of time, somehow the Government is promoting Capriles a lot by attacking him, Chavez has a long road with his health issue and there are seven months of campaigning to go.

A five point margin seems doable, even if the opposition has to win by a few percentage points.