VenEconomy: The National Assembly (AN) has been revving up its engines in order to consolidate the Castro-communist project. Its haste is due to the fact that its absolute power expires in January 2011 thanks to the will of the people who voted against revolutionary hegemony on September 26.
With this last-ditch effort, the redder-than-red parliamentarians will complete the Chavista project's legal network with five laws relating to the People's Power or Branch. Naturally, they will not approve them before mounting a show of taking them out on the street to "consult" with "their people."
These five new laws are the Organic People's Power Act, the People's Public Planning Act, the Communes Act, the Social Comptrollership Act, and the amendment to the Communal Economy Promotion and Development Act.
This package of laws is being camouflaged with the promise of giving people the opportunity to actively participate in the decisions of the State. This is a total fallacy, if account is taken of the fact that all these laws are aligned with the Federal Council of Government Act, a body that comes under the absolute authority of the President of the Republic.
The truth of the matter is that these laws will give another harsh blow to decentralization in order to concentrate all the power in the President's hands. The regional and municipal authorities will be appointed by Chavez at his discretion, and political-territorial policies will also depend on Miraflores.
Equally serious is the fact that it will give another mortal blow to private property. By establishing so-called social property, the government will become the owner of everything and it will be the government that will decide what, where, when, and how to produce.
This Thursday another bill joined the five new laws mentioned above when it was submitted to the plenary session of the National Assembly for its first debate: the Banking Sector Institutions Bill, which contains the same communist poison, in this case bringing the banks into line with the socialist plan.
Then there is the 2011 Budget Bill presented by Jorge Giordani to the National Assembly, which makes the government's intentions quite clear. The Budget Bill proposes handing over 35% of what was formerly distributed through the Intergovernmental Decentralization Fund - FIDES (=15% of VAT revenue) and the Special Economic Allocations Act - LAEE (=25% of oil revenue) to community organizations. Based on an average oil barrel price of $40 -as proposed in the Budget Bill-, this 35% would represent Bs.F.4.6 billion of a total of Bs.F.12.88 billion. Until now, under existing rules, the Bs.F.12.88 billion should be sent in full, directly and without delay, to the regions and municipalities.
Once again, following a defeat, Chavez is pushing ahead with his plan to make Venezuela a country of communes.
Sunday, November 14, 2010
Tuesday, November 2, 2010
VenEconomy // Even more evident how truly evil Chavez' revolution is
VenEconomy: On October 31, it was made even more evident how truly evil this revolution advocated by Hugo Chavez is.
Until now, there are those who might could have found a degree of rationality or justification in this government's demagogical decisions; and yet others might have attributed to certain confiscatory measures some "benefit" for this or that sector of the population.
The expropriations of Constructoras de Valvulas, Venepal, and Rualca, say, which allegedly were to have given way to social companies where workers had a shareholding, or the de-privatization of SIDOR, which was applauded by the workers because of promises of improved wages and better benefits. Today all these companies are mere shadows of their former selves and the workers are still waiting for just some of the promises to be made good.
Something for which there is no objective, political or ideological reason or justification is the confiscation of Siderurgica del Turbio (Sidetur), a company of the Sivensa Group that manufactures and markets steel and steel products.
In order to justify this confiscation, this Sunday the President accused Sidetur of selling its products at very high prices. That is a lie.
Sidetur is a socially responsible company that abides by the law. The products it manufactures and markets are key inputs for the construction sector whose prices have been regulated since 2006, even though there has been inflation of more than 100% since then.
What benefit will Sidetur in government hands bring to the country? VenEconomy can find not a one. But a cynic might think that Chavez wins by removing from the game a company that has demonstrated that the private sector can, in fact, work with the communities, even better than the government itself.
Nor does the confiscation of six urban developments in Yaracuy, Carabobo, and Miranda or the temporary occupation of eight more developments or the special measures against 19 more announced by the President in his Sunday program this Sunday make any sense whatsoever.
Who benefits or what is gained by confiscating buildings that are already under construction? No one. However, the country loses in terms of investments that will now not be coming and sources of productive employment that it will not have.
Today, Venezuela is a confiscated country where more than 350 private companies have been destroyed and more than 2 million hectares of fertile productive land left fallow or producing less. There is no information about a single case where these properties are producing more or at lower cost, are creating more jobs or generating better benefits for their workers.
In conclusion, Venezuela is a country where those who are governing it destroy simply for destruction's sake in the interests of a communist revolution that the majority of Venezuelans don't want.
Until now, there are those who might could have found a degree of rationality or justification in this government's demagogical decisions; and yet others might have attributed to certain confiscatory measures some "benefit" for this or that sector of the population.
The expropriations of Constructoras de Valvulas, Venepal, and Rualca, say, which allegedly were to have given way to social companies where workers had a shareholding, or the de-privatization of SIDOR, which was applauded by the workers because of promises of improved wages and better benefits. Today all these companies are mere shadows of their former selves and the workers are still waiting for just some of the promises to be made good.
Something for which there is no objective, political or ideological reason or justification is the confiscation of Siderurgica del Turbio (Sidetur), a company of the Sivensa Group that manufactures and markets steel and steel products.
In order to justify this confiscation, this Sunday the President accused Sidetur of selling its products at very high prices. That is a lie.
Sidetur is a socially responsible company that abides by the law. The products it manufactures and markets are key inputs for the construction sector whose prices have been regulated since 2006, even though there has been inflation of more than 100% since then.
What benefit will Sidetur in government hands bring to the country? VenEconomy can find not a one. But a cynic might think that Chavez wins by removing from the game a company that has demonstrated that the private sector can, in fact, work with the communities, even better than the government itself.
Nor does the confiscation of six urban developments in Yaracuy, Carabobo, and Miranda or the temporary occupation of eight more developments or the special measures against 19 more announced by the President in his Sunday program this Sunday make any sense whatsoever.
Who benefits or what is gained by confiscating buildings that are already under construction? No one. However, the country loses in terms of investments that will now not be coming and sources of productive employment that it will not have.
Today, Venezuela is a confiscated country where more than 350 private companies have been destroyed and more than 2 million hectares of fertile productive land left fallow or producing less. There is no information about a single case where these properties are producing more or at lower cost, are creating more jobs or generating better benefits for their workers.
In conclusion, Venezuela is a country where those who are governing it destroy simply for destruction's sake in the interests of a communist revolution that the majority of Venezuelans don't want.
Tuesday, October 26, 2010
In Our Opinion...
PDVSA on Monday confirmed the sale of US 3 billion of new global 2017s. Considering the current price in the international markets is around 70, this renders an implied FX rate of USD/VEF of 6.15-6.25. This compares to the USD/VEF 5.3 rate that has been prevailing in the SITME market.
In our opinion, this might be the clearest signal yet from the Venezuelan Government that a devaluation of the Venezuelan Bolivar is imminent and that the SITME's days are numbered. Would the Chavez Administration allow PDVSA to participate by selling USD directly onto the SITME platform at an FX sufficiently high to potentially encourage some private supply of USD bonds into the system?
In our opinion, this might be the clearest signal yet from the Venezuelan Government that a devaluation of the Venezuelan Bolivar is imminent and that the SITME's days are numbered. Would the Chavez Administration allow PDVSA to participate by selling USD directly onto the SITME platform at an FX sufficiently high to potentially encourage some private supply of USD bonds into the system?
Wednesday, October 20, 2010
Digging Venezuela out of the mess Chavez has plunged it into...
Veneconomy: PDVSA is offering two new bond issues of US$3 billion each. The first is PetroBono 2013 offered in replacement of PDVSA Bond 2011. This issue comes with a coupon at 8% and matures on November 17, 2011.
The second is PetroBono 2017, the purpose of which is apparently to finance PDVSA's investment projects, including "the social and comprehensive development of the country." However, it is thought that the proceeds from this issue will end up being frittered away to cover the revolution's expenses.
This issue matures in 2015, 2016, and 2017 and comes with a coupon at 8.5%. The bond is denominated in dollars as it is being offered to investors for payment in bolivars at Bs.F 4.30/$.
It is commented that demand for the 2017 issue will be high, and for that reason it could be increased to $4.5 billion.
It is assumed that the vast majority of buyers will resell their bonds on the European market to obtain the foreign currency needed to cover companies' urgent needs, in particular for the purchase of raw materials, servicing debt, and honoring other liabilities.
Added to that there is the $1 billion that will be acquired by the Central Bank to be resold gradually via SITME (System for Foreign Currency Securities Transactions).
Analysts estimate that the 2017 issue could be traded at between 65% and 75% of its face value, which suggests an implicit swap rate of between Bs.F 6/$ and Bs.F 7/$.
Assuming that the bond will be traded at the higher price (75%), it could end up with a yield of 16.5% at maturity. This 16.5% would be the true cost of the issue for PDVSA and the country.
There is no other country in the world that is so badly managed and so broke that it has to pay 16.5% in order to obtain financing or gain access to credit.
This issue may be welcomed by many in the short term, given the tremendous demand for foreign currency in the country as a result of the inflexible exchange controls; but in the short term it will be highly prejudicial for the entire population as, once again, it will permit the government to put off implementing sound policies for digging Venezuela out of the mess Chavez has plunged it into.
The second is PetroBono 2017, the purpose of which is apparently to finance PDVSA's investment projects, including "the social and comprehensive development of the country." However, it is thought that the proceeds from this issue will end up being frittered away to cover the revolution's expenses.
This issue matures in 2015, 2016, and 2017 and comes with a coupon at 8.5%. The bond is denominated in dollars as it is being offered to investors for payment in bolivars at Bs.F 4.30/$.
It is commented that demand for the 2017 issue will be high, and for that reason it could be increased to $4.5 billion.
It is assumed that the vast majority of buyers will resell their bonds on the European market to obtain the foreign currency needed to cover companies' urgent needs, in particular for the purchase of raw materials, servicing debt, and honoring other liabilities.
Added to that there is the $1 billion that will be acquired by the Central Bank to be resold gradually via SITME (System for Foreign Currency Securities Transactions).
Analysts estimate that the 2017 issue could be traded at between 65% and 75% of its face value, which suggests an implicit swap rate of between Bs.F 6/$ and Bs.F 7/$.
Assuming that the bond will be traded at the higher price (75%), it could end up with a yield of 16.5% at maturity. This 16.5% would be the true cost of the issue for PDVSA and the country.
There is no other country in the world that is so badly managed and so broke that it has to pay 16.5% in order to obtain financing or gain access to credit.
This issue may be welcomed by many in the short term, given the tremendous demand for foreign currency in the country as a result of the inflexible exchange controls; but in the short term it will be highly prejudicial for the entire population as, once again, it will permit the government to put off implementing sound policies for digging Venezuela out of the mess Chavez has plunged it into.
Oliver L. Campbell // PDVSA: Financial results -- January/June 2010
Former Petroleos de Venezuela (PDVSA) Finance Coordinator Oliver L Campbell writes: PDVSA has just published its financial results for the first semester of 2010. In its report, the company follows accounting convention and compares the figures with the first semester of the preceding year. However, I have preferred below to make the comparison with the full year 2009 so the reader can follow the trend in the two consecutive periods. It is easy enough to multiply January/June by two and compare it with the previous year.
Notes:
1) These items reflect an increase of 25% in the average export price, a reduction of 3% reduction in oil production and of 9% in export sales in 2010.
2) Companies in the agricultural and food sector have been transferred to other government entities.
3) The cause of the reduction in 2010 is not shown but it may be arise from reduced costs incurred by CITGO, where product demand has fallen, and to the translation of bolivar costs at the new exchange rate..
4) The reason for the significant fall in these costs is not given but again the new exchange rate applicable to bolivar costs will have had an influence. .
5) 2009 includes a profit made on the sale of dollar denominated bonds in the swap market. The first semester 2010 benefits from an exchange gain when translating a net liability in bolivars into dollars at the new exchange rate.
6) The figure is not available but will be insignificant since CITGO at present is not making much, if any, profit.
7) The increase in gross income arising from higher oil prices has made it possible to increase these contributions.
8) The substantial increase arises because the new exchange rate of Bs 4.30 instead of Bs 2.15 to the dollar has inflated taxable income which is calculated on the bolivar figures.
9) Several authorities believe the true production figure is lower than that reported by PDVSA.
10) The Venezuelan basket of crude and products is at present $75 per barrel, If this price continues, and the export level does not slip, then the government take in 2010 could reach $40 billion.
11) This figure includes a reduction of $1,243 million arising from the translation at the new exchange rate of investments in subsidiaries whose functional currency is the bolivar..
12 The commercial receivables increased from $9,178 million to $13,836 million at the end of June 2010. No explanation has been given.
13)The long-term debt to equity ratio of 29% at the end of June is acceptable.
14) There are reductions in various items: royalties payable, accounts payable to contractors, and compensation payable for aquatic assets expropriated.
I disagree with the external auditors as regards the provision for litigation. The amount has been surprisingly reduced from $2,094 million at the end of 2009 to $1,494 at the end of June 2010 without any explanation. It takes an act of faith to believe what is stated in note 22, "although it is not possible to predict the outcome of these matters, management, based in part on advice of its legal counsel, does not believe that it is probable that losses associated with the proceedings discussed above, that exceed amounts already recognized, will be incurred in amounts that would be material to the Company's financial position or results of operations."
I do not know what management consider "material" but it is quite probable the compensation payable to ConocoPhillips, ExxonMobil and other claimants will exceed $10 billion.
On June 30, 2010, PDVSA transferred its agricultural and food companies to other government bodies. Although " the Company will continue to provide financial support to the activities of PDVAL throughout 2010," it is hoped PDVSA can now concentrate on increasing crude oil production potential rather than on food purchase and distribution which is best left to companies specialized in that area.
Notes:
1) These items reflect an increase of 25% in the average export price, a reduction of 3% reduction in oil production and of 9% in export sales in 2010.
2) Companies in the agricultural and food sector have been transferred to other government entities.
3) The cause of the reduction in 2010 is not shown but it may be arise from reduced costs incurred by CITGO, where product demand has fallen, and to the translation of bolivar costs at the new exchange rate..
4) The reason for the significant fall in these costs is not given but again the new exchange rate applicable to bolivar costs will have had an influence. .
5) 2009 includes a profit made on the sale of dollar denominated bonds in the swap market. The first semester 2010 benefits from an exchange gain when translating a net liability in bolivars into dollars at the new exchange rate.
6) The figure is not available but will be insignificant since CITGO at present is not making much, if any, profit.
7) The increase in gross income arising from higher oil prices has made it possible to increase these contributions.
8) The substantial increase arises because the new exchange rate of Bs 4.30 instead of Bs 2.15 to the dollar has inflated taxable income which is calculated on the bolivar figures.
9) Several authorities believe the true production figure is lower than that reported by PDVSA.
10) The Venezuelan basket of crude and products is at present $75 per barrel, If this price continues, and the export level does not slip, then the government take in 2010 could reach $40 billion.
11) This figure includes a reduction of $1,243 million arising from the translation at the new exchange rate of investments in subsidiaries whose functional currency is the bolivar..
12 The commercial receivables increased from $9,178 million to $13,836 million at the end of June 2010. No explanation has been given.
13)The long-term debt to equity ratio of 29% at the end of June is acceptable.
14) There are reductions in various items: royalties payable, accounts payable to contractors, and compensation payable for aquatic assets expropriated.
I disagree with the external auditors as regards the provision for litigation. The amount has been surprisingly reduced from $2,094 million at the end of 2009 to $1,494 at the end of June 2010 without any explanation. It takes an act of faith to believe what is stated in note 22, "although it is not possible to predict the outcome of these matters, management, based in part on advice of its legal counsel, does not believe that it is probable that losses associated with the proceedings discussed above, that exceed amounts already recognized, will be incurred in amounts that would be material to the Company's financial position or results of operations."
I do not know what management consider "material" but it is quite probable the compensation payable to ConocoPhillips, ExxonMobil and other claimants will exceed $10 billion.
On June 30, 2010, PDVSA transferred its agricultural and food companies to other government bodies. Although " the Company will continue to provide financial support to the activities of PDVAL throughout 2010," it is hoped PDVSA can now concentrate on increasing crude oil production potential rather than on food purchase and distribution which is best left to companies specialized in that area.
Monday, October 18, 2010
VenEconomy // The costs of Venezuela'a Castro-communist Revolution
Venezuela is paying a high price for the imposition of the Castro-communist project.
In the interests of the revolution, the regime has been legislating grotesquely outside the bounds of the Constitution and, resorting to farcical illegality, wiping out private property by dint of "expropriations," which, in fact, is no more than pillage by those who abuse their power in the belief that it is eternal.
These mass "expropriations" of private companies are costing the country dear, not only because this practice has meant the destruction of the domestic productive apparatus, but also because of investments that have not been made. In the first quarter of 2010, direct investment was -US$1.8 billion.
It is proving equally costly in terms of jobs lost, shrinking domestic production, shortages, and inflation caused by the overwhelming and patent managerial incapacity and laxness of the government officials with whom Chavez surrounds himself.
Today not a single erstwhile productive and efficient private company confiscated by the government is the shadow of its former self.
Siderúrgica del Orinoco (SIDOR), just 18 months after being taken over by the State, set its liquid steel production goal for 2010 at 1.6 million mt, 59% less than the 3.9 million mt it produced in 2008. Even the state-owned companies are today are mere relics of what they were 12 years ago.
At PDVSA this deterioration has been more than obvious. Just over a decade ago, the state-owned oil company met with international standards in terms of good management, efficiency, and productivity, comparable with world class companies such as Shell or Exxon. Today, PDVSA only produces 2.9 million b/d (according to official figures), and not the 5 million plus barrels a day it should be producing according to the development plan it had at the start of the century.
Equally serious is the situation of the basic industry companies in Guayana, in particular that of Aluminios del Caroni (Alcasa). According to Alcasa's in-house news sheet, Hoja de Aluminio, the company has an accumulated debt as at July this year of nearly Bs.F.1.40 billion, and its budget for 2011 already has a deficit of Bs.F 1.75 billion, not counting its debt to date, according to an article posted on the web page of the journalist Damian Pratt.
On August 8 this year, Pratt wrote a lapidary open letter to Hugo Chavez on the occasion of his visit to Guayana.
Among other things, he tells Chavez that the instructions he gave in early 2005 to "turn the basic companies into socialist companies" and to "abandon criteria of profitability and productivity" have been followed to the letter, achieving the "feat" of leaving them bankrupt, despite the fact that it was precisely during that period (2005-2008) that aluminum prices reached an all-time high! And, stresses Pratt, "it was savage, vicious statism disguised as socialism that bankrupted them."
The question Pratt (and the entire country) asks Chavez is, "Aren't you and your government going to answer for this disaster?"
In the interests of the revolution, the regime has been legislating grotesquely outside the bounds of the Constitution and, resorting to farcical illegality, wiping out private property by dint of "expropriations," which, in fact, is no more than pillage by those who abuse their power in the belief that it is eternal.
These mass "expropriations" of private companies are costing the country dear, not only because this practice has meant the destruction of the domestic productive apparatus, but also because of investments that have not been made. In the first quarter of 2010, direct investment was -US$1.8 billion.
It is proving equally costly in terms of jobs lost, shrinking domestic production, shortages, and inflation caused by the overwhelming and patent managerial incapacity and laxness of the government officials with whom Chavez surrounds himself.
Today not a single erstwhile productive and efficient private company confiscated by the government is the shadow of its former self.
Siderúrgica del Orinoco (SIDOR), just 18 months after being taken over by the State, set its liquid steel production goal for 2010 at 1.6 million mt, 59% less than the 3.9 million mt it produced in 2008. Even the state-owned companies are today are mere relics of what they were 12 years ago.
At PDVSA this deterioration has been more than obvious. Just over a decade ago, the state-owned oil company met with international standards in terms of good management, efficiency, and productivity, comparable with world class companies such as Shell or Exxon. Today, PDVSA only produces 2.9 million b/d (according to official figures), and not the 5 million plus barrels a day it should be producing according to the development plan it had at the start of the century.
Equally serious is the situation of the basic industry companies in Guayana, in particular that of Aluminios del Caroni (Alcasa). According to Alcasa's in-house news sheet, Hoja de Aluminio, the company has an accumulated debt as at July this year of nearly Bs.F.1.40 billion, and its budget for 2011 already has a deficit of Bs.F 1.75 billion, not counting its debt to date, according to an article posted on the web page of the journalist Damian Pratt.
On August 8 this year, Pratt wrote a lapidary open letter to Hugo Chavez on the occasion of his visit to Guayana.
Among other things, he tells Chavez that the instructions he gave in early 2005 to "turn the basic companies into socialist companies" and to "abandon criteria of profitability and productivity" have been followed to the letter, achieving the "feat" of leaving them bankrupt, despite the fact that it was precisely during that period (2005-2008) that aluminum prices reached an all-time high! And, stresses Pratt, "it was savage, vicious statism disguised as socialism that bankrupted them."
The question Pratt (and the entire country) asks Chavez is, "Aren't you and your government going to answer for this disaster?"
Friday, October 15, 2010
Morgan Stanley warns about foreign exchange crunch in Venezuela
PDVSA to announce on Monday prospectus for US$3 billion bond sale
El Universal: Venezuela keeps borrowing as a mechanism to ease foreign exchange crunch in the domestic economy, and to find new funds that will help the country to improve the profile of liquid assets.
State-run oil company Petróleos de Venezuela (PDVSA) announced on Tuesday the issuance of $3 billion in bonds in a press release. The issue will have a semi-annual coupon and mature in 2015, 2016 and 2017, with equal repayment. Bonds may be purchased in the primary market, at the official exchange rate of Bs.F 4.30 per US$.
Despite the issuance, the foreign currency crunch in the Venezuelan economy is worrisome. According to a report prepared by investment bank Morgan Stanley, based on limited data and transparency about the supply and demand of foreign currency in Venezuelan economy, the fact that "Venezuela is expanding debts rather than foreign exchange reserves suggests that the government could be facing a foreign exchange crunch."
Morgan Stanley warned that Venezuela may face a demand of $61.8 billion in 2010, and $65.9 billion in 2011. The investment bank stressed that in an economy that gets 95% of its foreign currency from the sale of oil and byproducts, there is great uncertainty regarding the volume of PDVSA's oil production and exports, and doubts about the price of such negotiations or whether they are paid in foreign currency.
The report added that as a result of oil exports to countries in Asia, the Caribbean, Central and South America, which represent about 40% of total exports (2.7 million bpd), Venezuelan oil revenues could total $50.8 billion in 2010 and $55.1 billion in 2011, which would result in a $17 billion deficit. Morgan Stanley said that there is evidence that Venezuela would be facing a "foreign exchange crisis."
Implicit exchange rate
The Transaction System for Foreign Currency Denominated Securities (Sitme) approves $40 million per day, an amount that does not meet market expectations. This is the reason why the Venezuelan productive sector has been waiting for PDVSA bond issue to meet their currency needs.
Economist Angel Garcia Banchs said that the implicit exchange rate of the issue would be about Bs.F 6 per dollar, and it would adjust later to Bs.F 5.3 per US$, after the market absorbs the "punishment" that would affect the bond when the government starts to pay in foreign currency.
The economist warned that "the issue is likely to be bought by the Central Bank of Venezuela and private and state-run banks to feed the Sitme and only a small part of the $3 billion would be sold to natural persons and companies."
El Universal: Venezuela keeps borrowing as a mechanism to ease foreign exchange crunch in the domestic economy, and to find new funds that will help the country to improve the profile of liquid assets.
State-run oil company Petróleos de Venezuela (PDVSA) announced on Tuesday the issuance of $3 billion in bonds in a press release. The issue will have a semi-annual coupon and mature in 2015, 2016 and 2017, with equal repayment. Bonds may be purchased in the primary market, at the official exchange rate of Bs.F 4.30 per US$.
Despite the issuance, the foreign currency crunch in the Venezuelan economy is worrisome. According to a report prepared by investment bank Morgan Stanley, based on limited data and transparency about the supply and demand of foreign currency in Venezuelan economy, the fact that "Venezuela is expanding debts rather than foreign exchange reserves suggests that the government could be facing a foreign exchange crunch."
Morgan Stanley warned that Venezuela may face a demand of $61.8 billion in 2010, and $65.9 billion in 2011. The investment bank stressed that in an economy that gets 95% of its foreign currency from the sale of oil and byproducts, there is great uncertainty regarding the volume of PDVSA's oil production and exports, and doubts about the price of such negotiations or whether they are paid in foreign currency.
The report added that as a result of oil exports to countries in Asia, the Caribbean, Central and South America, which represent about 40% of total exports (2.7 million bpd), Venezuelan oil revenues could total $50.8 billion in 2010 and $55.1 billion in 2011, which would result in a $17 billion deficit. Morgan Stanley said that there is evidence that Venezuela would be facing a "foreign exchange crisis."
Implicit exchange rate
The Transaction System for Foreign Currency Denominated Securities (Sitme) approves $40 million per day, an amount that does not meet market expectations. This is the reason why the Venezuelan productive sector has been waiting for PDVSA bond issue to meet their currency needs.
Economist Angel Garcia Banchs said that the implicit exchange rate of the issue would be about Bs.F 6 per dollar, and it would adjust later to Bs.F 5.3 per US$, after the market absorbs the "punishment" that would affect the bond when the government starts to pay in foreign currency.
The economist warned that "the issue is likely to be bought by the Central Bank of Venezuela and private and state-run banks to feed the Sitme and only a small part of the $3 billion would be sold to natural persons and companies."
Just how bad is Venezuela's dollar crunch?
Financial Times (Benedict Mander): One has to wonder whether Hugo Chavez ever read that part of the book of Genesis where Joseph interprets the Pharaoh's dreams, predicting seven years of plenty followed by seven more of famine -- and hence the importance of saving during the years of plenty.
If a recent analysis by Morgan Stanley is correct, not only did Chavez fail to save during the years of plenty (read: the oil boom that ended in 2008), but now that years of plenty are back again (that is, oil prices have recovered to relatively comfortable levels in 2010), Venezuela's financial indicators seem to suggest behaviour more akin to leaner years.
The $3 billion debt issue by PDVSA this week reinforces Morgan Stanley's theory that the government is facing a dollar crunch. This is based on their observation that in past years during elevated oil prices Venezuela has accumulated international reserves; now, the OPEC country is instead amassing an ever-growing debt load (which, to make matters worse, is probably considerably larger than official figures suggest).
Even so, PDVSA's debt issue was no surprise, and approved in the national budget. Less predictable is what has been going on with PDVSA's refineries of late. The sale to Russia of PDVSA's German refineries announced by Chavez today may have as much to do with strategic considerations as the cash squeeze many analysts suspect PDVSA is suffering.
But the "virtual exclusion" of PDVSA, according to the Brazilian press, from partaking in a project with Petrobras to build the Abreu e Lima refinery in Pernambuco state is perhaps more revealing. Petrobras is apparently considering shutting PDVSA out because Venezuela's state oil company has failed to cough up even "a cent" since the partnership agreement was signed in 2005, says Brazilian newspaper O Estado de São Paulo.
The extent of Venezuela's dollar crunch is anyone's guess. Dubious statistics make it very hard to make an accurate prediction. But although Morgan Stanley calculates that "a projection of Venezuela's dollar balance can range from a cumulative $24 billion surplus to a $53 billion deficit over this year and next, in practice we see evidence that suggests the authorities are facing a dollar crunch."
If they're right, that could spell a whole series of problems for the government.
Not least its ability to pay for imports on which it relies so heavily, and the knock-on effects that could have on shortages and inflation -- and Chavez' popularity ahead of presidential elections in 2012.
If a recent analysis by Morgan Stanley is correct, not only did Chavez fail to save during the years of plenty (read: the oil boom that ended in 2008), but now that years of plenty are back again (that is, oil prices have recovered to relatively comfortable levels in 2010), Venezuela's financial indicators seem to suggest behaviour more akin to leaner years.
The $3 billion debt issue by PDVSA this week reinforces Morgan Stanley's theory that the government is facing a dollar crunch. This is based on their observation that in past years during elevated oil prices Venezuela has accumulated international reserves; now, the OPEC country is instead amassing an ever-growing debt load (which, to make matters worse, is probably considerably larger than official figures suggest).
Even so, PDVSA's debt issue was no surprise, and approved in the national budget. Less predictable is what has been going on with PDVSA's refineries of late. The sale to Russia of PDVSA's German refineries announced by Chavez today may have as much to do with strategic considerations as the cash squeeze many analysts suspect PDVSA is suffering.
But the "virtual exclusion" of PDVSA, according to the Brazilian press, from partaking in a project with Petrobras to build the Abreu e Lima refinery in Pernambuco state is perhaps more revealing. Petrobras is apparently considering shutting PDVSA out because Venezuela's state oil company has failed to cough up even "a cent" since the partnership agreement was signed in 2005, says Brazilian newspaper O Estado de São Paulo.
The extent of Venezuela's dollar crunch is anyone's guess. Dubious statistics make it very hard to make an accurate prediction. But although Morgan Stanley calculates that "a projection of Venezuela's dollar balance can range from a cumulative $24 billion surplus to a $53 billion deficit over this year and next, in practice we see evidence that suggests the authorities are facing a dollar crunch."
If they're right, that could spell a whole series of problems for the government.
Not least its ability to pay for imports on which it relies so heavily, and the knock-on effects that could have on shortages and inflation -- and Chavez' popularity ahead of presidential elections in 2012.
Wednesday, October 13, 2010
Venezuela loses over US$33 billion in 2008 alone ... consequences of corruption hurt the poor more than any other sector of society...
By Michael Murphy: Hugo Chavez again took to his Twitter account, expressing his support for Ecuadorian President Rafael Correa in the midst of an uprising by disgruntled police officers. While a firm fan of new social media, Mr. Chavez tends to take a dim view of the more traditional sort. Since his election to the presidency in 1998, he has sought to muffle opposition, with state dominance of the media at the heart of his 'Bolivarian Revolution.'
Invariably a government seeking to control the media is a government with plenty to hide, and the Chavez regime is sadly no exception. Booming oil exports and a lack of government accountability and transparency have combined to foster a culture of rent-seeking. The effects of this have percolated through the economy with the ultimate burden of the effects of corruption falling heaviest upon Venezuela's poorest.
Transparency International recently ranked Venezuela as one of the most corrupt countries on earth, alongside the Democratic Republic of Congo. Meanwhile, inflation has soared -- increasing over 30% from 2007 to 2008 according to World Bank figures -- as has violent crime in the country's capital, Caracas.
Inflation and violent crime disproportionally impact the poor, yet the policies which the regime has pursued to remedy these problems have been superficial. This year, the Chavez administration opened a series of 'revolutionary cafes' where ordinary Venezuelans can enjoy a brief respite from rising prices in the form of a state-subsidized coffee.
Meanwhile, another black liquid continues to fuel corruption and distort the domestic economy. Key sectors, such as agriculture, have been allowed to wither while Mr. Chavez tweets. A former government minister recently compared the 'socialist' Chavez regime to a colonial power, criticizing the 'rentier capitalism' that has come to prize oil revenues above all else. This was pungently illustrated by the recent discovery that a subsidiary of the state oil company had allowed 80,000 tonnes of food imports to rot in the docks.
While the regime struggles to get food into the country, it has allowed wealth to flow out. According to estimates from an upcoming Global Financial Integrity report, over US$33 billion of illicit capital left Venezuela in 2008 alone. This means that almost 10% of Venezuela's entire gross domestic product -- all the goods and services produced by Venezuelans that year -- left the country unaccounted for.
There is a weight of academic literature demonstrating that the consequences of corruption hurt the poor more than any other sector of society.
Lack of transparency and disregard for the rule of law have characterized Mr. Chavez' regime to date and continue to hurt those whose interests he claims to represent.
Rather than seeking to stifle dissent, perhaps Mr. Chavez would do well to heed the words of his hero, Simón Bolívar: 'Out of the most secure things, the most secure is to doubt.'
Note: The 2008 estimates may be amended following revision of the underlying Balance of Payments (BoP-IMF) and External Debt (World Bank) data. Later this year, Global Financial Integrity (GFI) will release a new report by GFI Lead Economist Dev Kar measuring illicit financial flows out of developing countries. The report builds upon GFI's ground-breaking 2008 report, titled "Illicit Financial Flows from Developing Countries: 2002-2006."
Invariably a government seeking to control the media is a government with plenty to hide, and the Chavez regime is sadly no exception. Booming oil exports and a lack of government accountability and transparency have combined to foster a culture of rent-seeking. The effects of this have percolated through the economy with the ultimate burden of the effects of corruption falling heaviest upon Venezuela's poorest.
Transparency International recently ranked Venezuela as one of the most corrupt countries on earth, alongside the Democratic Republic of Congo. Meanwhile, inflation has soared -- increasing over 30% from 2007 to 2008 according to World Bank figures -- as has violent crime in the country's capital, Caracas.
Inflation and violent crime disproportionally impact the poor, yet the policies which the regime has pursued to remedy these problems have been superficial. This year, the Chavez administration opened a series of 'revolutionary cafes' where ordinary Venezuelans can enjoy a brief respite from rising prices in the form of a state-subsidized coffee.
Meanwhile, another black liquid continues to fuel corruption and distort the domestic economy. Key sectors, such as agriculture, have been allowed to wither while Mr. Chavez tweets. A former government minister recently compared the 'socialist' Chavez regime to a colonial power, criticizing the 'rentier capitalism' that has come to prize oil revenues above all else. This was pungently illustrated by the recent discovery that a subsidiary of the state oil company had allowed 80,000 tonnes of food imports to rot in the docks.
While the regime struggles to get food into the country, it has allowed wealth to flow out. According to estimates from an upcoming Global Financial Integrity report, over US$33 billion of illicit capital left Venezuela in 2008 alone. This means that almost 10% of Venezuela's entire gross domestic product -- all the goods and services produced by Venezuelans that year -- left the country unaccounted for.
There is a weight of academic literature demonstrating that the consequences of corruption hurt the poor more than any other sector of society.
Lack of transparency and disregard for the rule of law have characterized Mr. Chavez' regime to date and continue to hurt those whose interests he claims to represent.
Rather than seeking to stifle dissent, perhaps Mr. Chavez would do well to heed the words of his hero, Simón Bolívar: 'Out of the most secure things, the most secure is to doubt.'
Note: The 2008 estimates may be amended following revision of the underlying Balance of Payments (BoP-IMF) and External Debt (World Bank) data. Later this year, Global Financial Integrity (GFI) will release a new report by GFI Lead Economist Dev Kar measuring illicit financial flows out of developing countries. The report builds upon GFI's ground-breaking 2008 report, titled "Illicit Financial Flows from Developing Countries: 2002-2006."
Monday, October 11, 2010
Chavez Nationalizes Plant Partly Owned by US
Published: Monday, 11 Oct 2010
By: Reuters
Venezuela's President Hugo Chavez nationalized a large U.S. and Italian-owned fertilizer factory on Sunday, just days after vowing to radicalize his state-led revolution in the aftermath of elections last month.
The government will take over Fertinitro, one of the world's main producers of nitrogen fertilizer and part-owned by private U.S. company Koch and Saipem, a subsidiary of Italy's Eni, Chavez said.
During 12 years in power, the 56-year-old former soldier has put large swathes of the OPEC member country's economy into state hands.
On Sunday, he also announced the nationalization of Venezuelan motor lubricants company Venoco. "Expropriate it." Chavez said in a live TV broadcast from a farm the government bought two years ago.
He then said the government will take control of almost 200,000 hectares (494,000 acres) of land owned by British meat company Vestey Foods Group on October 20. The government has been in talks for months to buy the Vestey cattle ranches.
"It's a friendly agreement, I am very thankful to the owners of the English company, which has been here for more than 100 years," Chavez said, on the six-hour TV show. In 2005, the government nationalized four Vestey cattle ranches, turning the land over to hundreds of peasant farmers who grow mainly vegetables, maize and beans.
The president also said he was sending a bill to parliament that will allow the government to expropriate unused urban land and stalled construction projects, in a bid to speed up new home builds.
A shortage of quality housing is a serious problem that Chavez has struggled to tackle, with many of the country's more than 28 million people living in precarious city slums prone to collapse in the rainy season.
The housing deficit is exacerbated by a fast-growing population. Chavez has stepped up nationalizations since his Socialist Party won a reduced majority in a legislative election in September.
Last week the government took over agricultural supplies firm Agroislena.
When the new parliament is formed in January, the Socialist Party will not have the two-thirds majority needed to pass some major legislation, such as the urban land bill, which will likely be passed before then.
Venezuela's state petrochemicals firm Pequiven holds 35 percent of Fertinitro, a Koch Industries subsidiary holds 35 percent and Saipem holds 20 percent. Another 10 percent is owned by Venezuela brewer and food firm Polar.
The affected companies did not immediately respond to requests for comment.
Last month, Fitch Ratings maintained Fertinitro Finance's $250 million 2020 bonds at 'CCC' on rating watch negative.
"Fertinitro, located in the Jose Petrochemical Complex in Venezuela, ranks as one of the world's largest nitrogen-based fertilizer plants, with nameplate daily production capacity of 3,600 tonnes of ammonia and 4,400 tonnes of urea," the Fitch report said.
By: Reuters
Venezuela's President Hugo Chavez nationalized a large U.S. and Italian-owned fertilizer factory on Sunday, just days after vowing to radicalize his state-led revolution in the aftermath of elections last month.
The government will take over Fertinitro, one of the world's main producers of nitrogen fertilizer and part-owned by private U.S. company Koch and Saipem, a subsidiary of Italy's Eni, Chavez said.
During 12 years in power, the 56-year-old former soldier has put large swathes of the OPEC member country's economy into state hands.
On Sunday, he also announced the nationalization of Venezuelan motor lubricants company Venoco. "Expropriate it." Chavez said in a live TV broadcast from a farm the government bought two years ago.
He then said the government will take control of almost 200,000 hectares (494,000 acres) of land owned by British meat company Vestey Foods Group on October 20. The government has been in talks for months to buy the Vestey cattle ranches.
"It's a friendly agreement, I am very thankful to the owners of the English company, which has been here for more than 100 years," Chavez said, on the six-hour TV show. In 2005, the government nationalized four Vestey cattle ranches, turning the land over to hundreds of peasant farmers who grow mainly vegetables, maize and beans.
The president also said he was sending a bill to parliament that will allow the government to expropriate unused urban land and stalled construction projects, in a bid to speed up new home builds.
A shortage of quality housing is a serious problem that Chavez has struggled to tackle, with many of the country's more than 28 million people living in precarious city slums prone to collapse in the rainy season.
The housing deficit is exacerbated by a fast-growing population. Chavez has stepped up nationalizations since his Socialist Party won a reduced majority in a legislative election in September.
Last week the government took over agricultural supplies firm Agroislena.
When the new parliament is formed in January, the Socialist Party will not have the two-thirds majority needed to pass some major legislation, such as the urban land bill, which will likely be passed before then.
Venezuela's state petrochemicals firm Pequiven holds 35 percent of Fertinitro, a Koch Industries subsidiary holds 35 percent and Saipem holds 20 percent. Another 10 percent is owned by Venezuela brewer and food firm Polar.
The affected companies did not immediately respond to requests for comment.
Last month, Fitch Ratings maintained Fertinitro Finance's $250 million 2020 bonds at 'CCC' on rating watch negative.
"Fertinitro, located in the Jose Petrochemical Complex in Venezuela, ranks as one of the world's largest nitrogen-based fertilizer plants, with nameplate daily production capacity of 3,600 tonnes of ammonia and 4,400 tonnes of urea," the Fitch report said.
Wednesday, October 6, 2010
Vargas Llosa: "What do we want: another Chavez or getting rid of Chavez?"
Merco Press Agency: President Hugo Chavez defeat in the recent legislative elections is "more significant than what numbers indicate," but the Venezuelan opposition must not hail victory or feel satisfied with such an excellent result, according to Mario Vargas Llosa.
The legislative election results in the last Sunday of September show the increasing unpopularity of Chavez and his regime and expose "the grotesque manipulation of the popular vote," writes the renowned Peruvian author in a Sunday column of Spain's main daily, El Pais.
Vargas Llosa points out that with the 65 seats obtained in the national Assembly, having won 52% of the vote, the opposition will have the necessary strength to stop the constitutional reforms that President Chavez is drafting. "The advance of the regime towards a Cuban model, of an integral Marxist-Leninist dictatorship will have many more obstacles to face before it materialize," says Vargas Llosa who nevertheless calls on the opposition not to "hail victory," nor again commit the mistakes of 2005. "By abstaining from an electoral process they delivered to Chavez parcel in hand the gift of an automatic rubber stamp National Assembly which during all these years has been a docile servant of the constitutional excesses of the Comandante."
Therefore, "it is essential" that the unity of parties, movements and simple citizens from the opposition under the umbrella of a Democratic Union forum "remains and strengthens" to continue advancing and integrating Venezuelans "that overwhelmed or fearful of the regime reprisals, abstained from participating in the dispute."
"To many of these sceptical abstentionists the electoral victory or resistance must have shook them and shown that there are still reasons for hope" says Vargas Llosa who disagrees with those who criticize the opposition for allegedly "not having leaders."
The big question is: "what do we want: another Chavez or getting rid of Chavez?"
The Peruvian writer anticipates that the coming months and years "won't be easy" for Venezuela because "the regime has advanced too much in the construction of dictatorial structures" and it's not clear if Chavez is willing to step down if the ballot so indicates.
"The greatest danger is that following the peaceful beating he received, a challenging Chavez through ukases and repressive bullying can achieve what he was unable through the democratic ballot."
Nevertheless Vargas Llosa believes it won't be "that easy" since he has lost that condition of messianic leader which he enjoyed for so long and now not only him but also "the Venezuelan people know that he is fallible and vulnerable."
The Peruvian writer ends forecasting "tense periods ahead, in which, once again, as two centuries ago, the future of freedom will be decided for the whole of Latin America on Venezuelan soil."
The legislative election results in the last Sunday of September show the increasing unpopularity of Chavez and his regime and expose "the grotesque manipulation of the popular vote," writes the renowned Peruvian author in a Sunday column of Spain's main daily, El Pais.
Vargas Llosa points out that with the 65 seats obtained in the national Assembly, having won 52% of the vote, the opposition will have the necessary strength to stop the constitutional reforms that President Chavez is drafting. "The advance of the regime towards a Cuban model, of an integral Marxist-Leninist dictatorship will have many more obstacles to face before it materialize," says Vargas Llosa who nevertheless calls on the opposition not to "hail victory," nor again commit the mistakes of 2005. "By abstaining from an electoral process they delivered to Chavez parcel in hand the gift of an automatic rubber stamp National Assembly which during all these years has been a docile servant of the constitutional excesses of the Comandante."
Therefore, "it is essential" that the unity of parties, movements and simple citizens from the opposition under the umbrella of a Democratic Union forum "remains and strengthens" to continue advancing and integrating Venezuelans "that overwhelmed or fearful of the regime reprisals, abstained from participating in the dispute."
"To many of these sceptical abstentionists the electoral victory or resistance must have shook them and shown that there are still reasons for hope" says Vargas Llosa who disagrees with those who criticize the opposition for allegedly "not having leaders."
The big question is: "what do we want: another Chavez or getting rid of Chavez?"
The Peruvian writer anticipates that the coming months and years "won't be easy" for Venezuela because "the regime has advanced too much in the construction of dictatorial structures" and it's not clear if Chavez is willing to step down if the ballot so indicates.
"The greatest danger is that following the peaceful beating he received, a challenging Chavez through ukases and repressive bullying can achieve what he was unable through the democratic ballot."
Nevertheless Vargas Llosa believes it won't be "that easy" since he has lost that condition of messianic leader which he enjoyed for so long and now not only him but also "the Venezuelan people know that he is fallible and vulnerable."
The Peruvian writer ends forecasting "tense periods ahead, in which, once again, as two centuries ago, the future of freedom will be decided for the whole of Latin America on Venezuelan soil."
Tuesday, September 28, 2010
The Economist UK // A Pyrrhic victory
Published: Monday, September 27, 2010
The Economist UK: Seldom has an election victory tasted so bitterly of defeat. Hugo Chavez, Venezuela's leftist President, had defined the legislative elections held yesterday as a plebiscite on his rule, spoken of the need to "demolish" the opposition and said that nothing less than a two-thirds super-majority in the 165-seat National Assembly would do. But with six races still to be defined, the ruling United Socialist Party (PSUV) had won just 96 seats, with the opposition taking 63.
Worse still for the President, the opposition is claiming a majority of the popular vote. Although the national electoral authority (CNE) has not yet released a vote tally, the Venezuela Unity (MUD) coalition, to which 60 of the 63 opposition candidates elected belong, says the government lost by 52% to 48%. If so, this would be just the second time in 12 years that Mr Chavez has lost an election, following the defeat of his constitutional-reform referendum in 2007. The PSUV only retained its congressional majority because of gerrymandering and a drastic reform of the electoral law that eliminated proportional representation.
Both the President and his campaign chief, Aristobulo Isturiz, brushed aside suggestions of failure. Using Twitter, Mr Chavez called the result a "solid victory", saying it was "enough to continue deepening" his "revolutionary socialist" project. But the PSUV's vanishing act on election night told a different story: its campaign headquarters emptied out by mid-evening, preventing journalists from obtaining comments from its members. At the MUD's base of operations, in contrast, opposition leaders clustered around microphones as they awaited the results.
Because the government brought the elections forward, the new congress will not take office until January, giving the PSUV free rein to rule as it pleases for nearly three more months. Afterwards, however, the party's underwhelming electoral performance will limit Mr Chavez' freedom to govern. Without a 110-seat super-majority, he will need support from the opposition to win some votes, such as appointments to the Supreme Court and the CNE. And if the PSUV fails to reach 99 seats, the President will no longer be able to legislate by decree. To circumvent such requirements, Mr Chavez may have to bypass the legislature through his control of the supreme court, a heavy-handed tactic he has used in the past.
The result also establishes a clear outline for the 2012 presidential campaign. A poor result for the MUD would have unleashed a power struggle in its ranks and might well have led to its disintegration. Now, the coalition can focus on debating how it will choose a rival to Mr Chavez. The candidacy of Henrique Capriles, the Governor of the State of Miranda, has already been announced. "The President has been given notice," Enrique Mendoza, an opposition leader who won a seat in the next congress.
Perhaps most importantly, the vote shows that Venezuelan democracy has not been reduced to a mere facade. In 2005 the opposition boycotted legislative elections, a decision that made it far easier for the President to cement his hold on power.
Now that the government has accepted a disappointing electoral outcome, opposition leaders who argue that voting is a waste of time will be further marginalized.
After 11 years of Mr Chavez' revolution, Venezuela is politically split down the middle. Neither side will be able to "demolish" the other anytime soon.
The Economist UK: Seldom has an election victory tasted so bitterly of defeat. Hugo Chavez, Venezuela's leftist President, had defined the legislative elections held yesterday as a plebiscite on his rule, spoken of the need to "demolish" the opposition and said that nothing less than a two-thirds super-majority in the 165-seat National Assembly would do. But with six races still to be defined, the ruling United Socialist Party (PSUV) had won just 96 seats, with the opposition taking 63.
Worse still for the President, the opposition is claiming a majority of the popular vote. Although the national electoral authority (CNE) has not yet released a vote tally, the Venezuela Unity (MUD) coalition, to which 60 of the 63 opposition candidates elected belong, says the government lost by 52% to 48%. If so, this would be just the second time in 12 years that Mr Chavez has lost an election, following the defeat of his constitutional-reform referendum in 2007. The PSUV only retained its congressional majority because of gerrymandering and a drastic reform of the electoral law that eliminated proportional representation.
Both the President and his campaign chief, Aristobulo Isturiz, brushed aside suggestions of failure. Using Twitter, Mr Chavez called the result a "solid victory", saying it was "enough to continue deepening" his "revolutionary socialist" project. But the PSUV's vanishing act on election night told a different story: its campaign headquarters emptied out by mid-evening, preventing journalists from obtaining comments from its members. At the MUD's base of operations, in contrast, opposition leaders clustered around microphones as they awaited the results.
Because the government brought the elections forward, the new congress will not take office until January, giving the PSUV free rein to rule as it pleases for nearly three more months. Afterwards, however, the party's underwhelming electoral performance will limit Mr Chavez' freedom to govern. Without a 110-seat super-majority, he will need support from the opposition to win some votes, such as appointments to the Supreme Court and the CNE. And if the PSUV fails to reach 99 seats, the President will no longer be able to legislate by decree. To circumvent such requirements, Mr Chavez may have to bypass the legislature through his control of the supreme court, a heavy-handed tactic he has used in the past.
The result also establishes a clear outline for the 2012 presidential campaign. A poor result for the MUD would have unleashed a power struggle in its ranks and might well have led to its disintegration. Now, the coalition can focus on debating how it will choose a rival to Mr Chavez. The candidacy of Henrique Capriles, the Governor of the State of Miranda, has already been announced. "The President has been given notice," Enrique Mendoza, an opposition leader who won a seat in the next congress.
Perhaps most importantly, the vote shows that Venezuelan democracy has not been reduced to a mere facade. In 2005 the opposition boycotted legislative elections, a decision that made it far easier for the President to cement his hold on power.
Now that the government has accepted a disappointing electoral outcome, opposition leaders who argue that voting is a waste of time will be further marginalized.
After 11 years of Mr Chavez' revolution, Venezuela is politically split down the middle. Neither side will be able to "demolish" the other anytime soon.
Friday, September 24, 2010
Will Venezuelan voters stand up to Hugo Chavez?
Dan Calabrese: A forerunner of America's expected electoral tidal wave could occur on Sunday in Venezuela. The presidency is not on the line, so Marxist dictator thug Hugo Chavez is safe for now. But he needs a two-thirds majority of the legislative assembly to maintain the absolute power with which he is so swiftly destroying the country.
Venezuelans appear poised to take it away from him -- if everything is on the up-and-up. Manny Lopez, my colleague at The Michigan View, is of Venezuelan descent, and recently visited the homeland for some interesting discussions about what may be coming:
Fortunately, Venezuelans are interested in change again -- only this time to get rid of the socialistic and totalitarian rules that have been imposed on the nation by a president who not only openly flaunts the law, he creates his own.
"Who is going to stop me?" Chavez said recently when questioned about campaigning illegally for candidates, according to Dow Jones Newswires.
Hopefully, more than 11,000 young people who have organized to monitor Sunday's elections to the national assembly as well as the millions more freedom and democracy loving people in Venezuela will do their part to keep him from intimidating voters, fomenting violence or flat-out altering results.
People around the world need to pay attention, too.
Chavez' socialists hold 137 of the 167 national assembly seats, but an energized opposition is poised to retake many of those and eliminate the two-thirds majority he needs to keep his dictatorial rule in place.
"The good thing is that the opposition has finally gotten the message and is consolidated (somewhat) and organized. They feel like if they get enough people at the polls to monitor, they can combat some of the fraud," Jon Perdue, director of Latin American Programs at The Fund for American Studies, told me Tuesday. But as Manny points out, a key to this potential success will be to keep Jimmy Carter out.
The self-proclaimed greatest former President alive showed up in Venezuela in 2004 to "certify" the election of Chavez, as if this tool has the authority to certify anything, completely ignoring all kinds of voting irregularities. In the process, he gave the international media an excuse for putting some bizarre imprimatur of legitimacy on the so-called results.
Chavez is more than just an irritating Marxist operating in our hemisphere, like, say, the Castro brothers -- who lost most of their strategic relevance when the Soviet Union collapsed. Venezuela is America's largest supplier of oil, and while Chavez has not been stupid enough to cut off supplies to his biggest customer (with thuggish Marxists, there's always a self-interested capitalist in there somewhere), he's been quite brazen about flaunting his position to cozy up to U.S. enemies like Iran.
And needless to say, Chavez has been a disaster for the people of Venezuela. Their economy is in tatters, crime is exploding and political right have virtually disappeared. For a guy who simply seizes control of TV stations who don't do his bidding, you'd think the U.S. media would be a bit more up in arms over it all. But that presumes some sort of intellectual honesty on the part of the U.S. media, and you'll never go hungry betting against that.
Hopefully, on Sunday, we can bet on the wisdom of the Venezuelan electorate -- as well as their ability to keep things clean and honest. It would be the sort of smackdown that would create hope for an entire region, and maybe provide a preview of an even sweeter one to come in November.
Venezuelans appear poised to take it away from him -- if everything is on the up-and-up. Manny Lopez, my colleague at The Michigan View, is of Venezuelan descent, and recently visited the homeland for some interesting discussions about what may be coming:
Fortunately, Venezuelans are interested in change again -- only this time to get rid of the socialistic and totalitarian rules that have been imposed on the nation by a president who not only openly flaunts the law, he creates his own.
"Who is going to stop me?" Chavez said recently when questioned about campaigning illegally for candidates, according to Dow Jones Newswires.
Hopefully, more than 11,000 young people who have organized to monitor Sunday's elections to the national assembly as well as the millions more freedom and democracy loving people in Venezuela will do their part to keep him from intimidating voters, fomenting violence or flat-out altering results.
People around the world need to pay attention, too.
Chavez' socialists hold 137 of the 167 national assembly seats, but an energized opposition is poised to retake many of those and eliminate the two-thirds majority he needs to keep his dictatorial rule in place.
"The good thing is that the opposition has finally gotten the message and is consolidated (somewhat) and organized. They feel like if they get enough people at the polls to monitor, they can combat some of the fraud," Jon Perdue, director of Latin American Programs at The Fund for American Studies, told me Tuesday. But as Manny points out, a key to this potential success will be to keep Jimmy Carter out.
The self-proclaimed greatest former President alive showed up in Venezuela in 2004 to "certify" the election of Chavez, as if this tool has the authority to certify anything, completely ignoring all kinds of voting irregularities. In the process, he gave the international media an excuse for putting some bizarre imprimatur of legitimacy on the so-called results.
Chavez is more than just an irritating Marxist operating in our hemisphere, like, say, the Castro brothers -- who lost most of their strategic relevance when the Soviet Union collapsed. Venezuela is America's largest supplier of oil, and while Chavez has not been stupid enough to cut off supplies to his biggest customer (with thuggish Marxists, there's always a self-interested capitalist in there somewhere), he's been quite brazen about flaunting his position to cozy up to U.S. enemies like Iran.
And needless to say, Chavez has been a disaster for the people of Venezuela. Their economy is in tatters, crime is exploding and political right have virtually disappeared. For a guy who simply seizes control of TV stations who don't do his bidding, you'd think the U.S. media would be a bit more up in arms over it all. But that presumes some sort of intellectual honesty on the part of the U.S. media, and you'll never go hungry betting against that.
Hopefully, on Sunday, we can bet on the wisdom of the Venezuelan electorate -- as well as their ability to keep things clean and honest. It would be the sort of smackdown that would create hope for an entire region, and maybe provide a preview of an even sweeter one to come in November.
Thursday, September 23, 2010
Venezuelan economy in shambles ... cliff-hanging parliamentary election
Post & Courier: When we last looked in on President Hugo Chavez of Venezuela he was fuming because departing Colombian President Alvaro Uribe had the nerve to give the Organization of American States documentary proof of Venezuela's support of the narco-terrorist FARC organization in his country.
Mr. Chavez threatened war. He was also still upset about the US Treasury Department declaring in 2008 that the two top intelligence officials in the Chavez government, along with a recent Interior minister, were guilty of arming, abetting and funding FARC. So Mr. Chavez proclaimed that a US diplomat, who truthfully related this fact in answer to a question from the Senate, was unwelcome in Venezuela.
More recently, he has accused his political opposition of sabotaging Venezuela's electrical grid, which has malfunctioned since he nationalized it. The Wall Street Journal reports other nationalized industries have recently experienced a string of costly accidents, probably caused by mismanagement. "We are facing a wave of sabotage, I have no doubt," said the President. An electrical engineer who revealed unfriendly thoughts about Mr. Chavez on Twitter is under arrest for inciting others to kill the President.
Meanwhile, Mr. Chavez has had the bones of Venezuela's founding hero, Simon Bolivar, exhumed for DNA studies. Some think he wants to claim descent from The Liberator, others that he wants to prove that Bolivar was murdered by US agents. He sees one plot after another against him.
The reasonable explanation for all these strange goings-on -- if the word "reasonable" can be applied to a man such as Hugo Chavez -- is that he faces an economy in shambles and a cliff-hanging parliamentary election on Sunday.
Those circumstances might similarly explain his decisions to jail several dozen political opponents, drive prominent media and financial leaders into exile and shut down any media operations that don't toe the government line.
Venezuela's economy is expected to contract by 11% over this year and next -- the worst performance in South America, by far -- according to The Economist, all the while experiencing double-digit inflation and ever- tightening rationing.
Earlier this month, the government even introduced a Cuba-like rationing card. It is called, with perfect irony, the "Good Life Card."
Yet none of this is expected to deliver the opposition a majority in Venezuela's congress. Mr. Chavez, despite -- or because of? -- his lack of emotional balance, has firmly gripped the reins of power.
That means Venezuela, due to Mr. Chavez' increasingly irrational leadership, is going from bad to worse.
Mr. Chavez threatened war. He was also still upset about the US Treasury Department declaring in 2008 that the two top intelligence officials in the Chavez government, along with a recent Interior minister, were guilty of arming, abetting and funding FARC. So Mr. Chavez proclaimed that a US diplomat, who truthfully related this fact in answer to a question from the Senate, was unwelcome in Venezuela.
More recently, he has accused his political opposition of sabotaging Venezuela's electrical grid, which has malfunctioned since he nationalized it. The Wall Street Journal reports other nationalized industries have recently experienced a string of costly accidents, probably caused by mismanagement. "We are facing a wave of sabotage, I have no doubt," said the President. An electrical engineer who revealed unfriendly thoughts about Mr. Chavez on Twitter is under arrest for inciting others to kill the President.
Meanwhile, Mr. Chavez has had the bones of Venezuela's founding hero, Simon Bolivar, exhumed for DNA studies. Some think he wants to claim descent from The Liberator, others that he wants to prove that Bolivar was murdered by US agents. He sees one plot after another against him.
The reasonable explanation for all these strange goings-on -- if the word "reasonable" can be applied to a man such as Hugo Chavez -- is that he faces an economy in shambles and a cliff-hanging parliamentary election on Sunday.
Those circumstances might similarly explain his decisions to jail several dozen political opponents, drive prominent media and financial leaders into exile and shut down any media operations that don't toe the government line.
Venezuela's economy is expected to contract by 11% over this year and next -- the worst performance in South America, by far -- according to The Economist, all the while experiencing double-digit inflation and ever- tightening rationing.
Earlier this month, the government even introduced a Cuba-like rationing card. It is called, with perfect irony, the "Good Life Card."
Yet none of this is expected to deliver the opposition a majority in Venezuela's congress. Mr. Chavez, despite -- or because of? -- his lack of emotional balance, has firmly gripped the reins of power.
That means Venezuela, due to Mr. Chavez' increasingly irrational leadership, is going from bad to worse.
Friday, September 17, 2010
The Cost of Chavez
By Matt Gurney on Sep 14th, 2010
Since coming to power in 1998, Venezuelan strongman Hugo Chavez has presided over radical changes inside the country. Promising to create “21st century socialism,” he has reformed the constitution, giving government-funded health care to all. He has nationalized key industries in repeated attempts to address what he perceives as an imbalance between Venezuela’s business elites and its masses of poor, including a “re-nationalization” of the oil sector. He’s worked within OPEC to keep the price of oil high and contain America’s power (while also blaming it for his economic woes).
Most alarmingly, he has turned into the bully of Latin America, purchasing large quantities of Russian weapons, threatening his neighbors with war and constantly yammering on about American assassination plots and military threats whenever he needs a boost to his domestic approval ratings. He has supported the FARC terrorists in their insurgency campaign against US-ally Colombia. Clearly, the man has been busy. So busy, in fact, that it was to be expected that he would drop at least one of the balls he was juggling. Too bad for the people of Venezuela that the ball in question was the one concerned with keeping crime low and the streets safe: Under his leadership, Venezuela has become a disaster.
The statistics are sobering, and astonishing. On the whole, the country, with 26 million people, saw a whopping 19,000 murders in 2009. To put that into perspective, the state of Texas, with a comparable population of roughly 24.5 million, experienced 1,374 murders in 2008, considerably less than a tenth of Venezuela’s total. Indeed, the United States as a whole, with roughly 12 times the population of Venezuela, recorded nearly 3,000 fewer murders in 2008 than did Venezuela in 2009. (Please note the differing years reflect the most recent available data for both nations.)
Put another way, it is safer to live in Iraq than it is in Venezuela.
The problem is particularly acute in the capital city of Caracas, currently the murder capital of the world. In 2008, as rival gangs battled for control of the underworld and kidnappings for ransom flourished, the city’s central forensic lab was filled to capacity with murder victims awaiting examination, with more arriving each hour. Later that year, after more than 500 people were murdered in the capital during the month of December alone, the Ministry of Interior Relations and Justice announced a slate of initiatives designed to help bring down the rate of violent crime the next year. Community outreach into troubled areas and specialized police units operating within the capital were entrusted with bringing the murder epidemic back under control. It didn’t work.
How is Chavez, a man willing to shake his fist at mighty America, tackling this national nightmare? He’s blaming the media for reporting the extent of the problem. Rather than face up to the fact that the number of murders in Venezuela has at least doubled (some figures suggest an even great increase of 400%) since he took office, Chavez’s government is accusing the media of supporting opposition parties ahead of legislative elections later this month by running pictures of the afore-mentioned Caracas morgue, overflowing with the bodies of murder victims. Venezuela’s courts quickly deemed the images pornographic and banned similar images from publication, in a move that brought swift condemnation from the United Nations and various international press agencies. The rulings have largely been reversed, though the first two papers to publish the images remain under sanction.
t seems to have escaped the notice of the government that if there’s a morgue full of crime victims, that itself is the problem, rather than the willingness of journalists to report on the facts. But for leaders such as Chavez, facts come a distant second behind ideology, and his ideology is simple: He is doing what is right for Venezuela, and if the country is in fact getting worse under his leadership, then it’s far preferable to shoot the media messengers than admit the truth. On the rare occasions when a government official is even willing to admit that there is a problem with a rising crime rate, they attribute it to regional factors, pointing out that other Latin American countries, such as Mexico, are also drowning in blood.
It is therefore interesting to compare Venezuela to its neighbor, Colombia. Colombia is of course far from perfect. It continues to grapple with an entrenched left-wing narco-insurgency, the very same FARC terrorists that Chavez supports. And violent crime remains a serious issue in many of Colombia’s major cities, in large part due to the same drug cartels and smuggling rings that beset Venezuela.
But unlike its socialist neighbor, Colombia shows no interest in denying that the problem exists and is more focused on finding solutions, including closer co-operation with America in modernizing its police. Such mutual assistance has paid dividends before; American military and technical aid was essential in allowing Colombia to deal several harsh military defeats to FARC, bringing large swathes of the country under government control for the first time in decades. FARC has even put out peace feelers.
Colombia’s efforts have paid off. Increasing security, economic development and a strengthening and maturing central government have seen the crime rate, while still problematic, drop by half during the same period than Venezuela’s has skyrocketed. With a newly inaugurated president, Colombia is well positioned to ride a wave of increasing prosperity in the wake of improving security conditions and continue to develop and modernize. None of this is to deny or minimize the challenges that lie ahead for a country that still must address economic disparity and remaining guerilla holdouts. But certainly, it is today better to live in democratic, capitalist, stabilizing Colombia than corrupt, violent Venezuela.
Hugo Chavez cannot be blind to the successes of his neighbor compared to the continued setbacks in his own nation. Whether or not he’s prepared to stop blaming the media for his own failures of leadership and take the steps necessary to improve the lives of his own people is an open question. But given his history of preferring the sound of a rattling saber over that of constructive criticism, there seems little reason for optimism.
Matt Gurney is an editor at the National Post, a Canadian national newspaper, and writes and speaks on military and geopolitical issues. He can be reached at matt@mattgurney.ca.
Since coming to power in 1998, Venezuelan strongman Hugo Chavez has presided over radical changes inside the country. Promising to create “21st century socialism,” he has reformed the constitution, giving government-funded health care to all. He has nationalized key industries in repeated attempts to address what he perceives as an imbalance between Venezuela’s business elites and its masses of poor, including a “re-nationalization” of the oil sector. He’s worked within OPEC to keep the price of oil high and contain America’s power (while also blaming it for his economic woes).
Most alarmingly, he has turned into the bully of Latin America, purchasing large quantities of Russian weapons, threatening his neighbors with war and constantly yammering on about American assassination plots and military threats whenever he needs a boost to his domestic approval ratings. He has supported the FARC terrorists in their insurgency campaign against US-ally Colombia. Clearly, the man has been busy. So busy, in fact, that it was to be expected that he would drop at least one of the balls he was juggling. Too bad for the people of Venezuela that the ball in question was the one concerned with keeping crime low and the streets safe: Under his leadership, Venezuela has become a disaster.
The statistics are sobering, and astonishing. On the whole, the country, with 26 million people, saw a whopping 19,000 murders in 2009. To put that into perspective, the state of Texas, with a comparable population of roughly 24.5 million, experienced 1,374 murders in 2008, considerably less than a tenth of Venezuela’s total. Indeed, the United States as a whole, with roughly 12 times the population of Venezuela, recorded nearly 3,000 fewer murders in 2008 than did Venezuela in 2009. (Please note the differing years reflect the most recent available data for both nations.)
Put another way, it is safer to live in Iraq than it is in Venezuela.
The problem is particularly acute in the capital city of Caracas, currently the murder capital of the world. In 2008, as rival gangs battled for control of the underworld and kidnappings for ransom flourished, the city’s central forensic lab was filled to capacity with murder victims awaiting examination, with more arriving each hour. Later that year, after more than 500 people were murdered in the capital during the month of December alone, the Ministry of Interior Relations and Justice announced a slate of initiatives designed to help bring down the rate of violent crime the next year. Community outreach into troubled areas and specialized police units operating within the capital were entrusted with bringing the murder epidemic back under control. It didn’t work.
How is Chavez, a man willing to shake his fist at mighty America, tackling this national nightmare? He’s blaming the media for reporting the extent of the problem. Rather than face up to the fact that the number of murders in Venezuela has at least doubled (some figures suggest an even great increase of 400%) since he took office, Chavez’s government is accusing the media of supporting opposition parties ahead of legislative elections later this month by running pictures of the afore-mentioned Caracas morgue, overflowing with the bodies of murder victims. Venezuela’s courts quickly deemed the images pornographic and banned similar images from publication, in a move that brought swift condemnation from the United Nations and various international press agencies. The rulings have largely been reversed, though the first two papers to publish the images remain under sanction.
t seems to have escaped the notice of the government that if there’s a morgue full of crime victims, that itself is the problem, rather than the willingness of journalists to report on the facts. But for leaders such as Chavez, facts come a distant second behind ideology, and his ideology is simple: He is doing what is right for Venezuela, and if the country is in fact getting worse under his leadership, then it’s far preferable to shoot the media messengers than admit the truth. On the rare occasions when a government official is even willing to admit that there is a problem with a rising crime rate, they attribute it to regional factors, pointing out that other Latin American countries, such as Mexico, are also drowning in blood.
It is therefore interesting to compare Venezuela to its neighbor, Colombia. Colombia is of course far from perfect. It continues to grapple with an entrenched left-wing narco-insurgency, the very same FARC terrorists that Chavez supports. And violent crime remains a serious issue in many of Colombia’s major cities, in large part due to the same drug cartels and smuggling rings that beset Venezuela.
But unlike its socialist neighbor, Colombia shows no interest in denying that the problem exists and is more focused on finding solutions, including closer co-operation with America in modernizing its police. Such mutual assistance has paid dividends before; American military and technical aid was essential in allowing Colombia to deal several harsh military defeats to FARC, bringing large swathes of the country under government control for the first time in decades. FARC has even put out peace feelers.
Colombia’s efforts have paid off. Increasing security, economic development and a strengthening and maturing central government have seen the crime rate, while still problematic, drop by half during the same period than Venezuela’s has skyrocketed. With a newly inaugurated president, Colombia is well positioned to ride a wave of increasing prosperity in the wake of improving security conditions and continue to develop and modernize. None of this is to deny or minimize the challenges that lie ahead for a country that still must address economic disparity and remaining guerilla holdouts. But certainly, it is today better to live in democratic, capitalist, stabilizing Colombia than corrupt, violent Venezuela.
Hugo Chavez cannot be blind to the successes of his neighbor compared to the continued setbacks in his own nation. Whether or not he’s prepared to stop blaming the media for his own failures of leadership and take the steps necessary to improve the lives of his own people is an open question. But given his history of preferring the sound of a rattling saber over that of constructive criticism, there seems little reason for optimism.
Matt Gurney is an editor at the National Post, a Canadian national newspaper, and writes and speaks on military and geopolitical issues. He can be reached at matt@mattgurney.ca.
Wednesday, September 15, 2010
Sweeping change in the "culture" of financial institutions
VenEconomy: The new regulations on the "Administration and Inspection of Risks Associated with Money Laundering and Financing of Terrorism Crimes Applicable to Institutions Regulated by the Superintendency of Banks and Other Financial Institutions" will go into effect on September 13. These regulations were issued by Sudeban on March 7, 2010, via Resolution No. 11910 and subsequently modified on August 24 to correct errors of substance and form.
It has to be said that the changes made in August clarified and improved the regulations issued in March, as a result of which the Venezuelan regulations are now in line with international standards in this matter.
In essence, these regulations aim to make financial institutions responsible for preventing and detecting activities involving money laundering and financing of terrorism by monitoring three aspects: the receipt of deposits or transfers, processing them, and sending them into the economy as legitimate funds.
It should be pointed out that the institutions subject to these regulations will not find things easy. The regulations are complex, difficult to implement, and costly, in particular for small financial institutions with little experience in international finance.
One of the requirements of these regulations is that banks and other financial institutions are under the obligation to set up a special internal structure, the "Comprehensive Risk Administration System (SIAR LC/FT after its initials in Spanish).
The new regulations require that all a bank's personnel, from the doorman to the president, "know" its customers and its customers' customers, which includes knowing what kind of business it is and where its managers, shareholders, suppliers and partners are from. It also means knowing where a transfer comes from and where it is going.
In order to comply with these regulations, it is essential that all personnel be trained in and committed to their application. Each employee, be he an executive or a teller, is a "risk factor," both for himself and for the bank. Failure to comply with these regulations could result in a prison sentence for those responsible or even the closure of the bank.
The regulations imply new, complicated procedures and controls that mean a sweeping change in the "culture" of financial institutions.
Recently, a Venezuelan financial institution was fined $10 million by the US authorities for what could be interpreted as an error committed in good faith when it accepted a deposit from a customer who turned out to be a drug trafficker. In this case, the fine was "only" US$10 million, but the example should serve as a warning for the owners and administrators of Venezuelan financial institutions on the importance of and the risks implicit in the new Sudeban regulations.
It has to be said that the changes made in August clarified and improved the regulations issued in March, as a result of which the Venezuelan regulations are now in line with international standards in this matter.
In essence, these regulations aim to make financial institutions responsible for preventing and detecting activities involving money laundering and financing of terrorism by monitoring three aspects: the receipt of deposits or transfers, processing them, and sending them into the economy as legitimate funds.
It should be pointed out that the institutions subject to these regulations will not find things easy. The regulations are complex, difficult to implement, and costly, in particular for small financial institutions with little experience in international finance.
One of the requirements of these regulations is that banks and other financial institutions are under the obligation to set up a special internal structure, the "Comprehensive Risk Administration System (SIAR LC/FT after its initials in Spanish).
The new regulations require that all a bank's personnel, from the doorman to the president, "know" its customers and its customers' customers, which includes knowing what kind of business it is and where its managers, shareholders, suppliers and partners are from. It also means knowing where a transfer comes from and where it is going.
In order to comply with these regulations, it is essential that all personnel be trained in and committed to their application. Each employee, be he an executive or a teller, is a "risk factor," both for himself and for the bank. Failure to comply with these regulations could result in a prison sentence for those responsible or even the closure of the bank.
The regulations imply new, complicated procedures and controls that mean a sweeping change in the "culture" of financial institutions.
Recently, a Venezuelan financial institution was fined $10 million by the US authorities for what could be interpreted as an error committed in good faith when it accepted a deposit from a customer who turned out to be a drug trafficker. In this case, the fine was "only" US$10 million, but the example should serve as a warning for the owners and administrators of Venezuelan financial institutions on the importance of and the risks implicit in the new Sudeban regulations.
Monday, September 13, 2010
Venezuela's economy has become a lasting casualty of the recession
The Economist: At dawn on September 16, 1810 Miguel Hidalgo, the parish priest of Dolores, a small town in central Mexico, rang the bells of his church to raise the cry of rebellion against the Spanish crown. Mexico, Spain's richest American colony, thus joined a struggle for independence which had already seen the colonial authorities ousted and rebel juntas installed in Caracas, Buenos Aires and other South American cities. Two years earlier, following Napoleon Bonaparte's invasion of the Iberian peninsula, King Joao VI of Portugal and his court had been installed in Rio de Janeiro by a British fleet. Brazil would never again be governed from Lisbon.
As Latin America marks the bicentenary of the start of its struggle for political independence, many of its constituent countries have more recent cause for celebration too. The five years to 2008 were Latin America's best since the 1960s, with economic growth averaging 5.5% a year and inflation generally in single digits. Even more impressively, a region which had become a byword for financial instability mostly sailed through the recent recession. After a brief downturn in late 2008 and early 2009, a strong recovery is now under way, with most forecasts suggesting economic growth of over 5% this year for the region as a whole.
Along with growth came a better life. Between 2002 and 2008 some 40 million Latin Americans, out of a total population of 580 million, were lifted out of poverty, and income distribution became a bit less unequal almost everywhere. Poverty increased in 2009 because of the recession, but will start declining again this year. Average unemployment went up slightly to 8.2%, but should come down again this year to 7.8%, according to the United Nations Economic Commission for Latin America and the Caribbean (ECLAC).
Latin America weathered the recession partly thanks to good fortune but also to sound policies. After the cataclysmic debt crisis of 1982 the region's policymakers abandoned the protectionism and fiscal profligacy that had brought hyperinflation and bankruptcy. In their place they adopted the market reforms of the Washington Consensus (opening up their economies to trade and foreign investment, privatization and deregulation).
But they found the road to stability and faster growth a long and bumpy one. During a second bout of instability, from 1998 to 2002, the region introduced more pragmatic policies. The formula has generally included flexible exchange rates, inflation-targeting by more or less independent central banks, more responsible fiscal policies and tighter regulation of banks, as well as social policies aimed at the poor. The recession was an important test. Last year "may have been the final exam and the graduation party" after Latin America's lengthy education in getting macroeconomic policy right, says Santiago Levy, the chief economist at the Inter-American Development Bank (IDB).
The region's newfound economic stability and social progress also owes much to the fact that over the past 30 years democracy has become established almost everywhere. Nearly all elections are now free and fair. The big exception remains the gerontocratic dictatorship of the Castro brothers in Cuba.
There are threats to democracy in some other places: last year a coup toppled an elected government in Honduras, and opponents of the governments in Venezuela and Nicaragua face growing harassment and intimidation. But broadly speaking Latin America today is more democratic than ever before.
Latin America's new resilience and faster growth is starting to attract increased interest from outsiders. That is especially true of Brazil, now often perceived to be in a league of its own. That is only partly because Jim O'Neill, an economist at Goldman Sachs, did it a huge favor when in 2001 he bracketed it together with Russia, India and China as one of the BRICs which would dominate world economic growth over the coming decades. Another reason is Brazil's sheer size: with a population of 191 million it accounts for a third of Latin America's total and 40% of the region's GDP. Since 2007 Brazil has begun to grow faster than the regional average -- although by common consent its red-hot pace of 11% in the year to March 2010 will subside to less than half that rate next year.
As multinationals face mounting difficulties in China, some bankers and businessmen are looking at Latin America -- and not just Brazil -- as an alternative. The region has 15% of the world's oil reserves, a large stock of its minerals, a quarter of its arable land (much of it unused) and 30% of its fresh water. Mexico, its other giant, with almost 25% of its GDP, suffered a deeper recession in 2009 and is struggling to deal with violent drug gangs, but it has maintained economic and political stability. Like the big two, Chile, Colombia, Panama and Peru have investment-grade credit ratings, and all four are growing fast. Governments, households and companies in all these countries are less indebted than those in many developed countries.
Already, Latin America takes a quarter of the total exports of the United States and around a fifth of its outward flow of portfolio investment. Total bank credit in the region will grow by about 12% a year over the next few years, faster than anywhere except China and India, reckons Manuel Medina Mora, who heads Citibank's Latin American operations and its global consumer-banking business. Its share of the market capitalisation of publicly quoted companies and assets under management is only 3-5% of the world total but growing at 25% a year, faster than anywhere else, according to Paulo Oliveira of Brain Brasil, a body set up to promote the country as a business hub.
Marketing people are beginning to talk about a "Latin American decade." If the region can keep up the growth of the past few years, it will double its income per person by 2025, to an average of $22,000 a year at purchasing-power parity. By then Brazil may be the world's fifth-biggest economy, behind only China, the United States, India and Japan. Half a dozen countries may have achieved developed-country status, with an income equivalent to Spain's today.
Causes for caution
Some Latin American countries may at last have found a path towards economic development. But getting there may be no quicker or easier than achieving independence. Latin America has often flattered to deceive. Today there are at least three big worries. First, since 1960 it has seen the lowest growth in productivity of any region in the world, not least because around half of all economic activity takes place in the informal sector. Second, despite some recent improvement, its income distribution is still the most unequal anywhere. This has acted as a drag on growth and caused political conflict. Third, it suffers from widespread crime and violence, much of it perpetrated by organised drug gangs. The murder rate is hideously high in some countries.
A problem for any report such as this one is that Latin America is so diverse as to defy most generalizations. For some purposes it includes the small English-speaking island-states of the Caribbean. Haiti's problems were more akin to Africa's even before its devastating earthquake. On the other hand, some Brazilians argue that their country -- differentiated by speaking Portuguese and, until recently, geographically isolated from its neighbors -- is not really part of Latin America.
Income per person also varies widely, from $15,300 in Panama to $2,900 in Nicaragua. And there is an ideological divide too. Venezuela's Hugo Chavez and the Castro brothers in Cuba reject integration with the world economy in favor of state socialism and managed trade. Their economies have suffered for it: Venezuela's economy has become a lasting casualty of the recession, despite the swift recovery in the oil price.
So there are differences. But there are clear trends, and an identifiable majority. Mr Chavez, for instance, has his allies but very few want to embrace fully his brand of economic mayhem. Rafael Correa in Ecuador is discreetly distancing himself. Evo Morales in Bolivia has pursued a prudent macroeconomic policy at the same time as launching a collectivist experiment under which people of indigenous descent are being granted special rights. Despite the efforts of its first family, the Kirchners, Argentina retains a vigorous private sector.
This report will concentrate mainly on the region's larger countries that have embraced globalization: Brazil, Mexico, Chile, Colombia and Peru, which between them represent three-quarters of Latin America's GDP and more than 70% of its people.
They have all recently enjoyed a huge bonus: the world commodity boom that began earlier this decade as China and India sucked up foodstuffs and raw materials.
As Latin America marks the bicentenary of the start of its struggle for political independence, many of its constituent countries have more recent cause for celebration too. The five years to 2008 were Latin America's best since the 1960s, with economic growth averaging 5.5% a year and inflation generally in single digits. Even more impressively, a region which had become a byword for financial instability mostly sailed through the recent recession. After a brief downturn in late 2008 and early 2009, a strong recovery is now under way, with most forecasts suggesting economic growth of over 5% this year for the region as a whole.
Along with growth came a better life. Between 2002 and 2008 some 40 million Latin Americans, out of a total population of 580 million, were lifted out of poverty, and income distribution became a bit less unequal almost everywhere. Poverty increased in 2009 because of the recession, but will start declining again this year. Average unemployment went up slightly to 8.2%, but should come down again this year to 7.8%, according to the United Nations Economic Commission for Latin America and the Caribbean (ECLAC).
Latin America weathered the recession partly thanks to good fortune but also to sound policies. After the cataclysmic debt crisis of 1982 the region's policymakers abandoned the protectionism and fiscal profligacy that had brought hyperinflation and bankruptcy. In their place they adopted the market reforms of the Washington Consensus (opening up their economies to trade and foreign investment, privatization and deregulation).
But they found the road to stability and faster growth a long and bumpy one. During a second bout of instability, from 1998 to 2002, the region introduced more pragmatic policies. The formula has generally included flexible exchange rates, inflation-targeting by more or less independent central banks, more responsible fiscal policies and tighter regulation of banks, as well as social policies aimed at the poor. The recession was an important test. Last year "may have been the final exam and the graduation party" after Latin America's lengthy education in getting macroeconomic policy right, says Santiago Levy, the chief economist at the Inter-American Development Bank (IDB).
The region's newfound economic stability and social progress also owes much to the fact that over the past 30 years democracy has become established almost everywhere. Nearly all elections are now free and fair. The big exception remains the gerontocratic dictatorship of the Castro brothers in Cuba.
There are threats to democracy in some other places: last year a coup toppled an elected government in Honduras, and opponents of the governments in Venezuela and Nicaragua face growing harassment and intimidation. But broadly speaking Latin America today is more democratic than ever before.
Latin America's new resilience and faster growth is starting to attract increased interest from outsiders. That is especially true of Brazil, now often perceived to be in a league of its own. That is only partly because Jim O'Neill, an economist at Goldman Sachs, did it a huge favor when in 2001 he bracketed it together with Russia, India and China as one of the BRICs which would dominate world economic growth over the coming decades. Another reason is Brazil's sheer size: with a population of 191 million it accounts for a third of Latin America's total and 40% of the region's GDP. Since 2007 Brazil has begun to grow faster than the regional average -- although by common consent its red-hot pace of 11% in the year to March 2010 will subside to less than half that rate next year.
As multinationals face mounting difficulties in China, some bankers and businessmen are looking at Latin America -- and not just Brazil -- as an alternative. The region has 15% of the world's oil reserves, a large stock of its minerals, a quarter of its arable land (much of it unused) and 30% of its fresh water. Mexico, its other giant, with almost 25% of its GDP, suffered a deeper recession in 2009 and is struggling to deal with violent drug gangs, but it has maintained economic and political stability. Like the big two, Chile, Colombia, Panama and Peru have investment-grade credit ratings, and all four are growing fast. Governments, households and companies in all these countries are less indebted than those in many developed countries.
Already, Latin America takes a quarter of the total exports of the United States and around a fifth of its outward flow of portfolio investment. Total bank credit in the region will grow by about 12% a year over the next few years, faster than anywhere except China and India, reckons Manuel Medina Mora, who heads Citibank's Latin American operations and its global consumer-banking business. Its share of the market capitalisation of publicly quoted companies and assets under management is only 3-5% of the world total but growing at 25% a year, faster than anywhere else, according to Paulo Oliveira of Brain Brasil, a body set up to promote the country as a business hub.
Marketing people are beginning to talk about a "Latin American decade." If the region can keep up the growth of the past few years, it will double its income per person by 2025, to an average of $22,000 a year at purchasing-power parity. By then Brazil may be the world's fifth-biggest economy, behind only China, the United States, India and Japan. Half a dozen countries may have achieved developed-country status, with an income equivalent to Spain's today.
Causes for caution
Some Latin American countries may at last have found a path towards economic development. But getting there may be no quicker or easier than achieving independence. Latin America has often flattered to deceive. Today there are at least three big worries. First, since 1960 it has seen the lowest growth in productivity of any region in the world, not least because around half of all economic activity takes place in the informal sector. Second, despite some recent improvement, its income distribution is still the most unequal anywhere. This has acted as a drag on growth and caused political conflict. Third, it suffers from widespread crime and violence, much of it perpetrated by organised drug gangs. The murder rate is hideously high in some countries.
A problem for any report such as this one is that Latin America is so diverse as to defy most generalizations. For some purposes it includes the small English-speaking island-states of the Caribbean. Haiti's problems were more akin to Africa's even before its devastating earthquake. On the other hand, some Brazilians argue that their country -- differentiated by speaking Portuguese and, until recently, geographically isolated from its neighbors -- is not really part of Latin America.
Income per person also varies widely, from $15,300 in Panama to $2,900 in Nicaragua. And there is an ideological divide too. Venezuela's Hugo Chavez and the Castro brothers in Cuba reject integration with the world economy in favor of state socialism and managed trade. Their economies have suffered for it: Venezuela's economy has become a lasting casualty of the recession, despite the swift recovery in the oil price.
So there are differences. But there are clear trends, and an identifiable majority. Mr Chavez, for instance, has his allies but very few want to embrace fully his brand of economic mayhem. Rafael Correa in Ecuador is discreetly distancing himself. Evo Morales in Bolivia has pursued a prudent macroeconomic policy at the same time as launching a collectivist experiment under which people of indigenous descent are being granted special rights. Despite the efforts of its first family, the Kirchners, Argentina retains a vigorous private sector.
This report will concentrate mainly on the region's larger countries that have embraced globalization: Brazil, Mexico, Chile, Colombia and Peru, which between them represent three-quarters of Latin America's GDP and more than 70% of its people.
They have all recently enjoyed a huge bonus: the world commodity boom that began earlier this decade as China and India sucked up foodstuffs and raw materials.
Friday, September 10, 2010
Giordani seems to think inflation of 30% is an achievement
Published: Wednesday, September 08, 2010
VenEconomy: Planning & Finance Minister Jorge Giordani denied outright that Venezuela would fail to meet payment of its foreign debt and fall into default.
According to the explanation he gave Jose Vicente Rangel in an interview broadcast by Televen, "Throughout its history, Venezuela has honored its commitments, and particularly during these ten years thanks to the political will of the government headed by President Chavez to honor them."
Perhaps because he was too young at the time or because his mind was on other things, Giordani does not remember the 1981 debt crisis, during the Luis Herrera Campins administration. Nor does he seem to remember the debt crisis at the beginning of the 20th century, when the British were given control of customs posts in order ensure servicing of the foreign debt of the day. Much less does he remember the many liabilities that this government has failed to meet as a result of expropriations and other matters subject to international treaties.
However, the important thing here is not the minister's bad memory, what's important is that, in his arguments for discarding default, he gave no hint of the elements that would guarantee payment in the future of the gigantic foreign debt incurred by this government. Among other things, he could have indicated where the resources for the payments will come from and which surplus or cash flow will be used to cover them, all relevant data, particularly bearing in mind that, for more than five years, both the national budget and the balance of payments have been sustained thanks to fresh borrowing.
Another unfortunate statement made by Giordani in that same interview with Rangel was when he said that the country's recession was a thing of the past, as the economy contracted less in the second quarter of 2010 than it had in the first. What Giordani did not mention were the factors that boosted the economy and that led him to make that optimistic forecast. The fact is that those factors are nowhere to be seen: no increases are predicted either in oil revenues or public spending, in private investment or consumption or in any other factor that would generate growth.
Another of Giordani's statements that looks hollow is that 2010 will close with inflation of less than 30%, for which there is no basis whatsoever.
What is worse, Giordani seems to think that inflation of 30% is an achievement, when the fact of the matter is that any figure above 3% is a disaster for any country. Nor does he seem to realize that Venezuela is the only country in the region with double-digit inflation.
All these statements by Giordani have electoral overtones, but, unfortunately, they reveal an even bigger vacuum: the lack of a clear strategy on the part of the planners of Chavez' revolution for getting Venezuela off the ground.
VenEconomy: Planning & Finance Minister Jorge Giordani denied outright that Venezuela would fail to meet payment of its foreign debt and fall into default.
According to the explanation he gave Jose Vicente Rangel in an interview broadcast by Televen, "Throughout its history, Venezuela has honored its commitments, and particularly during these ten years thanks to the political will of the government headed by President Chavez to honor them."
Perhaps because he was too young at the time or because his mind was on other things, Giordani does not remember the 1981 debt crisis, during the Luis Herrera Campins administration. Nor does he seem to remember the debt crisis at the beginning of the 20th century, when the British were given control of customs posts in order ensure servicing of the foreign debt of the day. Much less does he remember the many liabilities that this government has failed to meet as a result of expropriations and other matters subject to international treaties.
However, the important thing here is not the minister's bad memory, what's important is that, in his arguments for discarding default, he gave no hint of the elements that would guarantee payment in the future of the gigantic foreign debt incurred by this government. Among other things, he could have indicated where the resources for the payments will come from and which surplus or cash flow will be used to cover them, all relevant data, particularly bearing in mind that, for more than five years, both the national budget and the balance of payments have been sustained thanks to fresh borrowing.
Another unfortunate statement made by Giordani in that same interview with Rangel was when he said that the country's recession was a thing of the past, as the economy contracted less in the second quarter of 2010 than it had in the first. What Giordani did not mention were the factors that boosted the economy and that led him to make that optimistic forecast. The fact is that those factors are nowhere to be seen: no increases are predicted either in oil revenues or public spending, in private investment or consumption or in any other factor that would generate growth.
Another of Giordani's statements that looks hollow is that 2010 will close with inflation of less than 30%, for which there is no basis whatsoever.
What is worse, Giordani seems to think that inflation of 30% is an achievement, when the fact of the matter is that any figure above 3% is a disaster for any country. Nor does he seem to realize that Venezuela is the only country in the region with double-digit inflation.
All these statements by Giordani have electoral overtones, but, unfortunately, they reveal an even bigger vacuum: the lack of a clear strategy on the part of the planners of Chavez' revolution for getting Venezuela off the ground.
Tuesday, September 7, 2010
Standard procedure for Chavez to violate the Constitution
Published: Sunday, September 05, 2010
VenEconomy: It has already become standard procedure for the Hugo Chavez administration to violate the Constitution and the laws of the Republic whenever it feels like it, to suit its interests. It resorts to this practice to deal with any kind of circumstance, from the crisis of PDVAL's rotting food to the sinking of the Aban Pearl gas platform to matters having to do with elections.
The infringements of the Electoral Procedures Act committed by government officials and, in particular, by the President of the Republic are becoming ever more blatant.
This Thursday, September 2, Vicente Diaz, a director of the National Electoral Council (CNE), urged President Chavez and the rest of the country's government officials to respect the election campaign rules and to abide by the Electoral Procedures Act. Using videos, Diaz gave examples of these violations committed by the President, among them:
1) defamatory remarks about the democratic unity alliance candidates made by Hugo Chavez and his promotion of candidates of the government party, PSUV, in a nationwide networked broadcast, in violation of Article 145 of the Constitution and Article 17 of the Electoral Processes Act, which expressly forbids government officials to serve any political party or act in its favor;
2) the use of the national flag by the President when passing over to PSUV candidates during a television broadcast, even though the law forbids the use of patriotic symbols in election campaigns; and
3) the words, "We're going to give the opposition a beating on September 26," spoken by the President of the Republic at a public event broadcast in a nationwide networked broadcast.
Despite the gravity of the accusations, Diaz fell short ... he failed to mention, for example, that, while the President has suspended his Sunday program, Alo Presidente, for the duration of the election campaign as proof of his alleged political impartiality, Chavez has continued to make abusive use of presidential nationwide, networked broadcasts and programs on the government-controlled television channels to campaign in favor of PSUV candidates.
This was made patently obvious that same Thursday, September 2, when nearly all the government channels broadcast the electoral event "Hugo Chavez and candidates to the National Assembly for the PSUV" (the President's own party) from Maracaibo, while CNE director Tibisay Lucena gave a press conference to reject Vicente Diaz' accusations and give "guarantees" of the CNE's impartiality.
The cherry on the cake was when President Chavez, still campaigning in flagrante and in his best dictatorial style, attacked Vicente Diaz and threatened to take him to court.
VenEconomy: It has already become standard procedure for the Hugo Chavez administration to violate the Constitution and the laws of the Republic whenever it feels like it, to suit its interests. It resorts to this practice to deal with any kind of circumstance, from the crisis of PDVAL's rotting food to the sinking of the Aban Pearl gas platform to matters having to do with elections.
The infringements of the Electoral Procedures Act committed by government officials and, in particular, by the President of the Republic are becoming ever more blatant.
This Thursday, September 2, Vicente Diaz, a director of the National Electoral Council (CNE), urged President Chavez and the rest of the country's government officials to respect the election campaign rules and to abide by the Electoral Procedures Act. Using videos, Diaz gave examples of these violations committed by the President, among them:
1) defamatory remarks about the democratic unity alliance candidates made by Hugo Chavez and his promotion of candidates of the government party, PSUV, in a nationwide networked broadcast, in violation of Article 145 of the Constitution and Article 17 of the Electoral Processes Act, which expressly forbids government officials to serve any political party or act in its favor;
2) the use of the national flag by the President when passing over to PSUV candidates during a television broadcast, even though the law forbids the use of patriotic symbols in election campaigns; and
3) the words, "We're going to give the opposition a beating on September 26," spoken by the President of the Republic at a public event broadcast in a nationwide networked broadcast.
Despite the gravity of the accusations, Diaz fell short ... he failed to mention, for example, that, while the President has suspended his Sunday program, Alo Presidente, for the duration of the election campaign as proof of his alleged political impartiality, Chavez has continued to make abusive use of presidential nationwide, networked broadcasts and programs on the government-controlled television channels to campaign in favor of PSUV candidates.
This was made patently obvious that same Thursday, September 2, when nearly all the government channels broadcast the electoral event "Hugo Chavez and candidates to the National Assembly for the PSUV" (the President's own party) from Maracaibo, while CNE director Tibisay Lucena gave a press conference to reject Vicente Diaz' accusations and give "guarantees" of the CNE's impartiality.
The cherry on the cake was when President Chavez, still campaigning in flagrante and in his best dictatorial style, attacked Vicente Diaz and threatened to take him to court.
Monday, September 6, 2010
Chavez administration'spublic policies pushing Venezuela towards a precipice
Published: Friday, September 03, 2010
Bylined to: VenEconomy
VenEconomy: The Hugo Chavez administration's arrogance is preventing the country's institutions from honestly evaluating their performance and correcting the public policies that are pushing Venezuela towards a precipice. And in its eagerness to centralize the flow of information, the government is also preventing private institutions from promoting a debate of the situation.
Information on the deplorable state of the country thanks to the Chavez administration is being provided by groups outside the government: either by Venezuelan NGOs such as Transparencia Venezuela, Cedice, and, more recently, by the Coalition for Democratic Unity, which prepared a report on the food crisis in Venezuela, which also has implications for Venezuelans' health and pockets, and is the direct consequence of the government's wrongheaded social and economic policies, or most often, by reputable international agencies known for their independence of criteria and total credibility whose practice it is to analyze the economies and public policies of hundreds of countries.
From the World Bank to opinion forums and universities to nongovernment organizations, there are groups of people who measure the performance of countries in areas as diverse as economic freedoms, transparency in government, investment and business climate, competitiveness, human rights, freedom of speech, and violence and the lack of security.
And all these measurements have two common threads:
1) the higher a country's rating, the better the quality of life and standard of living of its population; and
2) the freer the economy, the greater its growth over time.
Another common factor in these measurements is that, in recent years, in the times of Chavez, Venezuela's ratings have been getting steadily and consistently worse. In practically all of the ten world indexes, Chavez' Venezuela is among the last in the ranking and, in most cases, side by side with poorer and poorly administered African countries.
For example, the Index of Economic Freedom 2010 issued by the Heritage Foundation and The Wall Street Journal ranks Venezuela 174 out of 182 countries. This classifies Venezuela as a repressed economy, ranking only above countries such as Burma-Eritrea, Cuba, Zimbabwe, and North Korea. Venezuela is even way below Ecuador and Bolivia.
Another worrisome rating is revealed by Transparency International's Corruption Perceptions Index 2009, where Venezuela ranked 162 out of 180 countries and 30 (out of 31) in Latin America, ahead only of Haiti.
It can be inferred from the results of nearly a dozen world indexes that, if the Chavez administration wanted to correct the negative course on which it has set Venezuela, all it would have to do would be to design policies based on those same international indicators of good government and solid economies.
Bylined to: VenEconomy
VenEconomy: The Hugo Chavez administration's arrogance is preventing the country's institutions from honestly evaluating their performance and correcting the public policies that are pushing Venezuela towards a precipice. And in its eagerness to centralize the flow of information, the government is also preventing private institutions from promoting a debate of the situation.
Information on the deplorable state of the country thanks to the Chavez administration is being provided by groups outside the government: either by Venezuelan NGOs such as Transparencia Venezuela, Cedice, and, more recently, by the Coalition for Democratic Unity, which prepared a report on the food crisis in Venezuela, which also has implications for Venezuelans' health and pockets, and is the direct consequence of the government's wrongheaded social and economic policies, or most often, by reputable international agencies known for their independence of criteria and total credibility whose practice it is to analyze the economies and public policies of hundreds of countries.
From the World Bank to opinion forums and universities to nongovernment organizations, there are groups of people who measure the performance of countries in areas as diverse as economic freedoms, transparency in government, investment and business climate, competitiveness, human rights, freedom of speech, and violence and the lack of security.
And all these measurements have two common threads:
1) the higher a country's rating, the better the quality of life and standard of living of its population; and
2) the freer the economy, the greater its growth over time.
Another common factor in these measurements is that, in recent years, in the times of Chavez, Venezuela's ratings have been getting steadily and consistently worse. In practically all of the ten world indexes, Chavez' Venezuela is among the last in the ranking and, in most cases, side by side with poorer and poorly administered African countries.
For example, the Index of Economic Freedom 2010 issued by the Heritage Foundation and The Wall Street Journal ranks Venezuela 174 out of 182 countries. This classifies Venezuela as a repressed economy, ranking only above countries such as Burma-Eritrea, Cuba, Zimbabwe, and North Korea. Venezuela is even way below Ecuador and Bolivia.
Another worrisome rating is revealed by Transparency International's Corruption Perceptions Index 2009, where Venezuela ranked 162 out of 180 countries and 30 (out of 31) in Latin America, ahead only of Haiti.
It can be inferred from the results of nearly a dozen world indexes that, if the Chavez administration wanted to correct the negative course on which it has set Venezuela, all it would have to do would be to design policies based on those same international indicators of good government and solid economies.
Wednesday, August 18, 2010
Has Chavez Put Venezuelan Oil on Road to Ruin?
Published by Reuters August 18, 2010
Venezuela's state oil company PDVSA is at a crossroads: act now to salvage the skills and equipment that once made it a rival to Brazilian giant Petrobras, or risk tipping irrevocably into the type of decline suffered by Mexico's Pemex.
Thomas Coex | AFP | Getty Images
Venezuela's state oil company PDVSA is increasingly at a crossroads.
So far, it appears more likely to take the same path as Pemex.
During more than a decade under socialist President Hugo Chavez, PDVSA has expanded quickly with the nationalizations of major crude projects and has hired tens of thousands of workers.
But Chavez also has insisted the world's No. 4 oil company fund huge social welfare projects, which, combined with a sky-high payroll, falling production and volatile global prices, has left it in dire financial straits.
It is a similar story at Mexico's state-owned monopoly Pemex, created when the government nationalized the oil industry in 1938.
Pemex has much stricter restrictions on private investment than PDVSA, but has continued to add staff despite a steep decline in production over recent years. Some experts believe it could cease oil exports in the next five years.
But Brazil's Petrobras, the third of Latin American's oil "majors," shows that the region's state-led oil enterprises can tell a different tale.
Despite a growing debt load, Petrobras is strengthening its position as the region's most successful oil company and has ambitious plans to exploit massive deep-sea reserves. It could almost double its output over the next decade.
Pemex and PDVSA face increasing demands from their governments, forcing them to take on more debt and limiting their ability to invest as they struggle to turn around falling production levels.
"Petrobras will be much more successful in developing their investment plans than PDVSA and Pemex, which continue to be the petty cash boxes of their governments," said Francisco Monaldi, a visiting professor at Stanford University and the author of a study on oil tax regimes across Latin America.
While Petrobras maintains a certain independence from Brazil's government, ties between the other two companies and their states are close. PDVSA is the main engine of Chavez's socialist "revolution," while Pemex is saddled with a crushing tax bill and low domestic prices.
PDVSA has become increasingly politicized under Chavez, with Venezuela's oil minister describing it as "red from top to bottom".
In Mexico, Pemex's access to investment resources has been curtailed, undermining its current and future performance.
Financing the Orinoco Belt
This month, PDVSA said its net profit more than halved in 2009 to $4.4 billion due to the global financial crisis, lower crude prices and production declines. Revenue dropped 41 percent to $75 billion.
Its focus is on developing vast extra heavy oil reserves in its Orinoco belt with projects that are slated to increase Venezuela's total crude output by about 70 percent, or some 2.1 million bpd of new production.
If those projects are successful, PDVSA could pull out of its slump.
But, with Venezuela likely to be the only country in Latin America to record negative economic growth in 2010, some analysts question whether it will be able to meet its 60 percent share of the Orinoco financing costs.
"No one believes PDVSA can invest close to $7 billion per year of its own money in the Orinoco region," said Gustavo Coronel, a former director at PDVSA.
"The country simply does not have that kind of money. In fact, both the country and PDVSA are increasingly growing their debt due to commitments that clearly exceed their financial capabilities, some of them not even related to oil."
The strong politicization of both Pemex and PDVSA can be seen in the number of workers they had last year—145,461 and 102,750, respectively, compared with 76,919 employees at Petrobras.
Venezuela President Hugo Chavez has insisted PDVSA fund massive social welfare projects.
Miguell Guitierrez | AFP | Getty Images
Hugo Chavez
Although the cash cost of paying its workforce is just a fraction of Pemex's budget, it is saddled with more than $40 billion in unfunded retirement obligations from decades of sky-high employment levels. Those pension obligations are slightly larger than Pemex's long-term financial debt.
PDVSA says its high number of employees is a result of nationalizations and putting contract workers on the payroll.
But the staffing increases in both Mexico and Venezuela came amid decreasing production. Venezuelan output has stagnated since early last year, while Mexican oil production has plunged by nearly a quarter since 2004 as output from the aging Cantarell field has collapsed.
The conservative government of President Felipe Calderon wants to make Pemex more efficient and has tried to push through reforms, but opponents in Congress have blocked efforts to give private companies more of a stake in the oil industry and Pemex's staff numbers have continued to climb.
Refining or Exploration?
"Due to falling oil output, especially from offshore, Mexico will likely cease being an oil exporting nation by 2015," U.S. geologist Byron W. King wrote this month. "Right now, there's not nearly enough internal Mexican investment in exploration and new oil development ... it's fair to ask if Mexico should change its approach to development."
Mexico relies on imported gasoline to meet more than 40 percent of domestic demand due to years of under-investment in refining, while Venezuela has had to import 60,000 barrels per day of products this year due to problems in its refinery network.
Petrobras investors remain focused on a massive share offering slated for September. It is the backbone of a campaign to tap deep-sea reserves estimated at between 50 billion and 100 billion barrels of recoverable crude.
In the long term, Petrobras also needs to increase its oil production to satisfy a voracious domestic market that sucked up some 1.75 million bpd in 2009—more than 80 percent of its production—in order to generate more exportable surplus.
The company still faces financial challenges, concerns over its operational priorities and political pressures.
At the end of 2009, Petrobras had the highest debt of the three Latin American "majors" at $56.87 billion, and its plans to step up investment in refining have raised concerns that it is moving away from its core competency as a deep-water exploration and production pioneer to satisfy the state's desire for it to create more jobs.
While it is nowhere near as interventionist as Chavez's administration, Brazil's government is also looking to use more of Petrobras' profits to help finance social welfare policies.
Venezuela's state oil company PDVSA is at a crossroads: act now to salvage the skills and equipment that once made it a rival to Brazilian giant Petrobras, or risk tipping irrevocably into the type of decline suffered by Mexico's Pemex.
Thomas Coex | AFP | Getty Images
Venezuela's state oil company PDVSA is increasingly at a crossroads.
So far, it appears more likely to take the same path as Pemex.
During more than a decade under socialist President Hugo Chavez, PDVSA has expanded quickly with the nationalizations of major crude projects and has hired tens of thousands of workers.
But Chavez also has insisted the world's No. 4 oil company fund huge social welfare projects, which, combined with a sky-high payroll, falling production and volatile global prices, has left it in dire financial straits.
It is a similar story at Mexico's state-owned monopoly Pemex, created when the government nationalized the oil industry in 1938.
Pemex has much stricter restrictions on private investment than PDVSA, but has continued to add staff despite a steep decline in production over recent years. Some experts believe it could cease oil exports in the next five years.
But Brazil's Petrobras, the third of Latin American's oil "majors," shows that the region's state-led oil enterprises can tell a different tale.
Despite a growing debt load, Petrobras is strengthening its position as the region's most successful oil company and has ambitious plans to exploit massive deep-sea reserves. It could almost double its output over the next decade.
Pemex and PDVSA face increasing demands from their governments, forcing them to take on more debt and limiting their ability to invest as they struggle to turn around falling production levels.
"Petrobras will be much more successful in developing their investment plans than PDVSA and Pemex, which continue to be the petty cash boxes of their governments," said Francisco Monaldi, a visiting professor at Stanford University and the author of a study on oil tax regimes across Latin America.
While Petrobras maintains a certain independence from Brazil's government, ties between the other two companies and their states are close. PDVSA is the main engine of Chavez's socialist "revolution," while Pemex is saddled with a crushing tax bill and low domestic prices.
PDVSA has become increasingly politicized under Chavez, with Venezuela's oil minister describing it as "red from top to bottom".
In Mexico, Pemex's access to investment resources has been curtailed, undermining its current and future performance.
Financing the Orinoco Belt
This month, PDVSA said its net profit more than halved in 2009 to $4.4 billion due to the global financial crisis, lower crude prices and production declines. Revenue dropped 41 percent to $75 billion.
Its focus is on developing vast extra heavy oil reserves in its Orinoco belt with projects that are slated to increase Venezuela's total crude output by about 70 percent, or some 2.1 million bpd of new production.
If those projects are successful, PDVSA could pull out of its slump.
But, with Venezuela likely to be the only country in Latin America to record negative economic growth in 2010, some analysts question whether it will be able to meet its 60 percent share of the Orinoco financing costs.
"No one believes PDVSA can invest close to $7 billion per year of its own money in the Orinoco region," said Gustavo Coronel, a former director at PDVSA.
"The country simply does not have that kind of money. In fact, both the country and PDVSA are increasingly growing their debt due to commitments that clearly exceed their financial capabilities, some of them not even related to oil."
The strong politicization of both Pemex and PDVSA can be seen in the number of workers they had last year—145,461 and 102,750, respectively, compared with 76,919 employees at Petrobras.
Venezuela President Hugo Chavez has insisted PDVSA fund massive social welfare projects.
Miguell Guitierrez | AFP | Getty Images
Hugo Chavez
Although the cash cost of paying its workforce is just a fraction of Pemex's budget, it is saddled with more than $40 billion in unfunded retirement obligations from decades of sky-high employment levels. Those pension obligations are slightly larger than Pemex's long-term financial debt.
PDVSA says its high number of employees is a result of nationalizations and putting contract workers on the payroll.
But the staffing increases in both Mexico and Venezuela came amid decreasing production. Venezuelan output has stagnated since early last year, while Mexican oil production has plunged by nearly a quarter since 2004 as output from the aging Cantarell field has collapsed.
The conservative government of President Felipe Calderon wants to make Pemex more efficient and has tried to push through reforms, but opponents in Congress have blocked efforts to give private companies more of a stake in the oil industry and Pemex's staff numbers have continued to climb.
Refining or Exploration?
"Due to falling oil output, especially from offshore, Mexico will likely cease being an oil exporting nation by 2015," U.S. geologist Byron W. King wrote this month. "Right now, there's not nearly enough internal Mexican investment in exploration and new oil development ... it's fair to ask if Mexico should change its approach to development."
Mexico relies on imported gasoline to meet more than 40 percent of domestic demand due to years of under-investment in refining, while Venezuela has had to import 60,000 barrels per day of products this year due to problems in its refinery network.
Petrobras investors remain focused on a massive share offering slated for September. It is the backbone of a campaign to tap deep-sea reserves estimated at between 50 billion and 100 billion barrels of recoverable crude.
In the long term, Petrobras also needs to increase its oil production to satisfy a voracious domestic market that sucked up some 1.75 million bpd in 2009—more than 80 percent of its production—in order to generate more exportable surplus.
The company still faces financial challenges, concerns over its operational priorities and political pressures.
At the end of 2009, Petrobras had the highest debt of the three Latin American "majors" at $56.87 billion, and its plans to step up investment in refining have raised concerns that it is moving away from its core competency as a deep-water exploration and production pioneer to satisfy the state's desire for it to create more jobs.
While it is nowhere near as interventionist as Chavez's administration, Brazil's government is also looking to use more of Petrobras' profits to help finance social welfare policies.
Wednesday, August 4, 2010
VenEconomy: Let’s hope he follows Raúl’s example!
Published on 8/3/2010.
In the 1920s, when the Russian economy went into a recession, Lenin implemented the New Economic Program (NEP), which allowed the people who farmed the land to enjoy the profits they obtained, while small and medium companies were freed from the controls of the communist State.
The economy recovered following the implementation of these measures. Then, following the death of Lenin, Russia took another backward step with the arrival of Joseph Stalin’s fierce, bloody communism, which plunged the Soviet Union into poverty and claimed the lives of millions of people.
In the 1990s, history repeated itself in Cuba. When he found himself without the economic support of the USSR, Fidel implemented a kind of NEP. He opened up the economy a bit, allowing private individuals to engage in agriculture and provide certain services, such as the “paradores” (small restaurants with seating for 12), and the economy posted its highest level of growth in decades.
Unfortunately, with the arrival of Chávez in the presidency, the Venezuelan Government stepped in and started to provide Cuba with patronage in the USSR’s stead, with the result that Fidel once again closed the economy to private initiative and returned to the backwardness of a communist regime.
Now, more than 10 years later, the new commander of the Cuban revolution, Raúl Castro, is leaving the doors of the economy ajar to allow people who farm the land to enjoy the fruits of their labor and private individuals to provide certain services. Everything seems to indicate that, in Raúl’s Cuba, there is the possibility of a more open economy.
This shoring up of the economy by setting it on the path to greater freedom would seem to be due to Raúl Castro’s certainty that the Venezuelan bonanza and, therefore, the unconditional economic support Chávez has been giving the Castro regime are coming to an end.
It is worth noting that this opening up of Cuba’s market is happening just when Chávez is taking steps to put communism firmly in place in Venezuela. Last week, the President signed a string of new socialist laws, among them the Partial Amendment to the Lands and Agricultural Development Act, which eliminates the right to own agricultural land, the Insurance Business Act, which burdens this sector with functions that are the responsibility of the State, and the Supreme Tribunal of Justice Act, which, among other things, grants the Constitutional Chamber full powers to reverse decisions handed down by any of the TSJ’s five chambers, making it a kind of Supreme Court within the Supreme Tribunal. This means that there will be no firm sentence worth the paper it is written on, so finally eliminating any vestiges of the rule of law.
One would hope that, influenced by his friend Raúl, Chávez will also consider opening up the economy, even if it’s just a little bit.
In the 1920s, when the Russian economy went into a recession, Lenin implemented the New Economic Program (NEP), which allowed the people who farmed the land to enjoy the profits they obtained, while small and medium companies were freed from the controls of the communist State.
The economy recovered following the implementation of these measures. Then, following the death of Lenin, Russia took another backward step with the arrival of Joseph Stalin’s fierce, bloody communism, which plunged the Soviet Union into poverty and claimed the lives of millions of people.
In the 1990s, history repeated itself in Cuba. When he found himself without the economic support of the USSR, Fidel implemented a kind of NEP. He opened up the economy a bit, allowing private individuals to engage in agriculture and provide certain services, such as the “paradores” (small restaurants with seating for 12), and the economy posted its highest level of growth in decades.
Unfortunately, with the arrival of Chávez in the presidency, the Venezuelan Government stepped in and started to provide Cuba with patronage in the USSR’s stead, with the result that Fidel once again closed the economy to private initiative and returned to the backwardness of a communist regime.
Now, more than 10 years later, the new commander of the Cuban revolution, Raúl Castro, is leaving the doors of the economy ajar to allow people who farm the land to enjoy the fruits of their labor and private individuals to provide certain services. Everything seems to indicate that, in Raúl’s Cuba, there is the possibility of a more open economy.
This shoring up of the economy by setting it on the path to greater freedom would seem to be due to Raúl Castro’s certainty that the Venezuelan bonanza and, therefore, the unconditional economic support Chávez has been giving the Castro regime are coming to an end.
It is worth noting that this opening up of Cuba’s market is happening just when Chávez is taking steps to put communism firmly in place in Venezuela. Last week, the President signed a string of new socialist laws, among them the Partial Amendment to the Lands and Agricultural Development Act, which eliminates the right to own agricultural land, the Insurance Business Act, which burdens this sector with functions that are the responsibility of the State, and the Supreme Tribunal of Justice Act, which, among other things, grants the Constitutional Chamber full powers to reverse decisions handed down by any of the TSJ’s five chambers, making it a kind of Supreme Court within the Supreme Tribunal. This means that there will be no firm sentence worth the paper it is written on, so finally eliminating any vestiges of the rule of law.
One would hope that, influenced by his friend Raúl, Chávez will also consider opening up the economy, even if it’s just a little bit.
Sunday, August 1, 2010
VenEconomy // SITME has been an almost insurmountable barrier...
VenEconomy: Just recently, in response to a question on the System of Transactions in Foreign-Currency-Denominated Securities (SITME), the president of the Central Bank of Venezuela, Nelson Merentes gave some good news: that the swap market would be restored in two months' time.
This is welcome news, as SITME has been a tremendous flop. While it has been allowing the government to maintain the lie of a strong bolivar fuerte (strong bolivar), as far as importers, merchants, and other businessmen are concerned, SITME has been an almost insurmountable barrier and has failed to meet their foreign currency requirements.
The volume of foreign currency being traded via SITME is no more than $25- $30 million a day, on average, compared to an average of between $80 million and $100 million a day that was being traded on the swap market last year. That means that, at the moment, there is repressed demand of some $60 million to $70 million a day.
The main reason for the scant volume being traded via SITME has nothing to do with the system's rigid and complex procedures; it has to do with the fact that the government does not have sufficient foreign currency to satisfy the market. If the Central Bank, PDVSA or Fonden had the foreign currency, they would be releasing it to the market, as this would help bridge the fiscal gap while stimulating economic activity.
It is said that the exchange rate on the illegal market has remained "high but stable, with scant volume." If that is true, the explanation for that stability would be that there is scant supply at a time when demand continues to be repressed.
The reason? Fear. No responsible company is going to resort to the illegal market, because it is being strictly monitored and is subject to stiff penalties that go from heavy fines to the closure and confiscation of the company. Faced with such a risk, companies' managers prefer to stop production or to stop selling.
Now then, what would happen if the Central Bank were to honor its offer of October and the swap market is legalized and revived?
On the one hand, the Central Bank will continue to be without sufficient foreign currency to meet demand. In other words, there will be no change in the present situation. On the other, when the swap market starts up again, without the restraints of repression and penalties, repressed demand will be unleashed and prices will shoot up.
And there is something else. Bearing in mind the huge fiscal deficit, it is highly likely that the government will decide to devalue the bolivar again in October, the second time this year.
Given this panorama, the only thing businessmen can do is to refrain from incurring debt in dollars and put their bolivars in tradable assets, as those are the assets that will maintain their value after the currency is devalued once again. As long as the march towards communism allows them to, that is.
This is welcome news, as SITME has been a tremendous flop. While it has been allowing the government to maintain the lie of a strong bolivar fuerte (strong bolivar), as far as importers, merchants, and other businessmen are concerned, SITME has been an almost insurmountable barrier and has failed to meet their foreign currency requirements.
The volume of foreign currency being traded via SITME is no more than $25- $30 million a day, on average, compared to an average of between $80 million and $100 million a day that was being traded on the swap market last year. That means that, at the moment, there is repressed demand of some $60 million to $70 million a day.
The main reason for the scant volume being traded via SITME has nothing to do with the system's rigid and complex procedures; it has to do with the fact that the government does not have sufficient foreign currency to satisfy the market. If the Central Bank, PDVSA or Fonden had the foreign currency, they would be releasing it to the market, as this would help bridge the fiscal gap while stimulating economic activity.
It is said that the exchange rate on the illegal market has remained "high but stable, with scant volume." If that is true, the explanation for that stability would be that there is scant supply at a time when demand continues to be repressed.
The reason? Fear. No responsible company is going to resort to the illegal market, because it is being strictly monitored and is subject to stiff penalties that go from heavy fines to the closure and confiscation of the company. Faced with such a risk, companies' managers prefer to stop production or to stop selling.
Now then, what would happen if the Central Bank were to honor its offer of October and the swap market is legalized and revived?
On the one hand, the Central Bank will continue to be without sufficient foreign currency to meet demand. In other words, there will be no change in the present situation. On the other, when the swap market starts up again, without the restraints of repression and penalties, repressed demand will be unleashed and prices will shoot up.
And there is something else. Bearing in mind the huge fiscal deficit, it is highly likely that the government will decide to devalue the bolivar again in October, the second time this year.
Given this panorama, the only thing businessmen can do is to refrain from incurring debt in dollars and put their bolivars in tradable assets, as those are the assets that will maintain their value after the currency is devalued once again. As long as the march towards communism allows them to, that is.
Sunday, July 25, 2010
In Our Opinion....
Colombian officials accuse Hugo Chavez of tolerating the presence of Revolutionary Armed Forces of Colombia "FARC" and demand international monitors on their border. In response, Chavez breaks ties and expels Colombian diplomats.
Until now, allegations that Colombian guerrillas use Venezuela as a refuge were supported by Chavez's declarations of sympathy for the rebels and his admiration for late FARC leader Manuel Marulanda. Last Thursday, the Colombian Government made a presentation before The Organization of American States using videos and photos: Colombian diplomats accused Venezuela of tolerating the presence of 1,500 leftist rebel fighters and several top leaders in its territory. Furthermore, they requested an international body to monitor the border and verify the presence of "FARC" in Venezuela.
In our opinion, Chavez has been presented with a unique opportunity to use this crisis with Colombia as an excuse to prevent the holding of parliamentary elections in September. An appeal to nationalist voters will not work and years of state interventions are taking a brutal toll on the economy: productivity; private activity and private business are all falling. The oil industry is pumping 20 percent less crude than when Chavez took office and is saddled with debt. The country's inflation rate could hit 35 percent this year and thousands of factories paralyzed by a failure to access money or spare parts, have closed.
All this in a year where according to the International Monetary Fund, some of the Latin America central banks worry about overheating economies: In Peru, Chile and Brazil, all of which embrace globalization, growth could indeed go well beyond 4 percent.
Until now, allegations that Colombian guerrillas use Venezuela as a refuge were supported by Chavez's declarations of sympathy for the rebels and his admiration for late FARC leader Manuel Marulanda. Last Thursday, the Colombian Government made a presentation before The Organization of American States using videos and photos: Colombian diplomats accused Venezuela of tolerating the presence of 1,500 leftist rebel fighters and several top leaders in its territory. Furthermore, they requested an international body to monitor the border and verify the presence of "FARC" in Venezuela.
In our opinion, Chavez has been presented with a unique opportunity to use this crisis with Colombia as an excuse to prevent the holding of parliamentary elections in September. An appeal to nationalist voters will not work and years of state interventions are taking a brutal toll on the economy: productivity; private activity and private business are all falling. The oil industry is pumping 20 percent less crude than when Chavez took office and is saddled with debt. The country's inflation rate could hit 35 percent this year and thousands of factories paralyzed by a failure to access money or spare parts, have closed.
All this in a year where according to the International Monetary Fund, some of the Latin America central banks worry about overheating economies: In Peru, Chile and Brazil, all of which embrace globalization, growth could indeed go well beyond 4 percent.
VenEconomy // Countdown to parliamentary elections ... cause for concern
VenEconomy: Venezuela is now in the countdown to its parliamentary elections. But a stream of incidents, also of national importance, has relegated this event in the media and in the minds of the general public.
But then, a few days ago, the parliamentary elections hit the headlines again when the Chilean Senate issued a communiqué requesting authorization from Venezuela's electoral authorities to attend those elections as international observers. In any country where democracy prevails, this request would have met with the acceptance of the electoral authorities. But in Chavez' Venezuela it was rejected by the National Electoral Council (CNE) and the Chavista benches in the National Assembly.
The president of the CNE, Tibisay Lucena, barred the Chilean parliamentarians as observers on the grounds of "the political positions contained in the agreement of the Chilean Senate," and claimed that their presence as observers at these elections would be a threat to Venezuela's sovereignty. Then, the president of the National Assembly, Cilia Flores, backing Lucena, called the Chilean senators "stupid" and "ridiculous."
This irate refusal to accredit the Chilean observers makes no sense if account is taken of the fact that a sizeable group of representatives from the CNE and Venezuela's National Assembly attended the Colombian parliamentary elections just a few months ago.
This should serve as a wake-up call for everyone. This is the last straw in terms of the repercussions resulting from the lack of independence of the branches of government in Venezuela, the only guarantee that people have that the parliamentary elections will be held in conditions of transparency and objectivity. But unfortunately it seems that Venezuelans were not surprised by the CNE's refusal, nor have they reacted to it. Even more unfortunate is the fact that it is just one more of the many violations of Venezuelans' electoral rights that have been committed by the Chavez administration.
The long list of measures and actions violating those constitutional rights starts with the enactment of the Electoral Processes Law, which drastically changed the country's electoral system, from a proportional system of minorities to a majority system.
This change in the law promoted the manipulation of the electoral districts, a strange proliferation of new polling stations, the appointment of election officers who will be manning the polling stations with a clear predomination of Chavistas, and, above all, the abusive use of the state-owned media, presidential nationwide networked broadcasts, and other government institutions and resources to promote the government. On top of this communications hegemony in the hands of the government, there is now the threat Chavez has been making to put his representatives on the board of Globovision before September 26, which would leave the democratic sector that opposes Chavez' communist project with no voice at all.
And if none of this gives people cause for concern, they should pay attention to Chavez' call to his governors and mayors to devote themselves full time to the elections: "We are not fighting for just one seat, no. This is a matter of life or death."
This time, those who want to restore democracy in Venezuela need to take the President at his word and put the following objectives at the top of their agenda: getting a mass turnout at the elections; achieving mass representation among witnesses and electoral officers on the day of the elections as the only way of defending the results; and getting opposition candidates to go door to door in their districts to spread the word about the country we want.
But then, a few days ago, the parliamentary elections hit the headlines again when the Chilean Senate issued a communiqué requesting authorization from Venezuela's electoral authorities to attend those elections as international observers. In any country where democracy prevails, this request would have met with the acceptance of the electoral authorities. But in Chavez' Venezuela it was rejected by the National Electoral Council (CNE) and the Chavista benches in the National Assembly.
The president of the CNE, Tibisay Lucena, barred the Chilean parliamentarians as observers on the grounds of "the political positions contained in the agreement of the Chilean Senate," and claimed that their presence as observers at these elections would be a threat to Venezuela's sovereignty. Then, the president of the National Assembly, Cilia Flores, backing Lucena, called the Chilean senators "stupid" and "ridiculous."
This irate refusal to accredit the Chilean observers makes no sense if account is taken of the fact that a sizeable group of representatives from the CNE and Venezuela's National Assembly attended the Colombian parliamentary elections just a few months ago.
This should serve as a wake-up call for everyone. This is the last straw in terms of the repercussions resulting from the lack of independence of the branches of government in Venezuela, the only guarantee that people have that the parliamentary elections will be held in conditions of transparency and objectivity. But unfortunately it seems that Venezuelans were not surprised by the CNE's refusal, nor have they reacted to it. Even more unfortunate is the fact that it is just one more of the many violations of Venezuelans' electoral rights that have been committed by the Chavez administration.
The long list of measures and actions violating those constitutional rights starts with the enactment of the Electoral Processes Law, which drastically changed the country's electoral system, from a proportional system of minorities to a majority system.
This change in the law promoted the manipulation of the electoral districts, a strange proliferation of new polling stations, the appointment of election officers who will be manning the polling stations with a clear predomination of Chavistas, and, above all, the abusive use of the state-owned media, presidential nationwide networked broadcasts, and other government institutions and resources to promote the government. On top of this communications hegemony in the hands of the government, there is now the threat Chavez has been making to put his representatives on the board of Globovision before September 26, which would leave the democratic sector that opposes Chavez' communist project with no voice at all.
And if none of this gives people cause for concern, they should pay attention to Chavez' call to his governors and mayors to devote themselves full time to the elections: "We are not fighting for just one seat, no. This is a matter of life or death."
This time, those who want to restore democracy in Venezuela need to take the President at his word and put the following objectives at the top of their agenda: getting a mass turnout at the elections; achieving mass representation among witnesses and electoral officers on the day of the elections as the only way of defending the results; and getting opposition candidates to go door to door in their districts to spread the word about the country we want.
Friday, July 23, 2010
Stand Up to Chávez
Published by Otto J. Reich in Conner.nationalreview.com
Venezuelan strongman and self-proclaimed “21st-century socialist” Hugo Chávez has broken diplomatic relations with Colombia after Colombia accused Venezuela of continued support for the Marxist FARC guerrilla army.
Accusations against Venezuela are nothing new, with the U.S., Spain and other nations having denounced Chávez’s support of the FARC and other terrorist groups (such as the Basque ETA) before. The evidence presented by the Colombian government today reveals that Chávez continues to harbor FARC training camps and leadership groups inside Venezuela. Neither Chávez nor his ambassador to the OAS denied the allegations; they simply railed at Colombia for denouncing Venezuela’s interference in its internal affairs.
The reaction of the Obama administration to this latest charge against Chávez will be revealing. So far, the administration has preferred not to speak up while Chávez harbors terrorists who continue to traffic in narcotics and who perpetrate murder and mayhem in Colombia.
This dispute is not one in which the United States can remain silent or neutral. One country, Venezuela, is ruled by an anti-American despot who is allied with Cuba’s Castro brothers and Iran’s Mahmoud Ahmadinejad; who has censored the media and jailed political opponents; who has bought Russian and other weapons in the billions of dollars; and who has undermined U.S. interests from Bolivia and Ecuador to Nicaragua and Honduras.
The other country is a friend and ally that, with the help of the United States, has decimated Marxist terrorist armies and right-wing paramilitaries; reduced narcotics trafficking; rebuilt its economy, creating hundreds of thousands of decent jobs; and simultaneously improved security and human-rights conditions in every corner of Colombia.
The U.S. must side clearly and strongly with Colombia; that is the best way to avoid this crisis from escalating into a violent one. Chávez is a hooligan who will see any wavering on the part of the U.S. as a sign of weakness. It is time for the administration to support — and be seen as supporting — the friends of the United States and confronting those like Chávez who damage our interests and call us enemies.
— Otto J. Reich served President Bush from 2001 to 2004, first as assistant secretary of state for the Western Hemisphere and later in the National Security Council.
Venezuelan strongman and self-proclaimed “21st-century socialist” Hugo Chávez has broken diplomatic relations with Colombia after Colombia accused Venezuela of continued support for the Marxist FARC guerrilla army.
Accusations against Venezuela are nothing new, with the U.S., Spain and other nations having denounced Chávez’s support of the FARC and other terrorist groups (such as the Basque ETA) before. The evidence presented by the Colombian government today reveals that Chávez continues to harbor FARC training camps and leadership groups inside Venezuela. Neither Chávez nor his ambassador to the OAS denied the allegations; they simply railed at Colombia for denouncing Venezuela’s interference in its internal affairs.
The reaction of the Obama administration to this latest charge against Chávez will be revealing. So far, the administration has preferred not to speak up while Chávez harbors terrorists who continue to traffic in narcotics and who perpetrate murder and mayhem in Colombia.
This dispute is not one in which the United States can remain silent or neutral. One country, Venezuela, is ruled by an anti-American despot who is allied with Cuba’s Castro brothers and Iran’s Mahmoud Ahmadinejad; who has censored the media and jailed political opponents; who has bought Russian and other weapons in the billions of dollars; and who has undermined U.S. interests from Bolivia and Ecuador to Nicaragua and Honduras.
The other country is a friend and ally that, with the help of the United States, has decimated Marxist terrorist armies and right-wing paramilitaries; reduced narcotics trafficking; rebuilt its economy, creating hundreds of thousands of decent jobs; and simultaneously improved security and human-rights conditions in every corner of Colombia.
The U.S. must side clearly and strongly with Colombia; that is the best way to avoid this crisis from escalating into a violent one. Chávez is a hooligan who will see any wavering on the part of the U.S. as a sign of weakness. It is time for the administration to support — and be seen as supporting — the friends of the United States and confronting those like Chávez who damage our interests and call us enemies.
— Otto J. Reich served President Bush from 2001 to 2004, first as assistant secretary of state for the Western Hemisphere and later in the National Security Council.
VenEconomy // Bolivarian "revolutionaries" grabbing what belongs to others
VenEconomy: The Bolivarian "revolutionaries" seem to be stepping up their efforts to grab what belongs to others.
It all started with the government's eagerness to appropriate agricultural land that was fully productive based on the unconstitutional Lands Law and on the grounds of the ill-named "rescuing" of properties, both large and small, such as La Marquesena, El Frio, Pinero, El Cedral, and El Charcote, the sugarcane fields in the Quibor Valley, and, more recently, La Carolina, a farm belonging to Diego Arria.
Then the government started to take over urban properties, among them, buildings, land used by small and medium industries, and shopping malls.
Now the National Lands Institute (INTI) is turning its attention to land on which homes have been built, denying the owners their constitutional property rights.
On July 2, the INTI published a notification in the local press in Nueva Esparta, declaring 521 hectares of populated plots of land in Arismendi, Maneiro, and Diaz municipalities to be "uncultivated or idle land," even though the majority of them have been built on.
The unbelievable part of this story is that this declaration is based on a decree issued in 1987 by the then-President, Jaime Lusinchi, who determined that those 521 hectares had agricultural potential. When dusting off this obsolete decree, the INTI failed to take account of the fact that the State itself had developed those plots of land for housing, installing basic services and infrastructure, and later sold them to private individuals.
Today, that land is the home of the populations of La Ceiba, Atamo North and South, Catalan, Chinguirito, Sabana de Guacuco, El Hato, Agua de Vaca, and Los Cerritos.
Nor did the Executive take account of the fact that more than 6,000 families (approximately 30,000 people) have lived in those communities for 20 years or more, and that all those people would be affected by this measure.
The precautionary measure that now prevents the sale and disposal of the properties on this land also ignores the fact that the majority of these residents have their documents in order, pay municipal taxes, and that the Constitution protects their ownership rights.
After causing widespread anxiety among the local inhabitants, the Ministry of Agriculture "clarified" that only 300 hectares would be affected on the grounds of being "idle," and that there was no danger of expropriation. However, people are still worried because, on the one hand, more than 80% of the plots of land are inhabited and, on the other, the Executive has still not lifted the precautionary measure that forbids them to sell, rent, remodel or mortgage their properties or otherwise use them for performing transactions of any type.
This is just one example of how the government is stepping up its attacks on private property in its determination to impose a communist regime, where there is no private property of any kind.
It all started with the government's eagerness to appropriate agricultural land that was fully productive based on the unconstitutional Lands Law and on the grounds of the ill-named "rescuing" of properties, both large and small, such as La Marquesena, El Frio, Pinero, El Cedral, and El Charcote, the sugarcane fields in the Quibor Valley, and, more recently, La Carolina, a farm belonging to Diego Arria.
Then the government started to take over urban properties, among them, buildings, land used by small and medium industries, and shopping malls.
Now the National Lands Institute (INTI) is turning its attention to land on which homes have been built, denying the owners their constitutional property rights.
On July 2, the INTI published a notification in the local press in Nueva Esparta, declaring 521 hectares of populated plots of land in Arismendi, Maneiro, and Diaz municipalities to be "uncultivated or idle land," even though the majority of them have been built on.
The unbelievable part of this story is that this declaration is based on a decree issued in 1987 by the then-President, Jaime Lusinchi, who determined that those 521 hectares had agricultural potential. When dusting off this obsolete decree, the INTI failed to take account of the fact that the State itself had developed those plots of land for housing, installing basic services and infrastructure, and later sold them to private individuals.
Today, that land is the home of the populations of La Ceiba, Atamo North and South, Catalan, Chinguirito, Sabana de Guacuco, El Hato, Agua de Vaca, and Los Cerritos.
Nor did the Executive take account of the fact that more than 6,000 families (approximately 30,000 people) have lived in those communities for 20 years or more, and that all those people would be affected by this measure.
The precautionary measure that now prevents the sale and disposal of the properties on this land also ignores the fact that the majority of these residents have their documents in order, pay municipal taxes, and that the Constitution protects their ownership rights.
After causing widespread anxiety among the local inhabitants, the Ministry of Agriculture "clarified" that only 300 hectares would be affected on the grounds of being "idle," and that there was no danger of expropriation. However, people are still worried because, on the one hand, more than 80% of the plots of land are inhabited and, on the other, the Executive has still not lifted the precautionary measure that forbids them to sell, rent, remodel or mortgage their properties or otherwise use them for performing transactions of any type.
This is just one example of how the government is stepping up its attacks on private property in its determination to impose a communist regime, where there is no private property of any kind.
Sunday, July 18, 2010
THE ECONOMIST: Venezuela's politics ... Commune-ism. Yet another method to entrench the President's power
THE (UK) ECONOMIST: When Jorge Urosa, the archbishop of Caracas, said recently that Hugo Chavez was installing a "Marxist-communist" regime in Venezuela, the country's leftist President called him a "troglodyte" and accused him of "instilling fear in the people." Yet Mr Chavez, an avowed socialist, is openly seeking to introduce what looks like a novel form of communism. After taking over the courts and provoking an opposition boycott of legislative elections, he is now targeting state and municipal governments, currently the last bulwark against his rule among elected officials. By forcing them to compete for resources with pliable "communes," he may starve them to death.
In June his legislative allies approved on first reading a draft bill creating the commune, a "socialist local entity … on the basis of which socialist society is to be built," with legislative, judicial and executive functions. The communes are supposed to be partly self-sufficient, thanks to a "socialist productive model," outlined in a separate bill, that will replace the existing capitalist economy. But in practice, the state will provide most of their resources, determine which communes can register, and impose "development" laws and decrees.
Darío Vivas, the vice-president of congress, says the bill will "develop popular participation in the most democratic way possible." But the opposition calls it a scheme to increase Mr Chavez' power. Each commune will "regulate social and community life [and] guarantee public order, social harmony and the primacy of collective over individual interests." Their courts will have jurisdiction over all residents, even though the communes are exclusively intended for socialists. Meanwhile, states and municipalities will be forced to transfer part of their revenues to the communes. Since communes can span municipal borders, they could move public funds from opposition-led districts to government-friendly ones.
The project flies in the face both of the constitution and of public opinion. Mr Chavez first tried to establish communes through a constitutional-reform package in 2007, which was narrowly rejected in a referendum. Many key articles in the proposed communes law were taken from the failed reform. Mr Vivas insists that "if we were to ask those questions today," the reforms would pass. But recent surveys suggest the reverse. According to a June study by Hinterlaces, a polling firm, only 31% of Venezuelans support Mr Chavez' "21st-century socialism," whereas 80% prefer private to communal property.
The bill still requires a second reading to become law. But although a more plural congress will be elected in September, new members will not be seated until January, allowing the outgoing assembly to pass unpopular laws without electoral repercussions.
Moreover, even while the bill awaits approval, the government says that over 200 communes are already in formation. A local referendum in which as little as 15% of the electorate casts a vote will be enough to bring them into existence.
Faced with declining popularity, Mr Chavez is wasting little time in setting up new means to wield his authority.
In June his legislative allies approved on first reading a draft bill creating the commune, a "socialist local entity … on the basis of which socialist society is to be built," with legislative, judicial and executive functions. The communes are supposed to be partly self-sufficient, thanks to a "socialist productive model," outlined in a separate bill, that will replace the existing capitalist economy. But in practice, the state will provide most of their resources, determine which communes can register, and impose "development" laws and decrees.
Darío Vivas, the vice-president of congress, says the bill will "develop popular participation in the most democratic way possible." But the opposition calls it a scheme to increase Mr Chavez' power. Each commune will "regulate social and community life [and] guarantee public order, social harmony and the primacy of collective over individual interests." Their courts will have jurisdiction over all residents, even though the communes are exclusively intended for socialists. Meanwhile, states and municipalities will be forced to transfer part of their revenues to the communes. Since communes can span municipal borders, they could move public funds from opposition-led districts to government-friendly ones.
The project flies in the face both of the constitution and of public opinion. Mr Chavez first tried to establish communes through a constitutional-reform package in 2007, which was narrowly rejected in a referendum. Many key articles in the proposed communes law were taken from the failed reform. Mr Vivas insists that "if we were to ask those questions today," the reforms would pass. But recent surveys suggest the reverse. According to a June study by Hinterlaces, a polling firm, only 31% of Venezuelans support Mr Chavez' "21st-century socialism," whereas 80% prefer private to communal property.
The bill still requires a second reading to become law. But although a more plural congress will be elected in September, new members will not be seated until January, allowing the outgoing assembly to pass unpopular laws without electoral repercussions.
Moreover, even while the bill awaits approval, the government says that over 200 communes are already in formation. A local referendum in which as little as 15% of the electorate casts a vote will be enough to bring them into existence.
Faced with declining popularity, Mr Chavez is wasting little time in setting up new means to wield his authority.
Tuesday, July 13, 2010
The revolution’s education rip-off
Published by Veneconomy July 12, 2010
Health and education are two basic factors that determine a country’s capacity to move ahead along the path of development.
The Hugo Chávez administration has condemned both sectors to failure and backwardness by imposing a socio-political model based on Castro-communism.
Control over the education sector has been one of its main objectives since the start of this Castro-Chavista hegemony, and to achieve its goal it has used a variety of tactics, including changes to study programs aimed at indoctrinating children and adolescents.
The government has penetrated the entire formal education system, from the first years, with the “Simoncitos” (kindergartens), to the Bolivarian primary and secondary schools. It has set up parallel structures to the formal education system, the so-called education “missions” –Robinson, Ribas, Sucre, and Vuelvan Caras-, which not only have not managed to wipe out illiteracy but are also failing to provide Venezuela’s youngsters with the knowledge they need to meet the challenges of a globalized world.
Then there are the legal tricks that have been invented to subordinate the academic to the revolutionary, among them the elimination of evaluations in primary and secondary education and the ban on failing a pupil when he is not ready to move on to the next academic level.
On top of that, there is the penetration of Cubans throughout the public education system. More than 300 Cuban “collaborators” and some 4,544 Cuban sports technicians are engaged in indoctrination activities throughout the country.
Meanwhile, since 2005, the government has been exercising another perverse form of control over private education: the economic strangulation of private education establishments by setting maximum fees below inflation. In 2008 and 2009, the ceiling was 20% of the maximum fee charged the previous year, when cumulative inflation for the period was 67.4%. This has forced many schools to abandon some of their extracurricular activities and reduce investment in improvements in infrastructure, equipment, and technology. Only a few establishments have been able to palliate their delicate financial situation by means of donations from parents’ associations.
This year, the Ministry of Education has, once again, decided that parents’ associations will have to increase school fees for the coming academic year to a maximum of 20%, which is below inflation this year to date and a far cry from the 40% estimated for 2010.
The communist process proclaimed by Chávez is totally dog in the manger. On the one hand, the facts prove that his promise of education after the socialist model is a rip-off that will affect the future of Venezuela’s children; and on the other, it is trying to eliminate private education from the game, despite the fact that it has provided irrefutable evidence of its ability to provide excellent, quality education.
Health and education are two basic factors that determine a country’s capacity to move ahead along the path of development.
The Hugo Chávez administration has condemned both sectors to failure and backwardness by imposing a socio-political model based on Castro-communism.
Control over the education sector has been one of its main objectives since the start of this Castro-Chavista hegemony, and to achieve its goal it has used a variety of tactics, including changes to study programs aimed at indoctrinating children and adolescents.
The government has penetrated the entire formal education system, from the first years, with the “Simoncitos” (kindergartens), to the Bolivarian primary and secondary schools. It has set up parallel structures to the formal education system, the so-called education “missions” –Robinson, Ribas, Sucre, and Vuelvan Caras-, which not only have not managed to wipe out illiteracy but are also failing to provide Venezuela’s youngsters with the knowledge they need to meet the challenges of a globalized world.
Then there are the legal tricks that have been invented to subordinate the academic to the revolutionary, among them the elimination of evaluations in primary and secondary education and the ban on failing a pupil when he is not ready to move on to the next academic level.
On top of that, there is the penetration of Cubans throughout the public education system. More than 300 Cuban “collaborators” and some 4,544 Cuban sports technicians are engaged in indoctrination activities throughout the country.
Meanwhile, since 2005, the government has been exercising another perverse form of control over private education: the economic strangulation of private education establishments by setting maximum fees below inflation. In 2008 and 2009, the ceiling was 20% of the maximum fee charged the previous year, when cumulative inflation for the period was 67.4%. This has forced many schools to abandon some of their extracurricular activities and reduce investment in improvements in infrastructure, equipment, and technology. Only a few establishments have been able to palliate their delicate financial situation by means of donations from parents’ associations.
This year, the Ministry of Education has, once again, decided that parents’ associations will have to increase school fees for the coming academic year to a maximum of 20%, which is below inflation this year to date and a far cry from the 40% estimated for 2010.
The communist process proclaimed by Chávez is totally dog in the manger. On the one hand, the facts prove that his promise of education after the socialist model is a rip-off that will affect the future of Venezuela’s children; and on the other, it is trying to eliminate private education from the game, despite the fact that it has provided irrefutable evidence of its ability to provide excellent, quality education.
EL Universal: "Bishops reject imposition of Cuba inspired socialism"
Published by Juan Francisco Alonso, EL Universal July 12, 2010
Prelates say they have a say and that will continue to exercise their right of opining on the national reality.
Neither the claims of the various public authorities to restrict themselves to exercise their pastoral work or the threat to indict president of Cardinal Jorge Urosa intimidate members of the Venezuelan Episcopal Conference (CEV ), who at the end of its ninety- fourth regular meeting reaffirmed their concern about the socialist system that the Government promotes.
In its traditional appeal the prelates said : "The people want to live in democracy, rule of law, with real participation of all in a climate of justice and freedom. This was decided in the referendum of December 2, 2007 . So is absolutely unacceptable to impose a socialist state inspired by the Cuban communist regime and has been specifically through laws and facts that ignore the popular will and the Constitution. "
The document , read by Monsignor Diego Padron , archbishop of Cumana , the Bishops reiterated its concern about the climate of violence and corruption in the country and is manifested "especially in insecurity , violent deaths , both in the street as in prisons and the shocking loss of food and medicines. "
Call vote
When you subtract a little over two months for the parliamentary elections of September 26 , the bishops invited citizens to attend the polls en masse , for which recalled that Parliament should not only enact laws but " must be also a body of effective and real exercise of government control , to ensure the correct use of resources and management development that meets the objectives defined democratically . "
It also advocated that the new legislature is not like this, monochrome , but he receives in the "bosom divergent political views . "
Continue opining
When asked about the statement that the directive of the Supreme Court of Justice issued , in which he accused the prelates of violating the concordat between the Vatican and Venezuela, Monsignor Padrón said with some disdain , that " we have not definitively established a position Because we believe that there are many more important things (...) The needs of the people we take more time . We have been reading the statement, but the answer will have his time, and experts may be entitled to respond . "
Finally, with regard to demands from the Government , the highest court, the Ombudsman and Parliament to let them make a decision on the national scene , the archbishop of Cumana said emphatically: " We have the right to their opinion as we have done and will continue to do , because that is the most comprehensive and natural that any citizen has . "
Prelates say they have a say and that will continue to exercise their right of opining on the national reality.
Neither the claims of the various public authorities to restrict themselves to exercise their pastoral work or the threat to indict president of Cardinal Jorge Urosa intimidate members of the Venezuelan Episcopal Conference (CEV ), who at the end of its ninety- fourth regular meeting reaffirmed their concern about the socialist system that the Government promotes.
In its traditional appeal the prelates said : "The people want to live in democracy, rule of law, with real participation of all in a climate of justice and freedom. This was decided in the referendum of December 2, 2007 . So is absolutely unacceptable to impose a socialist state inspired by the Cuban communist regime and has been specifically through laws and facts that ignore the popular will and the Constitution. "
The document , read by Monsignor Diego Padron , archbishop of Cumana , the Bishops reiterated its concern about the climate of violence and corruption in the country and is manifested "especially in insecurity , violent deaths , both in the street as in prisons and the shocking loss of food and medicines. "
Call vote
When you subtract a little over two months for the parliamentary elections of September 26 , the bishops invited citizens to attend the polls en masse , for which recalled that Parliament should not only enact laws but " must be also a body of effective and real exercise of government control , to ensure the correct use of resources and management development that meets the objectives defined democratically . "
It also advocated that the new legislature is not like this, monochrome , but he receives in the "bosom divergent political views . "
Continue opining
When asked about the statement that the directive of the Supreme Court of Justice issued , in which he accused the prelates of violating the concordat between the Vatican and Venezuela, Monsignor Padrón said with some disdain , that " we have not definitively established a position Because we believe that there are many more important things (...) The needs of the people we take more time . We have been reading the statement, but the answer will have his time, and experts may be entitled to respond . "
Finally, with regard to demands from the Government , the highest court, the Ombudsman and Parliament to let them make a decision on the national scene , the archbishop of Cumana said emphatically: " We have the right to their opinion as we have done and will continue to do , because that is the most comprehensive and natural that any citizen has . "
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