Venezuela is a country of extraordinary diversity and natural beauty where the sun shines most days of the year. Nowhere else will you find such a fusion of heavenly tropical beaches, snow-capped giant mountains, steaming pristine jungle and a vast mysterious savannah.

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.

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.

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.

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.

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.

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.

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 . "

Monday, July 12, 2010

VenEconomy // Another of the Venezuelan Revolution's failures...

VenEconomy: Besides the well-known failures of the Castro-Chavista "revolution," such as PDVSA and the health sector, there are others that are less well-known that also demonstrate the government's deplorable performance, its total lack of managerial capacity, and its lack of foresight.

Among these lesser-known failures are the basic industries in Guayana.

One example is Sidor, now de-privatized ... this company plans to produce 838,000 mt of steel this year, 80% less than the 4.3 million mt produced under Techint-Ternium's management, a drop of more than 80% in barely three years.

Even more revealing is the disaster in the aluminum industry. According to official figures (not necessarily reliable), domestic aluminum production was 46% below normal during the first five months of 2010.

Today, the erstwhile dynamic aluminum sector, which was capable of supplying the domestic market, is being forced to import given the huge drop in production. According to Reporte Diario de la Economia, Venalum has started procedures to import between 30,000 tonnes and 50,000 tonnes of aluminum to "cover domestic market requirements."

To make matters worse, it turns out that the government used the same mortgaging tactics it employed at PDVSA, with future sales of the raw material. A large part of the meager production that is being exported this year has already been paid for and the money frittered away in 2008 and 2009, so the little that is being exported is only generating expenses.

Another problem is that the collapse of the basic industries has dragged down other private domestic aluminum processing companies in its wake, among them companies that produce aluminum foil, aluminum shapes, and other inputs for the construction industry and companies that manufacture auto-parts, rims, for example. Today, those products will inevitably disappear or be available only if they are imported, which, in turn, will lengthen production time, increase costs, and put up retail prices.

The same ills that led to the deterioration of Venezuela's oil industry and its electricity sector have also contributed to the collapse of the basic industries: the cocktail of a communist project, with a long history of failures, combined with very bad management, laxness, inefficiency, and rampant corruption.

To top it all, in the case of the basic industries, there are also the labor disputes being promoted by the parallel trade unions that the government is financing and the more than 100 trade union leaders who have been killed over the past five years.

Some analysts claim that the collapse of the basic industries is due largely to the collapse of the national electricity system, which prompted the government to order the partial shutdown of these companies. Others are of the view that this decision by the Executive simply served to cover up the destruction that the "revolution" had already wrought in the sector.

In any event, the government can no longer deny the obvious.

Friday, July 9, 2010

In Our opinion...

Chavez referred tonight to the allegations that the country seeks to establish a Marxist socialist regime . He said who makes these claims , "or is a great big ignorant or is a fake. We are building our democratic socialism . "

He stressed that the roots of this model are Simón Bolívar , Ezequiel Zamora and Samuel Robinson. Then reiterated his criticism of the Cardinal Urosa Sabino , stating that in the country does not seek to establish a Marxist socialist model because that is a lie of the size of the sun , we are building a democratic socialism . "

Is this the same Chavez who confessed in a televised speech on the government's work in 2009 to the national assembly that he is a follower of the ideas of Karl Marx?

Is this the same Chavez who also revealed that he had begun studying Marx's Das Kapital again, and that the 19th century social philosopher's work gave him "the answers to many questions."

As Hannah Arendt once put it, ""The trouble with lying and deceiving is that their efficiency depends entirely upon a clear notion of the truth that the liar and deceiver wishes to hide."

Long time ago, the whole world came to the conclusion that Chavez was either an ignorant or a fake; tonight the Commandant himself has reached a painful conclusion: he is both ignorant and a fake.

Chavez has been quoted several times "For the love of God, let's halt this, let's put the brakes on this consumerist, capitalist insanity, that leads us to lose our spiritual values,"

In our opinion, for the love of God, let's halt this, let's put the brakes to The Commandant insanity that is leading Venezuela to absolute disaster...

Venezuelan Inflation Slows in June as Government Keeps Food Price Controls

By Jose Orozco and Corina Rodriguez Pons - Jul 8, 2010

Venezuelan consumer prices rose less than analysts forecast in June as the government maintained price controls on basic foods while shortages on a range of goods were averted.

Consumer prices rose 2 percent last month, down from May’s 2.2 percent increase, according to the central bank’s benchmark Caracas price index released today. The result was lower than the 2.5 percent median forecast of six economists surveyed by Bloomberg. Annual inflation accelerated to 31.3 percent from 31.2 percent a month earlier, the bank said.

Venezuela, the largest oil producer in South America and a net food importer, kept price controls on regulated goods after easing them earlier in the year because of shortages of goods including sugar and beef. Shortages increased after President Hugo Chavez devalued the currency as much as 50 percent Jan. 8.

“The government avoided price increases in regulated goods this month, which explains the slowdown in communications, rents, education and food prices,” said Boris Segura, a Latin America economist at RBS Securities Inc. in Stamford, Connecticut. “This is the lowest monthly inflation the government will reach this year.”

The government in March raised the price caps on rice, sugar and chicken by as much as 35 percent and the prices of milk and cheese by as much as 30 percent on April 5.

Bolivar, Prices

Chavez this year has devalued the currency and created a multi-tiered exchange system under which importers pay 2.6 bolivars per dollar for essential items and 4.3 per dollar for products deemed non-essential.

The free-floating bolivar plunged 27 percent to a record low 8.2 on May 11 before Chavez dismantled the unregulated currency market, operated mostly by brokerages, on May 18. He blamed currency speculators for the bolivar’s slide and for April’s inflation surge.

The new currency market allows Venezuelans to buy dollar- denominated securities within a government-set price band in order to obtain dollars abroad by then selling the securities.

Chavez said that the private sector was responsible for raising prices faster than the minimum wage, and that hoarding by businesses to skirt price controls caused food shortages.

The bank’s shortage indicator, which measures the percentage of goods missing from shelves in the metropolitan area of Caracas, fell from 14.5 percent in May to a seven-month low of 12.3 percent in June, the bank said today.

Alcoholic beverages and household goods led the price gains in the national index, surging 2.8 percent and 2.6 percent, respectively, the bank said. Food prices rose 2 percent.

Venezuela, which has the highest inflation rate of 78 economies tracked by Bloomberg, may post 40 percent inflation in 2010, according to RBS Securities.

Wednesday, July 7, 2010

In Our Opinion...

Venezuela lacks an alternative proposal to Chavez, who has taken advantage of every single opportunity he was given to destroy the democratic institutions of the country, and to assume a complete control of the nation's factors of production.

In our opinion Chavez has become a dictator whose main objective is to eliminate what ever is left of private property in Venezuela. He has destroyed the democratic institutions of the nation and has ignored human rights by incarcerating his political opponents or forcing them into exile.

Unfortunately, the opposition does not seem to understand that it’s not enough to agree on consensus candidates but to develop economic and social agendas as a viable alternative to the Chavez dictatorship.

VenEconomy: Red herrings

It is more than evident that the Chávez administration is facing serious problems of governance.
The first problem is the serious deterioration of PDVSA, one of the clearest signs being the tardy handing over of deficient, unaudited financial statements to the National Assembly. The oil corporation’s collapse is so complete that not even the touched-up figures and verbiage of a 380-page “preliminary” report were capable of hiding the bad management and corruption that sprang to light with the discovery of thousands of tons of decaying food imported by PDVAL and the oil spills in Lake Maracaibo.
The second problem is the apparent cash crisis facing the national budget, as a result of which the government will be resorting to further borrowing of Bs.F.20 billion in the third quarter of the year. (It is thought that the government will resort to borrowing in bolivars, as it is apparently finding it difficult to get anyone to lend Venezuela in dollars.)
The third problem is the sharp decline in President Chávez’s popularity on the eve of elections that will determine the makeup of the National Assembly. Opinion polls show that both the government and the President’s performance are viewed with disapproval by the majority of the population.
The fourth is the discovery of fresh evidence of alleged ties between officials of the Venezuelan Government and international networks of drug traffickers.
Finally, there are several things that could point to problems that have not yet come to light. One is that this strictly militaristic government did not hold military parades on June 24, the anniversary of the Battle of Carabobo, or on July 5, the date on which the Act of Independence was signed.
Another is that the military promotions were not televised, when the President does not pass up the slightest opportunity for ordering daily nationwide networked broadcasts.
Faced with his declining popularity, Chávez is, once again, launching offensives as a way of distracting people’s attention. On the one hand, he mounted a show with the symbolic remains of Manuelita Sáenz, the mistress of the Liberator Simón Bolívar, which he brought to the National Pantheon. On the other, he attacked Globovisión yet again and, on July 5, launched a savage, irrational attack on Cardinal Jorge Urosa, the Archbishop of Caracas, alleging that he was instilling fear in the people with tales of communism. He said that the cardinal is a “troglodyte” who is “unworthy to call himself a cardinal of the Catholic Church,” and claimed that, as far as he is concerned, the cardinal is Monsignor Mario Moronto (possibly with the intention of generating divisions within the Church).
Unfortunately, the government is using this marasmus it has created to make strides in weaving its “revolutionary” legal net, approving laws right and left that will turn the new parliament into an empty shell without the powers to undo the Castro-communism being imposed by Chávez.

VenEconomy // PDVSA is suffering the same ill as the Venezuelan Revolution

VenEconomy: In June, six months after the close of the fiscal year 2009, PDVSA presented its "preliminary" Report and Accounts. More serious than the delay in presenting the accounts, is the fact that the figures have not been validated by an auditor.

As Gustavo Coronel says in his blog, the figures in the report's 339 pages clearly reveal the magnitude of the disaster at the corporation that is Venezuela's main source of revenue.

In 2009, PDVSA had revenues of $72.95 billion, 42.3% less than in 2008. Before-tax earnings fell by 31.1%, from $13.64 billion in 2008 to $9.39 billion in 2009; and contributions to the nation were also considerably reduced, from $53.12 billion in 2008 to $23.83 billion in 2009, 55.1% less, whereas liabilities came to $74.85 billion, up 24.1% from a year ago.

These shrinking revenues are due, apart from political factors and the lack of administrative transparency, to a decline in average production, which fell from 3.4 million b/d in 2008 to 3 million b/d in 2009. The company attributes this 400,000 b/d drop in production to the severe blackouts caused by the electricity crisis (provoked, in turn, by bad management and the lack of investment), and also to the drop in associated gas, in particular, in the Maracaibo Lake basin, where nearly 50% of its oil production capacity is located.

On top of the decline in production, there was a 34% drop in the average oil barrel price, from $86.49 per barrel in 2008 to $57.08 per barrel in 2009.

As a direct consequence of these poor results, PDVSA's direct contributions to social development and Fonden fell by 87.3%, from $14.73 billion in 2008 to only $1.87 billion in 2009.

The report also contains some details that tell of the bad management and strategic failure of the "Bolivarian" revolution.

One is the whopping increase in PDVSA's payroll, which rose by 13,936 workers in just one year to nearly 100,000 employees. This payroll is very far from the 45,000 plus workers that the company had in 2002-2003, when Chávez started with his political and indiscriminate weeding out of 20,000 excellent professionals and technicians.

Even more serious than this swollen payroll, today the company is complaining of a lack of qualified personnel to carry out key gas and crude production and refining projects.

Ironically, that is a problem that has been generated by the company's criteria of "selecting" personnel à la Bolivarian.

PDVSA is definitely a reflection of the same ill that has the Castro-Chavista revolution in its death throes, where what prevails are the scourge of corruption, bad management, and a wrong-headed country project.

Tuesday, July 6, 2010

VenEconomy // ...and then Hugo Chavez came up against the economy

For more than 11 years President Hugo Chavez was able to impose his aggressive political agenda on the country. With the gift of a Pied Piper, he has been able, for years, to gain the support of millions of Venezuelans, above all among the very poor, who embraced his mirage of a class struggle. Thus Chavez earned enough points in his favor to just sit back and enjoy his sway over the country and impose his will on all the branches of government as well as the country's productive and financial sector.

During this period, Chavez split the population in two and implemented, as government policy, a system of segregation and persecution of vast sectors in the country. He also did everything in his power to reduce private production to its minimum expression using strong-arm tactics, stealing land, companies and properties.

To complete his evil designs, the battalion of followers led by Chavez ensured the collapse of the public sector, using incompetence, negligence, corruption and, above all, mismanagement and waste of all the oil money that has poured into the country, as their tools. The ills of PDVSA have also added up, with a marked decline in production capacity and widespread corruption. The most obvious example of the latter being all the cases of rotting food imported by PDVAL and the oil spills that have not been handled skillfully or diligently. What's more, despite rising oil prices that have averaged $70.03/bbl in 2010 -- almost 23% higher than in 2009 -- PDVSA has not managed to increase its earnings. The end result: further deterioration of an already misguided foreign exchange policy.

Chavez' wrongheaded focus on imposing communism also led to a serious and sustained electric-power crisis, with its harmful repercussions on domestic production and quality of life of the man on the street.

The government's contradictory policies have led to a continuous and rapid drop in the GDP, and high inflation, at a rate that has already reached 14.5% so far in 2010, causing what may end up being one of the most serious recessions in Venezuelan history.

Nevertheless, Chavez' political agenda inevitably came up against the economy, and things do not seem to be going his way.

Most public opinion polls show falling levels of approval as to how Hugo Chavez is managing the country. According to one of the most recent ones, in which Consultores 21 polled 1,500 cases in 66 towns in the country on June 4, 59% of those polled feel the Chavez government is bad and most of them consider that the country's main problem is the economic situation.

The worst piece of news for the President, however, is that more than 55% of those polled hold him responsible for the country's problems and feel that he is incapable of solving them.

His response to reality is that of all despots: Repression, control, and more control.

Friday, July 2, 2010

More Bad Omens in Venezuela

From the Editors of VenEconomy, July 2nd, 2010

Figures are still floating around that tell of the debacle in Venezuela thanks to the half-backed revolution headed up by Hugo Chávez.

This time the red figures come from the Economic Situation Poll conducted quarterly by Consecomercio, the organization that represents the formal commerce and services sector in Venezuela through 200 chambers countrywide.

The poll, which measures the behavior of some 19 sectors, reflects that they all posted a significant decline in retail sales of 29.4% in the first quarter of the year.

Some of the worst hit sectors were customs services (-38%), equipment, telecommunications, and supermarkets (-37% each), mechanical shops and education services (-35% each), vehicle parts (-34.1%), and the automotive sector (-32%). The least affected were pharmacies and medicines (-20%) and bakeries (-8%).

Some of the factors that most impacted commerce, according to Consecomercio President Fernando Morgado, were the present economic recession and inflation, which have forced people to reduce their consumption. On top of that, there are the foreign exchange and price controls and the impossibility of obtaining dollars at the official exchange rate, administered by CADIVI, the lack of legal certainty and personal security, violation of private property, and the political environment, all of which inhibits investment.

Morgado told the press that none of Consecomercio’s member companies that have registered with the new Foreign Currency Security Transactions System (SITTME after its initials in Spanish), have been allocated the foreign currency they need. Since it went into force on June 9, SITTME has granted an average of $27 million a day versus projected expectations by independent analysts of $80 million a day.

Of the companies polled, 83.5% said that they had not applied to CADIVI because of repeated delays in handing over the foreign currency, and only 27% of the 16.5% that did apply obtained the foreign exchange they had requested.

The poll also provides some results that should serve as a warning:

1. 63% of the commerce and services sector did not invest and the remaining 37% only invested to replace inventories or in technology, fixed assets, furniture and fittings, or equipment. Even more worrisome is the fact that 71% of the merchants polled said that they would not be making investments of any kind in the coming months.


2. 65.5% of those polled consider that sales will continue to drop, which bodes ill for the future, as the coming months are perhaps those that traditionally post a revival in sales.


3. 56% think that unemployment will increase.


4. 94% think that the government’s economic measures are negative.

These results augur ill as, unless the Chavista revolution changes course, stagflation could be just around the corner.

Chavez Crackdown on ‘Thieves’ Leaves Traders Jobless

By Corina Rodriguez Pons and Daniel Cancel

July 2 (Bloomberg) -- Trader Jofmar Heredia was thrown out of work when Venezuelan President Hugo Chavez shut the unregulated currency market in May and seized about 40 brokerages, accusing them of setting artificial rates, capital flight and money laundering.

Heredia, 31, said she’s worried she may never find a job at a bank again because of Chavez’s crackdown.

“I’m unemployed and leaving my resume in banks but no one is calling,” said Heredia, who worked at Proinversion Sociedad de Corretaje CA in Caracas. “A lot of my friends in brokerages taken over by the government have been let go.”

The brokerage business is in danger of becoming obsolete in this socialist nation, said Noris Aguirre, a director at the clearing firm Caja Venezolana de Valores. Since November, Venezuela’s securities regulator has taken control of about 35 percent of the 112 trading firms and closed four after they were blamed for the 27 percent drop in the bolivar through May 18. That may leave up to 2,500 without jobs even as Chavez says his biggest economic priority is preserving employment.

Chavez, a 55-year-old former paratrooper who’s been in power for 11 years, says the country doesn’t need such companies and accuses them of exploiting loopholes to become rich. The government banned investment instruments known as mutuos in February -- which are akin to repurchase agreements, or repos -- and prohibited brokers from trading in a new currency market established last month. Securities firms use repos to borrow money to finance positions in bonds and other securities.

Chavez Takes Control

In a speech on May 23 to supporters, Chavez said his country should eliminate brokerages.

“We’re going to respond strongly against these thieves that are trying to wash their hands now,” Chavez said. “There’s no economic reason for the weakening of the bolivar. It’s a huge fraud against the republic.”

The government took control of the country’s largest brokerage, Econoinvest Casa de Bolsa, after raiding it on May 24, arresting four directors and ordering it to cease operations for a week pending an investigation. Of the 420 workers at the company, 126 have resigned, according to the nation’s regulator. The directors are being held at the national intelligence service in Caracas awaiting final charges against them for illegally trading foreign currency and association with delinquency.

Authorities are investigating “irregularities” at Econoinvest and are trying to guarantee the investments of its 44,000 clients, the Finance Ministry said today in a statement.

No Opportunities

Rene Buroz, the lawyer for the directors, declined to comment, as did an Econoinvest public relations official, who asked not to be identified in accordance with company policy.

The government took control of Finalca Casa de Bolsa today for failing to prove the origin of funds and putting its clients’ investments at risk after a raid on June 2, according to a resolution published in the Official Gazette.

Nelson Venero, a 32 year-old accountant, lost his job at the end of May after working for five years in the brokerage industry. After securing a job at AVC Valores Sociedad de Corretaje and a pay raise with a dollar bonus in October, he said he was fired after the government seized the company in May.

“This limits operations so much for brokerages that I don’t see any opportunities for them,” Aguirre of Caja Venezolana de Valores, which helps manage bonds and equities owned by brokerage houses, said in an interview. “They’re allowed to buy and sell company shares, but all of the companies that traded on the stock market have now been nationalized.”

Nationalizations

Chavez nationalized Cia Anonima Nacional Telefonos de Venezuela, the phone company known as Cantv, in 2007 to boost the state’s hold on the economy. The government has also taken over assets from Exxon Mobil Corp., ConocoPhillips, Ternium SA and Mexican cement maker Cemex SAB, which listed on the Caracas Stock Exchange.

The brokerage industry boomed between 2005 and 2010, growing 42 percent to more than 100 institutions, according to the securities regulator. Traders were hired to perform bond swaps as a means of obtaining dollars for companies that failed to receive government authorization to buy at the official exchange rate.

The bond trading set an implicit unregulated rate. That rate plunged to 8.2 per dollar on May 11, seven days before Chavez shut down that market.

‘Destined’

The central bank re-opened the market on June 9, setting the maximum rate and limiting the amount of dollars for purchase. The average rate is now about 5.3 bolivars per dollar. In addition, there are two official exchange rates of 2.6 bolivars per dollar and 4.3 per dollar for imports.

“This was destined to happen,” said Roberto Gonzalez, 39, a former partner at a Caracas-based brokerage who left the firm last year. He declined to identify the company.

Tomas Sanchez, president of the securities regulator known as CNV, said the number of brokerages will likely be cut to less than 20 and that most of the unemployed traders may be able to live off savings since they earned commissions in dollars.

“We know some workers will be affected by this situation but they enjoyed exorbitant benefits and have savings,” Sanchez said in an interview in Caracas on June 9. “Maybe the secretaries and couriers can be incorporated into the public banking system.”

‘Blackmail’

Heredia said that she wasn’t paid in dollars and received a commission of about 10 percent of the value of bolivar transactions.

Raul Maestres, a consultant at Korn/Ferry International, an executive search firm, said their offices in Caracas have been inundated with resumes.

“It’s not the best moment to find work,” Maestres said.

Venezuela’s unemployment rate rose to 8.1 percent in May, from 7.7 percent a year earlier, as the economy slid into the first recession in seven years. Gross domestic product shrank 3.3 percent last year and will likely contract 2.5 percent this year, according to the median forecast in a Bloomberg survey.

Brokers are “not going to blackmail us with the idea that this is going to hurt employment,” Ricardo Sanguino, the president of the congressional finance committee, said in an interview. “Many of them acted outside the law and created more problems than benefits.”

Venero, the unemployed accountant, said that he feels powerless to find work and that he may take a broker course in Panama, where Venezuelan banks have opened branches.

“I don’t think I’ll find work in the capital markets because they’ve been very hard hit,” he said in a phone interview. “A lot of friends are out of work.”