Washington Post (Juan Forero): Moammar Gaddafi is hunkered down, some once-loyal aides have abandoned him for the rebel side and President Obama and other leaders are demanding he step down.
But he still has a friend -- the man who received the al-Gaddafi International Prize for Human Rights, President Hugo Chavez of Venezuela.
Though uncharacteristically quiet as Libya slid into anarchy, Chavez has in recent days venerated Gaddafi for his revolutionary credentials and asserted that the United States is about to invade the North African country to seize its oil. He also convened a meeting Friday in the Venezuelan capital in which his allies, including Cuba, Nicaragua and Bolivia, agreed to a vague peace mission to end the violence in Libya.
"The countries of the Bolivarian alliance are demanding the United States and the world powers respect the people of Libya," Chavez said to cheering, red-shirted supporters. "No to imperialist intervention in Libya! No to a new imperialist war that looks for oil over the blood of innocents!"
Chavez' close allies in the region have also had plenty to say about Gaddafi.
Soon after the rebellion ignited in Libya, President Daniel Ortega of Nicaragua announced that he had told Gaddafi in a telephone conversation that "difficult moments put loyalty to the test."
Cuba's Fidel Castro, busy writing columns and providing running commentary on world affairs as his brother runs the island nation, has condemned the "colossal campaign of lies" about Libya from the mainstream press. He also explained, in one essay, that the violence in Libya had little in common with the unrest in Egypt, Tunisia and elsewhere in the Middle East.
"Libya is first in the human development index in Africa," Castro wrote. "Education and health care receive special state attention, and the cultural level of its people is, without a doubt, the highest."
The camaraderie is perhaps not surprising. Nicaragua's Sandinista rebels received training from Gaddafi. Castro, like Gaddafi, has become iconic to some for resisting the United States.
Chavez, too, has forged ties to Libya since taking office in 1999. The two countries share little in common culturally, but both are powers with the Organization of the Petroleum Exporting Countries.
"There's a common bond of anti-US sentiment that brings together Gaddafi with some figures in Latin America, including Chavez and Fidel Castro and Daniel Ortega in Nicaragua," said Michael Shifter, president of the Washington-based Inter-American Dialogue. "There is a sense of standing up to the superpower, which is the United States, and that's created some sort of solidarity."
When it comes to Chavez and Gaddafi, two former army colonels who conspired against the governments they served, the links go beyond rhetoric.
There's the Hugo Chavez Stadium, for instance, just outside what is now the rebel stronghold of Benghazi, so named because of Gaddafi's fondness for Chavez.
And then there was Simon Bolivar's sword -- or rather, a replica of the sword used by Venezuela's venerated independence hero. In 2009, five years after Gaddafi honored Chavez with Libya's annual human rights prize, Chavez awarded Gaddafi a replica of the sword. "What Simon Bolivar is for Venezuelans, Moammar Gaddafi is for the Libyan people," Chavez said to Gaddafi, then making his first visit to the region.
Last week, Chavez said it "was a great lie" that Gaddafi's forces had attacked civilians, and he also stressed that Gaddafi would not be fleeing Libya anytime soon.
"It's a lie that Gaddafi is going to come to Venezuela or go to Nicaragua," he said to cheers from supporters. "Gaddafi is not going anywhere, I'm sure. Gaddafi is among those men who die fighting."
Margarita Lopez Maya, a political analyst in Caracas, said that Chavez is closely following the unrest in the Middle East because it could prove instructive for him.
"He can see what happens to a leader after so many decades controlling and concentrating power," said Lopez Maya. explaining that she believes Chavez intends to remain in power indefinitely. "These kinds of problems that leaders similar to him confront may serve as a lesson to him."
Tuesday, March 22, 2011
Monday, March 14, 2011
Could Venezuela really go bankrupt?
The Economist: Ever since Greece plunged into a sovereign debt crisis in 2009, investors have focused on which European country might be next.
According to Capital Economics, a research firm in London, however, the next trouble spot could be Venezuela.
"There is a growing risk that the government will default on its obligations in 2012,"its analysts wrote on February 17.
Some in the markets have taken fright, too: the country' credit default swaps imply a 50% chance of default by 2015.
That may be overblown. Even so, Hugo Chavez, Venezuela's leftist president, seems to be pulling off a dubious achievement by causing the bond markets to fear for the solvency of the world's eighth-largest oil producer.
The chief cause of Venezuela's travails has been Chavez' pillaging of PDVSA, the state oil firm. He has packed it with loyalists, starved it of investment and used it for social spending, cutting its output from 3.3 million barrels per day in 1998 to around 2.25 million, according to industry estimates.
Of that, some 1 million is sold at subsidized prices at home or to regional allies, leaving just 1.25 million barrels per day for full price exports.
Meanwhile, the president's hostility to business has devastated the rest of the economy. He has nationalized hundreds of companies and trumped up charges against their owners, causing much of Venezuela's private sector to shut up shop and flee.
As a result, the country has seen vast capital flight, and must import many goods that it used to produce. Non-oil exports have ground to a halt: Petroleum now accounts for 92% of its dollar intake.
A misguided currency policy has exacerbated the malaise. In 2005, Chavez pegged the bolivar at 2.15 to the dollar. However, he also tolerated a legal parallel market that kept the country supplied with hard currency at a higher rate (providing countless opportunities for arbitrage).
Last year, he closed that market and created a new state body, which provides just over half the dollars that the old system did, at a price of 5.3 bolivares. Venezuela also reinforced its ban on black market trading, making it punishable by up to seven years in jail. (Merely publishing the unofficial dollar price, now around 8-10 bolivares, has long been illegal.)
As a result, foreign exchange is now scarce. Venezuelans have begun asking friends abroad to send them necessities like diapers, sanitary napkins and baby formula.
The government has tried to compensate for these woes by raiding one of its piggy banks -- this year it has grabbed all but $3 million of the $832 million in a rainy-day fund set up to even out oil price fluctuations -- and by leaning on its workers. Public employees have staged frequent protests over unpaid salaries, worsening conditions and a virtual freeze on collective bargaining.
But Chavez' main short-term solution has been borrowing. Since 2008, China has lent Venezuela $12 billion and is being repaid in oil shipments, cutting PDVSA's annual revenues by a further 20%.
The government's opaque accounting makes it impossible to know how it has used the money. Net public debt rose from 14% of gross domestic product in 2008 to 29% last year, and the Economist Intelligence Unit expects it to reach 35% in 2011. The country cannot continue borrowing at today's rates: PDVSA's latest dollar-denominated bonds pay a 12.75% coupon.
Yet even though things look bad now, a default probably does not loom in the near future. If oil stays at $100 a barrel, the Capital Economics report calculates, Venezuela's export revenues should just cover its foreign-exchange requirements -- $11 billion of debt service, $28 billion of capital flight, and $100 billion of imports -- over the next two years.
And even if petroleum prices drop, the central bank has $22.5 billion in cash and gold, and another $7.5 billion in further unspecified illiquid assets.
Moreover, since 2005 the government has squirreled away $39 billion in a separate, unaudited fund called Fonden. Although analysts do not know how much of this has been spent, some part has probably been saved.
There are rumours that the president is hoarding hard currency to prepare for 2012, when he faces a difficult re-election battle that will cost him money. The recent spike in oil prices caused by unrest in the Middle East will surely give Chavez some extra breathing room. And at a pinch, he could probably turn to his friends in Beijing for a new loan.
Nonetheless, that sovereign default is even being mentioned in the same breath as the name of a big oil producer in a fast-growing region says something about Chavez' economic stewardship. Even if he makes it past 2012, he will eventually either have to change his policies or deny bondholders what they are owed.
According to Capital Economics, a research firm in London, however, the next trouble spot could be Venezuela.
"There is a growing risk that the government will default on its obligations in 2012,"its analysts wrote on February 17.
Some in the markets have taken fright, too: the country' credit default swaps imply a 50% chance of default by 2015.
That may be overblown. Even so, Hugo Chavez, Venezuela's leftist president, seems to be pulling off a dubious achievement by causing the bond markets to fear for the solvency of the world's eighth-largest oil producer.
The chief cause of Venezuela's travails has been Chavez' pillaging of PDVSA, the state oil firm. He has packed it with loyalists, starved it of investment and used it for social spending, cutting its output from 3.3 million barrels per day in 1998 to around 2.25 million, according to industry estimates.
Of that, some 1 million is sold at subsidized prices at home or to regional allies, leaving just 1.25 million barrels per day for full price exports.
Meanwhile, the president's hostility to business has devastated the rest of the economy. He has nationalized hundreds of companies and trumped up charges against their owners, causing much of Venezuela's private sector to shut up shop and flee.
As a result, the country has seen vast capital flight, and must import many goods that it used to produce. Non-oil exports have ground to a halt: Petroleum now accounts for 92% of its dollar intake.
A misguided currency policy has exacerbated the malaise. In 2005, Chavez pegged the bolivar at 2.15 to the dollar. However, he also tolerated a legal parallel market that kept the country supplied with hard currency at a higher rate (providing countless opportunities for arbitrage).
Last year, he closed that market and created a new state body, which provides just over half the dollars that the old system did, at a price of 5.3 bolivares. Venezuela also reinforced its ban on black market trading, making it punishable by up to seven years in jail. (Merely publishing the unofficial dollar price, now around 8-10 bolivares, has long been illegal.)
As a result, foreign exchange is now scarce. Venezuelans have begun asking friends abroad to send them necessities like diapers, sanitary napkins and baby formula.
The government has tried to compensate for these woes by raiding one of its piggy banks -- this year it has grabbed all but $3 million of the $832 million in a rainy-day fund set up to even out oil price fluctuations -- and by leaning on its workers. Public employees have staged frequent protests over unpaid salaries, worsening conditions and a virtual freeze on collective bargaining.
But Chavez' main short-term solution has been borrowing. Since 2008, China has lent Venezuela $12 billion and is being repaid in oil shipments, cutting PDVSA's annual revenues by a further 20%.
The government's opaque accounting makes it impossible to know how it has used the money. Net public debt rose from 14% of gross domestic product in 2008 to 29% last year, and the Economist Intelligence Unit expects it to reach 35% in 2011. The country cannot continue borrowing at today's rates: PDVSA's latest dollar-denominated bonds pay a 12.75% coupon.
Yet even though things look bad now, a default probably does not loom in the near future. If oil stays at $100 a barrel, the Capital Economics report calculates, Venezuela's export revenues should just cover its foreign-exchange requirements -- $11 billion of debt service, $28 billion of capital flight, and $100 billion of imports -- over the next two years.
And even if petroleum prices drop, the central bank has $22.5 billion in cash and gold, and another $7.5 billion in further unspecified illiquid assets.
Moreover, since 2005 the government has squirreled away $39 billion in a separate, unaudited fund called Fonden. Although analysts do not know how much of this has been spent, some part has probably been saved.
There are rumours that the president is hoarding hard currency to prepare for 2012, when he faces a difficult re-election battle that will cost him money. The recent spike in oil prices caused by unrest in the Middle East will surely give Chavez some extra breathing room. And at a pinch, he could probably turn to his friends in Beijing for a new loan.
Nonetheless, that sovereign default is even being mentioned in the same breath as the name of a big oil producer in a fast-growing region says something about Chavez' economic stewardship. Even if he makes it past 2012, he will eventually either have to change his policies or deny bondholders what they are owed.
Sunday, March 6, 2011
More lies from Venezuela's Government...
VenEconomy: In February, the Central Bank reported that the economy grew by 0.6% in the fourth quarter of 2010 and that, therefore, the country had climbed out of the recession.
With this announcement, the government is lying to the Venezuelan people yet again.
A comparison of the final February figures and the preliminary figures announced in December last year reveals that, in order to achieve this view of an improvement in the economy, the Central Bank is claiming what seems to be three lies:
That oil activity grew by 0.8% in the fourth quarter, instead of 0.2% as reported in December. OPEC contradicts this when it reports that production fell by 1.4%.
That nonoil activity grew by 0.2%, instead of the 6% drop estimated in December.
That the main factor that altered the result of nonoil activity was the manufacturing sector, which went from an estimated drop of 33.5% to a reduction of only 0.4%. Could it be merely coincidental that the entries with the biggest adjustments are supplied by state-owned entities such as PDVSA and the CVG?
The falseness of these figures is more than evident.
Another lie with negative international repercussions for the country is that Venezuela is not "selling any gasoline to Iran." On February 4 this year, in support of this statement, the Energy and Oil Minister-president of PDVSA Rafael Ramirez explained that the government understood that "the Islamic Republic had already solved the problem of the fuel deficit it apparently had."
But this Monday, the US Department of State announced that the United States is investigating Venezuela for allegedly having violated the Comprehensive Iran Sanctions, Accountability and Divestment Act (CISADA), passed in July 2010 after the Security Council of the United Nations issued Resolution 1929, which imposes military and financial sanctions on Iran, one of the outlaw states with close ties to Hugo Chávez.
What is more, US Congressman Connie Mack has stated that he has "documentary proof" of PDVSA's sales to the National Iranian Oil Company. Mack has also proposed that Venezuela be sanctioned for this and other violations of international laws.
If this proposal prospers, the lie will have cost the country very dear.
With this announcement, the government is lying to the Venezuelan people yet again.
A comparison of the final February figures and the preliminary figures announced in December last year reveals that, in order to achieve this view of an improvement in the economy, the Central Bank is claiming what seems to be three lies:
That oil activity grew by 0.8% in the fourth quarter, instead of 0.2% as reported in December. OPEC contradicts this when it reports that production fell by 1.4%.
That nonoil activity grew by 0.2%, instead of the 6% drop estimated in December.
That the main factor that altered the result of nonoil activity was the manufacturing sector, which went from an estimated drop of 33.5% to a reduction of only 0.4%. Could it be merely coincidental that the entries with the biggest adjustments are supplied by state-owned entities such as PDVSA and the CVG?
The falseness of these figures is more than evident.
Another lie with negative international repercussions for the country is that Venezuela is not "selling any gasoline to Iran." On February 4 this year, in support of this statement, the Energy and Oil Minister-president of PDVSA Rafael Ramirez explained that the government understood that "the Islamic Republic had already solved the problem of the fuel deficit it apparently had."
But this Monday, the US Department of State announced that the United States is investigating Venezuela for allegedly having violated the Comprehensive Iran Sanctions, Accountability and Divestment Act (CISADA), passed in July 2010 after the Security Council of the United Nations issued Resolution 1929, which imposes military and financial sanctions on Iran, one of the outlaw states with close ties to Hugo Chávez.
What is more, US Congressman Connie Mack has stated that he has "documentary proof" of PDVSA's sales to the National Iranian Oil Company. Mack has also proposed that Venezuela be sanctioned for this and other violations of international laws.
If this proposal prospers, the lie will have cost the country very dear.
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