The state of play...

Quico says: So, with 36 days to go until December 3rd, where is this election campaign? Basically, it's one of two things. Either:

• All the recent polls are roughly right, and Chavez is beating Rosales by somewhere between 15 and 30 points.
  or
  
• People are too scared to tell pollsters the truth, and the race is actually neck and neck.

Which one is it? Frankly, the polling news is so incredibly awful, I can see how it beggars' opposition supporters' belief: if DATOS, Consultores 21 and Zogby are more or less right, it would mean that, through mid-October, Rosales had managed to consolidate the anti-Chavez base and that's it.

His numbers are below even the what a "generic anti-Chavez candidate" had in May and June polling. That would mean Rosales has not even managed to consolidate the support of all the non-Chavistas who said they were willing to vote against Chavez six months ago. Now, a bunch of them are "undecided"! Not good news for a candidate whose only path to victory, demographically speaking, is to sweep essentially all undecideds and win a few soft-core chavistas as well.

DATOS tracking poll: OUCH!

So can Rosales really be running so far behind? Or are the polls screwed up somehow? I tend to think we really are getting whooped. As Lucia - who, contrary to popular belief, is NOT me - posted in a recent comments section:

Every day, surveys are conducted in nations where voters face substantially more danger or political repression than they do in Venezuela. Whether it's the Gaza Strip or West Africa or Nepal -- polling is happening. Pollsters who work in such places have developed methods for determining whether/how fear affects their ability to take an accurate survey, and for making the necessary adjustments.

But ask Luis Vicente Leon, Luis Christiansen, Saade, Keller et al if they're finding it harder than usual to get people to agree to participate? Once they agree, are more interviews (than usual) terminated once people realize political questions are included?

They'd tell you: nope, nothing out of the ordinary on that front.

Nor would any other of the normal indicators be present -- or, again, not present in sufficient size to warrant throwing traditional methods (and their results) out of the window.

But even if the slew of recent polls are all way off because people are fibbing to pollsters, I don't really see how that's good news for the opposition. If folks really are so scared of getting on the wrong side of the Bolivarianos that they won't even talk honestly to a pollster, what are the chances they'll feel emboldened enough to put their finger on a fingerprint scanner, get their names ticked off on a cuaderno electronico, and then go cast a vote for Rosales on a Smartmatic machine? That, my friends, is a much, much scarier proposition.

We should be honest here: unless something dramatic happens in the next month and a half to change the dynamics of the race, we're going to lose, and we're going to lose by a lot.

Admittedly, it always seemed likely that we would lose simply because most people vote with their pocketbooks and we're in the middle of an extravagant oil bonanza. But losing by 5 points is not the same thing as losing by 25 points...and what's staggering is that we seem headed for 25-point country.

A more eloquent candidate, one less visibly tied to the traditional opposition political class, a more effectively communicated Mi Negra...we can all start making our little pet lists of what the opposition might have done differently. But then, even the perfect oppo candidate running the perfect oppo campaign would find it hard to beat Comandante Moneybags and the $60/Barrel Brigade.

Surely I'll eat my words with a spoon if something dramatic happens in the next five weeks to change the dynamics of the race. But at the moment? It's grim...

A surplus of half-truths

Katy says: Venezuela's Finance Minister unveiled the government's budget for fiscal year 2007 recently. Venezuelan consultancy Veneconomy recently published an op-ed piece, for subscribers only, that sheds some light on what the document contains.

One of the main features of the budget is that both income and expenses are under-estimated, as is usual in Venezuelan budgets. But Veneconomy argues that the Chávez administration is grossly under-estimating earnings for next year with the sole purpose of lowering their obligations to state and local governments through Constitutional Allocations.

In Venezuela, state and local governments have very few tools to tax the population. Instead, they are automatically entitled to a percentage of the government's "ordinary income" as defined in each year's budget. This proportion is distributed among the different governments according to their population.

The 2007 budget assumes the price of oil will be $29. It also assumes inflation will be around 10-12%, contrary to Veneconomy's estimates of 17-19%. Finally, the budget assumes the exchange rate will remain at 2,150 Bs/$. Veneconomy thinks it is unlikely the exchange rate will remain in that range, predicting that it will have to change to 2,400 Bs/$ before 2007 is out.

The outcome of all this is that income and expenses are under-estimated. For example, any oil income stemming from a price of oil higher than US$29 would be considered "extraordinary income" and would therefore not be part of Constitutional Allocations. Any extra income from a depreciation of the exchange rate is also considered "extraordinary income" and would not be part of the allocations to state and local governments either.

Expenses are also under-estimated. The budget assumes, according to Veneconomy, that both income and expenses will remain constant relative to this year's budget. This implies that, in real terms (i.e., after taking into account an inflation of more than 15%), budgeted real spending and budgeted real income would be lower next year than this year. Likewise, if inflation leaps above 10-12%, state and local governments would not be entitled to compensation to cover the higher costs of the public goods they wish to provide.

The true story behind this, according to Veneconomy, is that both income and expenses are under-estimated in the budget because every year, a higher portion of both is going to special accounts in PDVSA and Fonden, which are handled outside normal budgetary rules. This allows spending to be more discretional and for there to be much less oversight.

Although the National Assembly has become a mere formality due to the total absence of forces contrary to the government, the formality of budget discussions still left room for independent economists and the press to exercise a bit of oversight. This task becomes practically impossible when up to 25% of government spending and income, according to Veneconomy, are not included in the budget but rather in obscure accounts that the Executive manipulates at will and with little to no scrutiny.

Budgets are important because they reflect a government's priorities. Without a formal budgetary discussion, politicians cannot be held accountable by the citizens whose money they are spending. The more obscure the budget becomes, the more discretionary its allocations, the less oversight we will have. In the end, it's democracy that suffers.

Atrévete te te te...

JayDee says: Manuel Rosales made a formal presentation of his Government Program yesterday in the Caracas Eurobuilding. There was no Q&A session for journalists, and he left right after the speech.

Here are some of the highlights:

“Mine will be a completely new government, run by talented professionals.”

“On December 4th, we will have a new opposition, one that will play a role in the decision making process of whichever government.”

“On December 4th, we will have a new Assembly National, and it will respect the necessity of minority representation in the government.”

“I don’t want to be a government that controls all the power; I want my government to have limits on its authority.”

“We should have elections every four years, with a single re-election. 8 years is more than enough for a President to carry out his vision.”

“We will respect private property, from the smallest homes, to the largest businesses.”

“We will respect the professionalism of the armed forces.”

“Our first act will be to de-centralize the authority of the President, so that the Governors and Mayors of Venezuela have more of a say.”

“We will have a foreign policy that encourages regional integration while it defends the interests of Venezuelans.”

“I will be the first Venezuelan President to really preoccupy himself with the well being of our environment.”

“We will construct 1.5 million homes in my administration.”

“We are going to eliminate all politics from our schools.”

“I am going to subsidize the agricultural sector, so that our farmers stop giving away what they grow to other countries.”

“I don’t have any owner; I am free of any previous attachments. I will govern myself, as my own boss.”

Why corruption isn't working as an issue for Rosales...

Quico says: One baffling, infuriating puzzle about this election is why Manuel Rosales isn't getting more traction on corruption. According to Keller's 3rd quarter survey, 52% of respondents think corruption is getting worse, and 30% think it's as bad as it's always been. Only on crime and drugs are people more critical of the government. So why can't Rosales get a lift out of it?


I think the answer is that corruption only riles people up when the economy stinks. During bad times, Venezuelans make a direct link between their pocket-book and corruption. They figure if they don't have any money, it's because people in power are stealing it. This is why Chavez managed to get so much traction out of the issue back in 1998...when oil was selling for 10 bucks a pop.

But now? The country is awash in petrodollars, people have more money in their pocket than they used to, times are good. In that setting, corruption becomes an abstract issue. Surely they know that the chavista elite is stealing a bucketfull - that's what they tell Keller. But that realization doesn't sear with the intensity of rage it would engender if people perceived that they can't afford lunch because somebody in power stole their money.

It's one of the screwy features of petrodependency. Corruption, as an issue, only "works" in Venezuela when the oil market tanks.

Mi Negra: It’s not about growth!

You know, the dangest people seem to read Caracas Chronicles. Today, we have a guest post on Mi Negra by Omar Zambrano, a Venezuelan economist working in Washington, DC

Omar says: Mi Negra, Manuel Rosales' flagship social policy proposal, has generated an intense electoral debate. Unfortunately, discussion on its potential economic and development impacts has been rather scarce and shallow. With some crucial features of the scheme still unclear or unrevealed, particularly those related to the ultimate beneficiaries and the conditions attached to the handouts (as well as some still fuzzy financial sustainability issues), I'd say we can reasonably characterize the Rosales' proposal as a Venezuelan variant of a Conditional Cash Transfer (CCT) mechanism, which is a handout to a targeted set of households (e.g. the poor, the poorest of the poor, the unemployed) contingent on a given behavior (e.g. children's education and health, home improvement, etc.).

The question of who will benefit is an important one: the economic impacts of more targeted mechanism like a CCT, can differ radically from proposals like the one presented earlier by Julio Borges.

Just for background, this sort of anti-poverty program has been used with considerable success in the region since the early 90's. The idea has been replicated elsewhere in the developing world. As trivia, I was surprised to find out that a program whose earliest precedent can be traced in Venezuela (the Beca Escolar, 1989), now is being considered even in the most conspicuous city of Mr. Danger's empire.

First off, lets be clear: I really don't think we should judge Mi Negra in terms of its effects on growth. Don't get me wrong. I'm sure that Mi Negra would have huge growth implications, and I'm pretty certain those effects would be positive. But growth considerations should not take center stage in discussing an instrument designed to achieve something else: to fight poverty and exclusion.

As I told Quico privately, we economists are trained to think you need as many public policy instruments as you have public policy goals. In a world with multiple objectives, you will need multiple instruments. Policy makers should aim to maximize social welfare, not growth rates. If we agree that Mi Negra is the best instrument for poverty alleviation, we still have many other instruments to tackle growth objectives like the trade policy, exchange rate policy or oil producing policy, etc.

Having said that, I still think Mi Negra would have a positive impact on growth.

Inequality and growth
The record so far shows conditional cash transfer mechanisms (CCTs) are very effective tools in alleviating poverty and improving equity. And measures that help lessen inequality help to spur growth. Here the evidence is quite robust: in a world of highly imperfect markets, those who do not have enough wealth or social status tend to under-invests or to invest in relatively unproductive activities.

Think of a buhonero using Mi Negra cash to finance the transition from being an informal employee (of the buhonero mafia) to a micro entrepreneur (a buhonero who sell his own stuff). An equity improving mechanism like Mi Negra would be efficiency enhancing in the sense of helping to reallocate resources from low-productivity activities to high productivity activities (see World Development Report 2006, Ch.5).

This idea may also hold at the aggregate level. Some authors find evidence that decreased inequality may be related to improved growth rates in poor countries. The argument, in brief, is that Mi Negra could help to raise investment rates, and better investment rates can lead to better growth rates.

Human Capital Accumulation
Provided handouts are attached to some conditions, CCTs have been highly effective increasing the, acquisition, accumulation and access to human capital (which is more education and better health) for the children of beneficiaries. Rigorous studies of Mexico's Progresa/Oportunidades program, Brazil's Bolsa familia and Colombia's Familias en Accion, among others, show clear improvements in the educational achievement and health levels among those targeted by the programs. The effect of human capital accumulation on growth is a well studied and verified phenomenon, now in the mainstream of growth theories. In the 1980s, this theoretical advance was called the endogenous growth revolution - but I can assure you, it's exactly nothing at all like the Nucleos de Desarrollo Endogeno.

Empowerment, transparency and accountability
For certain, the effects in this area are the more important ones. I will paraphrase here my friend Rei, another loyal Caracas Chronicles reader: Mi Negra is the first public policy idea we've seen that openly challenge the distributive model that has been in place in Venezuela since the discover of the Barroso II dwell in 1914. The proposal is absolutely liberal: it gives control over oil rents over to the individual, not the state apparatus.

So the proposal will enhance the incentives for the public to closely monitoring the actions of the State and the oil industry, and generate demand for transparency and accountability in the oil industry, strengthening the checks and balances over the system. Empowerment is the name of the game. As long as Mi Negra leads to a more efficient, transparent and accountable state, we can expect gains in the growth perspective of the country. The evidence here is quite robust as well.

So, can Mi Negra serve as the desperately needed growth engine for the Venezuelan economy? Probably but, perhaps not. If it doesn't, does that make it a bad proposal? Not at all.

Putin heads for the door, Leopoldo stirs the pot

Katy says: Two quick notes:

1.Russian President and elected autocrat Vladimir Putin announced today that, contrary to expectations, he will not attempt to modify his country's Constitution, which imposes a term limit on the Presidency. So he will be leaving office in 2008, even though he is very popular.

Putin's term has been marked by sky-high oil prices, a booming economy, growing presidential control of all of Russia's institutions, a controversial war in Chechnya, hostile attitudes toward weaker neighbors and increasingly heavy-handed restrictions on democratic freedoms.

Despite all of this, Putin has decided to show some democratic colors and is stepping down. Let's hope that our own petrocrat follows Putin's lead - that is, if voters decide to give him another term.

(Note: Russia is a big, complicated country; pardon the simplification.)

2.Leopoldo- Alek Boyd has an interesting interview with Chacao Mayor Leopoldo López, undoubtedly one of the opposition's brightest political stars. I take issue with some of López's positions regarding the Recall Referendum, but the interview is good in that it highlights the fact that the defense of the vote requires such a huge volunteer force, it becomes a task for all of us, not just the politicians. It is up to us to defend our votes.

The problem is that the Rosales campaign is not doing a good enough job of convincing people that voting itself will be secret. There is still a lot of fear in the general population about this point, and it should be addressed from now until the end of the campaign.

That is, of course, assuming it will be secret, which it will be... right?

Being obnoxious as raison d'état

So, it turns out that silly oppo commentators like me had it all wrong: the reason Chavez spent the last few months visiting some 30 capitals and handing out over a billion dollars sweetening up developing country governments was not to get a UN Security Council seat at all. Heavens no! The point, it turns out, was to demonstrate we could block a US-backed bid if we wanted to, to teach the empire a lesson. An objective, you'll agree, that "we have fulfilled."

Sigh.

So is this a sign that Chávez is ready to declare victory and move on from this embarrassing episode? Not at all. His acknowledgement that Venezuela will not get a rotating UN Security Council seat was followed not by acceptance of the need for a consensus candidate, but by a vow not to give up.

Pardon me if I fail to see any logic in this one. Once you've fessed up that you're not going to get the UNSC seat, what possible point is there in "not giving up"? To make sure they've learned their lesson extra good? Or to annoy the shit out of 192 UN ambassadors?

It's almost churchillian, the sentiment...

We shall annoy them on the seas and oceans, we shall annoy them with growing confidence and growing strength in the air, we shall annoy them on the beaches, we shall annoy them on the landing grounds, we shall annoy them in the fields and in the streets, we shall annoy them in the hills; we shall never surrender.

What's the UNSC vote really about?

Those of us focused on Venezuelan affairs will tend to examine the UN Security Council election this week for clues about Chavez's international standing. Probably, though, the vote tells us more about the way the world's governments feel about US hegemony. In a way Venezuela has done the world a service this week by giving states a chance to vote on the overarching strategic issue of the day:

Is international peace and security advanced if you counter the power of the United States at every turn, or does it make more sense to work pragmatically with the hegemonic power, at least sometimes? Is US power a purely negative force in the world? Or is the US, at least on some matters, a benevolent hegemon, one able to work constructively towards international peace and security?

These were the questions states were answering when they chose between Venezuela and Guatemala this week, and the answer has been clear: about 80 countries want a voice in the UN Security Council that will oppose the US on everything, always, and about 105 countries do not.

Certainly that such a lot of countries stand ready to back a policy as radical as Chavez's gives a strong indication of how badly the Bush administration has damaged the US brand in world affairs. A bigger group of countries, though, feels less threatened by the US than by the forces the US is trying to contain. Which is why they prefer a functioning UN Security Council to one bogged down by rhetorical grandstanding by a rotating member.

When you elevate "anti-imperialism" to the status of sole principle underpinning your foreign policy, you jump in bed, ipso facto, with forces far, far scarier than the US. How many UNSC votes did Venezuela lose to Chavez's flirting with North Korea? To his embrace of Ahmadinejad? To his solidarity with FARC? Certainly more than a few, probably more than he gained.

When anti-imperialism is interpreted, Chavez-style, in the most primitive and unreflexive way possible - as an imperative to side with every enemy of Washington, all other considerations be damned - some governments may line up to applaud, but many more will write you off as an ideological zealot.

Because it should be clear that it's Chavez's lack of sophistication, his utter tin-ear for the sense of the ridiculous that ultimately doomed Venezuela's bid. A loud and firm voice meant to balance US hegemonic power? Probably most countries in the world would love a country like that in the UN Security Council. But when you call George W. Bush the devil, a genocidal drunk, when you say he makes Hitler look like a suckling baby etc. etc. you cross that fateful border between the corageous and the ridiculous. Reducing diplomacy to the level of vaudeville act, you manage only to discredit the cause you claim to champion.

Ironically, by intensifying the link in international policy-makers' minds between "anti-US hegemony" and "comedically unhinged lunacy," Chavez has probably bolstered the legitimacy of US power more than he has undermined it. In a world where "only folks as nutty as Chavez" strike anti-imperialist postures, posing a strong challenge to American power makes you look like a nut. In the wake of Chavez's "devil" speech, the perception that Venezuelan foreign policy is just not serious has hardened. And that's an own-goal Chavez has scored all on his own, with no help at all from his myriad enemies, real or imagined.

The Dignity of Venezuela's UN Security Council Bid

This gobsmacking tidbit courtesy of the UK daily The Independent:

Not content with building runways in the Caribbean, sending aid to Africa and striking an oil deal here and there - not to mention calling George Bush "the devil" - Venezuelan President Hugo Chavez has resorted to more conventional means of convincing foreign statesmen that his country deserves a seat on the UN Security Council.

Venezuela gifted chocolates to delegates, and has now imported a crack team of Latin lovelies to charm those in need of a little gentle persuasion.

"They're not quite scantily clad," says a bag-carrier in the corridors of power, "but there is a bit of brushing of thighs with the older delegates.

What remittances tell us about Mi Negra

One important question in considering Manuel Rosales' plan to distribute a portion of oil revenues directly to poor families is how much of the money is likely to be invested and how much to be consumed. Some intriguing clues can be found in a recent Inter-American Development Bank report on how Latin American families spend the money their relatives in the US send back.

The research finds that 73% of Latin American immigrants in the US regularly send money back to their families. The average remittance - $300 per month - is actually at the low end of what Rosales proposes to give poor families each month (Bs.600,000/month.) Remarkably, the IADB finds that some 15-20% of the money sent back is invested rather than consumed, most of it on housing.

In some ways, remittances are a good approximation to the likely impact of Mi Negra. Like oil money would be under the Mi Negra plan, remittance money originates from economic activity abroad and is delivered directly to poor families.

The parallel also suggests some caution about the development potential of Mi Negra. In El Salvador - nobody's idea of an economic powerhouse - 22% of households receive remittances totalling $2.9 billion each year. It's the country's biggest source of foreign exchange earnings, and for a country with a population under 7 million, a hefty chunk of cash (17% of GDP, to be precise.) Yet, while remittances have doubtlessly made life much more comfortable for many Salvadoreans with relatives working abroad, there's little sign that remittance money is leading to the kind of productive transformation of Salvadoran society that could really end poverty there. And, I think, the same goes for Mi Negra-type proposals.

Venezuela after December 4th: Working out the Scenarios

One way or another, Venezuela will enter a new phase after December 3rd's presidential election. But what are the most likely scenarios for 2007 and beyond?

How about working out some scenarios colaboratively in the Comments' Forum? What do you see as the most likely post-election scenarios? Why?

Reading the UN Security Council Vote

Long-time reader, first-time poster Sentil shares his experience of how things really happen at the UN in this one-time guest post.

Yesterday's vote for the Security Council seat was really something, wasn't it? After 10 rounds of voting, neither Guatemala nor Venezuela reached the 2/3rds majority needed to capture the seat, and a third country option looks increasingly likely when the voting restarts at 10 a.m. today.

In the first round of voting, Guatemala had a decisive lead, although Venezuela edged back up in subsequent votes, even tying by the sixth round.

None of this was unexpected by either side, and actually may have less to do with with Venezuelan carrots or U.S. sticks than with longstanding committments between countries.

Everyone expected Guatemala to have more support in the early voting due to obscure deals made between member states. There's nothing exceptional about that: everything at the U.N. is a horse trade. Deals are sometimes struck years before a vote. A country may vow to support Guatemala's eventual bid for a Security Council seat in exchange for Guatemala's support for a particular project or vote. Delegates have long memories at the UN.

While some members are committed to voting for a particular country, their commitment is precisely calibrated in the original deal. For example, a country may have promised to support Guatemala through the first 10 rounds, while another may have pledged their support through 15 rounds. After those committment have been met, they are free to vote their minds.

A number of people have asked how these commitments could be enforced, since the vote is secret. Trust me, experienced U.N. delegates are skilled vote counters, and come away from each vote with a pretty strong idea of who voted for whom. If a member state breaks an earlier committment, it can seriously jeopardize support for their key projects down the road.

Between each round of voting, you can be sure that the pressure was on to capture "swing" votes. While there were likely negotiations on behalf of Venezuela and the U.S., I imagine that the heaviest push was coming from the contingency planners - those looking to promote a third, less controversial country like Uruguay or Costa Rica. Most delegates have no strong allegence toward either side, and would frankly be relieved to get the voting over with and the vote out of the spotlight. The fact that no third party emerged yesterday is an indication that the base for both sides is pretty strong, which hindered the rise a third-country coalition.

Still, most of the arm twisting likely happened after the vote adjourned yesterday evening, so the first couple of rounds of voting this morning will be indicative of where things stand. If a third country receives a good chunk of the vote early on this morning, it's probably all over for Venezuela and Guatemala. If there are only a few scattered votes for a third country, it means that both Guatemala and Venezuela are holding on to their base and we'll be in for a protracted battle. If Venezuela sees a spike in support in the early votes, they will push to go all the way. Ditto for an early Guatemala lead.

If you have LOTS of time to kill...you can follow the UN vote live on this UN Webcast Page.

Bonehead Populism

This article about the first day in operation of the Caracas-Cúa rail line in today's El Universal could be used as textbook material in a first year microeconomics course. I can just see it in the chapter on the Price Mechanism, a little side-bar on the unforeseen (but far from unforeseeable) consequences of making costly things free:

None of the new train users were surprised to find long lines outside the stations in Cúa and Charallave, even before 5 in the morning this Monday. The cause? The start of operations came with the delays typical of a brand new system, and user demand outstripped expectations, due to the last minute decision to make rides free.


People from Urdaneta County waited at their station until 5:20 am to take the first railroad, while the second only got there at 6:40. The delays meant that wagons arriving at Cúa - the start of the line - were already pratically full, since some passengers from Charallave-Norte and Charallave-Sur who wanted to go to Caracas opted to get on the southbound trains to Cúa so they could find seats and enjoy a more comfortable trip. This situation generated a vicious circle that led to total congestion all through the system.

The wait was in vain for many users who could not get to the train platforms before 9 a.m. in any of the three stations. Though they had paid Bs.1,100 (US$0.50) to get to Charallave-Norte or Charallave-Sur on minibuses, they ended up having to ride buses to Caracas as usual because they missed the last morning train.

21st century socialists can't seem to understand that price is a rationing mechanism - the way you make sure that no more of a scarce good or service is demanded than can be supplied. You can take away the price signal, remove any incentive not to over-consume, but that does not magically increase supply. Encourage over-consumption of rail services and you don't strike a glorious blow against the ideological superstructure of savage neoliberalism: you just create a shortage.

Which, of course, gets back to JayDee's point yesterday. Everybody wants a society where people can afford to move quickly and comfortably from home to work and back again. But if you try to bring it about in the most primitive, least thought-through way possible (free train for everybody!) you don't advance social justice, you just make an all around mess.

The Little Shopkeeper That Couldn't...

JayDee says: Of all the neighborhoods I have explored in Caracas, El Valle is one of my favorites. There is always something interesting going on in the area.

A few months back, I had a fascinating conversation with a shopkeeper whose little bodega is situated right in between the working class high-rises of El Valle and the Calle 13 barrio.

The first time I met José, I'd stopped for a cold Polar after a long afternoon touring the various misiones in the neighborhood. His storefront is surrounded by what many Chávez supporters would regard as the crowning achievements of the Bolivarian Revolution. Free soup kitchens, adult literacy programs, grass roots community radio stations, all gracias a Chávez, can be found within blocks of his bodega. From the rooftop of the man’s store, you can throw a rock and hit the front door of the house where Caracas Mayor Juan Barreto was born.

The area is almost all Chávista, of course.

José’s bodega is modest. His sales consist mostly of beer and cigarettes, though children often pass through with a handful of change to buy candy, and he carries some basic groceries - fresh bread and sandwich meat, a few canned goods and milk.

His store is the only source of revenue for both himself and his family, and he has been in this spot for approaching two decades. His shelves used to be stocked with a wide variety of groceries, though since the Mercal (subsidized supermarket) opened down the street a few years back, his inventory and his income have slowly dried up.

One small shopkeeper can’t vie for business with the government. It is financially impossible for the man to offer competitive prices, and as his earnings have slowed, the goods he is able to stock have dwindled. Selling beers and cigarettes one at a time is all that's keeping him afloat.

“Anyone but Chávez,” he said when I asked him how he planned to vote in December.

“His government has benefited many in the area, definitely, and I understand why people like him. But his policies aren’t very well thought through. I am not of the oligarchy, I was never rich; but I put my children through college with this store. And now...” he trailed off as his arm swept over a mostly empty shelf.

José’s story illustrates just how complex governance is, and shows a major shortcoming of the Chávez administration.

You would be hard-pressed to find someone who is opposed to the principals behind many of the misiones. Who is going to argue that a father living in Petare shouldn’t learn to read, or that a mother living in 23 de Enero shouldn’t be able to afford a carton of milk for her kid?

Too often the debate on what is going on in Venezuela is side-tracked into a meaningless caricature of an argument.

Jose’s problem with Mercal doesn’t stem from the fact that he is an elite from El Country Club who hates the poor, but from the fact that the government’s dismal planning has actually made it more difficult for him (a working class man from a working class neighborhood) to eke out a living.

And then people wonder why the percentage of those working in the informal economy is so high...

Let the spending binge begin!

Two news items struck my eye over the weekend:

1. Chavez announced that public sector workers will get their yearly aguinaldos (Christmas bonuses) on November 1st this year.
   
   
2. Chavez announced the new Cua-Caracas railway will be free for the remainder of this year.

In big ways and small, then, the pre-election spending binge is on.

If petrostate populism is the art of turning control of the state's oil money into control of the state in a self-perpetuating cycle, the ability to manipulate the timing of state spending for political purposes must be one of the most potent weapons in its arsenal.

Pre-election spending boosts are, of course, a feature of most democracies. In Venezuela, though, with the huge weight of the state-monopolized oil industry in the economy, the potency of such tactics is magnified.

Pre-election spend-a-thons work in incumbents' favor via two different channels. Directly, by making recipients of state handouts grateful and symbolically indebted to the government in power, with the understanding that they will reciprocate at the voting booth. But also indirectly, by boosting aggregate demand, making money circulate in the streets, and engineering the short-run feel-good factor associated with every keynesian boomlet.

It wasn't hard to guess that the government would manipulate the timing of state spending to coincide with the run-up to the election. Sadly, my guess is that the spending spree will more or less cancel out the advantage Chavez has been giving Rosales by running an unfocused, confused and contradictory campaign.

People vote their pocket books, folks, and Chavez has the power to determine when they're empty and when they're full.

Thinking through a Rosales presidency

Lost in all the campaign horse-race excitement is a simple question: if he did manage to beat Chavez, what would a Manuel Rosales presidency actually be like? How does the guy go about governing in an institutional environment dominated entirely by chavista appointees? Is he really up to it?

The scenarios are pretty dire.

• How does Rosales negotiate a budget with a 100% chavista National Assembly?
  
• What happens when the chavista-controlled Supreme Tribunal declares Mi Negra unconstitutional?
  
• How does he deal with the barrage of investigations from a Chavez controlled Comptrollership and Prosecutor General?
  
• How does he deal with the 22 chavista state governors?
  
• How does he take the 30,000 Kalashnikovs out of the hands of the Cuban trained Frente Francisco de Miranda?
  
• What does he do with the tens of thousands of Cuban doctors, and the hundreds (or thousands) of Cuban security agents in the country?
  
• Last but not least, how does he handle Leader of the Opposition Hugo Chavez?
  

The short answer is that he will be forced to call a new Constituent Assembly...but then, what happens if he loses the elections to appoint its members?

Folks, even if Rosales wins, it's not the end. It's merely the beginning.

Here a coup, there a coup, everywhere a coup coup...

Introductions are in order. Over the next few weeks, international wo/man of mystery JayDee will be posting occassionally on Caracas Chronicles. JayDee breaks the by-now-established CC mold in that s/he is actually IN Caracas. Imagine that! Further details withheld to avoid the wrath of our masters in Langley.
-Quico

JayDee says: One of the most interesting facets of Chavez's political strategy is to see how he uses the threat of "The Gringos are Coming!" as a weapon. In the last month, he has stated that Zulia police failed to take him out while he was campaigning. He followed that one up a few days latter with a bizarre claim that his spy in the white house has informed him that George W. has sworn to assassinate Hugo before leaving office in 2008.

From a political standpoint - It's a brilliant maneuver as slick and dark as anything Karl Rove or Dick Cheney have ever dreamt up. Chavez is constantly putting Rosales on the defensive while simultaneously linking him with arguably the most unpopular gringo in Latin America since at least Ronald Reagan. Most recently, the Chavez administration has been talking up the imminent U.S. backed coup against Evo Morales in Bolivia, and one has to wonder what the ulterior motive is here. We have all debated the possibility of the U.S. invading Venezuela, a prospect I happen to find very, very unlikely. But with Iraq going down the drain, Iran holding itself proudly in defiance of the U.N., and North Korea going nuclear, it seems almost ludicrous that the C.I.A would be working overtime to bring about Evo's downfall.

On the other hand, Morales has been facing a number of protests in country from what should be the his most rock solid constituency.

Is Hugo simply trying to show his fellow revolutionary how to discredit the opposition?

Personally, I have much more faith in Evo than I do Hugo. But it will be interesting to watch and see if he starts to fall in line with Chavez's scare tactics.

The Sacred Right to Vote

Katy says: The following post was written by a few loyal readers. It talks about how to vote, and what to do to defend our votes. In the spirit of real participatory democracy, I am reproducing it verbatim.

PS.- The picture - my idea, not theirs - is, of course, of Aung San Suu Kyi, one of the world's greatest living heroes. May her struggle inspire us.

"In order to make Rosales win the presidential election in December, we need to do two things:

1. Vote.
2. Defend our votes.

It sounds rather simple but past elections have taught us that it is not. Since we don’t plan to lay down and watch our country turned into another Cuba, we have put our heads together to think about the following question:

How can we defend our votes on December 3^rd?

These are the answers we came up with:

Negotiating with the CNE is like going into a blind dark alley and there is nothing new in this regard. The only way to get the CNE to behave is to force it to do so, and to do that, we need the people to back that up. And for the people to back it up, we need informed and prepared people, ready to defend their vote not on December 4, but on December 3 and before.

Perception is the first part of the equation, so an avalanche of clearly identifiable voters, in each and every precinct, has to be part of the strategy. Clear preparation of each individual that will be part of this avalanche is the main clue of the strategy.

Opposition voters could wear white T-shirts with the message: “Maldito el soldado que usa sus armas contra su propio pueblo”. When a National Guard in a voting station sees for 200 times in a row the same message, he will think twice about his actions. The effect of T-shirts with a message could multiply on its own and reduce the fear in the voters.

Fear is another clue element which should be shifted from voters to armed groups. Voters carrying cameras and video recording devices around the voting centers would make the armed groups aware of the fact that their actions are being filmed and recorded. Armed groups need to be left with the uncertainty about how many of their planned abuses will show up clearly demonstrated at some point in the future.

Since in previous events -the regional elections in 2004 come to mind-, the minister of the interior and justice declared that it was forbidden for electors to gather around voting centers to wait for the vote count, it is foreseeable that this time around they’ll do the same. This possibility should be addressed by Rosales before the government presents it as an accomplished fact. Anyway, if people feel safe and protected by one another, they might not care about legalities.

Rosales’ team could wisely benefit from this preparation process to boost the campaign. Certain phrases could be repeated and transformed it into a kind of mantra: “Peaceful revolutions have happened before, why not in Venezuela?” Thousands of citizens peacefully but forcefully defending their votes would be quite a thing to see.

The manual counts have to be extremely well documented with pictures, movies, times, and dates, with the presence of valid officials, judges, notaries, attorneys (there have to be quite a few non-aligned ones). Actas should have the signature of 10, 100, or even more witnesses and multiple copies should be made, especially if the electronic count does not match the paper count. Meetings should be held with international observers before the fact, to ensure they are aware of what is going on.

Remember that the main goal is to force the CNE to play fair and to accomplish it even the obvious needs to be watched.

-Make sure that the principle of 'one person one vote' is followed (ink in the pinkie and vigilant table witnesses).
-Make sure the boxes have not been stuffed before or after the vote.
-Make sure the actas are not manipulated.
-Corroborate the content of the voting boxes against the local machine 'acta'
-Corroborate the local 'actas' against the CNE reports.
-Corroborate the CNE report arithmetic.
- Demand to have the random selection done with a completely manual system, like the Spanish lottery (or something of the sort), to avoid 'spiked' databases.
-Vote early, and make anything possible to reduce the delays that will be imposed in the process.

“The only way to get things moving is to instill hope, to act with the conviction that things can be better, so that that conviction instills hope in others. The multiplication effect of this attitude, taking the challenges for what they are, breeds the creativity to overcome the problems, there is no need to be naïve about them, there is no reason to be blinded by optimism, but there is the need to do something about it. Apathy would not create such conditions. That's why any Opposition candidate's first priority has to be to instill hope, has to be to show Venezuelans that the great majority want change, so participation is the key and apathy is stopped.”

EB

Colaborators: Edgar Brown, Virginia, Damn, Ruben pero Hojillas, Gustavo and Cristina.

Making a believer out of me...

Here's the TV version of Hugo's Love Offensive.



This one, I think, is much worse than the print version. The forced smile. The awkward reading. The gawd-awful music in the beginning. The entire thing is just so incongrous, so gringo-consultant-style, so jarringly out-of-synch with everything that's come before. Really, it's very strange.

I'm still baffled about who exactly the ad is aimed at, but I guess we can reason it out by process of elimination. His hardcore base likes his fire-breathing style - they're not buying this. NiNis were never really invested emotionally with Chávez - he has no love to rekindle with them. And his opponents? It'll only anger them.

So who's left? Transactional chavistas: poor people who were never ideologically aligned with Chávez, but did have a strong emotional bond with him and appreciated his government's handouts. And, in particular, transactional chavista women.

If that's the case, if Chavez is worried enough about losing transactional chavista women's votes to recast his entire campaign to appeal to them, that is very good news for Rosales indeed. Because they have held the key to victory all along: without poaching at least a few transactionals, the numbers just don't add up to 50%+1 for Rosales.

However you interpret the reasons behind Chávez's dramatic change of campaign strategy, though, it's hard to avoid the impression that the guy is seriously worried now. Candidates just do not make message U-Turns on this scale when everything is honky-dory and they're cruising to victory. No way.

Because, lets be clear: the U-Turn couldn't be more complete. There is a wide abyss between "10 millones por el buche" and "Vote for me because I love you." There's just no way to square those two (Por amor por el buche?) Will the chavistas who loved Macho Man Chavez stay on board for the new, fuzzy, touchy feely Chavez? Is the switch even credible at this point? I really doubt it...

Plain old bonkers...

This ad is so, so far off the deep end, when someone described it in the comments section I thought it had to be a hoax. In fact, it is a half-page ad in today's El Nacional.



Aside from the unabashed weirdness of the message, the thing that strikes me is that this is really awful positioning. It's an ad about what Chavez needs, not about what the voters need. Me, me, me, me, me. Vote for MEEEEEE...

Then there is that odd, pleading tone. That sulking request for more time, coupled with the promise of endless love. There are odd overtones here of the cycle of domestic violence. After abusing his partner, "the batterer is frequently sorry, feeling guilty and willing to try anything to make up. There may be flowers or gifts, dates and romance as in the beginning of the relationship." He tries to pull the old heartstrings, to rekindle a romance he fears he has badly harmed. Please take me back, he whispers. Whatever I did, I did out of love. I only need more time.

Thing is, some of us remember him in abuse mode only too well...

Venezuelans who get it

Katy says: The following is a translation of an interview with Jean Paul Rivas, the President of CruzSalud. It was originally published in Debates IESA, in its July-September, 2006 issue. It does not appear to be available online.

"We can't see the poor from the highway"

Insurance for the poor? Anyone who has traditionally worked in the medical insurance business knows this is not a question that requires much discussion. The poor are, supposedly, unable to afford an expensive service such as medical attention. However, in the last year and a half, a novel entrepreneurial experience is tending to those caraqueños that insurance companies do not take into account.

Jean Paul Rivas is an entrepreneur with more than fifteen years of experience in the insurance and pension business. A year and half ago, along with three other partners, he founded CruzSalud, a company that offers pre-paid medical care to some ten thousand affiliates in the barrios and other populous zones of Caracas.

CruzSalud sells medical plans ranging from 18 to 40 thousand bolívars per month, which include home medical care, emergency care, dental emergencies, all the supplies needed to get either emergency care or an operation in a public hospital (ranging from the doctor's robe to an electronic scalpel), specialized medical consultations and lab tests. It has ambulances and care units that allow them to reach all of Caracas, 24 hours a day. The easiest way to pay the monthly fee is to buy a pre-paid card in drug stores, kiosks, bakeries and other authorized places, and to activate it just like you would a pre-paid cell phone card.

Sixty employees, including doctors, work in CruzSalud, and they also employ some eighty external physicians. A call centre takes emergency calls day and night, offers up information and renews memberships. Its headquarters is in the Lebrún industrial zone in Caracas, and it has administrative offices in the San Miguel and La Línea barrios of Petare.

Q: Where did the idea to start CruzSalud come from?
JPR: The only thing that is sure to grow in Venezuela is poverty. Before starting CruzSalud we projected the growth in the insurance market for the next ten years: we concluded the market was going to decline because, every day, fewer and fewer people will be able to buy insurance. Regrettably, the number of poor people is bound to go up for several reasons: political, economic, and demographic. The poor are a large market with collective, not individual, purchasing power; in them, we saw a market we could do business with. There are fifty insurance companies in Venezuela, fighting each other for ten percent of the population. Who is looking at the needs of the other ninety percent?

But there's something more: that ten percent of the population used to be twenty percent some twenty years ago. In other words, before, those same fifty insurance, plan administrators and pre-paid assistance companies were fighting for twenty percent of the population, and now they are fighting for ten percent. What percentage will they be fighting over in fifteen years, given the economic rhythm the country is in?

Q: Did you make actuarial calculations?
JPR: We didn’t do any calculations. It was more of a perception, an intuition about what was going on in the market. After having worked in this industry for fifteen years, you realize that the market is contracting, in spite of the numbers the Insurance Superintendence sometimes publishes. According to those numbers, the market is growing, yes, but in terms of bolívars, not in terms of people insured. If premiums go up by thirty percent, sales go up by thirty percent. But, are there thirty percent more people insured? No.

Q: So you discovered the poor.
JPR: No, I think other people discovered the poor.

Q: You identified them as a market.
JPR: That is what we did, and it remains a gamble. It’s not the same to talk about the poor than to talk about poverty. Poverty from a macro, actuarial or sociological point of view is one thing, but it’s quite another to look at the day-to-day life of the poor. The difference is that poverty, from an economic point of view, perhaps isn’t such. For example, when you go to a place like Petare you see people from different socio-economic levels. For some people, Petare is all in the D or E segment, but the truth is that there are differences: A, B, C, D and E segments.

The owner of the local hardware store, who has his car, who puts it away early so it won’t get stolen, whose kids go to a private college: he belongs to segment A, but one tends to think of him as being in segment D. The kid in the front of the drugstore smoking crack, he belongs to segment E. You have to understand the economics of the poor: because of his dynamics, he can have five thousand bolívars every day, but he never has thirty thousand bolívars; he earns today, gets paid today, plays today and needs to eat today. That is the life of the poor. You have to understand the lady who gets up at five in the morning and only has seven thousand bolívars in her pocket at the end of the day, who never has seventy thousand bolívars, and who buys two tomatoes, a quarter of a cabbage, a cube of chicken broth and a cigarette.

Those of us from the upper-middle class have a hard time understanding poverty. That is what we’ve been learning in CruzSalud, we’ve begun entering their world. When you realize that 85 percent of Venezuela is like that, then you understand that we are the outsiders. If we think the poor have to adapt to us were going in the wrong direction; we are the ones who have to adapt to them. We are not a mass-market company, we don’t advertise on television to reach the barrios. We go into the barrios on foot with our doctors, our nurses and our home units, and we open offices in the barrios.

Q: So then we must realize we are a minority.
JPR: Yes, and we will be an even smaller minority as time goes by. You have to realize how much money the informal sector moves: billions of bolívars, and more than half of the economically active population. People spend 4 billion bolívars a day in gambling and lotteries. Who’s got that kind of money in their pockets? It’s four billion bolívars that are coming from somewhere. How many businesses in Venezuela deal with 4 billion bolívars per day? Very few.

Q: What are the products you offer people with low incomes?
JPR: We offer the health services they need. Although they need a lot, we go as far as they can pay. Something that surprised us when we began to design the products was that their true need wasn’t coverage for one hundred million when they need it, but having somebody to call. People in the middle class always have a doctor handy: a brother-in-law, a cousin, a friend, and a neighbour. The poor have to wait until some nurse they know comes home at night. That is why we developed a call centre, where people can call and have a doctor available twenty-four hours a day.

The first thing they do is not believe you: “and you are going to come all the way up here?” They sign up and then they test us: “I feel bad, come over.” They test you to see if it’s true, because they’re not used to buying intangibles or services but concrete things. You have to build trust with them.

Now, how do you charge nine or eighteen thousand bolívars per month in the barrios? With prepaid cards. For them it’s not strange to buy prepaid cards. We managed to to talk to them in their commercial lingo. They don’t go to the bank. The street vendor who goes to the bank loses his spot, the jeep driver who goes to the bank wastes all day. The only time they have to go to the bank is on Sundays at Sambil. The solution, from their standpoint, is not to make a bank deposit. They don’t have a credit card and they are not on payroll, they work on their own.

Q: Where do these ideas, this way of seeing the world, the country and the poor come from?
JPR: They came when we realized the insurance market was not growing, that companies were spending millions of bolívars taking customers from each other. Then we wondered: where is the vision? Where is the ambition to do much more? There was a market opportunity, a way of helping the country.

Q: What do you mean by “helping the country”? How do you show us you’re honest about that?
JPR: Helping the country implies doing things like we do in CruzSalud: when, for a few thousand bolívars we can give a child paediatric care and give him medications, and making that a sustainable business. That is my particular way of helping my country. When we help a patient, when we hire a young doctor about to get married or wanting to get married who wants to buy her own apartment, and by hiring her we are helping her achieve her goals, those little things are what help the country.

Q: Are you a variation of Barrio Adentro?
JPR: We go into the barrios, although not as “adentro.” We don’t go to where cars or motorcycles can’t reach, or where people need to walk for 45 minutes to get there. We don’t go there, Barrio Adentro is there. Those are the places where people live in extreme poverty; where people don’t have anything to eat and can hardly afford a product like ours. We operate in the more established barrios. For example, in Petare we are in El Carmen, Maca, El Carpintero, La Línea, and we are also entering Catia, Caricuao and the 23 de Enero.

Q: What is your relationship with Barrio Adentro?
JPR: We’ve become a complement to Barrio Adentro. There are people who believe in the Cuban doctors, there are those who do not, but people certainly feel like someone is there for them. Sometimes they don’t have supplies, they have certain needs, sometimes they work, other times they do not. On the other hand, we always work. People now have options they did not have before; they have the choice of something I like to call “comfort in their zone”: both programs in their barrio. People in the barrio with higher incomes can pay for a private plan, then there’s us and whoever can’t pay anything goes to Barrio Adentro.

Working in popular zones is not like opening an office in Acarigua from the Caracas headquarters. To open a health module in a barrio, the nurse has to be from the area. You need “validators:” people from the area who can certify you are there to do good and will not take advantage of them. When you settle down in a barrio you have to get to know the community boss, the organized community in the street. They are more organized than we think they are. We get to sit down with the Barrio Adentro doctor, with the lady from the salon, with the man from the drugstore, with the neighbour and with the street vendors across the street, because it’s an intense lifestyle.

Aside from our offices in Lebrún we are in a private residence in La Línea, in Petare. We rented out half of the living room, put a front window and that’s where our doctor receives patients. The people who own the house have been there for 25 years. When you are a part of a community everybody knows you, everybody wants to get to know you and find out what you’ve come to do. The difference with the middle class is huge: it’s common that in a building the years go by and people don’t know each other. In Caracas’ residential districts, people who live in one block don’t know anyone beyond the second to next house. But they should know, because helping each other is important.

Q: How did you learn all this? Did you consult a sociologist?
JPR: We spent a year planning this thing. We went to the barrios, we walked, we observed, we spoke to the people. We studied models from other countries. These systems work well in India and Nepal. We realized that in underdeveloped countries, public and private health care systems tend to complement each other. We decided to study what is being done in those countries; we did not go study the Spanish or the Swedish systems. When we entered in Venezuela, we realized that we were more like India and some African countries than developed ones, so we went there to see what was being done there.

Q: You discovered the poor as a people, but also as a community. You talked about having to establish connections with the owner of the salon, the guy who owns the drug store, etc.; so people in the barrios have to know one another because they have to help one another.
JPR: We did not discover them; we can’t see the poor from the highway. Someone had to make that step. People like us don’t do it for fear of their personal safety, because they don’t know how to navigate and because it’s an unknown world. We wanted to be pioneers and we were not afraid. Last year we made more than 2,500 house calls in the barrios, 24 hours a day, and we have not had the first incident with personal safety. Of course there is a lot of crime, like in the rest of the country, and a lot of poverty. We decided to enter in an organized manner. Traditional marketing says that you have to think “these are my costs, this is my price, and whoever can afford it has to pay, and if not they can look for something cheaper.” But when your market is that 85 percent of poor people, you have to know what their willingness to pay is, and whether you can actually help them or not.

Q: So Michael Porter is right? You develop a good product or service if the customers are demanding?
JPR: Customers in the barrios are very demanding; because, though it may seem than five or ten thousand bolívars is not a lot, it is to them. Once in Petare I was told the nearest CAT Scan was in Sabana Grande. When I told them there were two in La Urbina, they told me they were talking about the nearest one in terms of their pocket, not in terms of distance. When they find out that for the 400 bolívars that a bus ticket costs they can save 1,500 bolívars on a cheaper scan, they are willing to spend an entire morning in line waiting. The value of money is great to them, so they become demanding customers. When they pay CruzSalud those ten or twenty thousand bolívars per month they expect a lot in return, they expect you not to disappoint them.

Something else: not only are they demanding, but also they protect you as long as you’re good and efficient. We’ve had a lot of things happen to us. They will call at three in the morning with a sick child, with a temperature of 40 degrees. So the person calling tells the paramedic: “When you are nearby, call me and I will go with the child to the police module and you can see him there.” People know their limitations, they know where they live and they don’t want the doctor to have a bad experience, because they know that if the doctor has a bad time he won’t come back. In middle class sectors, when they call for an ambulance and it hasn’t arrived in five minutes they call a hundred times and start complaining. In the barrios people don’t complain as much, but they expect a lot more from you: they expect you to live up to your promises. It’s a pact of words, you could almost not have to write written contracts, but you have to shake hands, you have to look them in the eyes so they can trust you. The mistake a lot of people in the A/B segments make is that, to them, people in the barrios are like the people they employ in their homes. But the barrios are filled with businessmen, entrepreneurs, and college graduates; it’s a complex world.

One of the big challenges of private companies going into low-income segments is that there is no formal economy. When you rent a space in a barrio, nobody is going to draw up a lease and it will not get notarised. How could a multinational possibly rent a space in a barrio without signing a contract?

Q: There is an extended system of micro credits that can loan up to a million bolívars without a single paper being signed.
JPR: All based on the word of the client, because their greatest asset is their word and they are not willing to lose it because they have nothing else. They don’t have luxury goods, they don’t have a home or a car; what they have is their honesty and their credibility and they are not willing to lose it.

Q: Why have so few of the minority in Venezuela dared to reach out to this other part? If the insurance market is not growing, isn’t there a prime business opportunity there? Why were you guys the first to make the leap? Why hasn’t there been any competition?
JPR: Because it’s very hard to adapt to the lifestyle in the barrio. For a bank, for example, the business of micro-financing is difficult because you can’t open a branch in a barrio nor can you hire a manager willing to work there and attract customers. The technological platform is of no use there either, because people earn weekly wages; you can’t draw up a credit document and notarise it because there are no notaries. When traditional companies try and enter, they realize there are no channels, they can’t reach the people so they have to invent their own channels.

Little by little, though, comfort zones in the barrios are beginning to grow. It’s a phenomenon of today’s Venezuela. Companies are making the effort to reach places like the 23 de Enero with movie theatres, with shopping malls that are as close as possible to where people live; they are taking comfort to where people live. It’s one of the great things we are beginning to understand. A generation ago, people living in marginal areas studied so they could move to a better area. That is ending because the country doesn’t allow it anymore. People are getting married and live in the same place where they have always lived. “Why should I move since everybody knows me here and nobody hurts me? Why should I go somewhere else if I’m fine here? Let’s make one more roof, I keep on studying, I get married and I live here.”

Q: What are your short-term goals in terms of growth?
JPR: We want to end 2007 with close to one hundred thousand members.

Q: In a year and a half you plan on multiplying your existing customer base by ten?
JPR: A year ago we didn’t have anybody and now we have ten thousand! And that’s just Caracas. This is a market of millions of people. We plan on opening elsewhere in the country, where obviously growth will be slower but where there is a great market as well. If the traditional insurance and medical industries compete for 3 million people and there are 20 million nobody is paying attention to, I think we’re being conservative. There will be competition for sure, but the market has great growth potential. Companies will have to specialize more and more or face a steep decline; there is no other way to grow in Venezuela in the next five to ten years.

Q: What is CruzSalud’s biggest challenge?
JPR: From an entrepreneurial point of view, growth. We have great plans for creating jobs and improving people’s lives. That’s what we have done from day one. That’s our way of growing.

Keller details...

A little bird sent me a PDF summarizing Keller's 3rd quarter 2006 poll, and I thought I'd share a couple of key slides. This is that poll whose headline finding was Chavez 50%, Rosales 37% - taken soon after Manuel Rosales established himself as the opposition establishment's single candidate against Chavez in December's presidential election.

Annoyingly, there is no Methodology slide, so I don't know what size of towns were polled - only the total sample size (n = 1,000.) All I can say is that Alfredo Keller is a generally professional, reliable public opinion researcher.

So, what do we have? First off, that revealing question pollsters love to ask - overall, how are things going in the country?

click to enlarge
The red line captures positive responses, the blue line negative ones. As you can see, the trend this year is for perceptions to sour: positive responses are down 9 points since the start of the year, and negative answers up 10 points.

Still, a solid 60% of respondents gave a positive response, with less than 40% giving a negative answer. That's a tall mountain for an oppo candidate to climb.

Then, we have Keller's political segmentation slide. While this kind of excercise is mostly down to the pollster's judgment - the way Hinterlaces slices the electoral pie, for instance, results in many more NiNis than using Keller's standard - it's true that a segmentation excercise carried out with consistent methodology over time can give a good idea about trends:

click to enlarge
Now, the trend is for "neutrals" to turn against Chavez, while the number of chavistas stays pretty stable.

Still, the absolute numbers are fairly daunting. At the start of the campaign - and the fieldwork for this poll was done very soon after Manuel Rosales was annointed Single Oppo Leader - the task facing him was to sweep essentially all the NiNis while retaining his base and winning over at least some chavistas. Basically, he has to clean Chavez out comprehensibly, in the middle of a public-spending led, oil-boom fueled consumption bonanza.

Impossible? No.

Very, very hard? Yes.

Policing the comments section

Katy says: I have begun regulating the comments section. There are no fixed guidelines, and I won't catch all offenders, but here are the points to keep in mind before posting something:

• If you post a comment that has no value for the discussion, it will be deleted.
• If you post an incendiary comment that only looks to provoke the anger of other posters, it will be deleted.
• If you post something offensive that has no wit and has been said a million times before, it will be deleted.
• I will not explain my choices for deletions.
• Do not take it personally if I delete a post of yours.
• If I don't like the tone you use in a comment, it will be deleted.
  
• I will exercise my rights to censorship in an absolutely discretionary way, following the guidelines set forth in Venezuela's Media Law.
  
• I will not parse through a comment selecting the good portions and the bad ones. If there is something that makes a comment deletable, it will be deleted in its entirety even if the rest is brilliant.
  
• I won't be banning all the time, only when I have a few moments on my hands.
• Quico has offered to help me enforce standards on the comments section.
  

Open thread on "the avalanche"

Katy says: Manuel Rosales held a big rally in Caracas over the weekend, called "The Avalanche." I could not follow it since weekends are generally bad for me, but I did want to leave a post so people could comment on it.

Our fellow bloggers Daniel, Miguel, Alek and many others have a lot of information on the rally, some of it first-hand.

My favorite part about the event was that Rosales got up there surrounded by his wife, his kids and his baby. No old-time politicians, no military goons, no Fidel, No Evo, No Eva - just a guy, and his family, and hundreds of thousands. Kind of a refreshing photo-op, don't you think?

What do you make of this event? Do you have personal experiences to share?

PS.- Thanks to loyal reader captainccs for the picture below.

Where's the muckraking spirit?

Reading over Katy's latest post, I'm struck with a mixture of exasperation and despair over the state of Venezuelan journalism. Because, you see, I'm in no doubt that the horror stories about corruption she tells are true - and that other cases out there must make the ones she tells seem vanilla. Given all that, I just can't work out why nobody in Venezuela takes the time to investigate, document, and publish the evidence on this stuff.

I mean, poor Iris Varela: she goes to all the trouble of finding a Merc SUV without tinted windows specifically so that people will see her in it and nobody has the decency to take a photo of it. And what would it take to dig up some documentary evidence on JR's Margarita hangout? One or two marginally competent reporters with enough institutional backing to spend a couple of weeks on the story, that's all.

Too scared to print it under your name, or in your newspaper? Hell, what's Noticiero Digital for? (Or, for that matter, Caracas Chronicles?) Somehow, though, these stories never seem to get commissioned. It's infuriating.

"Que se me quemen las manos ... "

Katy says: This news item made me chuckle. In it, they quote Chávez saying that when he leaves Miraflores he'll be "as poor as when he came in." Since he is planning on leaving after he's dead and dead men don't carry cash, technically he'll leave even poorer than when he came in, but never mind. His collaborators and close confidants can't say the same thing.

While in Caracas, I heard horror stories from eyewitnesses to the ill-gotten wealth of chavistas. From direct sources, I learned, for example, that when a famous congresswoman known for her bright red hair bought her Mercedes Benz SUV in cash, the dealer asked her if she wanted tinted glass on her windows, and she said she did not because she wanted everybody to see her in that car. I learned about the brother of a chavista mayor of a large municipality who lives in a posh four-story penthouse in eastern Caracas (yes, four-stories). He has ten bodyguards waiting for him in the parking lot, and he owns a fleet of cars that includes 3 Hummers, a Porsche SUV and a BMW SUV. He is the head of appropriations of the municipality.

I heard stories about former presidents of the CNE building themselves multi-million dollar homes in Margarita designed by renowned architects. I heard stories about congressmen I am acquainted with who walk around wearing $5,000+ tailor-made suits and gold Rolex watches, dining at Caracas' poshest restaurants while doing business with the Italian government. I learned of acquaintances of mine who, by virtue of being related to PDVSA's higher management, have become "toll booths" for getting into the business of exploiting gas in our country.

People aren't stupid. Corruption is everywhere in Venezuela, and the fact that Chávez feels the need to address the issue means that it's becoming a big liability for the government.

The picture of the week

Katy says: Alek Boyd deserves some sort of award for this spontaneous shot of Manuel Rosales on the campaign trail. Have a good weekend everyone!

Bolivian court blocks Morales

Katy says: I don't typically comment on stuff from other countries, but this news item about Bolivia is tangentially related to Venezuela.

For those who can't read Spanish, Bolivia's Supreme Court has denied a request by the Morales government to grant "supra-constitutional", "originarian" powers to Bolivia's Constitutional Assembly. In other words, the Court says that Bolivia's Assembly must work within the bounds of the current Constitution because "originarian" powers can only be given to an Assembly when "a State is being created", such as when Bolivia itself was created in the 1820s. It clearly said this was not the case right now.

This strikes me as a major blow to the Morales administration's attempts to establish a revolution in the mold of Hugo Chávez. Let's recall that the beginning of the process in Venezuela did not come about when Chavez was elected. The process really began when the Supreme Court at the time decided to grant the Constitutional Assembly all-encompassing powers, causing justices such as Cecilia Sosa to resign in disgust.

This decision paved the way for a Chávez-controlled Assembly to do away with all existing powers, including the recently-elected Congress, the Prosecutor General and the Supreme Court itself. As a result, we have had to put up with the unchallenged powers of the Ivan Rincons, Isaías Rodriguezes, Clodosbaldo Russians, Francisco Carrasqueros and other assorted yes-men.

The Bolivian Supreme Court seems to have learned something from our histoy.

PS.- Speaking of Chávez's yes-men, I was surprised to learn while I was in Caracas that Jorge Rodríguez's wife works in Miraflores. She is Chávez's chef. That's some bond the three of them have.

Final de la Marcha - Discurso de Manuel Rosales

Cocoplums and the State

Katy says: A trip to Venezuela is a homecoming. Something about waking up and seeing dilapidated American cars from the 70s and 80s roaming the streets stirs my memories, awakens my saudade. Whether it's the constant honking of horns, the sight of thousands of trees with their trunks half-painted in white, the smell of my mother's lilac bushes or eating traditional, homemade Maracaibo cocoplum jam, Venezuela is a feast for my senses. My country is a place where even in the middle of any city, you have to clean the iguana droppings from your car, the loud chirping of crickets keeps you up at night and the howling of guacharacas announces the break of day.

Venezuela is also a place where sidewalks are an afterthought, traffic lights are mere suggestions and everybody, everywhere is having car trouble. People in Caracas spend two, three, four hours in traffic every day and simply assume it as "the way things are," as if everyone living in large cities had to go through the same. The country's exhuberant nature would look a whole lot better if it didn't have to be viewed through steel bars.

The first airplane I flew in was also having mechanical problems, so the airline gave me 24 hours in Panama City to compensate. Panama City is pretty nice, with impressive skyscrapers and an attractive historic downtown that is slowly reviving. There's poverty there, but I got the feeling during my short stay that it was shrinking, and that conditions were getting better. There is a real sense in the country that tourism is the wave of the future, so they take special care in presenting a clean, safe city.

One of the things that impressed me was how we were able to drive next to the Presidential Palace, which as you can see from the picture was guarded by a few soldiers and nothing else. The turnover of the Canal and the planned expansion seemed to bring about an infectious optimism to the people I spoke to, regardless of their political leaning. I left hoping to find some of that in Venezuela.

Instead of finding hope, I landed in Venezuela finding that the aesthetic of our cities says one thing only: poverty. I had trouble trying to grasp why it is that Venezuela simply looks poorer than other places in Latin America in spite of having a similar culture, similar geographies and somewhat similar standards of living. I concluded that rentism is to blame for much of the bad aesthetics of our cities, for the feeling of chaos that suggests something is not right.

For example, driving through Venezuela you can sense the neglect in public works. Sidewalks are sort of there, sort of not. Streets are full of potholes, public works take forever to complete and the general decorum of the cities is shoddy. Graffitti is common, there is garbage everywhere and the streets belong to gangs. La Chinita Airport in Maracaibo, for example, was renewed a few years ago, yet you can still see significant cracks on walls surrounding air-conditioning vents and in ceilings. Hallways are small and crowded, and even though it presents itself as a modern airport, the guy at customs doesn't even have a computer. It would seem as though anything having to do with the State is done in bad taste, without proper care, with no concern for doing things the best possible way.

One of the reasons for this is rentism. Theorists say two of the reasons States need to exist are: to provide public goods and to intervene in markets or situations where there are negative externalities. But in Venezuela the State - the Petrostate, that is - is there to dole out the wealth, to support a rentist society.

A public good is a good that continues to satisfy other people's needs when consumed. For example, when I walk on a sidewalk, the sidewalk stays there for the next person to use. Defense and justice are public goods. These are goods that are typically not provided privately, so they are one of the reasons States exist.

Externalities occur when one person's consumption causes another person's disutility. For instance, smokers cause negative externalities because their habit not only causes harm to themselves but also take up valuable health-care resources from society, be it in the form of second-hand smoke cancer or in the form of enormous health care costs the State has to cover. The control of externalities is another reason to have a State, so that somebody can tax the smoker and provide the incentives for him or her not to smoke anymore or, if they do, to have enough funds to be able to pay the extra health-care costs their smoking causes to society.

In Venezuela, it seems that the provision of public goods and dealing with externalities are simply not a priority for the State. When crime rates soar, traffic jams sink entire cities into gridlock and lakes suffer from horrendous pollution, one would expect a normal government to care, to do something about it. But neither the current nor previous Venezuelan governments cared about this stuff. All they care about is rents - how to hand them out, how to get favors from people who recieve them, how to produce more of them. The government's entire structure is built around this notion, one of the consequences being that there is total chaos on the streets. Other places in Latin America don't seem to suffer from this.

Some entrepeneurs are beginning to get around this idea. For example, I found out about CruzSalud, a private company that sells insurance to people in the barrios. For a monthly fee of 18 to 40 thousand bolívars, customers in barrios have access to house calls, emergency care, as well as complete health-care kits should they have to go to a public hospital which includes syringes, cotton and scalpels.

A normal State would do its best to have functioning hospitals, since proper health care provides positive externalities for society as a whole. But when the State's attention is turned to creating and distributing rents, some privates see opportunities. It's too bad the CruzSalud can't figure out a way to solve Caracas's traffic problems.

Other entrepeneurs take advantage. One of the most shocking things I learned was that street vendors in highway traffic jams are now selling ice-cold beer to drivers. I confronted a friend who happens to be the President of an entrepeneurial association, asking him whether beer manufacturers didn't feel the need to control the illegal sale of their product. He simply shrugged, telling me it was the role of the State to control that and the company could do nothing about it.

Part of that may be true, but the whole argument goes against modern business ethics. Large private beer companies usually control the shelf where their product is placed on, in every supermarket they sell to. They even control things like the temperature of the refrigerators that hold their products. Surely, I told him, they can control the five or six guys selling beer in the most popular traffic jams. Selling beer in highways causes enormous negative externalities, but neither the State nor the company seem to care, since both are focusing their efforts on their rents.

So think about it the next time you walk around the streets in Venezuela and see people race by at double the speed limit or you trip on a poorly constructed sidewalk. In countries with similar income levels as Venezuela, public goods are not so poorly provided, externalities are taxed. And while you're at it, appreciate the good things around you, like the cocoplums. Luckily there are some things the State hasn't been able to screw up yet.