October 10, 2008

The audacity of ignorance

Juan Cristobal says: The Chávez's administration has a long and distinguished record of pulling the most obscure ñángaras from the gutters of academia and putting them in positions where they can do some real harm. However, the current Minister of Planning, Haiman El Troudi, is in a class of his own.

I've written about Mr. El Troudi's "exotic" policy prescriptions before. And if you're into masochism, you can read more of them in his own blog.

His latest? An earnest call for Venezuelans to respond to the financial crisis by repatriating their dollar holdings. "They're much safer here than in those speculative banks up north."

Once you stop laughing, pause to realize that this is the President's top economic policy architect.

Forget for a second that US bank deposits are insured up to $250,000 by the FDIC, regardless of citizenship. Put aside the fact that nothing "private" is ever safe in Venezuela. Is El Troudi seriously suggesting that investors "flee to Venezuelan quality" by buying up bolivars ... at BsF 2.15 per $?!

Think about it. Suppose you're a chavista bigwig, say, Ambassador to Argentina, and you have a nice hefty bank account in Florida's Commercebank. If you did what El Troudi said, you would change, say $1 million at the official rate and get BsF 2.15 million. The street value of your dollars, though, is close to BsF 4.5 million (last time I checked).

So by bringing your money back to a "safe" country such as Venezuela, you'd be taking a hit of BsF 2.35 million for the privilege of keeping it in a petrostate at the start of an oil slump. Faster than you can say "yanquis de mierda", your bank would be nationalized and the information from your bank accounts would be on a CD, for sale for BsF 1.50 from the friendly street vendors of the Plaza Caracas, readily available to any kidnapper looking for a bargain. Genius!

But, hey, what's left of your money would be safe.

I don't know if El Troudi's suggestion is a desperate plea for capital or a desperate plea for ideas. Probably both.

(ps.- hat tip to Omar for the title)

50 Ways to Imprison Your Opponents Without Convicting Them

Quico says: This is one of those tidbits that just beggars all belief: the trial of one-time Caracas security officials Lazaro Forero, Ivan Simonovis and Henry Vivas has now been delayed fifty times since it started 31 months ago, making it the longest trial in Venezuelan history.

The amazing thing is that the trial - where the three are accused of plotting the mass murder of Chávez supporters on that crazy pre-coup afternoon of April 11th, 2002 - is basically over, but the prosecution has gone through every delaying tactic in the book to forestall a final decision. The defense has had to wait six months just for a chance to put forward its final arguments. The prosecution has blown through every permissible time-lag in COPP, they have no legal standing whatsoever to keep the defendants behind bars anymore. But they do. Could this have something to do with the fact that the prosecutor in charge of the case is the Interior Minister's sister?

This thing has mistrial written all over it...but Forero, Simonovis and Vivas are still rotting away in jail.

Hey, it's hardly the Gulag Archipelago, but make no mistake about it: these guys are political prisoners.

October 9, 2008

My country went Marxist and all I got was this lousy fiscal planning system

Quico says: I'll tell you what gets me about Chávez's reaction to the Great Financial Freakout of 2008. As the world faces a protracted recession, our supposedly Marxist government got caught totally unprepared, holding just 10 months worth of imports in foreign currency reserves and far fewer rainy-day funds than it'll need to smooth out spending if the crisis lasts more than a year or so.

Now, there's a lot of trash to be talked about Marxism, a doctrine that gets much more wrong than it gets right. One thing you cannot fault Marxism for, though, is ignoring recessions. Just the opposite: Marx focused almost obsessively on the cyclical nature of capitalism. Das Kapital is, in important ways, an extended meditation on the business cycle, with capitalism portrayed as lurching inevitably from one crisis to the next, a pattern Marx thought would ultimately doom it. Chávez himself is, on some level, aware of this central bit of Marxist doctrine, which is why you've barely been able to wipe the shit-eating grin from his face for the last few weeks.

...but, if Chavez understood a crisis was looming, if he knew all along that capitalism, like Windox XP, just sort of seizes up every so often and needs a reboot, if he grasped that oil bust inevitably follows oil boom, then why the heck didn't he do anything to bolster the country's resilience to these inevitable shocks?

I mean, c'mon! A Marxist who gets caught off guard by a recession is like a Jehova's Witness who gets caught off guard by the rapture!

Lets review the score here. Venezuela is a dependent monoexporter, getting 94.6% of its foreign currency earnings from oil exports. The price of oil has already fallen 46% from its high, and is now hovering around Chávez's budget-sustainability point of about $80/bbl.

There is, of course, no way to really forecast the oil market, but if the generalized craziness in the credit markets sets off a prolonged recession in North America and Europe - which is looking pretty likely these days - we could easily be looking at several years of depressed global demand for oil. OPEC will do what it can to blunt the impact, but it's easy to see oil prices hovering somewhere in the $35-75/bbl range over the next several years. Even at the higher part of that range, the government's spending plans become chimeric...and the chances of continuing to bankroll society by continually increasing spending are pretty well nil.

Wait, don't we have reserves for cases like this? Well, the foreign reserves kitty is not quite empty - at $39 billion, it looks healthy at first glance. Trouble is that at the furious rate we've been importing over the last few years, that'll only cover about 10 months of imports!

Plus, note, those are currency reserves: money that's there to back the currency, not for the government to spend. So how about, rainy day funds? Money the government can actually use to pay teachers and nurses and such?

All we've got left over from that furious oil bonanza we've been living through is $15 billion or so - a sum that ODH Group's Abelardo Daza estimates might tide us over for a bit over year, maybe. Care to bet the global recession won't last longer than that?

Actually, Chávez did worse than merely not preparing for a bust: he actually dismantled the risk-management mechanisms that were in place when he got there!

And this is the worst part, the most mind-bendingly maddening aspect of this whole situation: we actually had a mechanism to smooth out the oil cycle! It was called FIEM, and it was carefully designed to set aside part the windfall during high-oil years so it could be spent when oil prices dropped. The Chávez regime first ignored and later chronically starved FIEM of funds. Today, there's less than a billion bucks in there - well under a week's worth of public spending - instead of the tens of billions we should've saved when oil was at $145/bbl.

Instead of saving, Chávez went nuts buying submarines for the navy and cool lookin' planes for the air force and oil for Fidel and oil refineries for Correa and houses made of oil for Daniel Ortega: an orgy of non-productive spending that means we're now heading into an oil price slump with more debt than we had when the boom started!

The scale of the irresponsibility in the way our public finances have been managed is simply staggering. I mean, seriously, it defeats me: I don't know how to find the words.

It's, of course, kind of crass to look at the political opportunities that will be created by the social tragedy we're now heading toward. Still, the one ray of hope in all this is that Chávez's political vision will probably be as much a victim of this crash as Lehman Brothers was.

Our economy is more dependent on oil today than it was ahead of Viernes Negro in 1982. We are, once again, going to have to borrow to cover the shortfall caused by an oil slump, except this time we'll have to borrow either from very badly battered international credit markets or from geopolitical allies that are getting hit by the oil slump just as hard as we are (Iran, Russia).

We've seen this movie before - we know what it does to the prestige of those who govern while it's playing.

The first act will be devaluation. The second act will be the end of Chávez's Rico McPato shtick, both at home and abroad. There's no way chavismo will be able to sustain a situation where only one of its customers pays full price for its oil. In fact, much of the petropatronage-supported influence Chavez has bought himself up and down the continent will start to dissipate...and that will happen at the same time as a charismatic, popular new leader pledged to double US foreign aid spending takes power in Washington.

Inside the country, the same dynamic holds. Chávez will try to blame the deep, painful spending cuts and the runaway inflation that will follow devaluation on the Empire, except the face of empire is about to change rather drastically. With his popularity already tanking enough to lose a referendum even a year before oil prices had even dropped, it's hard to see Chávez's remaining "soft" supporters staying onside through, say, the National Assembly elections in 2010.

Personally, I've always been very skeptical of claims that Chávez's "best days are behind him." Alberto Franceschi's been recycling that line in OpEds for the last 8 years and, as they say, con ese cuento me dormían a mi.

But this time it's different. It's been clear for a long time that nothing short of a sudden, sharp, systemic crisis in world capitalism causing a sustained fall in oil prices could slam the breaks on the chavista petrostate.

Well, here's your sudden, sharp, systemic crisis. Whatchoogonna do now, punk?

October 8, 2008

Chavez versus the people

Juan Cristobal says: - In the movie The War of the Roses, Michael Douglas and Kathleen Turner play a succesful, picture-perfect couple. The years go by, the tensions in the marriage start to mount, and the irritating quirks they find in each other start growing to the point of becoming unbearable. By the time they realize they can't stand the sight of the other, what should have been a civilized breakup turns into all-out war. Turner drives her SUV over Douglas's tiny Morgan, Douglas kills Turner's cat. When the movie ends, they have both destroyed their house, and they lie on the floor, lifeless, on the shattered remains of the chandelier that presided over their foyer.

I couldn't get this movie out of my mind as I analyzed Chávez's words and actions the past few days while the world witnesses an apocalyptic financial meltdown.

It is hard to overstate the seriousness of the current mess. Stock markets the world over are tanking and banks are failing left and right. Governments, central banks and multilateral institutions, normally the voices of reason, use incredibly dire language to describe the situation. The IMF talks of a "major downturn", the Federal Reserve Chairman talks of a "grave threat" and the US President warns the entire US economy "is in danger." Billions upon billions of dollars are being used to rescue the ailing financial system, and nobody knows whether this will even work.

The implications for Venezuela are dramatic. Oil is tanking, and according to Miguel's calculations, we are already below the minimum price needed to pay for our imports. The black-market rate for the dollar is now 4.5 BsF, more than double the official rate of 2.15. Venezuela's country risk has shot up to 1205 base points, liquidity problems in our banks have raised interest rates, and the cost of food increased 53.3% in the past year. It seems like the perfect storm we discussed about a few months ago has indeed formed.

And Chávez? Well, he's as happy as a little girl.

See, Chávez has framed this as the final defeat of capitalism and the coup-de-grace of George Bush's presidency. Faster than you can say "I told you so", Chávez has been mouthing off left and right, going so far today to say that this crisis is "necessary" in order to "demolish" the capitalist system "that has caused so much harm to the world."

In Chávez's mind, a crisis of global proportions is good for him because it proves him right. He's called on the big-bad-wolf of Latin American leftists, the IMF, to "kill itself." Instead of warning people that changes may be necessary, he has promised to maintain currency exchange controls until 2020, blissfully ignorant that reality may force him to eat his words much, much sooner than that. In no uncertain terms, he has blamed this crisis on Bush, imperialism, the IMF, capitalism, greed and neoliberalism, going so far today to hint this vindicates Marx, Engels and Gramsci.

Now, we can't blame the President for this hardly-contained bout of schadenfreude. These days, anachronistic ideological battles such as this are the only things that get his heart-rate going, and in part he is right, something is rotten in the system. But is it too much to ask for a little bit of glauckenstück?

Ideological warfare is entertaining and all, but this crisis is going to inflict serious harm on Venezuela. Much as he has tried the past few years to move the country to some alternative economic reality, the truth is that he hasn't done a very good job of that.

Venezuela is still very integrated with the rest of the world. Our economy is more dependent on foreign markets than before, and there is some concern that Venezuela's foreign reserves may be at risk. Moreover, basic economic intuition suggests that when the price of the one thing we have to offer to the world tanks, that is a problem. It doesn't take a genius to realize that when the people who are actually your customers are being clusterfucked to the poorhouse, that is a problem.

Chávez is Nero, fiddling while Rome burns. The crisis has underscored just how deeply detached the President is from the day-to-day problems of ordinary Venezuelans. Instead of coming up with an insightful analysis of the crisis and its consequences for our country, he uses his bully pulpit to "nah-nah" the rest of the world. Instead of providing a solution, he gets busy travelling to obscure places, linking up with genocidal governments and shopping for weapons on borrowed money.

That is why recent polls show his candidates are trailing badly. Venezuelans don't care about imperialism, capitalism and alternative economic systems. They care about bread-and-butter issues: inflation, personal safety, garbage collection, traffic and jobs. While most opposition candidates are doing a decent job in staying on message and talking about those things, Chávez is busy rejoicing in another Great Depression and travelling from Summit to useless Summit.

Chavez isn't at war with the US, and he isn't at war with George Bush - he feels like he won those already. Chávez is at war with his own people. While he fights imperialism and capitalism, he is doing nothing to prevent the fire from his battles from lighting up his own house. Like the Roses, he is so intent on destroying the other guy, the other idea, he doesn't realize he is destroying himself, and us, in the process.

And for now, all we can do is watch in horror. As we watch our irresponsible, reckless President rejoice in the fall of capitalism, we realize we are all along for the ride.

I know it's true because I read it in the newspaper...

Quico says: Hey, it turns out this blog shows "both a political balance that can be refreshing in these polarized times and a mischievous, evidently Venezuelan sense of humor." Who knew?!
[click image to enarge.]

October 7, 2008

Devious Injuns

Quico says: In today's NYTimes, Simón Romero goes to the Amazon and finds the stereotype of the lazy, devious indian alive and well at the heart of chavista officialdom.

Faced with Yanomami anger at the shoddy health care program - think of it as Selva Adentro - they've been forced to rely on since gringo missionaries were kicked out three years ago, a senior official with the government research institute that focuses on tropical diseases tut-tuts him...
"One cannot forget that the Yanomami and other indigenous groups have learned how to exert pressure on the government in order to receive food or other benefits,” he said. “This does not mean there aren’t challenges in providing them with health care, but caution is necessary with claims like these.”
For their part, Yanomami leaders point to what they consider to be a broad pattern of neglect and condescension from public officials. “They put pictures of Yanomami everywhere, on tourist brochures, in airport lobbies, even on ambulances here in Puerto Ayacucho,” said Andrés González, 38, a Yanomami leader.

“That’s where they want us, in pictures, not positions of power,” he said.

As they say, read the whole thing.

October 6, 2008

When sovereignty dissolves with a whimper, not a bang

Quico says: Walter Lippmann once said that "there is no greater necessity for men who live in communities than that they be governed, self-governed if possible, well-governed if they are fortunate, but in any event, governed."

From that point of view, and from no other, the good burghers of El Nula, Apure State (pop. 10,893) can consider themselves lucky. [hat tip: Bristow.]

ps: Sorry if posting's been light. We have a bunch of ideas and projects cooking in the background; I guess you could say that, at the moment, our ambition is running well ahead of our available time. Do keep checking, though...good stuff is on its way.