September 18, 2009

A photographer captures Venezuela's descent

Juan Cristóbal says: - The New York Times has an excellent review of the new book of photography, "Capitolio," by Christopher Anderson. The images are haunting, and the review itself is not to be missed.

Kudos to the great Lucía for finding this.

Different fortunes of two chavistas

Juan Cristóbal says: - Few things thrill Hugo Chávez more than seeing a leftist win an election. Whether it's in El Salvador, Ecuador, Bolivia or Spain, he can't help gushing over any victory for his anti-imperialist "side."

And can you blame him? When your international status is that of a quasi-pariah and you have to resort to making deals with these people, well, you too would be thrilled at any chance you get of "expanding" your list of allies. Never mind the fact that his new "allies" are, more often than not, sensible politicians. For Chávez, any win counts.

But does it?

In the next few months, both Uruguay and Chile will hold Presidential elections. Uruguay is currently headed by the sensible leftist President Tabaré Vasquez. Term limits prevent him from running again and cashing on his considerable popularity, which is why I wasn't surprised when I heard the government's candidate was the favorite. But when I heard he was a former guerrilla fighter, my eyebrows rose.

And yet, reading this interview, I can understand why he's leading the polls. Uruguayans are, if anything, a serious people, not prone to fall for the showmanship, anti-business, anti-imperialist rhetoric that bellows from Chávez's mouth. (Well, sometimes they're not so serious.)

Mujica presents himself well here. He is an unassuming man of the people, that's for sure, and his leftist credentials, gained by fourteen years in prison, are impeccable.

But he is quick to say that his will not be a government where the state gobbles everything up. He says he needs businessmen to create jobs, and shies away from radical proposals like a "Constitutional Assembly" that has been used by Chávez, Correa and Morales to concentrate power. In a very explicit way, he comes across as a Lula-like figure. And at 74 years of age, I wouldn't expect him to change the Constitution so he can stay in power.

When the topic turns to Chávez, Mujica's common sense and wit shine through. He criticizes Chávez for talking too much, but recognizes that Uruguayans like the fact that Chávez sends them cheap oil. Still, that doesn't prevent him from being honest, like when he recalls telling Chávez that he's not building socialism, but rather an enormous bureaucracy that will gobble him up.

A pawn of chavismo, he is not.

In Chile, chavismo's luck is taking a turn for the worse. The young, dynamic "Trojan horse" candidate Marco Enríquez-Ominami has been rising in the polls. Having lived in Chile for five years, I've been following him for a while and I can honestly say he is a hard-core chavista - no "Lula-type," "chavismo-light" analogies are appropriate here. This is, after all, a guy that was invited by the CNE to observe elections. But don't take my words for it - take his.

Sure, he is trying to shy away from this, a must in a country where Chávez is slightly less popular than getting food poisoning from homemade mayonnaise, a surprisingly frequent occurrence in Chile. So Enríquez-Ominami, in his best I'm-a-good-boy-let-me-move-to-the-center voice, is trying to present himself as a modern, moderate leftist.

Although he was and is a long shot to win, for a while I thought his shtick would work and Chileans would fall for it to some extent. My fear was that a strong showing in this election would lay the groundwork for a win in a future one. And then...

Out of the blue comes an interview he gave in 2003, where he said that, for him, being Chilean "was a tragedy," and that he would have preferred to be an Italian. His lame attempts at damage control were, perhaps, even worse. After this, his candidacy, and perhaps his entire political future, are effectively dead.

Chavismo will boast, and they will win more elections in the future. But don't buy the hype. Both Uruguayans and Chileans are going to be fine.

The view from your window: Lusaka

Lusaka, Zambia. 2:00PM.

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September 17, 2009

Finding the link


Juan Cristóbal says: - "Mi Comandante, I would like you to meet my friend Michael Moore..."

The View from your Window: Berlin


Ernst Reuter Platz, Berlin, Germany - 10:00 A.M.

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September 16, 2009

Elite Permutations

Quico says: Fly into Venezuela and you come face-to-face with the single most important element reshaping Venezuelan society literally as soon as you've entered the country.

I'm not talking about the giant posters of Chávez you see in Maiquetía's baggage claim area. I'm talking about the the thing that happens the moment you leave customs, cross that symbolic portal into the country as such: you find yourself face-to-face with some hustler saying "bolivars? change dollars...good rate..."

In a way, it's a uniquely honest introduction. That guy at the airport is the tip of a massive socio-economic iceberg. Because currency arbitrage is much more than just one aspect of the chavista model of political economy: it's its heart and soul.

The distortions introduced by Venezuela's permuta-dependent, de-facto dual currency exchange system are remaking Venezuelan society from the ground up. Until you've grasped its dynamics, you've grasped nothing of the way the chavista stranglehold on Venezuelan society actually operates.

And yet even as I'm writing it I realize that that phrase - "permuta-dependent, de-facto dual currency exchange system" - is obtuse enough, impenetrably technical enough to send most sane people's interest's waning.

And that, in a way, is why it works: in the permuta system, we have a virtuoso feat of misdirection. While we all focus on what the government is doing with the one hand, it's off remaking society with the other.

Because, make no mistake about it: just beneath the surface, just beyond the heavily propagandized mountains of socialist paja, the government really is upending Venezuelan society. It's just that the reinvention is happening by stealth, through a mechanism too obscure for most observers to quite grasp, let alone pay any attention to.

When you get past the economist's mumbo-jumbo, the permuta system is the vehicle for a 21st century montonera, a mechanism for replacing one elite with another.

The dual-rate exchange market is, at its nub, an instrument of financial alchemy, a way of turning $1 into $3 instantaneously, with no risk, but only so long as you have the right connections.

Administrative permission from Cadivi is your golden ticket to this incalculable manguangua. Needless to say, if you can create $3 out of $1, you can create $9 out of $3, and $27 out of $9. Which amounts to saying that, in Venezuela, the amount of the nation's oil rents you can appropriate, risk free, is entirely dependent on your connections.

The dual exchange system's genius lays in the way it makes participation in the go-go world of risk-free bolibourgeois oil rent appropriation entirely dependent on your political loyalty. With control over a key part of the arbitrage mechanism, the government keeps a tight rein on who is able to participate in the windfall and who is not.

In this way, the Permuta System allows the real agenda of chavismo to be achieved: not the hopeful bla-bla-bla about the abolition of the class structure, but rather the recycling of elites. It's a process as old as Venezuelan nationhood, repeated a dozen times in the 19th century and another four times since Juan Vicente Gómez's death three-quarters of a century ago.

Any number of otherwise incomprehensible puzzles start to make sense when you understand the Permuta System's absolute centrality to Venezuela's political economy these days. Everything from the fact that a batido de guanábana costs $4.50 in an arepera if you put it on a foreign credit card but just $1.50 if you buy it like a sane person, to the fact that Wilmer Ruperti sails around in a vintage yacht that once belonged to Henry Ford.

International Capital's softly-softly approach to the Chávez regime only makes sense when you realize that any number of multinational firms have literally billions of dollars in profits whose value depends entirely on Cadivi's willingness to honor their official dollar requests.

Witness this Wall Street Journal article on Telefónica of Spain's perilous position with regard to its profits from Movistar's Venezuelan operation: whether Telefónica walks away with over $2 billion in profits from its Venezuelan operations since 2006, or with a third of that depends entirely on a single administrative decision in the hands of a handful of bureaucrats and advisors close to president Chávez. Can we really believe that the Spanish government's benevolent line towards the Venezuelan regime is uninfluenced by that?

And the supposedly "technical" policy debate inside the government on what to do with the exchange rate can be reinterpreted as a fight over who will end up appropriating the nearly limitless arbitrage opportunities arising from dual exchange rates: whether it will be Nelson Merentes' cronies inside BCV (who, unsurprisingly, are pushing for the Bank to adopt a daily auction of dollars that would leave their hands right next to the till), Alí Rodríguez's at Finance (who want rather a "tax" on foreign exchange transactions whose proceeds would end up - you guessed it - in the Finance Ministry's hands) or Rafael Ramírez's syndicate at PDVSA, which wants to keep the current system because the status quo leaves massive sums of cash flowing from PDVSA directly to the Permuta market, allowing them to appropriate part of the arbitrage margin.

Which faction succeeds is of mostly academic interest to outsiders, because each is locked in a bitter battle with the others over control of a natural resource rent stream whose existence is entirely independent of their efforts to control it. What we have, in other words, is a near-dictionary definition of rent-seeking (rentismo): an economic system where the prevailing incentive structure drives people to focus their efforts on activities that create no value for society as a whole.

The faction that exploits the rent-seeking opportunities around them most effectively will, inevitably, become the country's new economic elite. Venezuela will inevitably become the property of people well-connected enough to persuade Cadivi to trade them $20,000 for Bs.43,000, and then manage to use those $20,000 to buy a car in the US, ship it back here, and sell it for Bs.70,000. Or to those who manage to do the same with medicines, or clothes, or toothpaste, or any other product. The country is being turfed out to the Arbitrageurs.

The skills needed to ride this particular gravy train - politicking, bureaucratic empire-building, scheming and intriguing - are skills that do precisely nothing to advance the welfare of Venezuelan society as a whole. This is the system Chávez has reinvented. This is the receptacle into which all that drool pouring out of Oliver Stone's slack jaw must eventually be collected. This is the revolution, people. The rest is bread and circus.

The View from Your Window: Quito

Quito, Ecuador - 4:16 p.m.

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September 15, 2009

IMF ... WTF?

Juan Cristóbal says: - Ridiculous deadlines are preventing us from posting more regularly, but ridiculous headlines bring us back. So, we couldn't pass up the delicious irony of this little nugget: the IMF has apparently loaned $3.5 billion to the Central Bank of Venezuela. Yes, that's billions of dollars, not roubles.

Two years ago, Hugo Chávez announced he was pulling Venezuela from the IMF and the World Bank. Lucky for him, he never made good on his threat, 'cause now it looks like he's getting a quickie loan.

I just can't get my head around this one: the IMF bailing out Hugo Chávez. I could go on and on about how Chávez has railed against the "destabilizing" role of the IMF, but suffice it to say that if there's a Museum of Hypocrisy somewhere, they should put this in the Chávez Wing. Why just today, Finance Minister Alí Rodríguez is proudly announcing that Venezuela is making progress in its quest for "independence" from the IMF and the World Bank, which impose "outrageous" conditions in exchange for help. He should know!

So far, the Wall Street Journal, on a feed from Dow Jones, is the only news organization carrying this. If this is confirmed to be true, kudos to Jose Guerra for blowing the whistle on it.

The View from Your Window: PEI

Prince Edward Island, Canada - 10:00 a.m.

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September 14, 2009

Occam's Razor and the Opposition to LOE

Quico says: The Education Ministry's byzantine conspiracy theories about the real reasons the opposition is upset at the new Framework Law on Education would be easier to swallow if it wasn't for the mountains evidence hiding in plain sight to explain why people are jittery about the government's handling of schools. Rather than carp on emails that are plain old made up, shouldn't MinPoPoEdu have a look at this press release, put out by the government's own press agency, touting president Chávez's plan to distribute El Correo del Orinoco to every school in the country?

Lets get it straight: the newly relaunched Correo del Orinoco is journalism in the best tradition of Granma, Juventud Rebelde and the old-style Pravda: a governing party mouthpiece dedicated almost entirely to aggressively peddling chavista propaganda.

It's not just that Chávez want to use state funds to distribute political propaganda to the nation's school children - a move that's illegal on several counts, including the same type of misuse of public monies that used to get Venezuelan presidents removed from office - it's that he actually brags about it in public.

Estimadísimos señores del MinPoPoEdu, trust us, there really is no reason to go searching for the fifth, sixth, seventh and eighth legs on this particular cat.

The reason LOE alarms us is posted on ABN's website.

The View from Your Window: New York

New York, NY - 5:28 p.m.

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September 13, 2009

The View from Your Window: Nairobi

Nairobi, Kenya - 12:24 p.m.

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