Although in a funk, waiting to decide what future blogging should be, I still need to cover the direct consequences of the February 15 vote. This past few days there were two apparently unrelated events which are in fact very related.
Rice processing plants "intervenidas"
Whenever Chavez "wins" an election, he sorts of need to show who is the boss. This primitive to primal reflex, that gorilla chest thumping of him was seen three weeks after his 2006 reelection when he decided to close RCTV. Now he did not even wait three weeks to administratively take over two rice processing plants with a clear threat of their final nationalization (well, he did also take over Stamford bank but that is another story: it failed as a Ponzi scheme and rumor has that most of its depositors were chavista nouveau riche).
The excuse was very simple: apparently part of the rice elaborated there circumvented regulation prices by adding a flavor to the presentation. Considering that producing rice is no good business in Venezuela, these plants used this scheme to make sure that at least they did not lose money overall. A far as we can tell that "flavored rice" did not represent even 10% of what was manufactured in the country, and thus f little social impact as that flavored rice is sold in upscale groceries to people than can afford it. But the propaganda impact is big as rice is a basic staple (pabellón anyone?)
The real problem here is that the government has been trying for years to find ways to control Polar, harass the company that is perceived as a threat. Why is the Polar groups such a threat? Because it is a demonstration that agribusiness can work efficiently in Venezuela and as such it is a constant reminder of the failures of chavismo to get off the ground their own counter agribusiness. See, chavista "entrepreneurs" did not fail because of Polar unfair competition: Polar has been harassed and controlled and kept in check for half a decade already. These "entrepreneurs" (socialists cooperatives, individuals who cast their lot with chavismo and all sort of hanger one) failed because simply they are inefficient and are in the business for the quick buck, courtesy of chavismo grants. Not for them the long term commitment of a traditional group like Polar which is important to note is not even at the stock market. All that Polar did was with its own self investment (and beer money, true, but not state money granted to the chavista "entrepreneurs").
What we have seen this week is the first direct assault of a series from chavismo against Polar. Now chavismo is in more of a hurry because as oil prices are not going to recover anytime soon it needs to secure food supplies to at least feed part of that 54%. The obligations of populism, you know. The other 46% will have to figure out ways to eat, that is not chavismo problem. And of course, Polar as the legendary golden egg goose will soon lose all productivity and we will starve as we will have no money left to import rice. But that is OK with Chavez, he will have gained another couple of years in power and surely he will come up with something else to take over and destroy, until nothing is left, Cuba style. Did a starving Zimbabwe stopped Mugabe from lavishly celebrating his birthday?
One banker less
The other event is that a well trained commando like kidnapped one of the main banker/stock exchange guys in Venezuela. German Garcia Velutini was abducted as he was driving on his own by a commando like operation. Two things here:
The government inaction and even complacency with such crimes has been emboldening such terror groups. Venezuela is becoming fast one of the worst countries in the world for these type of actions. And they are not reserved only to Caracas: my own poor rural state is, per capita, one of the three worst states of Venezuela for abduction statistics (and not all are reported, by far).
The second thing is that Garcia Velutini is the member of a family who has one of the main critics of Chavez economic policies in its ranks. Oscar Garcia Mendoza (a half brother I assume) is the president of the Banco Venezolano de Credito. As such he presides one of the safest banks in Venezuela in that it is probably the one with the least exposure to unreliable Venezuelan state bonds. It pays little interests to your accounts but at least it has an advantage, you are pretty sure that it will be the last one to go bankrupt in Venezuela so you will find back your money. People found out that under the Caldera bank crisis of the mid 90ies. Garcia Mendoza has thus two advantages: he knows what he is talking about when he discusses the Venezuelan financial situation, and he has the credibility to sustain his positions.
Thus one cannot help but wonder if the kidnapping of Garcia Velutini is just that, a kidnapping for money. Or if there something way more sinister behind it.
On the road to crash
The consequences of these apparently two unrelated events are in fact quite simple to perceive once you understand how they are linked: a Chavez who thinks that his 54% is once again a blank check to pursue his policies is announcing that he does not care at all about private enterprise to help him navigate the shoals ahead. Truly, who is going to come an invest big time in Venezuela when your business can be taken away by the government at will, or your top executives can be abducted at will?
To add insult to injury Chavez even said that if he expropriates the rice mills, he will pay them with "papers" and not with hard cash. Which, if you think of it, as a confession by the president himself that Venezuelan bonds are worthless.
The big mistake Chavez is doing is to misread completely the new world scenario. The crisis is not the end of capitalism, it is its reinvention as it has taken place before. Obama might succeed or fail, but even if he fails there will be another guy to come after and succeed anyway. After all, pushing it a little bit, it took WW2 to finally make the New Deal a permanent success that lasted until the late 70ies. If the efforts to come back from the current recession bear fruit, the capitalism that will emerge will be a conservative one, a capitalism where accounting and legality and seriousness will be core values. How do you expect a rogue regime like Chavez will fare with the new order when irremediably he comes hat in hand to ask for help?
Because by taking over rice mills and ignoring protection of bankers Chavez is only speeding up the time of his reckoning. You can trust me on that one.