Monday, December 23, 2013

Getting ready for 2014 (5): short term options

There are only short term options for all the players, they cannot plan beyond June, truly. Chavismo has a little bit more leeway as it holds all the money levers and thus can afford to imagine plans B and C and D for the after June when plan A fails. However the opposition risks strongly to be trapped in a reactive position. The weakening of Capriles leadership deprives it from its only credible proactive spokesperson. Then again there is at least 4 opposition leaders that can take the initiative if need be.

Chavismo short term options

For them the key is to balance somewhat their accounts somehow. They need to do so because they cannot borrow anymore and they need some money for corruption requirement, mostly for the armed forces which are the main pillar of the regime. The civilian corrupt can be kept at bay for a few months as they are not needed for elections.

Apparently they are going to use the holidays to dictate a few measures that will be halfhearted and that will at best allow chavismo to gain some time, while not solving anything. For example we can expect a moderate gas price rise. It will go from free to very cheap, I do not think they will dare for the time being to sell it at cost, probably not even at half cost. But there is a measure that has been perfected by the regime which is the outright theft and extortion through devaluation.

A devaluation is on the wings, either a direct shock to around 10 or a dual exchange rate where few can keep getting the 6,3 currency while the rest, maybe 2/3 of the people, will get a somewhat floating rate that may start at around 11 and that will push its way to around 15 by June. But that is not all.

Not only the regime ignores its debt through devaluation by paying its internal creditors with worthless bolivar bills, but in addition in February 2013 it has tested a way to steal directly the hard earned income of honest working companies. It has been already a few months that the regime has stopped honoring the debt legally contracted at 6,3 by Venezuelan importers. Our providers are waiting for the money of what they sold to us since mid year. Now it seems that they will force us to pay our providers at the new rate. This will result for the second time in barely a calendar year of the outright robbery of any earnings the private sector in Venezuela has made through a very difficult 2013. In other words, the way things are looking now, whatever we earned in 2012 and 2013 will be stolen outright by the regime though a retroactive devaluation.

One consequence is taxes will be increased. We can be certain that already the regime must feel the pinch of a decreasing income sales tax. Now, starting January business is going to start its income tax declaration where the devaluation loss of 2012 will be accounted for and kill taxable income. Both sales and income tax revenue will drop further as a consequence of ruining commerce last November. That a tax increase at this time will make matters worse,  is something that is beyond the understanding of Ramirez and Giordani and outright kanji for Maduro.

Still, if the regime wants to it should be able to push all the way to June the truly hard decisions. I doubt the situation is sustainable beyond June unless oil prices flare or privatization of PDVSA starts tomorrow.  And even if these circumstances were to happen. The private sector may well go bankrupt this year if devaluation is indeed retroactive and if the regime does not find a way to help the people it spoiled to restock their shelves.  By June the regime will have one last source of cash to survive: nationalize the banking system. And then its plan B for the rest of the year will be making us a new Cuba.

Politically Maduro got an extension with the elections earlier this month. Yet rarely candidates did have their picture taken with Maduro, he has 0 coattails. The one that managed that campaign for chavismo was Diosdado Cabello and the more chavismo tries to present the result as a victory the more Cabello benefits from it at the expense of Maduro who will also be the one responsible for the crisis. By the way, the hypothetical "rapprochement" between the regime and the opposition is speculated by some to be a blame sharing trick for the tough measures to be taken. As such it is set to benefit only one person: Cabello who is neither Maduro nor the MUD.  For Maduro the next months are crucial for bringing Cabello under control once and for all. Through the weakening of his army pals? Daring to send Cabello to court for corruption? Failure to bring down Cabello, failure to associate the opposition to the economic disaster brewing and in June it is chavismo lumpen that is going to hang Maduro high and dry. I wonder, truly, if he realizes that.

The MUD options

The electoral options are almost nil after December 8. The constitutional assembly talk that was reaching beyond Diego Arria and touching Voluntad Popular and Capriles is now DOA.  The referendum required for such a constitutional assembly requires a voter signature drive of 20% of the people. You are not going to convince people to expose themselves to reprisals from the regime, to a new Tascon list, by signing for the necessary referendum when you start almost a million votes behind... The more so if a damning economic crisis starts in January when the private sectors starts closing down business and laying off people. A new constitution has no appeal when you need to stand in line for food for hours.

Are there electoral options left? The easy answer is no because it is clear that the regime will never be booted through elections that they will rig more and more as needed, amen of the idiots that think abstention is great, thank you, we feel so empowered now.  But there are ways to use elections to at least weaken the regime and speed up its final inner crisis: a chavismo division.

One way to do that would be to call for recall election on half a dozen chavista representatives. You also need 20% of the electorate to sign up but in some districts, like in Caracas or Lara this may not be too difficult to achieve. For example trying to force a recall election on one of the biggest pieces of s**t of chavismo, Pedro Carroña Carreño, could bring political dividends. Not to mention that it can also make chavismo lose its magical 99 at the Nazional Assembly.

A consultative referendum can also be called, and needs only 10% of the voter roll to sign. Picking up the right issue, say, the enabling law voted over a month ago, could also bring important dividends.

But to exert an electoral option the MUD needs to solve really fast, say, by March, the following agenda items: decide if Capriles remain its leader; decide if the MUD offer needs to be revised; review how the MUD operates; decide if the MUD will be more confrontational in that it will start calling a spade a spade which means that it will say that chavista voter has nobody to blame but himself or herself for voting for that gang of corrupt and incompetent people holding Miraflores Palace hostage. And more. And this as recession will begin to be felt by all. I think that simply put there is no mood for an electoral option until at least the end of the 2014, Capriles killed.  And then what for when there is one year left for a new national assembly to be elected.

While the MUD considers preparing electoral options (which also include confronting the fraudulent Electoral Board CNE once and for all) it also needs to draw fast strategies to resist the repression that is sure to come from the regime. The Miraflores meeting of last Wednesday illustrated better than nothing the potential faces of the future political prisoners of the regime. I am sorry to say that this meeting already looks like the famous tale of the scorpion asking the frog for help in crossing the river. Two days ago Maduro went back on the warpath demanding that more shop owners be jailed for speculation. The temptation will be simply too strong for the regime as the economy worsens to find innocent guilty in the opposition rank. When have we seen thugs with ethics?

Outside of these options the opposition people of Venezuela and its democrats have nothing else to do but sit and watch the regime implode. A little bit like the ugly caterpillar about to transform itself into a deadly moth, like the poisonous one that comes from the Orinoco delta.

After June

This is really the big question that should anguish us all.

It is possible that the regime will not do a retroactive devaluation. Maybe some people inside will see the danger and beg for late payments as income becomes available, but payment at 6,3.  Maybe they will offer favorable terms to restock depleted shelves, and trust me, they are depleted this week in Caracas as I did my Christmas shopping. Will we by June have passed the worst of the crisis? No, because unless confidence is restored in investors nothing is going to happen to restart the economy.

Then again the Cuban master and the Taliban inside the regime will carry the day and dare to apply a retroactive devaluation and use any excuse to take over the banks accusing them of causing the devaluation. Why not?  It worked in November, they blame commerce, stole their goods and rolled on to avoid defeat in December. We could reach June with the end of the private sector although it may not be quite obvious. Owning the banks and owning the debts to the banks from the private sector is an indirect way to nationalize all the economy.

The paradox here is that we may think we are entering into a major crisis this end of year but in fact we will enter into a much worse one by mid year that neither side will have any idea how to get out of it, with the aggravating factor that in the next 6 months we could lose the few means left available to us, politically or financial. What good would be a "coalition" government in June when the economy is devastated? Maybe this is what the opposition should start saying as of today.


  1. charly2:45 PM

    As for Cabello, to forecast his future see what happens to his brother David. SENIAT is nothing but a moneymaking machine the Cabellos consider their personal fiefdom according to some accounts.

  2. I thought companies in oil and gas development and maintenance were already being offered 40 cents on the dollar for outstanding back payments. If this is true and compounded with the devaluation paying retroactive debts with the new rate, I do not see how these companies could possibly stay in Venezuela.

  3. Yngvar12:31 AM

    Public Choice Theory posits that in elections the median voters preferences always wins out. It would seem that the 'centrist' position among the Venezuelan electorate/people are pretty extreme, voting for chavismo as they do. Any thoughts?

    Feliz navidad from Norway!

    1. Yngvar1:09 AM

      I must apologize. My felicitations in that last sentence collides with the tone of the post. All I can say is that I wish You, Daniel, and your S.O. all the best this Christmas and for the new year.


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