Iran gasoline in Venezuela: tragedy or bad joke

This nice PDVSA worker, all dressed in red of course, cheers and waves the flag as Iranian tankers reach Venezuela to deliver gasoline.

What is wrong with this picture?

To begin with, the worker is a fraud, he represents a state oil company which once upon a time was a world class company and that the chavista revolution has run to the ground. It went exporting oil and gasoline eons ago to now being unable to supply the Venezuelan market, resorting to the lone country willing to sell gas to Venezuela: sanctioned Iran.

Let's continue. The bolivarian revolution, liberator of minds and spirit has sunk so low that it now glorifies a theocracy which among other things holds the death penalty, separates genders, prosecutes minorities and and tramples varied human rights. All is ABSOLUTELY against the original purposes of chavismo.  But then again, the "revolution" is long been gone, whatever that was. 

But they all wear masks and gloves, which I hear are missing in public hospitals. But I digress.

What matters beyond this cheap show of avowed failure is that the Iranian gasoline has been a failed show: nobody really cared.  No tanker was pirated or sunk in high seas. No problem. The US was coherent with its sanctions: food, medicine and stuff like gas can pass. period. End of propaganda.

In Venezuela the regime hoped for a confrontation, and so did part of the opposition desperate for the Marines to land. But on May 22 I was tweeting, in Spanish, sorry, that nothing would happen, no matter the cheap escort show the Venezuelan army planned and did when the tankers reached Venezuelan waters. Nobody apparently thought that if the US of A was going to sink a tanker it would have done so in high seas. But I digress again.

3 EEUU tiene que ser coherente con el extento de sus sanciones. Por lo tanto no va a parar los tanqueros iranies. A menos que busquen un casus belli con Iran; y ese sería malísimo. Hay mejores.
4 ni que traigan 10 tanqueros se arregla el problema. La escasez regresará siempre.

— daniel duquenal (@danielduquenal) May 21, 2020

So gasoline from Iran made it.  Nobody knows how it will be paid for, though we all suspect it will be from the scarce gold reserves left and the Blood Gold from the devastated Bolivar state.

The opposition could not do a thing but at least it announced that were they in charge, the would find the credits to buy 40+  tankers a month, regularize gas supply within two weeks and fix in a short time whatever can be fixed of the Venezuelan refineries.  

Of course, this way the opposition did score a point indicating that 5 Iranian tankers are not enough to cover the needs, which we can see from day one of the tankers arrival. Corruption and extended gas lines were kept. The price of gas was jacked up from 0,00000... USD to 50 a cents a liter, little bit less than 2 $ a gallon. Plus of course what you pay the Nazional Guard to let you access the gas station and other miscellaneous expenses.

Because yes, without a doubt, the gas distribution scheme was designed to favor corruption, directed mostly to the army that can get pretty much what it wants and resell it at any price it wants (I was told by some friends that they paid as much as 4$ a liter at the peak crisis time).

When we will be able to write real history books, t4his Iran gas thing will mark one of the low points. But a high point in corruption, certainl.

Como fue que Chávez perdió nuestro petroleo

Las noticias desde los EE.UU, el odiado imperio de los chavistas, no son buenas para Venezuela. Si siguen las cosas como van, de aquí a pocos años el petroleo venezolano podría volver a ser de uso médico como lo era en el siglo XVIII, para lavativas y purgantes.

Tomemos un articulo de prensa cualquiera estos días, como hoy en el Washington Post. Hay un gráfico que con mucho gusto me voy a tomar la molestia de traducir y explicar.

Cúpira: Chavez ultimate symbol of utter failure

It is fitting that during the heat of his reelection campaign the Cúpira bridge collapsed, illustrating in that simple event all the multiple failures of the Chavez regime in creating a functional country.

I am not going to go into the details and the specifics of the trauma: suffice to say that one of the 10 most important bridges of Venezuela fell because of neglect, lack of prevision, etc, etc...  There is a saying that the human is the Homo genus is the only animal that stumbles twice on the same stone.  Well, the chavista beast has mastered the art of repeatedly stumbling over the same stone. No wonder in Venezuela we use the term chabestia more and more.

Chavismo has been so wrong, so misguided in so many issues that keeping count is now impossible.  Let's just resume some of the dramatic items that the Cúpira bridge summarizes.

A mandatory reading from Gustavo Coronel

Gustavo Coronel writes more than his blog and today the web page of El Universal accepted one lengthy article on the state of the oil industry in Venezuela.  Gustavo Coronel has made a career in PDVSA and the pre PDVSA companies and as far as the reality on the ground I think that today his experience is top notch, beyond numbers and estimates put forth by the regime and even journalists.

Do your self a favor and read "The petroleum policy of the Hugo Chavez government", in English and in Spanish at his blog if you prefer.

The truth on Venezuela's oil production

One of the biggest mystery of Venezuela under Chavez is how much oil money do we really get and what he does with it. Since 2003 the estimated numbers from international agencies and those published by the PDVSA monopoly have always clashed, badly at times. Indeed, the PDVSA numbers are only held truthful by chavistas, the rest of the world, including OPEC, has long ago ceased to pay much attention to the numbers published by a company that has not submitted itself to a real audit since it left the SEC (not that the 2003 audit was anything to write home about).

But I digress. Simon Romero of the New York Times has published today a comprehensive and definitive article which speaks VOLUMES about the real situation of PDVSA. It includes:

- rumors that CEO Rafael Ramirez wants to bring back PDVSA to its real business: oil production (Imagine that! Ramirez realizing that selling chicken in markets popular markets could be done better by other folks than PDVSA!)

- a reopening of Venezuela to the hated capitalistic companies that were kicked out as recently as 2007. (Wait a minute! Where those companies not replaced on occasion by Vietnamese, Belarus or other well known oil companies? Were they not as efficient as, say, Exxon, in prospecting for oil fields? Have we been lied to? Naaah!...)

The unavoidable conclusion is that things must be going South for Chavez that he discretely seeks reconciliation to those he abused a year ago. The difference a Wall Street crash makes, no matter how many times Chavez claims that Venezuela is not threatened by the world crisis.

The Romero NYT is a must read. Though you will not escape a couple of killer quotes below:

At stake are no less than Venezuela’s economic stability and the sustainability of his rule. With oil prices so low, the longstanding problems plaguing Petróleos de Venezuela, the national oil company that helps keep the country afloat, have become much harder to ignore.

But Venezuela may have little choice but to form new ventures with foreign oil companies. Nationalizations in other sectors, like agriculture and steel manufacturing, are fueling capital flight, leaving Venezuela reliant on oil for about 93 percent of its export revenue in 2008, up from 69 percent in 1998 when Mr. Chávez was first elected.

Or as we say in Venezuela, tanto nadar para ahogarse en la orilla (so much swimming to drwon reachign shore).

It is amazing that after 10 yers of bolivarian farce we find ourselves more dependent on oil than AT ANY TIME in our history. I wish Simon romero had followed his logic to the end and added this.

The end

The PDVSA 12 billion: They are missing or not? They matter or not?

There was this little country of Podunkistan who got entangled into some bad management of his sate monopoly of scented geraniums. When the big seed reseller of Empiristan got mad at some joint project for its spring catalogue that went bad it blocked a lot of Pedevesia Stinkera seeds in some storage room on the island state of Netherlandia. Soon the benevolent dictator for life of Podunkistan, Sabaneto Farcosy, sent his scented geranium minister to explain in great details where all the seeds were coming from and who paid for them. It was just a big misunderstanding and the lawyers of both sides went home with only the cab fare for their expenses.

This story unfortunately will not happen in the latest bolivarian debacle, the freezing of 12 billion USD in PDVSA assets. Tonight, getting spinning art in high gear, Ramirez, the PDVSA minister and main "alcahuete" (enabler) of Chavez went on a cadena on his own to explain that all were lies, that PDVSA was immune to the financial actions of Exxon, that the opposition was betraying the fatherland for not supporting the country, that the media were manipulating the whole thing. Which was what he already said earlier today (in English here)

Unfortunately since we have no idea about which are the real numbers of PDVSA considering that no real audit has taken place in years, and since he did not disclose the court injunction details and the documents that would establish that the foreign courts were mislead, we have only his word to validate his speech. And that, after a few years of his tenure plagued with lies and threats, after illegal money bags flying out of PDVSA vaults to Argentina and Bolivia, is not enough.

In other words, when Chavez himself does not come to the forefront, when he sends a rather discredited understudy to defend his polices, well, you know that he is in big deep shit trouble. Though he could be breaking glass at Miraflores again, or visiting the Castro live mummy for advice, or prostrated in one of his bipolar depressed moments. We have seen that in the past.

So, what is the situation today?

True, the 12 billions are spread enough around and involve limited amounts of actual cash (1 billion total?) that a giant like PDVSA can manage for a while. True, the money is not lost, as long as PDVSA wins its trial. True, Fitch did not downgrade (yet?) the Venezuelan debt though at BB- it is far form stellar already and probably does not require further downgrade.

But it is also true that PDVSA has 12 billion less of collateral to keep up its activities, its ability to borrow temporary bridge loans and what not. And since the Venezuelan economy is more than ever PDVSA, then our own ability to borrow and to do business is going to be seriously hampered sooner than later.

Let's look at some of the data reported through the day (all links in English).

First some of details of the financial deal, and the PDVSA top executive flying in a hurry to London (not on tourist fare, I am pretty sure: what is a first class ticket when 12 superdupper grands are at stake?). From the list mentioned there, the assets blocked are not as small as what Ramirez would have us believe. Since chavistas always speak on relative Manichean terms, he might think them small compared to the whole PDVSA, but they are big alright on their own and cost a lot to the state when they were established.

Through 2008 Venezuelan reserves have already dropped by 884 million USD to 32 billion. That is, the 12 billion blocked represent A THIRD OF VENEZUELAN RESERVES!!! Ouch! But we also learn in the same article that PDVSA contributed in the last two years by 13.5 Billion to the FONDEN. In other words the PDVSA blocked assets do represent a very significants hit on Venezuelan assets and finances, no matter what Ramirez burped tonight.

In Europe Venezuelan debt took a further beating as Europeans are simply afraid that Chavez will go crazy on this. It seems that they have taken full measure of the guy.

The political front data is more complex.

We got the usual jingoistic speeches. The one from PPT, a small political party that cannot find enough ways to bend backwards to please Chavez said that it was an imperialist adventure of the UK. It also added, without any sense of ridicule, that the whole thing was done to stop progress form ALBA and the Chavez very own FMI, Banco del Sur. It was thus a litmus test for the Venezuelan opposition who has NEVER consulted on all these mistakes by chavismo that the spokesjerk was mentioning, but should still rally behind Chavez without even a sigh. And sure enough, it called for a protest at the British embassy since he probably thinks that the judicial in the UK is as servile to Exxon as the judicial in Venezuela is servile to Chavez.

The ABN, the official agitprop of Chavez after a long silence, instead of explaining and justifying went to the offensive: the head lines this evening indicated that the "national interests were above those of any private business", it underlined the more checkered past of Exxon, and of course Bush is behind it all. The usual shoot the messenger, certainly not a study on badly managed PDVSA is.

And of course the inénarrable speech from the National Assembly head of energy commission, Angel Rodriguez. "...comes as part of an exercise of full oil sovereignty in Venezuelan territory. Any dispute or lawsuit should be addressed under the jurisdiction of domestic courts only.". Yeah right, the Venezuelan courts are going to be fair if Exxon is a plaintiff.... But beyond this ridiculous statement we must see one sad reality: Rodriguez not only actually thinks that a biased judicial system is alright, but he also has no idea on how investing operates. When Exxon went to the Orinoco it probably chose that investment over another one in, say, Podunkistan. Now, it cannot go back there and will lose sales and access to oil reserves just because Chavez woke up one morning deciding that all oil should be done by PDVSA alone. Exxon is justifiably suing for breach of trust and fraud. No matter how much we are allowed to despise Exxon after the Valdez, they have the right to sue not only for the equipment seized, but also for the lost business that chavismo accepted for many years. If you accept that Exxon can be spoiled just like that, then you accept that Chavez can take away your land or home or business without fair compensation whenever he will feel like it.

It is that simple.

If that makes me a traitor, so be it.


-The end-

Chavez campaigns overseas and gets told by another King

Chavez must be feeling very confident about the result of December 2 vote. I do not know whether his polls tell him another story from what is developing lately here, or if the CNE has already programmed the result wished for in the Smartmatic machines but in the middle of a delicate electoral campaign he travels to Chile and then to Saudi Arabia and Europe.

Or perhaps he senses that the only way to win the election the way he wants to win is to create again a radicalization of the political situation. Since he has no sparring partner in Venezuela besides the protesting students, well, kings will have to do.

Long time readers of this blog know that my thesis on Chavez victories is that whenever he is on the ballot (directly or indirectly as it is the case for the coming December 2 contest) Chavez NEEDS to have more votes than the preceding election. All polls tell us that this will not be the case this time because between abstention and NO votes Chavez might win but with not much more than half the votes he got last December. It is important to keep this in mind when one tries to understand what Chavez has been doing these last couple of weeks. Besides, the violence implied in the constitutional proposal makes it imperative for Chavez to win it big otherwise soon he will get in trouble at home and overseas as he tries to apply something which is not wanted by the people. Let's also keep in mind that it is one thing to vote for a constitution and another to vote for a president, a detail that seems to have escaped chavismo...

So, after having been told to shut up by the King of Spain, off to Saudi Arabia we see our beloved world Supremo. It was quite something to watch his speech on Venezuelan TV last night. According to Chavez, he has been the de facto ruler of the OPEC since the Caracas summit of 2000 and thanks to his enlightened vision oil went from 10 USD to 100 USD to the barrel. The man really believes that it is because of him!!! I mean he certainly contributed to the initial rise but he seems to neglect a few little details such as the stupendous growth of China and India, September 11 with its consequences and the decline of the greenback which by itself might account for as much as 10% of the actual oil prices. And yet when inflation is taken in oil is not much more expensive today than what it was in the late 70ies and early 80ies. Then again Chavez does not do well with relativity, which is probably why he thinks he is the linty belly button of the world.

I wonder what the Saudis and other assorted oil potentates must have thought about Chavez speeches wanting to make the OPEC a social political force (directed by Chavez who probably is upset he cannot be reelected head of OPEC?), switch to the Euro for oil prices, and his own self glorification. Perhaps that speech could work to stir the downfallen passions of the lumpen chavismo too busy looking for milk to go to election rallies, but in Riyadh it did not work.

In fact King Abdullah rebuke was much softer and nicer than the one from the King of Spain but it was as effective and direct to expose the naked ambitions of Chavez who is so unhinged that he treats all as if they were his subjects. The Saudis have seen pass much worse characters through the Middle East than Chavez and he certainly will not brow beat them. From the CBS/AP report (you should really read it completely to see how out of touch is Chavez with OPEC reality) we get these words from King Abdullah:

After Chavez's speech, Saudi Arabia's King Abdullah, the conservative head of the world's largest oil exporter, appeared to rebuke the leftist president by insisting "OPEC has always acted moderately and wisely."
"Oil is an energy for development, it should not become a tool for conflict and emotions," said Abdullah.

The king also sought to head off Chavez's attempt to reshape OPEC in his socialist image, saying the organization "has not overlooked its responsibilities to developing countries and poverty alleviation." He highlighted that the OPEC Fund for International Development has made donations to over 120 developing countries.

Elsewhere in the press reports are not any more flattering of Chavez role at the OPEC. From the Guardian we get the rather acrimonious debate of Chavez and Ahmadinejerk emissaries against the rest of OPEC when someone plug a TV camera where it should not have been plugged. The Wall Street Journal event titles directly: "Chavez's OPEC Speech Spurs Rebuke From Saudi King".

Enough said.

-The end-

For your reading pleasure: what Chavez wants to do and what will really happen

For your reading pleasure I have two things today.

Simon Romero writes a major article, major as in big here, on what the referendum to be held in two is about. Yet I am not quite satisfied with this New York Times piece. I understand that Romero cannot be outright against Chavez constitutional changes where he is publishing. I sense that he certainly feels the danger behind Chavez move and he has the smarts to quote Barrera Tyszka who coins the "tyranny of popularity" to describe Chavez regime. The reader will come out of that article definitely worrying about the future of Venezuela (at least the democratic reader which I do hope are the NYT majority readers). But there is still something missing. Could it be that Romero includes academics in Chavez power base when all the evidence is to the contrary as chavismo is unable to win a faculty election in all serious and independent university, when not a single high flying Venezuelan academic is supporting the regime, where the only luminaries are imported mediocrities such as Spain's Monedero?

Perhaps that is what is missing in Venezuela coverage today: that there are few noteworthies that are willing to support the regime and that all support comes from a love relationship between Chavez and a large section of the masses. Romero gets it right when he senses that fervent chavistas will vote SI even if they do not agree with the changes because they trust Chavez no matter what. But perhaps Romero should have been more careful about judging the support to Chavez elsewhere. Also, he could have underlined that after all these chavismo excesses are only made possible through US diplomacy mistakes and its refusal to grow less dependent on Venezuelan oil.

At any rate, Romero at least offers a clear glimpse at what is awaiting Venezuela, a legally elected autocracy without hope of return to democracy except through violent means. But he only hints at the implications (well, the article can only be so long, the NYT is not a blog). If you want to look at the consequences you could start very well on the story of Citgo as researched and told by the Wall Street Journal (hat tip AC). There you will read how Chavez policies have been slowly but surely gutting Citgo, making miss its chance to become one of the leading oil companies in the world, leaving it now to face a slow extinction.

Of course, at 100 USD a barrel Citgo with Venezuela support will not go bankrupt, but that is not the point. The point is that Citgo under a good management and the insured Venezuelan oil supply could have become a leading US company, one of these whose words shape US policies. Instead it is slowly but surely becoming an average business at the sufferance of the US public who is more and more staying away of Citgo. Not that it matters much anyway as Citgo has become unable to supply its clients and gave up hundreds and hundreds of its affiliates.

The reason behind the dismantlement of Citgo is the need for fast cash by Chavez. Not for him long term business plans: it is now or never. Thus, the purchase of Citgo which cost a considerable effort to the old PDVSA. Now, by just signing some contract sale, oil terminals and refineries in the US are sold and the revenue is spent happily by Chavez in unproductive social programs, gifts to other countries, corruption and what not. That is right, assets go up in intangible smoke of no benefit for Venezuela except for a temporary political benefit for Chavez. The assets that PDVSA acquired at difficult times with rather sharp acumen are squandered. It is difficult to see how the new PDVSA would recover them someday if it needed them again. The opportunities of the 90ies are gone for good in the oil industry.

The WSJ paper also tells us two very interesting items about the future of Venezuela, even if only Citgo is studied. First, the secrecy that now surrounds Citgo. Citgo has sold any stocks or bonds it might have and is now out of SEC control. That is not too important in a way, through worrying. What is more important is that now Citgo is managed through a board of directors that are not US (it is not clear if there is at least one US guy on it), and a board which acts in total secrecy. Secrecy! That is a word that characterizes well the new look of the Chavez movement and one of the goal of the new constitution where the people will have definitively no access to the government accounts. In other words there is no way for an independent inquiry to see how well Citgo (or any state controlled business in Venezuela ) is doing. At least for Citgo we can have some day tax returns at the IRS which will give us profits over revenues. But for the rest of Venezuela we will only know how much the revolution of Chavez has cost us once he is out of office. A reason by the way powerful enough for him to cling to power for ever and ever.

The other item expanded in the WSJ ties up with what I wrote above, that none of the Venezuelan best and brightest are in bed with chavismo. The board of Citgo includes two foreigners, Bernard Mommner described as a French Marxist mathematician (and a very discrete power player within chavismo with a reported lavish European life style) and the Mexican Juan Carlos Boué (who, by his name, might also be of French origin). These two characters had espoused in the past the theory that PDVSA was not bringing home enough of its profits by investing too much overseas. In such way they demonstrated clearly that they did not know how a capitalist business must work, through constant investment to keeps its competitive edge, its market share and its future prospect. After all, whatever PDVSA bought overseas was still owned by Venezuela and could eventually ensure a comfortable income once the investment was absorbed.

The strategy of PDVSA was based at a time where Venezuelan oil was not well quoted and where oil in general was thought as a long term cheap commodity. But PDVSA had planted the seeds to become a major world player once oil woudl go up again. Instead by listening to advisers such as Mommer and Boué Venezuela is reverting to a colonial exploitative system where it will sell its oil to the highest bidder, becoming thus economically dependent on the highest bidder, being that one the US, China, India or Europe. Because the higher bidder will also pose its conditions and the unquenchable thirst of Chavez will make him eventually accept the conditions imposed.

And thus we see the future of Venezuela where Chavez will repulse the Venezuelan intellectual elites and thus will have to rely more and more on international mercenaries. Meanwhile in the streets even people that know better are deciding to vote SI because they just love Chavez.

-The end-

The New York Times Magazine does PDVSA

Tina Rosenberg wrote for the NYT Sunday Magazine a great review article on Venezuela economy, namely PDVSA fate. A must read for anyone that tries to figure out the mess Venezuela is in.

I loved this part, which illustrates how corruption worked in the 70 ies and 80ies and how it works today (explaining to us by the way how come we have reached unthinkable levels of corruption today)

“If Pérez (1973-78 and 88-92) wanted money from his oil boom, he had to wait for Pdvsa to pay taxes, and he had to go to Congress and approve extraordinary spending,” one Venezuelan economist told me. “Today, the president gets on the phone with Ramírez and in an hour can get $200 million.”

She was nonplussed by the misiones either.... I suppose that if Tina Rosenberg says what Venezuelan English language bloggers have been saying for quite a while, then maybe, for example, the scarcity of milk is true (she even reports that she did not find milk in stores! the nerve!)

-The end-

Why Chavez wants to close RCTV and Globovision

So, the scandal of the 800 000 dollars attaché kept making huge waves. In Argentina, that is. Even El Clarin give us a picture of what approximately would 800 000 USD look in a small suitcase. Definitely more than attaché is needed, even with 100 bills.

Today we learned the following from Argentina:

• One of the passengers, Claudio Uberti , was dismissed from position as assistant to the Planning Ministry. The said minister, De Vido, seems to be in trouble too.


• A judge decided that there are causes to investigate further the case, seized all of the 800 000 USD of the bag. there is no word as to the current whereabouts of Antonini. Apparently he left the country without bothering to recover the 400 000 that he could still recover if that cash were legitimate. Amazingly Clarin has found more information about Antonini than what we found about him in Venezuela so far.


• President Kirchner, sensing political trouble acted swiftly, not only asking for at least one head but going on the offensive saying that his government was effectively fighting corruption as the dismissals are supposed to suggest. Well, at least we will give him credit to remove the blatant cases of corruption in Argentina, which is not the case in another country closer to our hearts.

Because indeed, that is the point: while in Argentina things are moving, an investigation is taking place, some actions are done, in Venezuela the day was characterized by what DID NOT happen.

First, the Argentine press noted that the Venezuelan vice president made this whole business yet again a media manipulation from an international conspiracy. La Nacion goes as far as giving the article the following title "Venezuela takes distance again from the scandal", a clear allusion at the desire of chavismo to avoid its responsibility. Even better, ENARSA press representative complains about the nerve of the Venezuelan air hitchhikers to bring along such a suspect character as Antonini. In fact La Nacion uses the words "shot at the Caribbeans" as a clear ethnic prejudiced expression to qualify Venezuelans as not serious characters (or worse). In all fairness, it is hard to blame them after such a pitiful Venezuelan display, when Antonini left the country in a hurry..........

Indeed, the actions of Venezuelan officials were today less than stellar. If the Vice President was his usual self, the Republic Prosecutor Isaias Rodriguez was at his worst, or best depending on your angle. He simply said that it was an Argentinean problem, that any crime was perpetrated there, and that he would wait for the Argentina report to see if there were any cause worth opining an investigation at home.

Some one should explain to Isaias that there is a stringent currency exchange control in Venezuela and that if, say, this blogger were caught at an airport with 10 000 USD he would be in great trouble.

And we should not forget that this prosecutor is the one who, based on a deep look in the eyes of a Colombian criminal, found enough evidence in that look to jail a few people for the Anderson case that remains to date unsolved. In fact, he has no problem in keeping Patricia Poleo out in exile even as his whole case on the Anderson murder has completely collapsed and we have lost all hope to ever know who the heck was behind it all... but perhaps I should not be so hard on Isaias: at least he sort of told us not to worry, that nothing will be done about Antonini larceny.

Only Luis Vielma, one of the few chavista servants with an ounce of dignity left, told us that an investigation should be done because customs laws were broken. I bet you that this stand will come back to bite Vielma in the ass once Chavez comes back to Venezuela from his gift giving tour of LatAm.

So you see again why Chavez wants to close media such as RCTV and Globovision: these people do try to inquire the way the Argentina media inquired and already got one head. Chavez does not like that, he does want only submissive media which spend their time praising the great leader of the revolution. Go to ABN and search for news of PDVSA employees taking along with them a guy and his money bag. Nothing! You will find only stupid glorification of Chavez giving Venezuelan property as if it were his and only his to give around, and the speech of the Vice President of course.

Let RCTV and Globovision be closed and Venezuelans will not know anymore about official money laundering, about the sacking of the country by Chavez cronies. At a time by the way where corruption is reaching unequaled heights in our history.

-The end-

A corruption "gotcha'" in Venezuela

This week we have a clear, smoking gun evidence, of the extent of Venezuelan corruption. With even a price tag.

The basic facts

Chavez went to Argentina last week end to buy 1 billion dollars (US) of rather bad Argentinean debt. It is not the case to discuss the real motivations of the trip here, just that Chavez, without even discussing matters with the National Assembly, for example, goes to Argentina to buy bonds. Just so, because he decided it.

Unfortunately there was a small cash tip going along with that billion: someone claiming to be with the Chavez entourage, arrived on a private flight carrying 800 000 USD. Cash, cold cash in some attaché. The Venezuelan ambassador in Buenos Aires was quick to say that the guy carrying the cash had nothing to do with the Venezuelan embassy.

La Nacion of Argentina carries the names of the passengers (linked to ENARSA, the Argentinean oil state company) and the tale of what happened at the airport. One of them, Uberti, is closely linked to all the Argentina-Venezuela juicy deals. You draw your own conclusions.

El Clarin just reported the press issue of ENARSA. There all the names of ENARSA directors in that flight are confirmed, as well as the petition from PDVSA to give a "lift" to Buenos Aires to five of its employees. The Argentineans accepted. One of the Venezuelans was Antonini Wilson of no specificied rank or title within PDVSA.

The impossibility of it all

Now, that does not mean of course that Uberti is a corrupt accomplice, or if he was just taken in by his good faith as PDVSA crooks might have hoped that, just as it happens in Venezuela, high officials are sort of exempted from custom controls. Unfortunately Argentina being significantly more orderly and civilized than bolibanana Venezuela, I can imagine the face of Antonini when the directors of ENARSA, even coming through a private flight, checked through customs. That is how the 800 K were caught.

Now, without going further, the presumption of fraud and delinquency committed in Venezuela is already enormous, even if Wilson was, well, only holding the bag.

In Venezuela there is a severe currency exchange control. NO VENEZUELAN can buy dollars without the consent of the government through its currency control agency, CADIVI. Any import that you make must be approved by CADIVI if you want to be able to pay your provider at the official currency rate. Otherwise you must go to the parallel market, at twice the bolivar value. In other words, getting an 800 000 cash transaction is already rather difficult.

In fact it is even more difficult than what you think. Any Venezuelan that travels overseas has the right to ONLY 600 USD a year, plus a few thousands THROUGH approved credit cards. In other words, ANY VENEZUELAN carrying more than 600 USD in cash must have some special permit from the government.

But it is even worse than what you think. If this blogger must travel and ask for his 600 in cash to pay for cab fees, a cup of coffee and such stuff, he must present his plane ticket and his CADIVI permit to his bank. Then the bank processes it and will call this blogger after about a week. This blogger then has at most 72 hours to go and withdraw his cash. If he does not do so, the cash is returned to the Central Bank and that is that. In other words: Venezuelan private banks do not carry significant amounts of foreign cash at their agencies. At most a few thousands for their daily needs. That is, NO VENEZUELAN BANK is likely to have at any given time 800 000 in its vaults unless there is some very special arrangement between the Central Bank, the private bank and the government for a given purpose.

What Antonini Wilson was carrying was the cash allotment of 1,333 Venezuelans (1,333 X 600 = 800 000). Clearly, it was not the case of 1,333 PDVSA employees pooling together their resources to go on a Buenos Aires vacation.........

Conclusion

In Venezuela today there are only two ways to have 800 000 in cash. It is either

1) some drug trafficking (difficult as most Venezuelans would be paying in VEB rather than dollars: where would they get the dollars for their fixes, at CADIVI?)

2) some governmental direct action. In such case it would be very easy for PDVSA to emit a communique explaining the "incident". No such communique has been issued.

Thus we are left with only one other explanation that makes sense: through governmental complicity someone in the government (not necessarily PDVSA, Antonini might just be the bag boy) has managed to get from the Central Bank (or PDVSA, the only guys that could perhaps be managing such cash sums though by law they are supposed to give ANY USD they get o the Central bank) the 800 000 in cash. The motive will apparently be obscure (if it were legit we would already know about it). The motives could be anything from financing the electoral campaign of Cristina Kirchner (she better watch out!) to simply stashing away some cash by some PDVSA director that wants to invest corruption money in Argentina. I personally think that it was for political purposes during Chavez visit. Or for Cristina.

And speaking of Chavez? What is he saying to all this? "Media manipulation" "Bush/Empire intervention" "the private media is th worst problem in the world" and what not, leaving Chomsky far behind. But is he ordering a thorough investigation? NO! In fact considering the recent revelations at how corrupt and inefficient PDVSA has become I doubt very much that any investigation will be launched. The regime could collapse as some are murmuring that the total stolen monies could be several billions dollars ( a number of 7 is advanced even).


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Chavez and George Bush strange similarities

Chavez is trying to make a career out of accusing George Bush of everything that is evil in the world, including everything in Venezuela where all the failures of chavismo are blamed on one or another CIA conspiracy.

However Chavez looks much more like Bush than some of his followers would care to admit. For example the unconditional support to underlings that messed it up big time. The way that George Bush goes to bat for some of his White House employees is becoming quite spectacular and borders the ridicule. Recently, look for example how Gonzalez, the Attorney General, is defended even at increasing political costs, when removing him and getting a new attorney would simplify Bush's life greatly as he is needed for more pressing matters that are harassing his administration.

This past Sunday Chavez came to bat to defend Ramirez, his oil minister, his PDVSA president. PDVSA is sinking. Oil production has ceased to increase and has started going down. Bad decisions since 2003 indicate that oil production is very, very far from being able to increase again, and probably will lose an extra 20% production capacity within a year or two. But if these crucial economic decisions were not enough to remove from office any minister who took such decisions, amen of a president, the political decisions of Ramirez are even worse. From his outright political campaign involvement in 2006 in violation of all elemental electoral rules, for which he got barely a slap on the wrist, to his open, deliberate, constant support for the discriminatory apartheid society making Tascon list, Ramirez has gutted PDVSA from any responsible personnel that could help the company regain some credibility. Instead Ramirez is presiding over the creation of a huge unproductive bureaucracy where people are more interested in watching what is on the screen saver of their coworker (Chavez pictures are apparently mandatory) than balance sheets and accounting of management decisions. That is, one of the most sophisticated industries of the world will be run by folks chosen strictly on their political credentials. Nobody cares anymore whether they can manage an oil rig.

And I am not even touching the direct financial corruption that is linked with such style of management.

In any normal country, any democratic country, not only Ramirez would have been fired but he would be probably under judicial investigation, indicted and contemplating jail anytime soon. But In Venezuela, Chavez yesterday defies common sense, political or human, by sticking his neck for Ramirez and taunting us with a threat of keeping him for years to come. Of course he will, Ramirez forks over Chavez any dollar that he still manages to collect from oil sales, even if he is gutting the response ability and maintenance habits of PDVSA. And as any good accomplice, Ramirez is willing to shield his boss from any blame.

However there is a difference between Bush and Chavez: by January 2009 Bush and his accomplices will be out of office whereas Ramirez and Chavez might be there for years, stealing the country's future, if anything by their sheer incompetence. And that is quite a difference, whether you like Bush or not.


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Oil production problems in Venezuela

I have been very busy these days so no posting time. However I could not pass on a couple of choice items.

There is the rather dismal failure of the Margarita pseudo summit, reported here by Miguel. And I will pass on the video where Uribe and Lula are laughing at the silliness of Chavez.

And there is a little gem from Maria Anastasia O'Grady, ever sharp on Venezuela matters. I have observed that lately the pro Chavez lobby in Venezuela is making a frontal attack on any guy form the foreign press that does not like Chavez. I have even received reports from faithful readers of similar activities on this corner of the blogosphere from the pro Chavez cheer leading squad. So I am sure that it will be soon enough the turn of Ms. O'Grady to be crucified, as in character assassination since her arguments as those of the other "victims" of this campaign, are nearly unobjectionable. By the way, crucification of critics seems an appropriate activity I suppose for a Chavez posing under crucifixes these days.

Since the Wall Street Journal is for subscriber only, I give a hat tip to A. who sent me the article posted below, after the "click"

A Crude Power Grab
By MARY ANASTASIA O'GRADY
April 16, 2007, the WSJ

In two weeks' time, Exxon Mobil will complete the transfer of operations at its Cerro Negro facilities in Venezuela to the state-owned oil company Petroleos de Venezuela, known by its Spanish initials as PdVSA (pronounced pay-day-vey-sah).

The Dallas-based company isn't voluntarily relinquishing control, nor is it alone in doing so. President Hugo Chávez has decreed that all six U.S. and European oil companies running exploration and upgrading facilities in the country must turn over operations to PdVSA by May 1, and that they must surrender majority ownership of their projects as well. As to the compensation that Venezuela will pay for these expropriations, negotiations are still under way.

Mr. Chávez has been brimming with bravado as he has shredded these oil contracts and told foreigners to step aside because he's in charge now. But he'd better relish the thrill while it lasts. The move is not good for Venezuela and it will probably end up hitting the commandante of the revolution in the pocketbook. Corruption, incompetence and mismanagement have already taken a big bite out of PdVSA's productivity since Mr. Chávez began politicizing the company in 2001. High oil prices have mitigated the damage to his balance sheet up to now but they won't protect him forever. Meanwhile, this latest assault on property rights threatens to accelerate the steady deterioration of the Venezuelan oil sector and the broader economy, which remains heavily dependent on oil income.

Venezuela nationalized its oil industry in 1976. But in the 1990s, the government decided to sign 25-year contracts with foreign oil companies to form "strategic associations" with PdVSA, for the purpose of exploiting the rich reserves of tar-like heavy crude in the Orinoco Belt.

In the past decade, Exxon Mobil, BP, Conoco Phillips, Norway's Statoil, France's Total and Chevron all have set up shop in the oil-rich region, extracting the thick, black gold, sending it by pipeline to the Caribbean coast and "upgrading" it to make it lighter and therefore useful. U.S. companies send their upgraded Orinoco crude to Gulf Coast refineries specially designed to transform it into gasoline.

The foreign oil companies sank some $17 billion into the strategic associations with mutually beneficial results. The four projects together produce roughly 600,000 barrels a day from a region that, while rich in reserves, offered Venezuela little income potential before upgrading processes were mastered with sophisticated financing expertise and foreign technology.

The Chávez government says that it doesn't anticipate any production problems stemming from the change in operatorship or ownership. From a strictly technical point of view, that forecast may be defensible. It is certainly true that both oil extraction and the upgrading processes could be run by any oil company. Still, given the performance of PdVSA under Mr. Chávez, it is highly unlikely that productivity, investment and income won't suffer.

One problem already looming is labor. Last month Dow Jones Newswires' Peter Millard reported that, though PdVSA has said that it will retain the 4,000 employees who staff the strategic associations for the foreign companies, union leaders are warning that many of the chemical engineers and processing managers are unhappy about proposed pay cuts and are launching job searches.

A shortage of human capital is already pinching PdVSA. In 2002 Mr. Chávez fired 20,000 workers -- many of them skilled -- because he didn't like their politics. Those employees were replaced with politically compliant candidates and production never recovered. OPEC says that Venezuela now produces 2.5 million barrels a day, one million barrels less than in the pre-Chávez era. According to Mr. Millard, this year Nigeria replaced Venezuela as the fourth-largest oil supplier to the U.S.

Declining production at PdVSA may also be tied to a politicized management environment that takes it cues from the state. The Chávez government is notorious for graft and low standards and it would not be surprising to find that similar business practices had crept -- or rushed -- into the state-owned oil company. Nor would it be surprising to see those practices migrate to the strategic associations that will now be run by PdVSA.

The expropriation also threatens to destroy a business model that provides more than the pumping, processing and refining of oil. The marketing divisions of these companies play a crucial role in placing product and keeping transaction costs low. The loss of these networks will also harm Venezuelan competitiveness.

Finally, and perhaps most important, there is the damage to Venezuela's investment profile. PdVSA is already hurting for cash because profits that would otherwise be plowed back into exploration and development are being siphoned off by the government to advance political and social causes. In a robust investment climate, this misallocation of capital might be compensated for by the private sector. But so far investors have had a predictably bad reaction to their loss of property at the hands of Mr. Chávez. Mr. Millard reports that output has fallen an estimated 60,000 barrels a day to 440,000 at the 32 fields "as the companies affected by PdVSA's takeover halted new investments."

Mr. Chávez seems to think he can solve this by inviting China National Petroleum Corp. into Venezuela. But, as Mr. Millard reported from Caracas last week, CNPC has a dismal track record in the Venezuelan oil fields. In 1997 it committed to two oil-field blocks with a plan to raise production to 50,000 barrels a day in each field. By March 2006, one field was yielding 16,500 barrels a day while the other was still running at its 1997 production rate of 4,400 barrels daily, even though CNPC had doubled the number of active wells to 84. One former PdVSA project manager said that in 2001 CNPC drilled six dry wells at Caracoles, a field with 218 million barrels of proven reserves.

Exxon Mobil CEO Rex Tillerson said last month that if the terms of compensation offered by Venezuela are not acceptable to the company, it would leave Cerro Negro entirely. That would mean eating a loss, but with Mr. Chávez pulling stunts like he did in January, when he slashed production quotas for the foreign companies so that he could meet OPEC cuts without hampering PdVSA sales, the risks of walking away may be lower than perceived. In the end, an Exxon exit would probably end up costing Venezuela even more.


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