Returning home for Dummies

What can I say? Never did I see so many changes in Venezuela after a mere three weeks absence. In fact, the shock of the first few days was so big that I refused to update my database on politics and the like. Even today as I type I am far behind the details. And yet they do not matter: the big picture has become bigger for me after four weeks outside.

My first shock was the grocery store when I went to refurbish my refrigerator. The prices went noticeably up in one month for the stuff I buy. There was no imported goods. Of course, among the goods available there is all sorts of imported stuff re-processed in Venezuela. After all we are importing now at the very least 60% of our food (estimates vary, I am giving you the bottom line). What I mean is that you could still find an occasional treat, like some average Italian pasta, or an overpriced jar of raspberry jam. This is now all gone. And it has not been replaced, even by sub-par Venezuelan production.

"Unificación cambiaria" for dummies

I have been meaning for a few days to write up a simple way for people to understand why the country seems to have been frozen the last few weeks, even though Giordani is out, Lopez still in, and Capriles remains deaf mute. You may think that it seems a lot of stuff is going on but this is not the case, no matter what glaring headline stares at you. The reason is quite simple; the country is waiting at three real questions that need answers. The first one is will the regime increase gas prices. The second one is will the regime devaluate at around 15 or at around 25 for the USD. And the third question, maybe the more important one, but that NO ONE dares to touch politically, will the regime amend the labor law of 2012, a regulation that is choking all, ALL business in the country, be they state or private owned.

As long as these questions are not answered neither chavismo can plan for its post Maduro nor the opposition find again some form of political coherence. We are all silenced by the catastrophe about to fall on us.

Empty hospitals, empty airports

While Capriles and the MUD keep gazing at their navel and while chavismo tries to find a novel idea, the country keeps sinking at a steady pace. Today we had two gems that speak volumes about what await us.

Electrodomestico-nacht, the banana republic version of Kristallnacht

She supports Maduro. The good life!
Thieves of the world unite!

It is kind of eerie that tonight we commemorate the 75 anniversary of Kristallnacht when Hitler made his first large scale pogrom based on a rather minor political event in Paris.  But those are other times, in bolibanana pseudo revolution which has only in common with the Nazi of those days to be a band of thugs that turned to fascism to reach and retain power for as long as they could, to death if need be in order to avoid the punishment they so richly deserved.

And yet today may be a turning point of equal importance for the Caracas regime. Today it has crossed the line where it is now OK to loot stores to satisfy the appetites of its followers. Today it made OK to brand enemies whoever needs to be branded an enemy even if a few weeks ago it was benefiting from the association with power, a mutual benefit if I may dare say.  Today it has become clear that the regime will destroy anything it needs to destroy to remain in office. Today formalities have become unnecessary. Today the regime has demonstrated that it has no friends or foes, just moving targets.

Desperation News and Views

Daka pictures on newspapers and Twitter

UPDATED FOR LOOTING
So what is a regime that got handed the news of 5% inflation for a single month, whose main "evil" opposition leader is received by the Pope, when a "spontaneous" multigathering protest is convoked for today, that cannot hide the increasing low key riots for food, to do? It decides to sack a major electronic store chain.

Maduro ordered yesterday to seize the 5 stores of Daka, an overpriced, but then they all are, electronic/appliance chain. Allegedly the stores will be forced to recalculate their "costs" and sell all their appliances at "just price".  We assume of course that the militia and Nazional Guard in charge of the organized semi looting will be served first.  Maybe even for free. Which does not stop a country of "lambucios", from the regime or the opposition, to rush to the store to take a turn in the line and be the first ones to shop when they open again. Maduro conoce su ganado we would say in Venezuela, Maduro knows his cattle.

The devaluation is retroactive: the great chavista robbery

There is all sorts of economists pontificating about the devaluation and all sorts of politicians talking of "paquetazo rojo" and how minimum wage has lost X% of its purchasing power.  But I do not hear many talking on how the regime is actively bankrupting the private sector of the country by making the devaluation retroactive. And certainly no one in the MUD would be caught dead defending these filthy capitalists which are going to go belly up in a few weeks if the regime does not change its post devaluation robbery scheme. To bad for the workers about to be laid off I suppose....

"El Patrio", a.k.a. Freddy Bernal, chavista congressman in Venezuela

One does not not whether the US is really that clumsy to blacklist 4 very high ranking chavista for arm and/or drug trafficking.  After all, just a few hours before the local political class is about to learn of a rather momentous IACHR decision the US gives to Chavez yet more fodder to kick the table.  Certainly the two decisions are absolutely unrelated and the question as to whether Bernal was an arm dealer had been answered long ago: we just got official notice yesterday.  But chavismo is going to use the "intervention" exhausted old argument, among equally worn out arguments, to politically ban Leopoldo Lopez et al. under the excuse, say, that the US bans chavista "leaders".

I am not going to speculate on why the US treasury suddenly decides to blacklist 4 guys whose names should have been blacklisted at least a couple of years ago.  They have their reasons even if they go with a dreadful sense of timing.  Rather, let's have fun at the expense of the one who has been a noted criminal since at least April 2002.

Chavez advertises even in Tal Cual: tax payer money for twitter ads for Chavez

What was my surprise today reading a strong editorial of Teodoro Petkoff in Tal Cual?  Well, that the spot for Google Ads was occupied by an advertisement for what is allegedly Chavez twitter account, @chavezcandanga (which I do not follow, by the way).  Of course, it was a coincidence but I could not fail to observe the irony that when in his editorial Petkoff attacks Chavez on the extreme abuses of cadenas, he is even further harassed by Chavez advertising next to the editorial. 

When taxation without representation becomes mere highway robbery: Chavez robs the Venezuelan treasury

This week is holiday in Venezuela and traditionally even Chavez had a more moderate approach in what still remains a traditional country, albeit not very religious anymore.  But strapped for cash Chavez decided to use the holiday lull to make a preemptive strike in what basically accounts to a mere robbery of the public treasury to use it as he pleases.  Really, I kid you knot, with the new decree law announced last night Chavez will have a few extra hundreds of million USD (up to a couple of billion depending how oil prices vary) to spend as he wishes, without legislative control, without any form, of accounting whatsoever.  And that money he steals it directly from locally elected authorities, that is town halls and governorships.

The Sur del Lago region is resisting the potential narco-guerrilla take over

Dangerous escualidos defending their job

It seems that censorship is working inside Venezuela because I learned late that the 47 farms that were expropriated last week in what we call "Sur del Lago"are resisting the unjust chavista take over.  Not only I learned about this recent development late but I learned it through Colombian TV while Globovision was continuing its "normal " programming.....  Although there are already pictures available on the web the information is meager, just official TV relating that all is going well in the "rescue" of abandoned land and El Universal who is more explicit and which writes that three, 3, battalions of the army have been dispatched to take over these, I assume considering the extensive army deployment.

The current Venezuelan crisis for Dummies ®

With all that has been happening in Venezuela since September 26 the casual reader, as well as the informed reader, might have some trouble in figuring exactly what is going on.  Ever willing to help this blog will try to explain the core reasons and consequences of the current political crisis.  Yes, in case you have any doubts,  it is a political crisis that is taking place in Venezuela and the reaction of the regime in place is a not-so-slow motion coup d'état.

The basic reasons behind the regime actions

Regular readers and well informed people already know what is going on and why, but it never hurts to refresh memory and simplify the input.

Career prospects for juvenile delinquents

Weil catches perfectly what the regime has become when it seizes without ANY excuse Agroisleña, combining it with the plague of juvenile delinquency that the regime has also caused.

And when I grow up I want to be an expropriator

Our starvation will be on Twitter: La Carolina is stolen by the INTI

When you drive from Barquisimeto or San Felipe to Caracas there is really only one nice place where to stop: La Bodeguita at Hacienda La Carolina. It is the only original place, where real creole food is cooked and served to you under a clean "caney" with view over a pond where some birds frolic, the whole thing surrounded by meticulously manicured grass.  A lot of what is served to you is produced from the surrounding land, and La Bodeguita is also a store set in a country decor where what is for sale is 90% grown and prepared in situ, from the delicious confit orange peels to the coffee grown in the wooded hills you admired while you had your lunch.  Amen of the assortment of cheeses and desserts baked there, and one of the most extensive collections of spicy sauces you will find in Venezuela.

This very soon will be no more, and La Bodeguita, if it retains its name, might start serving "carne en vara" or, gasp, "chicharron" if it can serve anything.  If you want something green or vegetably or merely well cooked and presented, you might have to wait, hold tight for that, for the Mac Donald after Valencia. 

The EXITO nullity debacle

Before I get into discussing the seizure of EXITO stores by chavista goons today I thought that it would be good to add a sense of perspective. The major stockholder of the CATIVEN group which holds EXITO and CADA is the Casino group of France. They declared today that losing the EXITO stores would simply not affect their balance sheets because the Venezuelan operation represents about 1% of its turnover and almost zero profit. So here, at home, we have been anguishing over the EXITO takeover, watching workers fighting it out among themselves, thinking for ourselves it was a big deal, wondering how it will affect our access to increasingly scarce and expensive items, when in fact EXITO is almost irrelevant for its owner.

I cannot think of a better example to illustrate how irrelevant Venezuela is becoming in a globalized economy. Imagine what we will represent in 5 years from now if Chavez does not leave office. No more than a mediocre occasional oil supplier?

Chavez new constitution: Article 98

Patents and the decline of science and technology in Venezuela

In May I posted information published by the National Science Foundation (NSF) that discussed science and engineering in Latin America. In it they reported that Brazil, Argentina, and Mexico have been trending upwards in technology development to become "high-tech exporters". Not surprisingly Venezuela ranked the lowest of the countries scored, mainly because: "[it] suffered because it was considered the riskiest or least attractive site for foreign investment". Instead of stimulating foreign and domestic investment and encourage technology development, the Chavez government has made decisions that adversely affect Venezuelans competitiveness and economy while currently they are taking steps to further discourage innovation. Specifically within the constitutional reform, to be voted on December 2nd, a modification to article 98 is planned. The original article states:

Cultural creation is free. This freedom includes the right to invest in, produce and disseminate the creative, scientific, technical and humanistic work, as well as legal protection of the authors rights in his works. The State recognizes and protects intellectual property rights in scientific, literary and artistic works, inventions, innovations, trade names, patents, trademarks and slogans, in accordance with the conditions and exceptions established by law and the international treaties executed and ratified by the Republic in this field.

Modified article 98 - text changes are underlined

Cultural creation is free. This freedom includes the right to cultural diversity pertaining to invention, production and dissemination for creative works, scientific, technological, and humanistic, including the legal protection and rights to the author for their work. The state recognizes the rights of all to participate in the cultural community, enjoy the arts, and participate in scientific technological progress, and enjoy their benefits.

The most concerning aspect of this reform is that it limits protection to cultural diversity, to the exclusion of any protection that may be strictly intellectual or economic. In addition, the term "cultural diversity" is non-specific, how should one define it or interpret it? More than likely the interpretation will be left to the court system which is controlled by Chavez.

A simple interpretation of the new article suggests that most science and technology would not be protected since most do not contribute to cultural diversity. There are countless examples of how this will affect Venezuela, from books to merchants with the sole goal of bringing everything under state. State control has proven to be inefficient and a hindrance on scientific and technological progress, the participation of the private sector and intellectual property protection is essential for it to flourish.

It is clear that the Chavez government is reforming and will interpret the new article in a way that will significantly decrease intellectual property rights and severely limit patent protection. In the words of National Assembly member Carlos Escarra these are economic (i.e. capitalist) rights not cultural rights. Cultural rights constitute art, poetry, and literature whereas "inventions" have economic benefits. Apparently, Escarra fails to realize that art, music, and literature do have economic benefits to the inventor, through the sale of their work.

It is unfortunate that the new reform is designed to decrease patent protection since it is well established that patent protection, along with property rights and decreasing state bureaucracy play key roles in spurring innovation and economic development, ultimately leading to decreased poverty. This is not a new concept, but Chavez seems intent on creating a society based on a barter system and where some of the most important technological advances, such asOrimulsion is being phased out while giving the Chinese the technological knowhow for production while collecting little to no royalties.

The proposed reform to article 98 is simply putting on paper what the Chavez has been doing for years, either directly or indirectly though his actions. To see how Venezuela has declined in technological innovation we can look at the number of U.S. patents awarded to individuals in Venezuela (see graph below).



In the graph we see that Venezuela averaged about 32 patents a year from 1993 to 2002. From 2002 to 2006 the number patents dropped sharply to 15 after hitting a 13 year low of 10 in 2005. The most probably explanation for this sharp drop in patents is Chavez's decision to purge PDVSA of political opponents, particularly those such as the PhD investigators at PDVSA research institute (INTEVEP), where 66% (108 out of 164) were fired. The loss of highly skilled/educated individuals comes at a huge loss to the State, making it less competitive, reducing innovation and investment, resulting in a less diverse economy and loss of potential revenue. The loss of these investigators is particularly damaging to PDVSA since it accounts for the bulk of the economy and requires technological innovation to stay competitive among the other oil companies. Sadly this loss is long term since the time and investment required to create a highly skilled worker with a PhD is high, approximately 5 years of education and $300,000 not counting the experience needed post PhD. Making the Venezuelan situation worse is that most of these skilled workers have left, and/or have been prevented from working in Venezuela, thus they have emigrated and sought jobs with other petroleum companies taking their knowledge and skills with them. So who loses? Venezuela.

Over the years we have seen how Chavez has made decisions that adversely affect innovation in Venezuela, now the Chavez government is poised to modify article 98 which will further discourage investment and innovation that will not only affect the oil industry but the wider economy. The Venezuelan chamber of franchises has already stated that modification to article 98 will negatively affect that business sector, which has seen significant growth recently and now accounts for 2.2% of the GDP.

The modification of article 98 is an obvious decision by the Chavez government that will only lead to decreased technological innovation in Venezuela. However, this is only one decision, although a significant one, among many that Chavez has made during the past 10 years that will adversely affect Venezuela for many years.

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Kensey writes his own blog, Venezuela US topics, and he can be reached there also for further questions.


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Chavez cannot get good help: the Centro Internacional Miranda

One of the dramas of regimes that range between autocratic to totalitarian is that the big leaders have a hard time in getting good help. I mean, they can easily attract through power, money, or both, people capable of doing all the nasty things required for the beloved Supremo to remain in office. But that is all. Professional people, experienced people, people aware of their own value, have a hard time putting up with the tantrums and bad manners of the leaders of such regimes and prefer to exile themselves or to stick to some low management job and spend their lives in discretion, waiting for better days. In general the result is countries that on the surface seem to work well enough but who are in fact very fragile and with time simply start crumbling. Nobody cares enough for things to be done as they should be, or worse, nobody in charge has an idea what to do. When that last situation occurs, these deficient bureaucrats manage to survive by doing the only thing that really matters: praise and suck up to the beloved Father so it really does not matter much whether trains run on time or not.

Sky high robbery and media manipulation in Venezuela

Today the stunning news is that the Venezuelan government has taken over, forcibly, the cable car system of Caracas. It is stunning in two aspects, the mere fact on how the take over has been performed, in all contempt for private property and investment, and it is perhaps even more stunning in the governmental spin put on that more than sordid affair.

The cable car issue

Our one before last dictator, Perez Jimenez, had a moment of folie des grandeurs and decided that he wanted to put two gigantic systems of cable car. Gigantic at least for the time. The one in Merida for many years was (and might still be for all that I know) the cable car system that reached the highest in the world, a few hundred feet away from the 15000 feet Bolivar peak above Merida. The other one was the Caracas system which not going as high was equally as ambitious and ostentatious.

The Caracas "teleferico" rose from 2700 feet to almost 6000 to go down all the way to the Caribbean sea. To add agreement and economical viability to the project, Perez Jimenez had a hotel built on top of the Avila mountain, with heated pool, luxurious spaces, and its own small cable car system to link it to the main station a little bit lower on the mountain ridge.

Very quickly the system showed its vulnerability: cost of upkeep. Indeed, all food, services, supplies, water, electricity, etc... had to be lifted all the way to the top. And thus only a high added value could sustain the system. One of the reasons for example why even a skating ring was added at the top station in addition of fancy restaurants and soda fountain (it was the early 60ies, you know). Thus it is not a surprise that when the left-populist AD that succeeded Perez Jimenez decided to forbid a casino and other "elite" activities on top of the mountain, quickly the "teleferico" lost its shine and started its long decline which lead to its ultimate closing in the early 80ies. Simply put, no government had the stomach to invest what was needed to keep up such an expensive system, nor had the stomach to restrain access of part of it to the very rich to help subsidize the rest at more accessible prices.

The first item to go was the cable car to the Caribbean. This was conceived as a way to go to the beach in a fell swoop across the mountain. But when people got sick for the sudden changes in altitude just to reach a now dirty sea shore invaded by shacks and cheap fried fish joints, nobody was interested anymore. In fact the Caribbean connection was designed to link to La Guaira harbor where cruise ships would dock and unload their tourists, enough of them willing to take the cable car to the top of a 6000 feet mountain straight above the sea. This never happened and already in the mid 60ies the sea side was closed for good.

The Caracas side kept going on and off, but on enough to give me some of my most wonderful childhood memories even if when young I was very sensitive to sudden height changes. In the 60ies and 70ies Caracas was still an amiable city and I remember when my parents and their friends had no problem going occasionally to skate until midnight, when the teleferico had its last cars down.

I never saw the Humboldt hotel open. As a young kid I still remember when we tried to peep inside the hotel and could see still the original art deco furniture displayed, the empty pool with all of its chaises displayed around, still waiting for bathers that would never return. It was a totally magical place for a kid, some mysterious sleeping beauty palace so suddenly abandoned. But perhaps the most impacting memory, for the scientist that I was going to become, was the cable car to the Humboldt hotel. It followed the ridge of the mountain for about a mile, and it was composed by cute cylindrical vans that could seat 4 people. And it ended against a big wall. That is, the cables went through a small hole and the little cabins just hung there, in the air, nowhere to go and shield themselves from the cold and the mist. The decision to close that small cable car system might have been the first one to be taken when you consider the wall built but it took decades to the government to finally have the courage to dismantle these cabins that might have served no more than a year or two. To this day that short ride is the ride that I will always miss not to have had a chance to take it. With the ocean on one side and Caracas on the other it must have been one of the most exciting rides ever designed.

Avila Magica

At some point the Venezuelan government decided that something should be done about the deteriorating hotel and the cable car system. Caracas was getting crowed, needed green spaces, and the eyesore that the teleferico had become was constant reminder of how incompetent the successive administration had been. So the second Caldera administration decided to try finally the private enterprise card. A public auction was held and a financial group won and created Avila Magica. This was 1998.

When Chavez came to office in 1999 the contract were respected and until this year there were no complaints. But suddenly things changed. In some speech Chavez said that it was scandalous that the cable cars of Venezuela were in private hands (1). And just as it happened for CANTV or EDC the government started the take over. With a difference: in CANTV and EDC we had foreign investors and they were at least reasonably compensated. But in the case of Avila Magica, as was the case of the transmitting system of RCTV, we had Venezuelan investors only and they were just robbed of their property. Chavez can say today again that private property will be respected, after what happened in May and today, I wonder who in Venezuela will invest his or her own money anymore in any business....

What are the government charges? Well, they are ludicrous and they are uttered with utmost seriousness. Apparently the Avila Magica folks "destroyed" a Venezuelan heritage. That is the teleferico was a national monument of sorts and could not be altered in any way but was. Avila Magica replies that they never got guidance or help in deciding on any thing, and beside when they got the old system it was crumbling, in ruins, nothing working. Other charges include for example that the Caribbean side was not restored yet. Well, the Caracas side was barely profitable and far from having its investment recovered the comapny simply did not have yet the cash to reopen the Caribbean cable, a much more expensive, and much less profitable endeavor than the Caracas side. And more that I will spare the reader from.

What is worse: the government is announcing exorbitant fines against Avila Magica, fines whose sole objective is to justify the take over of the system without having to fork over at least part of the investment of the private associates. It is simply a rip off. And the destiny of Avila Magica will be simply to fall into the hands of chavista interests, at low price. This will allow for many corruption dividends through the contracts that will suddenly appear to restore the Caribbean side or to create a "popular" hotel on top that will survive only with heavy subsidies, subsidies that previous administration never had the nerve to carry through but that the chavismo administration, already the more corrupt in our history, will have absolutely no problem generating.

Chavismo justification and propaganda

Well, today, just as chavismo took over management not even allowing the past administration time to clear up their desks, chavismo passed already a video of the new cable car system, that now "belongs to all Venezuelans". One would believe that any visitor with a red shirt was forbidden to pay the entrance fee and enter... But the video reaches new heights of propaganda sleaze, impressive heights even by the standards of chavista propaganda. In that video out today you can see contented kids at the teleferico being entertained by clowns and other such stuff. You see pictures of the alleged damage done to the national treasure by Avila Magica consortium and you already see nice and clean alleys, restored stuff where grateful Venezuelans can now enjoy the teleferico.

Unfortunately all these true images were taken DURING THE TENURE OF AVILA MAGICA. It is mind boggling that chavismo thinks at this point of the game that they will fool people with such blatant lies and manipulations, as if a miraculous team had rebuilt everything in a very few hours. The chutzpah truly worries because it might mean that actually the hard core chavismo has lost any critical ability and is now swallowing such garbage.

The reality



Youtube carries plenty of amateur videos at Avila Magica. You can get the feel of the area. True, Avila Magica was a tad cheesy, a tad Disneyworld like, but then again this is what you find everywhere in the world now, from Shanghai to Orlando. True, it was a little bit expensive for a Venezuelan budget. But Avila Magica could not but be expensive. After all you must pay the half an hour ride to the top, of a a cable car that must be maintained above a jungle canopy and over large precipices. And Avila Magica must carry everything up, someone has to pay for it if the government does not want to pay for it. Thus it is even more infamous when the propaganda video going out today shows some bolivarian bimbo (brunette, obviously) saying that you had to be very rich to be able to go up with the cable car. Her words had of course the right resentful tone. Monday's were specially priced at less than 10 USD for the ride. Any worker in Venezuela has at lest two weeks vacation a year and can go at least one Monday a year. after all, are we not told endlessly that Venezuela has the highest minimum wage in LatAm? Are we not told that poverty has all but been erased?

My own experience was probably tainted from my childhood glorious memory. I found it stale, commercial, limiting (after all you are not allowed to wade through the mountain as most access are sort of closed since there is no rescue and search for the wayward tourist, a state responsibility and not one for Avila Magica). The new skating ring had none of the charm of the old one. The decor of the new restaurants was anodyne, as well as the food. But it did not really matter anyway because one goes up to watch down (as in my own night picture above).

No matter how commercial Avila Magica might have been it had at least the benefit to take you up the mountain, safely, and allow you to get at least water and chips on top. And fresh air, and glorious vistas. Chavismo will not be able to improve the area. Now we will have red and white uniforms for the personnel, that is right, RED and white uniforms (2). We will have posters of the great leader here and there. Chavismo will take over the hotel to make all of its private functions just as it did with the Teresa Carreño and the Poliedro. Chavez will put a hideous Bolivar monument pointing in challenge towards the US, at a ridiculously high cost, financially and environmentally for the country. And Avila Magica will not be "de todos" but will belong to chavismo only. Until it breaks down as it will inevitably happen in Venezuela.

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1) The cable cars of Merida and Caracas were always in state hands, only a private concession was granted for a determined period, long enough to ensure the return of investment and then the government would recover the full system duly restored. But chavismo of course ignores that.

2) the government felt compelled to announce that the existing staff would not be fired. Which can only mean that the Tascon list will be in full force sooner than later at Avila Magica as chavismo needs to find jobs for all those graduates from inefficient programs of the UBV or Mision Sucre.

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