Saturday, October 01, 2005
Bone headed statement of the year
A lot of bone headed comments get made in the course of a year. But this one has to be a contender for the most absurd one during all of 2005 – and from what would normally be considered to be a serious person:
So, we are to believe defeating the Iraqi insurgency is somehow even more important than defeating the fascist Axis powers of WWII who were murdering millions in concentration camps and invading numerous countries. I guess the fate of the whole world depends on the U.S. successfully subjugating Iraq!! Absolutely unreal.
I have to say the pattern I see developing here is the worse things go for the U.S. in Iraq, the more their lies are revealed, the more troops that die, and the less support they have, the more outlandish their claims for why “we must fight this war”. Not only is their misguided endeavor in Iraq quickly going down the drain but so too is whatever stature and credibility they may have once had.
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Defeating the Iraqi insurgency is as important to the United States as winning World War II was 60 years ago, the Pentagon's top officer said Monday.
Air Force Gen. Richard Myers, who will leave his post as chairman of the Joint Chiefs of Staff at the end of this week, said the United States must win in Iraq because "the outcome and consequences of defeat are greater than World War II."
So, we are to believe defeating the Iraqi insurgency is somehow even more important than defeating the fascist Axis powers of WWII who were murdering millions in concentration camps and invading numerous countries. I guess the fate of the whole world depends on the U.S. successfully subjugating Iraq!! Absolutely unreal.
I have to say the pattern I see developing here is the worse things go for the U.S. in Iraq, the more their lies are revealed, the more troops that die, and the less support they have, the more outlandish their claims for why “we must fight this war”. Not only is their misguided endeavor in Iraq quickly going down the drain but so too is whatever stature and credibility they may have once had.
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When a dollar's not a dollar any more
Yesterday while speaking at a South American conference president Chavez revealed that all of Venezuela’s foreign reserves have been moved out of the United States, principally to Europe. He didn’t say how much of the reserves had been in the United States in the first place or when they had been moved but their removal from the U.S. would be a significant departure from past practices.
Currently Venezuela has over $30 billion dollars in foreign reserves, the largest amount ever in its history. These reserves serve the purpose of a safety net so that a country can still meet its foreign obligations, such as paying its debt, even if something should happen to its income or exports. For example, a few years ago during the opposition led oil strike Venezuela lost almost all its income for a while as oil exports stopped. They had to rely on their foreign reserves to be able to meet their debt payments and pay for vital imports such as food and gasoline (yes, Venezuela actually had to pay for gasoline as their own refineries were shut down by the strike). So in this sense, the foreign reserves of a country are completely analogous to the bank saving people keep around for a “rainy day”.
These savings are generally kept in things like gold or “hard currencies” such as those of the U.S., Western European countries or Japan. Some of this is held as cash in regular banks such as Citibank or Chase Manhattan and some in bonds such as U.S. treasury bonds.
Chavez said that Venezuela had sold all its U.S. treasury bonds and that the money was now in Europe. The reason he gave was due to the deterioration in the relations between Venezuela and the U.S. he feared the U.S. may at some point simply seize these assets. This is not an unfounded fear as the U.S. has a track record of doing this to other countries. For example when relations deteriorated between the U.S. and Iran in the early 80’s the U.S. froze all Iranian assets in the U.S. The U.S. later did the same thing to Iraq and in a bitterly ironic action used those same funds to help pay for the occupation of that country (meaning most of the money probably wound up in Halliburton’s pockets rather than doing anything to benefit Iraqi’s). Given this track record Chavez acted prudently.
However, there is another reason why moving these funds out of the U.S. would be wise and made me surprised that Venezuela had any funds there in the first place. And that is the declining value of the dollar. Before its recent rally the US dollar had lost between 25% and 30% of its value versus other major currencies such as the Euro and the Yen. And in all likelihood it will resume its decline in the future given the huge trade deficits that the United States has. [an interesting tangent to this is that the surge in oil prices in recent years isn’t all increased cost in oil – rather part of it is simply due to the decline in value of the US dollar which oil is priced in. For this reason some oil exporters have talked about pricing oil in Euros rather than dollars]
What would be the effect of this decline on Venezuelan reserves in the U.S.? To answer that lets assume that Venezuela had $10 billion dollars of its reserves held in the U.S. If the dollar declined 25% that means the Venezuelan government would have lost $2.5 billion!!! That loss could have been averted completely if the money had been kept in another place such as Europe. So for this reason alone there are huge economic reasons for Venezuela to move its money.
In the end what we are left with here is another very wise, if belated, decision by the Venezuelan government
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Currently Venezuela has over $30 billion dollars in foreign reserves, the largest amount ever in its history. These reserves serve the purpose of a safety net so that a country can still meet its foreign obligations, such as paying its debt, even if something should happen to its income or exports. For example, a few years ago during the opposition led oil strike Venezuela lost almost all its income for a while as oil exports stopped. They had to rely on their foreign reserves to be able to meet their debt payments and pay for vital imports such as food and gasoline (yes, Venezuela actually had to pay for gasoline as their own refineries were shut down by the strike). So in this sense, the foreign reserves of a country are completely analogous to the bank saving people keep around for a “rainy day”.
These savings are generally kept in things like gold or “hard currencies” such as those of the U.S., Western European countries or Japan. Some of this is held as cash in regular banks such as Citibank or Chase Manhattan and some in bonds such as U.S. treasury bonds.
Chavez said that Venezuela had sold all its U.S. treasury bonds and that the money was now in Europe. The reason he gave was due to the deterioration in the relations between Venezuela and the U.S. he feared the U.S. may at some point simply seize these assets. This is not an unfounded fear as the U.S. has a track record of doing this to other countries. For example when relations deteriorated between the U.S. and Iran in the early 80’s the U.S. froze all Iranian assets in the U.S. The U.S. later did the same thing to Iraq and in a bitterly ironic action used those same funds to help pay for the occupation of that country (meaning most of the money probably wound up in Halliburton’s pockets rather than doing anything to benefit Iraqi’s). Given this track record Chavez acted prudently.
However, there is another reason why moving these funds out of the U.S. would be wise and made me surprised that Venezuela had any funds there in the first place. And that is the declining value of the dollar. Before its recent rally the US dollar had lost between 25% and 30% of its value versus other major currencies such as the Euro and the Yen. And in all likelihood it will resume its decline in the future given the huge trade deficits that the United States has. [an interesting tangent to this is that the surge in oil prices in recent years isn’t all increased cost in oil – rather part of it is simply due to the decline in value of the US dollar which oil is priced in. For this reason some oil exporters have talked about pricing oil in Euros rather than dollars]
What would be the effect of this decline on Venezuelan reserves in the U.S.? To answer that lets assume that Venezuela had $10 billion dollars of its reserves held in the U.S. If the dollar declined 25% that means the Venezuelan government would have lost $2.5 billion!!! That loss could have been averted completely if the money had been kept in another place such as Europe. So for this reason alone there are huge economic reasons for Venezuela to move its money.
In the end what we are left with here is another very wise, if belated, decision by the Venezuelan government
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Friday, September 30, 2005
Business Week takes notice
I guess not to be outdone by Fortune Business Week has come out with its own article on Venezuela's successes:
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Chávez' Oil-Fueled Revolution
It seems there's no stopping Venezuelan President Hugo Chávez. He's already curbing the power of the big oil companies operating in Venezuela. Now he's stepping up a program of expropriation that could bedevil a number of businesses, both locally owned and foreign. The moves come just as Chávez seems prepared to further consolidate his power at legislative elections in December. The pro-Chávez coalition hopes to increase its majority in the 167-member National Assembly by more than 20 seats, to around 110. "It's going to be a battle for us," concedes Gerardo Blyde, a legislator from the opposition First Justice Party.
The opposition has pledged to join forces for the elections, but remains discredited after last year's defeat in a referendum that attempted to oust Chávez from office. If voters reward Chávez with a big win, as expected, the way will be clear for sweeping new moves in his Bolivarian revolution -- his populist effort to tap Venezuela's oil wealth to impose socialism in the country. "Chávez is dead set on his revolution; there's no turning back," says Aníbal Romero, a political scientist at Simón Bolívar University in Caracas. "The question is how fast and how far."
Food fight
Chávez is moving quickly. He has been boosting spending on health and education since coming to power in 1999, but he is now increasing government control of the economy, to investors' dismay. Oil companies with operating contracts in Venezuela, such as Chevron (CVX ) and BP PLC. (BP ), have been ordered to set up joint ventures controlled by state oil company Petróleos de Venezuela (PDVSA), and royalties have been hiked from 16.7% to 30%. Chávez now has targeted more than 700 plants, particularly in the food industry, that are idle or not operating at capacity for possible expropriation. On Sept. 26 the state seized control of a plant operated by Alimentos Polar, the country's No. 1 private food manufacturer. "This is an unfair and arbitrary expropriation," Polar President Lorenzo Mendoza told reporters, adding that the facility was operational. The move followed the seizure of a shuttered H.J. Heinz Co. (HNZ ) tomato processing facility. The company is negotiating to sell the plant to the state. Chavez defends the moves. "We will only expropriate what is necessary," he said in a recent speech.
The President is also going after rich landowners. Authorities recently began taking control of 21 large ranches spread over hundreds of thousands of acres. Chávez has threatened to hand part of the land to poor Venezuelans unless owners legally document their ownership and show that their spreads are being productively used. In another shock to investors, Chávez disclosed plans to review -- and possibly revoke -- mining concessions and create a national mining company. The news caused shares in Canada's Crystallex International Corp., (KRY ) which has operations in Venezuela, to plunge 52% from Sept. 19 to Sept. 28. "What happens here in Venezuela will undoubtedly have some impact on the commercial decisions of companies, not just from the U.S. but from all over the world," U.S. Ambassador to Venezuela William Brownfield told reporters in Caracas. "Nationalization is a step backward," adds a State Dept. official in Washington.
It may sound risky, but Venezuela can afford it. Gross domestic product soared 17.9% in 2004 as the country rebounded from two years of recession following a long strike at the national oil company. Growth of 6.5% is forecast for this year and next, says Efraín Velázquez, president of the National Economic Council. Thanks to a new law, Chávez can dip into the country's $32.6 billion in international reserves for social spending.
How to win friends
While Chávez goes out of his way to irritate President George W. Bush -- he's a close friend of Fidel Castro's -- he's using Venezuela's wealth to win support in his neighborhood. His Petrocaribe initiative offers 196,000 barrels of oil a day to 13 Caribbean countries -- including 98,000 to Cuba alone -- with long-term financing options. He has set up the Petrosur alliance with Venezuela, Brazil, and Argentina to work on joint oil exploration and development. A similar alliance could be forged with Colombia, Peru, Bolivia, and Ecuador. PDVSA is looking to invest in half a dozen of the region's oil refineries.
Chávez, 51, is up for reelection in 2006, and he vows to stay in power until at least 2021. Critics say his shakeup may redistribute income from the rich and middle classes to the poorest, but the spending won't be sustainable if oil prices tumble. "With oil prices this high, Chávez doesn't need investment," says Miguel Octavio, director of BBO Financial Services, a financial advisory firm. "But if they drop by $15 or $20 [a barrel], there will be problems." Annual foreign direct investment has fallen from $5 billion in 1998 to $1.5 billion last year, according to Central Bank figures. The President's bet is that he'll transform his country without foreign investors and before the oil markets shift. With Venezuela's opposition so divided, Chávez' experiment could continue for years.
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Thursday, September 29, 2005
PDVSA in the limelight
An interesting article focusing on the Venezuela state oil company in Fortune:
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Bound for places like Boston, Baltimore, and Port Everglades, the five supertankers sit low in the shimmering blue-green Caribbean water, their hulls brimming with oil, gasoline, and jet fuel. Filling at a rate of 36,000 barrels an hour, these ships can be loaded and on their way from Venezuela in half a day, which is a good thing, since five more tankers are waiting in the distance for their fill-up. Americans are paying $15 million for each cargo, but the plant’s manager just shrugs. “It’s business,” he says, already focusing on tomorrow’s manifest: 500,000 barrels of high-sulfur fuel oil, destination China.
The problem for the U.S. is that we may have to ante up more—a lot more—for that petroleum in the future if Venezuelan President Hugo Chavez has his way. Venezuela is now the key to satisfying America’s oil habit: By some measures this volatile Latin American nation, just a four-day sail from the U.S. Gulf Coast, has leap-frogged Canada and Saudi Arabia to become America’s leading foreign source of crude. In the first half of 2005, Venezuela supplied one-seventh of our imported oil, or 1.6 million barrels a day. And that’s helping the fiery socialist Chavez challenge Big Oil. He’s hiking taxes and royalties on the international giants, even as he strengthens the hand of OPEC and state-owned energy companies around the world. What’s more, Chavez has threatened to shut the spigot if the Bush administration challenges his grip on power in Caracas.
Naturally, that’s raising the temperature both in boardrooms in Texas and in the corridors of power in Washington, D.C. In August the Rev. Pat Robertson made headlines with a call for U.S. special forces to “take out” Chavez—he later apologized—and even normally cool heads in Congress are eager to confront what they claim is a dangerous regime close to U.S. shores. Representative Connie Mack (R-Florida) says, “We must all recognize that when we purchase Hugo Chavez’s gasoline, we line the pockets of a staunch enemy of freedom.” Representative Mark Kirk (R-Illinois) goes even further, calling Chavez “Venezuela’s Mussolini.”
Ironically, even as the political rhetoric gets hotter, with politicians like Mack arguing that Chavez is “Castro with oil,” the U.S. and Venezuela’s oil-fueled symbiosis is growing closer. “He depends on us as much as we depend on him,” says consultant Rob Cordray of PFC Energy, noting that about 50% of Venezuela’s crude exports go to the U.S. The devastation wrought by Hurricane Katrina has offered Venezuela an even greater opportunity: In early September, Venezuelan authorities announced they would send an extra one million barrels of gasoline north to make up for the output of U.S. refineries shuttered by the storm. And while the Robertson-Chavez exchange was portrayed as a dustup between crackpots from opposite ends of the spectrum, Chavez is a smart, canny operator—and his hunger for both petrodollars and petro-power is something America needs to take very seriously.
The point man in Venezuela’s contentious relationship with the U.S. is a tall, prematurely gray 42-year-old engineer named Rafael Ramírez. As both Venezuela’s Energy Minister and CEO of its national oil company, PDVSA (pronounced ped-a-VAY-sa), Ramírez is arguably the most powerful oilman Americans have never heard of. (If some Americans do know the name Rafael Ramírez, they’re probably thinking of the all-star shortstop who played for the Atlanta Braves in the 1980s.) But if you’ve visited one of Citgo’s 14,000 U.S. service stations recently, Ramírez appreciates your business. Citgo is among America’s biggest gasoline providers and PDVSA owns it. With Venezuela now the world’s sixth-largest oil producer and possessor of the biggest reserves of any country in the Western Hemisphere, Ramírez is becoming increasingly visible in global energy circles.
In a rare interview in his spacious Caracas office—which features an impossible-to-miss portrait of Chavez—Ramírez lays out for FORTUNE his plan to bend Venezuela’s oil industry to Chavez’s socialist vision and change the balance of power between oil-producing countries and private companies. He may be dressed in a conservative dark suit and tie, but Ramírez is an agitator of the highest order on subjects like how to extract more money from Big Oil. He is tightening his grip on U.S. giants like Exxon Mobil and Chevron as well as European players such as Shell and Total. Through higher taxes and royalties, all foreign oil companies are being forced to turn over a bigger share of their profits to the government in order to fund Chavez’s new social programs. “We are working on becoming a tool for the state to recover its sovereignty,” Ramírez explains. “When the private companies have control over production, it’s impossible to conduct your own national oil policy.”
Ramírez isn’t just setting his sights on foreign oil firms in Venezuela. He wants PDVSA to work with national oil companies (NOCs) in countries like Iran, Saudi Arabia, and Algeria so that the NOCs can wrest power away from the likes of Exxon and other private corporations worldwide. “This does not mean we will refuse to work with private companies,” says Ramírez. “But when oil companies have the high hand over a country, there is no way for a country to resist the pressure coming from these companies.” Ramírez also wants a bigger say within OPEC. Venezuela was a founding member of the cartel in 1960 and remains its most powerful non-Arab member. Before Chavez took over, Venezuela routinely flouted OPEC’s production quotas. That’s no longer the case—and Ramírez wants to make sure OPEC enforces its quotas in order to keep prices high.
Even as Ramírez challenges the status quo in the oil arena, his boss Chavez is upsetting Washington by courting U.S. foes like Cuba and Iran. He makes no secret of his admiration for Fidel Castro and Venezuela supplies Cuba with nearly 100,000 barrels a day of subsidized oil. In exchange, Venezuela receives medical help from more than 17,000 Cuban doctors and dentists stationed in Venezuela. Chavez has been a frequent visitor to Havana, most recently in August. A delegation from Tehran visited Caracas in March, and PDVSA employees are now getting technical training from Iran, a country the U.S. believes is supporting terrorists in Iraq. Chavez has also been signing deals throughout Latin America and the Caribbean to supply cheap oil to his neighbors, elevating Venezuela’s influence—and his own profile.
PDVSA is no longer just an oil company—it’s the engine of the Chavez revolution. After being crippled by an anti-Chavez strike in 2003 that resulted in the firing of more than 18,000 workers, PDVSA says it is on track to generate revenues of $75 billion this year. “La Nueva PDVSA,” as the company is known, has earmarked $4 billion of its internal budget this year for social programs and projects like new highways and railroads. Nearly $10 billion more flows into the Venezuelan treasury, forming the backbone—35%—of the federal budget. “PDVSA was an enclave within the country with very expensive facilities surrounded by poverty and misery,” says Ramírez, who’s become a hero to Venezuela’s poor because of PDVSA’s largesse. “That’s impossible today.” Just in case anyone forgets who really deserves the credit for this “21st-century socialism,” Chavez’s image appears on the back of many company IDs, and his slogans decorate the hallways of PDVSA.
Like all skilled actors and politicians, Ramírez and Chavez are keenly aware of their audience. They walk a fine line, alternately assuring Americans that Venezuela will continue to supply El Norte with 1.6 million barrels of crude a day and telling Venezuelans that they will cut America’s energy lifeline if the Bush administration makes any hostile moves against Caracas. Given the history of U.S. intervention in Latin America—encouraging the overthrow of Salvador Allende in Chile, the removal of Panama’s Manuel Noriega by the first President Bush—it’s no surprise that many Venezuelans think a U.S. invasion is a real possibility. Yet while the current President Bush would be happy to see Chavez replaced by a more pro-Western leader, any military action is unthinkable as long as the oil keeps flowing.
And despite this former paratrooper’s authoritarian tendencies—he attempted to seize power in a coup six years before being elected democratically in 1998 and has recently tried to intimidate opponents through arrests and a new law aimed at the press—Chavez is hardly Fidel. At least not yet. Most privately owned media in Venezuela remain critical of Chavez, and U.S. companies have a major presence. In downtown Caracas, a sign urging solidarity with Chavez’s Bolivarian revolution sits next to a huge green-and-white IBM billboard.
For the most part, the macho talk coming out of Caracas is just that. As Ramírez himself notes, America’s location and enormous demand make it Venezuela’s most natural customer. But the image of standing up to the U.S. plays well in the ranchitos, the Caracas slums that are Chavez’s political stronghold. (Chavez has nicknamed Bush “Mr. Danger,” while Defense Secretary Donald Rumsfeld is “Mr. War.”) As Chavez knows, this kind of rhetoric has helped keep his political idol Castro in power through ten U.S. presidencies.
Still, foreign oil giants are definitely feeling the heat. In fact, the Venezuelan tax authority has created a special branch focusing exclusively on private oil companies. Ramírez accuses Big Oil of systematically cheating on their taxes, and back-tax claims of at least $1 billion are likely. Is this the start of a campaign akin to the Kremlin’s attack on Yukos, the Russian oil giant that was bankrupted and then nationalized after being hit with back-tax penalties? “I don’t think the situation is that bad,” says Ramírez. “Most companies are willing to pay, and they are paying.”
The key element in Ramírez’s squeeze play is the forced renegotiation of 32 operating agreements under which foreign firms pump 500,000 barrels a day of oil that they deliver to PDVSA for a set fee. Instead of the old 34% levy, profits from these deals will be taxed at a 50% rate. And rather than operating agreements, Ramírez is insisting on joint ventures, with Venezuela controlling at least 51%. By forcibly rewriting the contracts, Ramírez can earn more per barrel and also avoid paying hundreds of millions in incentive payments that were due to foreign companies under the old agreements. What’s more, in the tar sands of the Orinoco belt, where Exxon, Total, Chevron, and others have separate agreements and have invested billions to extract oil from what’s basically asphalt, royalties on each barrel of oil are being raised from 1% to nearly 17%.
The new terms haven’t been finalized, but they’re not just being applied to U.S. giants; all foreign companies, including NOCs like Brazil’s Petrobras and China’s CNPC, are being hit. Most, if not all, are likely to swallow the changes Ramírez is imposing. If they don’t go along, they’ll lose access to Venezuela’s 80 billion barrels of proven oil reserves—one of the biggest energy prizes on the planet.
That’s why powerhouses like Chevron have adopted a remarkably accommodating stance toward Venezuela. Although tax auditors raided a Chevron office in Maracaibo in July, the company isn’t protesting while it awaits a possible back-tax bill. Vice chairman Peter Robertson insists Chevron has “a good, excellent relationship with the Venezuelan government.” His boss, CEO Dave O’Reilly, adds, “Venezuela will work its way through this. Ramírez is a very straight shooter.” Indeed, O’Reilly says Chevron would like to invest more in Venezuela.
After challenging some deductions and applying the tax hike retroactively, auditors recently slapped Shell with a $132 million tax claim. But the head of Shell’s operations in Venezuela, Sean Rooney, isn’t complaining. “The government of Venezuela is auditing the majority of oil companies’ returns,” he says. “We were lucky enough to be the first.” In fact, Rooney is determined to stay, come what may. “It is hard to turn away from the tremendous opportunities in Venezuela,” he says. “The Venezuelans can and will be extracting higher rents, and we expect and accept that. We are prepared to pay more when the opportunity merits.”
The only foreign giant fighting hard against Ramírez’s moves is Exxon. It’s threatening to sue the Venezuelan government and bring international arbitration proceedings, citing the legal sanctity of the original contracts. But Ramírez is betting it won’t go that far. He hasn’t spoken to Exxon CEO Lee Raymond directly but says, “I have a hunch that they finally read the clauses of the contract and realize we are right.” An Exxon spokesperson says that while arbitration remains an option, the company “wishes to explore an amicable resolution.”
Ramírez has an ace up his sleeve in negotiating with Big Oil—Asian rivals eager for a foothold. Any Western corporation that exits Venezuela could eventually be replaced by a Chinese or Indian firm. The flirtation is mutual. Ramírez himself went to Beijing in August to open PDVSA’s first office in China. And an agreement signed in June calls for Venezuela to supply 30,000 barrels of fuel oil to China. As Ramírez says, “There is a lot of interest from China and India, that’s a brand new condition.… Yes, they have huge, deep pockets.”
A longtime friend of Chavez who founded a natural-gas company before going to work for PDVSA, Ramírez speaks in a soothing voice that’s barely above a whisper. But his message is a provocative one in a country whose rocky relationship with Big Oil goes all the way back to the Rockefellers and the first Venezuelan wells in the 1930s.
Of course, fresh oil is a lot harder to find now than it was then, and Western giants like Shell desperately need new prospects around the world. So the case of Venezuela is just one more example of the way regimes from Russia to Nigeria to Kazakhstan are challenging Big Oil for a larger slice of the burgeoning profit pie, says PFC’s Cordray. “These big oil companies are used to operating in some of the most unfriendly political environments on earth,” he says. And with the last potential gushers increasingly in government hands in places like Kuwait, Saudi Arabia, and Russia, there’s really nowhere else to go. “It would be hard for me to see a scenario where they just up and walk away from Venezuela,” says Cordray.
As for Ramírez, he is well aware that Exxon is on track to earn more than $30 billion this year, and he naturally thinks that kind of windfall would be better spent by Chavez on social programs. “We are a country with huge resources, but we have millions of poor people—80% of the population is poor,” he says. “We have work to do.”
Omar Bravo is not political. In a country that’s fiercely divided between Chavistas and los escualidos (“the squalid ones,” as anti-Chavistas are known), the deputy manager of Venezuela’s biggest refinery happily describes himself as a pragmatist. When PDVSA’s workforce went on strike to protest Chavez’s left-wing policies, Bravo crossed the picket lines and stayed. “I was doing what I had to do, saving my job,” he says. Bravo’s wife of 30 years, Irma, saw things very differently—she supported the PDVSA workers who walked off the job and were subsequently fired by Chavez. Indeed, at the height of the strike, she joined them in nightly protests outside the Bravo home, a few miles from the refinery.
“I don’t like this government—I am a democratic person and I believe in freedom,” Irma says, sitting next to her frowning husband in their sunny living room. “You have to wear a red hat to work in this country,” she adds, referring to a popular Chavista symbol. “That’s not true!” Omar Bravo exclaims. “Typical escualida. Typical.” In the two years since the strike, the Bravos have reconciled—mostly. That’s not the case for other PDVSA workers. Friends and neighbors who were fired for striking still won’t come over or talk to Omar Bravo. “Many of them are still unemployed or driving taxis or selling cheese on the street. But it was wrong to strike—Venezuela’s economy depends on PDVSA,” says Omar.
Indeed it does—a third of its GNP is generated by oil, and energy accounts for 80% of its exports. So PDVSA is watched by Venezuelans with a passion usually reserved for soccer teams—it even has its own radio station, 105.7 on the FM dial. These days, PDVSA is the subject of a fierce debate over just how much damage the strike caused and whether Chavez’s policies will further weaken it.
PDVSA may be state-owned, but its daily production rivals that of foreign giants like Total. If it falters, that could create a shortfall for refineries on the Gulf Coast. Critics like former PDVSA chairman Luis Giusti say management isn’t investing enough to develop new projects. Instead, he says, PDVSA is merely scrambling to pump as much oil out of the ground as it can now to fund Chavez’s social programs. “There were political pressures in the past, but PDVSA was run like a private company,” says Giusti. “Now it’s part of the state, and it’s been severely mismanaged. We’ve gone back 20 years.”
Ramírez and other execs admit that the strike—they call it “the sabotage”—crippled the company. But Ramírez insists that Venezuela’s output has recovered and now stands at 3.3 million barrels a day. The U.S. Department of Energy and outside observers like Giusti say Venezuela’s daily production is more like 2.6 million barrels. That adds up to billions in lost income for PDVSA and the Venezuelan people, says Giusti.
In Caracas this summer, Ramírez and other PDVSA officials promised FORTUNE that a long-delayed 2003 SEC filing was “weeks away.” It has yet to appear, and prospects for the 2004 report to the SEC are murkier than the waters of Lake Maracaibo. But they did open the books to go over what they say are the company’s latest results. Through May 2005, according to PDVSA director Eudomario Carruyo, the company’s sales totaled $31 billion, and it’s on track to ring up $75 billion for the full year. That’s up from $64 billion last year. Net profits totaled $3.4 billion for the first five months of 2005.
That windfall, says Carruyo, will enable PDVSA to spend the billions it has earmarked for social programs, while leaving $5.6 billion for new projects. Carruyo is confident the company will never have to choose between money for social programs and finding oil. “Oil prices might drop,” he says, “but it will never drop below $50.”
It’s not just PDVSA’s future that’s being wagered on high oil prices—so are the expectations of ordinary Venezuelans. In the poor Caracas neighborhood of Sucre, a shedlike former public bathroom has been converted into an educational center for adults. A circle of middle-aged men and women go over the day’s lessons. “We’re here because of PDVSA,” says the center’s director, Juan Eduardo Mendoza. Critics like Giusti may worry that Ramirez is spending the oil windfall rather than investing it in PDVSA, but ordinary Venezuelans like Mendoza don’t want to hear it. “If Chavez believes in Ramírez, we believe in him. Before, we didn’t even know about PDVSA. Now the whole country knows who Rafael Ramírez is.”
The world, too, is beginning to know the extent of Venezuela’s oil ambitions. But despite Chavez’s outrageous rhetoric and occasional threats, the crude will most likely keep flowing north. If he has his way—and there’s no reason to suppose he won’t—American oil companies and consumers alike are going to end up paying more for it.
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"Zero credibility"
From the Christian Science Monitor here is what on US State Department Official said about the Posada travesty:
Yep, he sure got that right.
And has everyone noticed the deafening silence from Venezuela's opposition on this outrage? I guess when you can't even fund your own political movements and have to prostitute yourself to get money then you better not say anything that might piss off your sugar daddy.
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"It's bad enough when the world knows that we're rendering suspected Islamic terrorists to countries that routinely use terror," said one State Department official. "But here we have someone who we know is a terrorist, and it's clear that we're actively protecting him from facing justice. We have zero credibility."
Yep, he sure got that right.
And has everyone noticed the deafening silence from Venezuela's opposition on this outrage? I guess when you can't even fund your own political movements and have to prostitute yourself to get money then you better not say anything that might piss off your sugar daddy.
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You know things aren't going to well when...
I was checking around on AntiWar.com when I saw an interesting headline. "Generals Say Iraq War Strategy Is Working " it read. So I expected the usual clap trap about how insurgency is "its last throws" or some such similiar non-sense. But instead the article started out:
So they go from three functional battalions to one and that is "working". I wonder what their conception of not working is.
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Only one Iraqi army battalion seems capable of fighting without U.S. help, a senior American general told Congress on Thursday, leaving some lawmakers worried about worsening conditions there despite his assurances that the overall military strategy is working.
Gen. George Casey, the top U.S. commander in Iraq, told the Senate Armed Services Committee that the number of Iraqi army battalions rated by U.S. officers as capable of fighting without U.S. help had dropped from three to one. This prompted expressions of concern by Democrats and Republicans alike, at a time when many lawmakers and members of the public are growing restless about the U.S. involvement in Iraq and the nearly 2,000 American troops who have died there.
So they go from three functional battalions to one and that is "working". I wonder what their conception of not working is.
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Wednesday, September 28, 2005
One more way to screw an economy
A true accounting of how much money Venezuela has lost due to the opposition’s coup attempts and multiple strikes, not to mention the occasional rioting here and there, will probably never occur. To quantify the effects on an entire economy from multiple actions is probably impossible. But there are glimpses here and there of the scale. For example in PDVSA’s audited financial statements for 2003 to the losses from the 2002/2003 oil strike was quantified at $13 billion dollars.
In today’s Panorama there was an interesting article on another way in which the strike hurt the economy. The article was about “risk” – that is how a countries credit risk is rated and therefore how much of a premium a country has to pay on any bonds it may issue to raise funds (ie, how much it pays on its debt). Credit is rated in “basis points” with 100 points being equal to 1% of interest. That one percent interest is what a country has to pay in on top of the prevailing interest on US Treasury bonds. Say for example the risk is rated at 300 basis points and the interest on US bonds is 4%. Then that country has to pay 4% plus 3% (300 basis points equals 3%) 7% interest on any bonds it issues. If the country has a risk of 1,000 basis points then it would pay 14% interest (4% from the US bonds plus 10% for the 1,000 basis points).
The bottom line of all this is that the higher your risk as reflected in these basis points the more it costs you to borrow money. With that in mind the Panorama article pointed out that Venezuela currently has a risk of 330 basis points. So on the money it borrows it would pay about 7.3% interest. Not the best in the world but certainly not bad. By way of comparison it was pointed out that Colombia has a lower risk of 234 points while Brazil, whose economic performance is constantly talked up in the business press, has a higher risk of 353 basis points.
Now I know this is a lot of economic mumbo jumbo but here is the kicker. During the oil strike of 02/03 Venezuela’s risk went through the roof and hit 1,500 basis points. That means it would have been paying almost 20% interest on any bonds it issued to raise money. And of course, during the strike when it had very little money coming in is when they most needed to borrow. Just for the sake of argument lets say they had to issue $2 billion in bonds. At 20% interest they would have to pay $400 million dollars per year in interest. Yet if they only had to pay interest at the rate they currently pay they would only have to pay about $150 million dollars based on their current rate of 7.3%. So that would be a cool $250 million (400 million – 150 million) dollars out the window right there thanks to the opposition. Fortunately, as Chavez has gotten the economy to recover from the strike Venezuela's risk has steadily dropped.
So the next time the opposition talking heads blather on about how Chavez is wasting money on his international travels, or cleaning up a Bronx river, or giving discounted oil to poor countries you might want to ask them where their newfound sense of fiscal responsibility came from. After all, they had no problem pissing away $13 billion here, $250 million there, and God knows how much more in their various other attempts to unseat Chavez.
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In today’s Panorama there was an interesting article on another way in which the strike hurt the economy. The article was about “risk” – that is how a countries credit risk is rated and therefore how much of a premium a country has to pay on any bonds it may issue to raise funds (ie, how much it pays on its debt). Credit is rated in “basis points” with 100 points being equal to 1% of interest. That one percent interest is what a country has to pay in on top of the prevailing interest on US Treasury bonds. Say for example the risk is rated at 300 basis points and the interest on US bonds is 4%. Then that country has to pay 4% plus 3% (300 basis points equals 3%) 7% interest on any bonds it issues. If the country has a risk of 1,000 basis points then it would pay 14% interest (4% from the US bonds plus 10% for the 1,000 basis points).
The bottom line of all this is that the higher your risk as reflected in these basis points the more it costs you to borrow money. With that in mind the Panorama article pointed out that Venezuela currently has a risk of 330 basis points. So on the money it borrows it would pay about 7.3% interest. Not the best in the world but certainly not bad. By way of comparison it was pointed out that Colombia has a lower risk of 234 points while Brazil, whose economic performance is constantly talked up in the business press, has a higher risk of 353 basis points.
Now I know this is a lot of economic mumbo jumbo but here is the kicker. During the oil strike of 02/03 Venezuela’s risk went through the roof and hit 1,500 basis points. That means it would have been paying almost 20% interest on any bonds it issued to raise money. And of course, during the strike when it had very little money coming in is when they most needed to borrow. Just for the sake of argument lets say they had to issue $2 billion in bonds. At 20% interest they would have to pay $400 million dollars per year in interest. Yet if they only had to pay interest at the rate they currently pay they would only have to pay about $150 million dollars based on their current rate of 7.3%. So that would be a cool $250 million (400 million – 150 million) dollars out the window right there thanks to the opposition. Fortunately, as Chavez has gotten the economy to recover from the strike Venezuela's risk has steadily dropped.
So the next time the opposition talking heads blather on about how Chavez is wasting money on his international travels, or cleaning up a Bronx river, or giving discounted oil to poor countries you might want to ask them where their newfound sense of fiscal responsibility came from. After all, they had no problem pissing away $13 billion here, $250 million there, and God knows how much more in their various other attempts to unseat Chavez.
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Polling numbers
Yesterday the polling firm Hinterlaces released some interesting but bizarre polling numbers. The first aspect to them is that supposedly the level of approval of the Missiones (social programs) has fallen from 73% to 65% in September. Nothing to unusual about this sort of variation and it shows the social programs are quite popular among almost two thirds of the population.
It then goes on to say that the popularity of Chavez himself has gone down from 53% to 45%, both of which are significantly lower than any other numbers I have seen for him. However, it then says that the so-called “Ni-Ni”, those who are against both Chavez and the opposition is now 53%. So if you add the 53% opposing both Chavez and the opposition to the 45% supporting Chavez you wind up with 98% of the population thereby implying that somehow only 2% of the population supports the opposition!!!! Rather bizarre.
Obviously that can’t be correct yet that is the way the poll numbers read. As usual they don’t give any technical data or what the questions were they posed to people. Plus they don’t indicate if they asked people if they approve of the opposition and how many said yes. Its reasonable to assume they probably did ask that question and its probably not a bad guess to say that the reason they didn’t publish it is because the numbers weren’t very good. The other bizarre, although not entirely impossible, part of the poll is the large discrepancy in the approval numbers between Chavez and the Missions especially considering how closely he is identified with them.
In any event, you can see some of the reading between the lines that gets done with what passes for polls in Venezuela. However, as the legislative elections are only two months away polls, good and bad, are going to be important to pay attention to.
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It then goes on to say that the popularity of Chavez himself has gone down from 53% to 45%, both of which are significantly lower than any other numbers I have seen for him. However, it then says that the so-called “Ni-Ni”, those who are against both Chavez and the opposition is now 53%. So if you add the 53% opposing both Chavez and the opposition to the 45% supporting Chavez you wind up with 98% of the population thereby implying that somehow only 2% of the population supports the opposition!!!! Rather bizarre.
Obviously that can’t be correct yet that is the way the poll numbers read. As usual they don’t give any technical data or what the questions were they posed to people. Plus they don’t indicate if they asked people if they approve of the opposition and how many said yes. Its reasonable to assume they probably did ask that question and its probably not a bad guess to say that the reason they didn’t publish it is because the numbers weren’t very good. The other bizarre, although not entirely impossible, part of the poll is the large discrepancy in the approval numbers between Chavez and the Missions especially considering how closely he is identified with them.
In any event, you can see some of the reading between the lines that gets done with what passes for polls in Venezuela. However, as the legislative elections are only two months away polls, good and bad, are going to be important to pay attention to.
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Tuesday, September 27, 2005
Posada Update XII
Its been forever since the last Posada Update because the U.S. has been sitting on the case for quite some time. For those who don't know Posada is a Cuban-Venezuelan accused of terrorism and mass murder for participating in the blowing up of a Cuban Airliner flying out of Venezuela killing more than 70 people.
Some including this blogger have been very critical of the US government for not acting quickly to see this alledged terrorist is brought to justice. Venezuela had requested his extradition months ago. This contrasts with the search for Bin-Laden where the US just goes ahead and invades whatever country it thinks might be harboring him.
Today there is news a decision has been made on his fate. Apparently a US immigration judge decided he can't be extradited to Venezuela because he might be subject to torture there!!!
So lets make sure we have this straight. The US does, and essentially admits, it routinely tortures people. Yet the US expects anyone it wants to be turned over immediately. Yet Venezuela, which is not exactly famous for torturing people, can't get its hands on a suspected mass murderer because the US is afraid he might be tortured.
Double standards if ever there were any.
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Some including this blogger have been very critical of the US government for not acting quickly to see this alledged terrorist is brought to justice. Venezuela had requested his extradition months ago. This contrasts with the search for Bin-Laden where the US just goes ahead and invades whatever country it thinks might be harboring him.
Today there is news a decision has been made on his fate. Apparently a US immigration judge decided he can't be extradited to Venezuela because he might be subject to torture there!!!
So lets make sure we have this straight. The US does, and essentially admits, it routinely tortures people. Yet the US expects anyone it wants to be turned over immediately. Yet Venezuela, which is not exactly famous for torturing people, can't get its hands on a suspected mass murderer because the US is afraid he might be tortured.
Double standards if ever there were any.
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Chavez plays it smart
Anyone who has followed the Venezuelan situation closely knows that oil policy has been one of the primary areas of contention between president Chavez and those who oppose him. How much oil should the country produce, should it follow OPEC quotas, and how much should it open up to foreign investment have all been areas of dispute.
Another area of disagreement between the Chavez administration and the opposition has been how to interact with the foreign oil companies already present in Venezuela. The governments prior to Chavez not only opened up Venezuela to foreign oil producers but often did so on terms that were extremely advantageous to those companies. Royalties were kept as low as 1%, Venezuela itself only had minority ownership, and the government looked the other way when these oil operators didn’t pay their full taxes. Chavez has done a 180 degree turn on this. Royalties were raised to a minimum of 16%, contracts were re-written to give Venezuela majority ownership, and the government has worked very aggresively to collect back taxes, sometimes in the billions of dollars.
This rather predictably raised a hue and cry among the Venezuelan elite and opposition who never met a sweetheart deal they didn’t like. Their claim was that if royalties were raised or contracts renegotiated the oil companies would leave, or at least stop investing in Venezuela.
Of course, these were by and large the same people who when Venezuela worked with OPEC to implement a price band of $22 to $28 per barrel said it was too aggressive and would get consumer nations to cut back on oil and use alternative energy sources. Now that oil is over $60 per barrel that seems laughable but that is what they said. Given how wrong they were on that I had little concern about their objections to the royalty increases and more aggressive posture to maximizing revenue from the foreign oil operations. My view was Chavez was acting in Venezuela’s best interest in a very prudent way.
Well, low and behold we have some confirmation, straight from the oil companies themselves that this is indeed the case. Witness this report from the Wall Street Journal in an article entitled “Chavez plays it safe”:
And if that weren’t enough here is yet more confirmation for the Toronto Globe and Mail:
So there you have it. Despite all the nonsense from the opposition big oil is still in Venezuela. Why? Because “its about business”, they are making “very big profits”, and they “expect, and accept” higher royalties. Once again we have a clear example of how right Chavez was and how wrong the vendepatrias of eastern Caracas have consistently been.
Now they’ve moved on to bitching about empty grain silos or ketchup factories being taken over by the government or idle land being redistributed to small farmers. This they say will scare off foreign investment and hurt the economy. Fortunately Chavez is smart enough to just ignore them. He knows, as do many of us, that they will never learn and never stop selling their country short. And every time he has ignored these chicken littles and plowed ahead to do what is right Venezuela has reaped the rewards.
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Another area of disagreement between the Chavez administration and the opposition has been how to interact with the foreign oil companies already present in Venezuela. The governments prior to Chavez not only opened up Venezuela to foreign oil producers but often did so on terms that were extremely advantageous to those companies. Royalties were kept as low as 1%, Venezuela itself only had minority ownership, and the government looked the other way when these oil operators didn’t pay their full taxes. Chavez has done a 180 degree turn on this. Royalties were raised to a minimum of 16%, contracts were re-written to give Venezuela majority ownership, and the government has worked very aggresively to collect back taxes, sometimes in the billions of dollars.
This rather predictably raised a hue and cry among the Venezuelan elite and opposition who never met a sweetheart deal they didn’t like. Their claim was that if royalties were raised or contracts renegotiated the oil companies would leave, or at least stop investing in Venezuela.
Of course, these were by and large the same people who when Venezuela worked with OPEC to implement a price band of $22 to $28 per barrel said it was too aggressive and would get consumer nations to cut back on oil and use alternative energy sources. Now that oil is over $60 per barrel that seems laughable but that is what they said. Given how wrong they were on that I had little concern about their objections to the royalty increases and more aggressive posture to maximizing revenue from the foreign oil operations. My view was Chavez was acting in Venezuela’s best interest in a very prudent way.
Well, low and behold we have some confirmation, straight from the oil companies themselves that this is indeed the case. Witness this report from the Wall Street Journal in an article entitled “Chavez plays it safe”:
To his critics, Venezuela President Hugo Chavez comes across as a messianic radical, cozying up to anti-American figures like Iran’s mullahs, blasting capitalism as the “road to hell” and threatening to stop shipping oil to the U.S. which relies on Venezuela for about 14% of its oil imports.
But when it comes to the country’s economic centerpiece, the oil industry, the fiery leader is more pragmatic than most realize. He has squeezed more royalties and taxes out of foreign oil companies at a time when they can afford it because of high oil prices. And he is using that money, along with a windfall in exports from state run oil giant Petroleos de VenezuelaSA, to help fund his leftist agenda at home and to cultivate friends in the region.
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The moves caused some analysts to fret about the future for Western oil companies in a country with the largest estimated reserves outside the Middle East – and at a time of tight supplies and already high prices.
“The companies who are there feel that although it’s not an optimum situation, they can manage it,” says Frank Verrasco, an energy analyst at the Washington-based Center for Strategic and International Studies.
Despite Mr. Chavez’s moves, no big oil firm has packed its bags and left the Andean nation. With the exception of ExxonMobil Corp., which is taking Venezuela to an international court over some of the rule changes, other major companies have quietly reached accommodation with Caracas, analysts say. The proof is that all the big Western oil firms are still bidding for Venezuelan oil projects, despite the tighter restrictions.
Two weeks ago, Shell’s regional production manager, Frank Glaviano, told Dow Jones Newswires that despite pressure from the government, Shell is optimistic about Venezuela. “Its not about being angry,” he said. “Its about conducting business.”
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Even Mr. Chavez’s occasional tirades about oil have a certain logic. His sporadic threats to cut all supplies of Venezuelan oil to the U.S., for instance, are made with the intent of talking up oil prices. “He says things that get oil traders’ attention,” says one former White House official. Mr. Chavez was at it again recently, saying that a Venezuelan study showed oil prices could reach $95 a barrel.
And if that weren’t enough here is yet more confirmation for the Toronto Globe and Mail:
"It is hard to turn away from the tremendous opportunities in Venezuela," Sean Rooney, the head of Shell's operations in Venezuela, bluntly conceded to Fortune Magazine recently. "The Venezuelans can and will be extracting higher rents, and we expect, and accept, that."
The actions of the Venezuelan government are "typical" of what is to be expected when the price of oil is far higher than anyone had expected, Christophe de Margerie, a Total executive vice-president, said in Calgary. "We are making, it's true, very big profits. Total is more than willing to re-discuss the sharing of those profits. The problem we have today is how to do it."
So there you have it. Despite all the nonsense from the opposition big oil is still in Venezuela. Why? Because “its about business”, they are making “very big profits”, and they “expect, and accept” higher royalties. Once again we have a clear example of how right Chavez was and how wrong the vendepatrias of eastern Caracas have consistently been.
Now they’ve moved on to bitching about empty grain silos or ketchup factories being taken over by the government or idle land being redistributed to small farmers. This they say will scare off foreign investment and hurt the economy. Fortunately Chavez is smart enough to just ignore them. He knows, as do many of us, that they will never learn and never stop selling their country short. And every time he has ignored these chicken littles and plowed ahead to do what is right Venezuela has reaped the rewards.
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Monday, September 26, 2005
Action and reaction
According to the Toronto Globe and Mail president Chavez is a man of his word:
Which provoked the following reaction:
Somehow I don't think this reaction was enitirely unintended on Chavez's part.
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Chavez staying true to pledge for U.S. poor
Citgo officials scrambling to fine-tune Venezuelan leader's promise of cheap oil
By ESTANISLAO OZIEWICZ
Friday, September 23, 2005
When Venezuelan President Hugo Chavez said on the weekend that he was going to open the taps on subsidized heating oil for poor folks in the United States, many assumed it was a drive-by comment aimed at raising the ire of his frequent critics in Washington.
But, as it turns out, Mr. Chavez is a man of his word.
Officials at Citgo Petroleum Corp. -- the Houston-based company that is wholly owned by Venezuela's state-owned energy company -- say they are scrambling to put the fine points on Mr. Chavez's promise to supply some of the poorest neighbourhoods in the United States with cheap heating oil this winter.
"The idea is to work with communities in need, with schools, and we'll have to work through not-for-profit organizations that will serve as intermediaries," public affairs manager Fernando Garay said.
Which provoked the following reaction:
Listen to Hugo, Ralph
LES MacDONALD
If Venezuelan President Hugo Chavez (Chavez Staying True To Pledge For U.S. Poor -- Sept. 23) can supply subsidized oil to America's poor, what's stopping Alberta Premier Ralph Klein from doing the same for needy Canadians?
Somehow I don't think this reaction was enitirely unintended on Chavez's part.
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Sorry, gone shopping
It has been pointed out before on this blog that the opposition has had great difficulty organizing demonstrations recently. Is this really unexpected? No, for a couple of reasons.
First all the demonstrations they had a couple of years ago led to nothing as they could never pressure Chavez into resigning and then elections came along which proved that the opposition was clearly a minority anyways. Secondly, how much is there to really protest when most everywhere you look things are improving? When an opposition artificially tanked the economy through their strike maybe people believed the country was really collapsing and they had to do something. But with the economy booming that is clearly no longer the case. Hence, people have better things to do than attend meaningless protests to protest… what? That they are a minority and can’t win elections?
Nevertheless, there are always some who are not deterred and they were determined to carry out an anti-Chavez protest yesterday by Plaza Francia in the very wealthy section of Caracas called Altimira. Here are a few pictures gleaned from the Noticiero Digital website:
As can be clearly seen very few people showed up. In fact, quite a few opposition types were complaining that this “demonstration” wasn’t televised. Does every gathering of a couple dozen people have to get televised? Anyways, its hard to see what they accomplished except pissing of some motorists by blocking traffic. And of course leaving the obligatory piles of trash burning in the street for someone else to pick up.
However, the excellent blogger Luigino Bracci Roa managed to figure out where all the opposition types went – shopping in the upscale Sambil Mall.
Then again, given how Chavez has the economy booming again who can blame them? So here is some advice for my opposition friends. Next time you want to hold a rally instead of doing it in the streets, pissing people off, and making a mess try holding it in the 5th floor food court at the Sambil. I bet you’ll be a lot more successful. And even if you don’t have many participants you’ll have a good sized captive audience of people munching on their Wendy’s burgers and fries.
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First all the demonstrations they had a couple of years ago led to nothing as they could never pressure Chavez into resigning and then elections came along which proved that the opposition was clearly a minority anyways. Secondly, how much is there to really protest when most everywhere you look things are improving? When an opposition artificially tanked the economy through their strike maybe people believed the country was really collapsing and they had to do something. But with the economy booming that is clearly no longer the case. Hence, people have better things to do than attend meaningless protests to protest… what? That they are a minority and can’t win elections?
Nevertheless, there are always some who are not deterred and they were determined to carry out an anti-Chavez protest yesterday by Plaza Francia in the very wealthy section of Caracas called Altimira. Here are a few pictures gleaned from the Noticiero Digital website:
As can be clearly seen very few people showed up. In fact, quite a few opposition types were complaining that this “demonstration” wasn’t televised. Does every gathering of a couple dozen people have to get televised? Anyways, its hard to see what they accomplished except pissing of some motorists by blocking traffic. And of course leaving the obligatory piles of trash burning in the street for someone else to pick up.
However, the excellent blogger Luigino Bracci Roa managed to figure out where all the opposition types went – shopping in the upscale Sambil Mall.
Then again, given how Chavez has the economy booming again who can blame them? So here is some advice for my opposition friends. Next time you want to hold a rally instead of doing it in the streets, pissing people off, and making a mess try holding it in the 5th floor food court at the Sambil. I bet you’ll be a lot more successful. And even if you don’t have many participants you’ll have a good sized captive audience of people munching on their Wendy’s burgers and fries.
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“This happened everyday”
Ever since being caught torturing prisoner at Abu Ghraib the U.S. military, with the complicity of the U.S. media, has maintained that it doesn’t torture prisoners. This was the work of a few bad apples it says. Rogue elements. The U.S. just not condone or do things like that.
For people still foolish enough to believe that non-sense there was an article in the New York Times on Saturday that showed just how naive they are:
So these are the people “civilizing” Iraq. They’re bringing “democracy”, “freedom”, and “peace” to them.
Only the most pathetic apologists for war, occupation and good old fashion imperialism can believe this now.
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For people still foolish enough to believe that non-sense there was an article in the New York Times on Saturday that showed just how naive they are:
September 24, 2005
3 in 82nd Airborne Say Beating Iraqi Prisoners Was Routine
By ERIC SCHMITT
WASHINGTON, Sept. 23 - Three former members of the Army's 82nd Airborne Division say soldiers in their battalion in Iraq routinely beat and abused prisoners in 2003 and 2004 to help gather intelligence on the insurgency and to amuse themselves.
The new allegations, the first involving members of the elite 82nd Airborne, are contained in a report by Human Rights Watch. The 30-page report does not identify the troops, but one is Capt. Ian Fishback, who has presented some of his allegations in letters this month to top aides of two senior Republicans on the Senate Armed Services Committee, John W. Warner of Virginia, the chairman, and John McCain of Arizona. Captain Fishback approached the Senators' offices only after he tried to report the allegations to his superiors for 17 months, the aides said. The aides also said they found the captain's accusations credible enough to warrant investigation.
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In separate statements to the human rights organization, Captain Fishback and two sergeants described systematic abuses of Iraqi prisoners, including beatings, exposure to extremes of hot and cold, stacking in human pyramids and sleep deprivation at Camp Mercury, a forward operating base near Falluja.
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In one incident, the Human Rights Watch report states, an off-duty cook broke a detainee's leg with a metal baseball bat. Detainees were also stacked, fully clothed, in human pyramids and forced to hold five-gallon water jugs with arms outstretched or do jumping jacks until they passed out, the report says. "We would give them blows to the head, chest, legs and stomach, and pull them down, kick dirt on them," one sergeant told Human Rights Watch researchers during one of four interviews in July and August. "This happened every day."
The sergeant continued: "Some days we would just get bored, so we would have everyone sit in a corner and then make them get in a pyramid. This was before Abu Ghraib but just like it. We did it for amusement."
He said he had acted under orders from military intelligence personnel to soften up detainees, whom the unit called persons under control, or PUC's, to make them more cooperative during formal interviews.
"They wanted intel," said the sergeant, an infantry fire-team leader who served as a guard when no military police soldiers were available. "As long as no PUC's came up dead, it happened." He added, "We kept it to broken arms and legs."
The soldiers told Human Rights Watch that while they were serving in Afghanistan, they learned the stress techniques from watching Central Intelligence Agency operatives interrogating prisoners.
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In a Sept. 16 letter to the senators, Captain Fishback, wrote, "Despite my efforts, I have been unable to get clear, consistent answers from my leadership about what constitutes lawful and humane treatment of detainees. I am certain that this confusion contributed to a wide range of abuses including death threats, beatings, broken bones, murder, exposure to elements, extreme forced physical exertion, hostage-taking, stripping, sleep deprivation and degrading treatment."
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Interrogators pressed guards to beat up prisoners, and one sergeant recalled watching a particular interrogator who was a former Special Forces soldier beating the detainee himself. "He would always say to us, 'You didn't see anything, right?' " the sergeant said. "And we would always say, 'No, sergeant.' "
One of the sergeants told Human Rights Watch that he had seen a soldier break open a chemical light stick and beat the detainees with it. "That made them glow in the dark, which was real funny, but it burned their eyes, and their skin was irritated real bad," he said.
A second sergeant, identified as an infantry squad leader and interviewed twice in August by Human Rights Watch, said, "As far as abuse goes, I saw hard hitting." He also said he had witnessed how guards would force the detainees "to physically exert themselves to the limit."
Some soldiers beat prisoners to vent their frustrations, one sergeant said, recalling an instance when an off-duty cook showed up at the detention area and ordered a prisoner to grab a metal pole and bend over. "He told him to bend over and broke the guy's leg with a mini-Louisville Slugger that was a metal bat."
Even after the Abu Ghraib scandal became public, one of the sergeants said, the abuses continued. "We still did it, but we were careful," he told the human rights group.
So these are the people “civilizing” Iraq. They’re bringing “democracy”, “freedom”, and “peace” to them.
Only the most pathetic apologists for war, occupation and good old fashion imperialism can believe this now.
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Sunday, September 25, 2005
Tax man in overdrive
In the previous post I mentioned that the Venezuelan economy might hit overdrive soon with a the money soon to be pumped into public works. However, maybe it is already in overdrive.
Or at least its tax collection system is in overdrive. Witness this news: the Venezuelan tax authorities announced that they just exceeded their tax collection goals for the entire year. Thats right, with more than three months left in the year they already beat their target of 27 trillion bolivares or about 12 billion US dollars. And not only are there three months left in the year but they are far and the way the busiest 3 months with greatly increased retail sales due to the Christmas holiday. So the ultimate tax collection goal should be exceeded by much more than one 25%. Its quite possible they could beat it by 30 or even 40 percent.
All around fantastic news indeed.
And by the way. Ever wonder why all the vitrol directred at Chavez? Well think about it. If you were a wealthy Venezuelan used to almost never paying taxes and then Chavez came along and put into place a highly effective tax collection system might not you be a little upset? Well, they're more than a little upset. As you might have noticed.
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Or at least its tax collection system is in overdrive. Witness this news: the Venezuelan tax authorities announced that they just exceeded their tax collection goals for the entire year. Thats right, with more than three months left in the year they already beat their target of 27 trillion bolivares or about 12 billion US dollars. And not only are there three months left in the year but they are far and the way the busiest 3 months with greatly increased retail sales due to the Christmas holiday. So the ultimate tax collection goal should be exceeded by much more than one 25%. Its quite possible they could beat it by 30 or even 40 percent.
All around fantastic news indeed.
And by the way. Ever wonder why all the vitrol directred at Chavez? Well think about it. If you were a wealthy Venezuelan used to almost never paying taxes and then Chavez came along and put into place a highly effective tax collection system might not you be a little upset? Well, they're more than a little upset. As you might have noticed.
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What a difference a couple of years makes
A couple of years ago the opposition used an oil strike to try to starve the Venezuelan government and its supporters into submission. Of course they failed as oil production was restarted and the economy regained momentum that led it to have 17% growth last year and almost 10% so far this year.
At the low point of the strike foreign reserves fell to as low as $14 billion. As Chavez turned the economy around the reserves began growing again and now stand at an all time historical record for Venezuela of over $32 billion. This spectacular recovery has led Venezuela to have more money squirreled away than it needs to keep for emergencies.
To deal with these excess billions of dollars a new fund, Fonden, was set up that would use these excess monies for capital projects the country needs. This year $6 billion are expected to go into this fund and the Central Bank just transferred in the first $3 billion. And the first $900 million of projects were announced:
Among the budgeted items are:
$500 million for medical equipment for hospitals.
$204 million to finish the new construction of Caracas’s new subway line.
$109 million for the light rail system in Valencia
Hundreds of millions more for other rail lines throughout Venezuela
$28 million for power plant expansions in the state of Lara.
And this is just the first billion. They’ll be five billion more. Not to mention another $6 billion next year. This is how you physically build a country and put an economy in overdrive.
As the advertisement says: With Fonden, the oil gets to (benefits) everyone.
UPDATE: Chavez announced on Alo Presidente that the government will use $1 billion of the excess international reserves to create a new steel company. Venezuela currently has a steel company that was originally created by the government but then privatized called SIDOR. SIDOR has been barely scraping by. The primary reason for its difficulties was that the Bush administration put high tarrifs on imported steel which hurt Venezuelan exports to the U.S. This means the new company would do well to focus on other markets - China maybe? But Venezuela has very large iron deposits along with large hydroelectric projects (expanded by Chavez) to supply cheap electricity. So there is no reason this new venture should not be succesful.
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At the low point of the strike foreign reserves fell to as low as $14 billion. As Chavez turned the economy around the reserves began growing again and now stand at an all time historical record for Venezuela of over $32 billion. This spectacular recovery has led Venezuela to have more money squirreled away than it needs to keep for emergencies.
To deal with these excess billions of dollars a new fund, Fonden, was set up that would use these excess monies for capital projects the country needs. This year $6 billion are expected to go into this fund and the Central Bank just transferred in the first $3 billion. And the first $900 million of projects were announced:
Among the budgeted items are:
$500 million for medical equipment for hospitals.
$204 million to finish the new construction of Caracas’s new subway line.
$109 million for the light rail system in Valencia
Hundreds of millions more for other rail lines throughout Venezuela
$28 million for power plant expansions in the state of Lara.
And this is just the first billion. They’ll be five billion more. Not to mention another $6 billion next year. This is how you physically build a country and put an economy in overdrive.
As the advertisement says: With Fonden, the oil gets to (benefits) everyone.
UPDATE: Chavez announced on Alo Presidente that the government will use $1 billion of the excess international reserves to create a new steel company. Venezuela currently has a steel company that was originally created by the government but then privatized called SIDOR. SIDOR has been barely scraping by. The primary reason for its difficulties was that the Bush administration put high tarrifs on imported steel which hurt Venezuelan exports to the U.S. This means the new company would do well to focus on other markets - China maybe? But Venezuela has very large iron deposits along with large hydroelectric projects (expanded by Chavez) to supply cheap electricity. So there is no reason this new venture should not be succesful.
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