Oil Wars

Sometimes it is hard to believe that less than three years Venezuela’s economy was on the floor. An opposition, hell bent on ousting Chavez even if they had to burn Venezuela to the ground to do it, had thoroughly trashed the economy by shutting down the oil industry and locking out employees of any other companies they controlled. Certainly, it wasn’t a pretty picture for Venezuela – the economy tanked, inflation, unemployment, and poverty all rose sharply, and their were many who wrote off Venezuela and Chavez.

But the opposition has always overestimated itself. And for as much damage as they were able to inflict it was nothing compared to the ability of the Chavez administration and its supporters to not only set things right but to push the entire country to new heights. Over the past months this blog has amply documented the stunning accomplishments of the Venezuelan government; reducing poverty, unemployment and inflation; implementing new and desperately needed social programs to give medical care, education, and the basic necessities of life to those who were previously marginalized; and forging ahead with a bold anti-imperialist foreign policy that has not only kept Venezuela from being isolated by would be enemies but also bettered the lives of many other Latin Americans.

Of course, sometimes all the numbers become a little dry and don’t do justice to the reality of the situation. These numbers need to be balanced by more rounded accounts of events and their impact on peoples lives. And in that regard the New York Times didn’t do half bad today with its summary of what Venezuela has accomplished recently:

CARACAS, Venezuela - Firmly in power and his revolution now in overdrive, President Hugo Chavez is moving fast to transform Venezuela's economy by bucking free-market planning with what he calls 21st-century socialism: founding state companies, seizing abandoned private factories and establishing thousands of cooperatives and worker-run businesses.

The populist government is reorganizing the country's colossal oil industry, taking a bigger share from private multinationals. Planners are reorganizing the banking system, placing stringent restrictions on lending while creating state banks. Venezuela is also developing a state-to-state barter system to trade items as varied as cattle, oil and cement as far away as Argentina and as near as Cuba, its closest ally.

"It's impossible for capitalism to achieve our goals, nor is it possible to search for an intermediate way," Mr. Chávez said a few months ago, laying out his plans. "I invite all Venezuelans to march together on the path of socialism of the new century."

According to many mainstream economists, the change is simply a mix of plans taken from the protectionist policies of the 1960's and others adopted from Cuba and countries of the former Soviet bloc. It may not be communism - as detractors contend it is - but it mixes socialism with capitalism and what some call improvisation.

Many of the president's grandest plans are put into practice at the year-old Ministry for the Popular Economy. Planners there have already created 6,840 cooperatives that employ 210,000 people nationwide, many producing for the state.

The banking system is crucial to the government's plans. Regulators tightly control interest rates and demand that private banks devote 31.5 percent of all loans to agricultural projects, housing construction, tourism and microcredits, loans to tiny startup businesses.

The new measures - which include the seizure of factories, mines and fields the government says are unproductive - are playing well domestically. Mr. Chávez has an approval rating topping 70 percent.

"I'm not afraid of socialism and never have been," said Rivas Silvino, who works in a diaper factory run by workers and managers under a state co-management plan. "The world is afraid. I say, don't be afraid."

So far, no noticeable exodus of foreign companies operating in Venezuela has occurred. Banks and oil companies are making record profits thanks to oil prices that have left the country, the world's fifth-largest exporter, awash in petrodollars. This year, the oil industry is generating $20 billion for the government, nearly $8 billion more than last year.

Still, there is restlessness in the boardrooms, with executives worried about government intervention, which is sometimes seen as haphazard and improvised. Economists say the government has not made the investments needed in the oil sector. And political analysts and mainstream economists warn of recession and dourly note that foreign investment is about a third of what it was five years ago. They say that Venezuela's vast oil profits give the illusion of prosperity - the economy's growth rate is 9.3 percent - but that if prices fall, or Venezuela's growing spending catches up, the economy could founder.

Domingo Maza Zavala, the director of the Central Bank, warned of recession as soon as 2007. "There is uncertainty and instability because of the strategies being used by the state," he said in an interview. "If there was a strategy, defined, well established and clear and with objectives, this would create a climate of confidence that could generate a recuperation of investments."

In the tumbledown barrios where Mr. Chávez draws much of his support, it is easy to see why the new system has been warmly welcomed. The hills around Caracas and the farms in the outback are filled with cooperatives and other businesses in which the state plays an important role. Workers produce everything from shoes to corn.

Aura Matos, 28, is a seamstress in a state-run textile factory that sells to the state, a job she has held just a few weeks. "I was in my house, with nothing to do, and President Chávez and God gave me this opportunity," Ms. Matos said as she took a break from sewing jeans and blouses.

One of the government's most ambitious ventures is a new state airline, price $110 million so far. The airline, Conviasa, now has three planes, which regularly serve Bogotá, Havana and other nearby destinations. It plans to expand to 14 jets in about a year and travel as far as Beijing and Europe.

What about competition in this cutthroat industry? "The philosophy is not to compete, but to cooperate with other airlines," said Wilmer Castro, who as Venezuela's tourism minister oversees the airline. "Our policy is to have fares that are lower than the others in the market."

Another project gives workers a stake in the ownership and management of tottering private companies. In return, management - made up of the original owners and the workers - receives government credits and other incentives.

"The businesses closed by the neoliberal system - factories and farms - are reopening, but it's done by the people," said Elías José Jaua, minister of the popular economy. "This is a state that has the duty to push and support this."

The state is also founding a mining company, an iron and steel company, a tractor factory and a state computer company, which Mr. Chávez says will produce "Bolivarian computers" in honor of his guiding light, the 19th-century independence hero Simón Bolívar. The government has even spoken about acquiring nuclear technology from Brazil and Argentina - emphasizing that it would be for peaceful purposes, like energy production or medical care.

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A couple weeks ago I posted on the good news that poverty in Venezuela has fallen over the past couple of year and is now below what the poverty level was when Chavez first came to office. Of course, given that these numbers reflect well on the Chavez administration the opposition and its allies are falling all over themselves trying to discredit the numbers. First, a number of Venezuelan media, opposition blogs, and even commenters on this blog have claimed the way the numbers were calculated had been changed to make them look better. And then today opposition cheerleader and Miami Herald columnist, Andres Oppenheimer, tried to cast aspersions on the good numbers. So first, lets look at what Mr. Oppenheimer said:

A miracle! Venezuela's poverty has suddenly fallen

BY ANDRES OPPENHEIMER
aoppenheimer@herald.com

ANDRES OPPENHEIMER

aoppenheimer@herald.com

How interesting! Just a few months after Venezuela's official statistics institute reported that poverty had increased by 11 percent since President Hugo Chávez took office in 1999, the same institution is now reporting -- after a public scolding by the president -- that poverty has suddenly plummeted to pre-1999 levels.

Before I tell you what explanation I got from the president of Venezuela's government-run National Statistics Institute (INE), let's recap the statistical roller-coaster of Venezuela's official poverty figures.

You may recall that in March I reported in this column that Venezuela's INE had said poverty had risen from 43 percent to 54 percent of the population during Chávez's first four years in office. The report said that extreme poverty -- the poorest of the poor -- had increased from 17 percent to 25 percent of the population.

And you may recall that I made a big fuss about these figures. I noted that Chávez, a self-described champion of the poor, had managed to increase poverty despite the biggest increase in Venezuela's oil-export income in modern history. Oil, which accounts for about 80 percent of Venezuela's foreign income, has risen from $9 a barrel when Chávez took office to more than $60 a barrel today.

Shortly after I wrote about these figures, Chávez criticized the INE's statistics, saying they reflected a ''neo-liberal'' free market way of measuring poverty that did not reflect the reality of a ''socialist'' economy like Venezuela's. He called on the INE to change its methodology.

THE NUMBERS

Well, guess what? A new INE poverty report published this week shows a near miraculous decline in Venezuela's poverty. Overall poverty has suddenly plummeted to 38.5 percent of the population -- 4.5 percent below what it was when Chávez took office.

And the new figures for extreme poverty -- the poorest of the poor -- are even more startling: It has plummeted from 24 percent of the population in the first half of 2004 to 10 percent today.

''This is very suspicious,'' says Luis Pedro España, an economist who heads a poverty studies project at Venezuela's Andrés Bello Catholic University. ``If they had indeed reduced extreme poverty by more than half in a few months, it would be a world record.''

España says that's not likely to be the case. He added that not even Chávez's massive social programs would help explain the dramatic reduction in extreme poverty, because they are most often concentrated in big cities, while the poorest of the poor tend to live in remote rural areas.

VANISHING FIGURES

Ana Julia Jatar, an economist with the Institute of Higher Administration Studies (IESA), noted that some of the figures in previous INE reports that reflected badly on the Chávez government have mysteriously disappeared from the INE website.

''Venezuelan statistics are no longer credible,'' Jatar says. ``They have become an instrument of government propaganda.''

Not true, INE's president Elias Eljuri told me in a telephone interview from Caracas. The new figures result from a dramatic increase in Venezuela's gross domestic product during the past two years. And they were taken using the same measuring standards as in previous years, he said.

'Poverty levels had soared in 2002 and 2003 because of a drop in the GDP caused by the [anti-Chávez] coup d'etat and the oil workers' strike,'' Eljuri said. ``But since then, the economy has grown by 18 percent in 2004, and will grow by near 10 percent in 2005. A recovery of such magnitude brings about a big drop in poverty rates.''

''There is an opposition campaign against the INE,'' he told me. ``When I reported that poverty had risen [during Chávez's first four years in office], I was their hero. Now that the economy has grown and I'm reporting that poverty has dropped, I've suddenly become a liar.''

My conclusion: If Venezuela's INE is right, and wants to maintain its reputation of unbiased economic reporting, it should accept some adult supervision and open its books to independent economists, like most governments do.

Otherwise, I will have to conclude that it is following Cuba's example, and has begun publishing its own happy figures, which nobody can independently corroborate. Miracles may exist, but most of us find it hard to believe in them.

First things first. The notion, peddled by some, that the methodology for calculating poverty was changed is dealt with here. Please recall that although a verbatim interview transcript of the INE president in Panorama newspaper and another article in Ultimas Noticias made it clear that the methodology for measuring poverty had NOT changed at all, some, including El Nacional and some very dishonest opposition bloggers insisted that the INE president had said that the poverty measurement had changed.

Well apparently Mr. Oppenheimer is a sufficient bigwig that he can call and get Venezuelan officials on the line. And what did the INE President, Eljuri, tell him Mr. Oppenheimer on the phone? That in fact the poverty figures were calculated “using the same measuring standards as in previous years”. So unsurprisingly, Panorama, Ultimas Noticias, and this blogger were correct on this and the usual opposition blowhards were lying. And just as with the oil production numbers apologies will be accepted.

Nevertheless, Mr. Oppenheimer still claims these numbers are hard to believe. So lets take a closer look at his article and see if we can figure out why. The obvious slanting of information begins right in the first paragraph:

”Just a few months after Venezuela's official statistics institute reported that poverty had increased by 11 percent since President Hugo Chávez took office in 1999, the same institution is now reporting -- after a public scolding by the president -- that poverty has suddenly plummeted to pre-1999 levels.

Oppenheimer that the numbers have changed “suddenly”. That is not true at all. The numbers showing poverty going up that he was happy to pounce on when they were released a while back were for 2003 – a full two years ago. The numbers being given now are up through 2005. So the change is over a period of years, not months. Hardly a sudden change.

Then comes this:

You may recall that in March I reported in this column that Venezuela's INE had said poverty had risen from 43 percent to 54 percent of the population during Chávez's first four years in office.

To say that poverty increase during Chavez’s first four years in office is another rather obvious attempt to mislead. To see why let me list once again the poverty statistics by year:

1997= 48.1%
1998 = 43.9 %
1999 = 42 % [Chavez takes office]
2000= 40.4 %
2001 = 39 %
2002= 48.6 [coup and strike]
2003 = 55.1
2004 = 47.0
2005 (first semester) 38.5%
2005 (second semester – anticipated) 35%

Looking at this you can see that the number of poor was steadily decreasing until the opposition started with their famous coup attempt and oil strike which threw the economy into a tail spin. From looking at the year by year numbers it is clear that it isn’t Chavez’s policies that contributed to any increase in poverty but rather the concerted effort by the opposition to overthrow the government and trash the economy that did it (could this be why Oppenhiemer never shows the year by year numbers?) And a very cynical strategy it was, damage the economy as much as possible and then blame the results on Chavez. Fortunately, even though some dupes like Oppenheimer buy it the vast majority of Venezuelans know exactly who was responsible for the hard economic times of 2002 and 2003.

But if that weren’t enough here is another one:

I noted that Chávez, a self-described champion of the poor, had managed to increase poverty despite the biggest increase in Venezuela's oil-export income in modern history. Oil, which accounts for about 80 percent of Venezuela's foreign income, has risen from $9 a barrel when Chávez took office to more than $60 a barrel today.

About the only thing he gets right here is that Venezuelan oil was selling for about $9 a barrel before Chavez took office. The $60 per barrel number is meaningless – Venezuelan oil has never sold for that price. In fact while oil prices are very high this year they are still averaging $44 per barrel for the year – not $60. More importantly, that is what it is NOW. But in 2002 and 2003, when the poverty levels went up, it was only selling for a little over $20 per barrel. What is more, part of 2003 Venezuela wasn’t getting much money from oil as its oil industry was shut down from a oil strike!! This is standard anti-Chavez propaganda, pretending that he has gotten much more from the oil revenues than he has and conveniently forgetting the billions lost to opposition sabotage.

But he saves the best for last. He can’t believe that poverty could have gone down so much so fast. It would, according to him, take a “miracle” for that to happen. But would it really have taken a miracle? Lets see.

Between 2002 and 2003 the economy contracted 17% and poverty rose from 39.1% to 55.1% or about 16%. So the GNP and poverty were almost exactly inversely proportional – as the economy went down 17% poverty went up 16%. Now lets look at what happened in 2004 and 2005. The economy grew 17% in 2004 and another 10% in 2005 for a total of 27%. And poverty is shown as falling from 55% to 35%, a decrease of 20%. So this time the inverse proportionality is broken somewhat – the economy went up 27% but poverty only decreased 20%. If the same inverse proportion held as when poverty was increasing then poverty should have decreased by about 27% instead of just 20%. In other words, looking at these numbers it isn’t surprising that poverty decreased so much, it is surprising it didn’t go down even more. Wow, so maybe the INE IS making a mistake. Maybe they are UNDERESTIMATING how much poverty went down!! That certainly is what an analysis of these numbers shows.

So there is no miracle here. Only very good and very plausible numbers which reflect how a booming economy has helped lift a significant number of Venezuelans out of poverty. Oppenheimer and his anti-Chavez friends may not like that as it dims their chances of giving Chavez the boot. But arithmetic is arithmetic and that is what the numbers show. So it needs to be said again, congratulations to the people of Venezuela and good work President Chavez.
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For the last couple of days there has been much talk of the number of U.S. military deaths topping 2,000. Personally, I don’t find it a very meaningful event. Its just one more number on the way to somewhere else. How significant will this marker seem when the deaths wind up toping 5,000 or 10,000 as it certainly looks like they will? Not very I suspect.

Another reason I don’t want to dwell on this event is it almost has the perverse effect as making it seem that the Americans soldiers are the victims. Listening to all the hand wringing over this one could almost forget that this war results from the U.S. invading, with no legitimate purpose, another country and trying to subjugate its population. One could also forget that the great majority of violence and brutality is being inflicted by Americans on Iraqis and not the other way around.

To help make sure that point is not forgotten I decided to post some excerpts from an article
in the New York Times this past Sunday. It is a long article which gives the story of one U.S. officer, Colonel Sassaman, and how his tactics towards Iraqis became more brutal over time. The excerpts won’t tell this story. But they will give some indication of U.S. brutality and serve to remind us all who are the aggressors and who are the victims. Always keeping this in mind is important and justifies the following lengthy quote:

The emergence of the Iraqi insurgency stunned senior American commanders, who had planned for a short, sharp war against a uniformed army, with a bout of peacekeeping afterward. Now there was no peace to keep. In response, American officers ordered their soldiers to bring Iraq back under control. They urged their men to go after the enemy, and they authorized a range of aggressive tactics. On a visit from his headquarters in Tikrit, Maj. Gen. Raymond Odierno, the commander of the Fourth Infantry Division, ordered Sassaman and other officers simply to "increase lethality." Sassaman, adored by Odierno for the zeal with which his men hunted down guerrillas, took the order to heart. He sent his men into the Sunni villages around Balad to kick down doors and detain their angry young men. When Sassaman spoke of sending his soldiers into Samarra, his eyes gleamed. "We are going to inflict extreme violence," he said.

.................................................................

In late November 2003, I drove with a photographer to Sassaman's base as the Iraqi insurgency was gathering force. As we wound our way down a country road, we spotted Sassaman and a handful of his men standing on the roadside, gathered round an Iraqi man. It was an interrogation.

"If you weren't here with your camera, we would beat the [expletive] out of this guy," one of the soldiers said.

......................................................

On the night of Nov. 17, as one of the battalion's patrols moved past Abu Hishma, a crowd of young Iraqis began taunting them. Seconds later, a team of insurgents fired a volley of rocket-propelled grenades directly at one of the Bradleys. One rocket-propelled grenade, or R.P.G., sailed directly into the chest of the driver, Staff Sgt. Dale Panchot. It nearly cut him in half.

The death of Panchot seemed to change everything for the battalion. Sassaman decided that the Sunni sheiks had broken the truce and that from that moment there would be no more deals. Building a democracy in places like Abu Hishma would have to take a back seat. The new priority would be killing insurgents and punishing anyone who supported them, even people who didn't.

The day after Panchot was killed, Sassaman ordered his men to wrap Abu Hishma in barbed wire. American soldiers issued ID cards to all the men in the village between the ages of 17 and 65, and the soldiers put up checkpoints at the entrance to the town. Around the camp were signs threatening to shoot anyone who tried to enter or leave the town except in the approved way. The ID cards were in English only. "If you have one of these cards, you can come and go," Sassaman said, standing at the gate of the village as the Iraqis filed past. "If you don't have one of these cards, you can't."

...........................................

Yet the experience in Abu Hishma and the other Sunni towns posed a basic challenge for Sassaman's men: apart from killing insurgents, how could the Americans ensure that their authority would be respected and that they would be obeyed in a place where they were so thoroughly hated? In Sunni towns like Samarra and Abu Hishma, even the ones wrapped in barbed wire, the Americans found that if they were not being shot at, they were being challenged, and not just by small handfuls of villagers but by nearly everyone. Young men hurled rocks at American patrols. Adults stayed out past curfew. People scrawled graffiti exhorting their neighbors to kill American soldiers. Some of the resistance was passive: whenever American soldiers showed up in a Sunni village looking for insurgents, the locals, more often than not, just stood and shrugged. And some Iraqis, though not actually shooting at the Americans, were clearly cooperating with the insurgents. When Sassaman's soldiers would go on a patrol through a Sunni area, for instance, they might see a man on a rooftop a hundred yards away, unarmed and in street clothes, watching them go by. Farther down the road, another Iraqi might be standing off to the side, looking at his watch, marking the time of the convoy's pass. The myriad acts of defiance signified the steady erosion of American authority. And they led to the death of American soldiers. "If I don't do anything when the guy flips me off, then the next time I drive by there I'm going to catch an R.P.G.," Perkins said.

............................................

Under the prodding of the generals, Sassaman took the concept of nonlethal force to its limits. His theory was that no progress would be possible without order first and that ultimately, even if his men were hard on the locals, they would come around. When his men came under fire from a wheat field, Sassaman routinely retaliated by firing phosphorous shells to burn the entire field down. The ambush site would be gone, and farmers might be persuaded not to allow insurgents to use their land again.

Sassaman detained Sunni sheiks, holding them responsible when his troops were attacked. When Iraqis gave him bad intelligence, he detained them too. When locals scrawled graffiti on a wall, denouncing President Bush or calling on the Iraqis to kill Americans, Sassaman asked local leaders to paint it over, and if they did not, he ordered his men to destroy it. If kids threw rocks, his men threw rocks back. If they caught an Iraqi man out after curfew, they piled him into a Bradley, drove him miles outside of town and told him to walk home. "All I was getting at was, If grown-ups throw rocks at me, we're throwing them back," Sassaman said. "We are not going to just wave. We are not driving by and taking it. Because a lot of the units did."

On a mission in January 2004, a group of Sassaman's soldiers came to the house of an Iraqi man suspected of hijacking trucks. He wasn't there, but his wife and two other women answered the door. "You have 15 minutes to get your furniture out," First Sgt. Ghaleb Mikel said. The women wailed and shouted but ultimately complied, dragging their bed and couch and television set out the front door. Mikel's men then fired four antitank missiles into their house, blowing it to pieces and setting it afire. The women were left holding their belongings.

...........................................

That same winter in Samarra, Sassaman's men moved through a hospital and pulled a suspected insurgent from his bed. When a doctor told the Americans to leave, a soldier spat in his face. Another time, an officer told Spanner, one of Sassaman's soldiers threw a wounded man into a cell and threatened to withhold treatment unless he told them everything he knew. "We've told him he's not getting medical attention unless he starts to talk," Capt. Karl Pfuetze told Spanner. The man's fate was unknown. (Pfuetze now denies the withholding of treatment. Sassaman insists he never condoned beatings or denial of medical treatment.)

The best explanation for such tactics was offered by an officer in the Fourth Infantry Division. Echoing the private comments of many American officers, he said that the Iraqis seemed to understand only force. "To an American, this might upset our sense of decency," he added. "But the Iraqi mind-set was different. Whoever displays the most strength and authority is the one they are going to obey. They might be bitter, but they obey."

................................

But most of the tactics employed by Sassaman's men had been explicitly ordered or at least condoned by senior American officers, and many units in the Sunni Triangle were already using the same kind of tough-guy methods. The order to wrap Abu Hishma in barbed wire, for instance, was given by Col. Frederick Rudesheim, Sassaman's immediate supervisor. Odierno signed off on the wrapping of Saddam Hussein's birthplace, Awja. Destroying homes and detaining people as quasi hostages - those, too, were being condoned by American generals. At a news conference in November 2003, Sanchez, the top commander in Iraq, acknowledged that he had authorized the destruction of homes thought to be used by insurgents. That same month, American officers said they detained the wife and daughter of Gen. Izzat Ibrahim, a high-ranking member of Hussein's government who was still at large. The hope, they said, was that the women could lead them to Ibrahim.

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It was around this time that soldiers in the 1-8 started getting people wet. It seemed to work so well the first time they tried it, in December 2003, when the men from Alpha Company's first platoon were driving their Bradleys toward the Balad airfield, and an Iraqi man, standing in front of his auto repair shop, raised his hand in an obscene gesture. On the way back, the Americans stopped and searched the shop but found nothing. Lt. Jack Saville, the platoon commander, told his men to take the Iraqi to a pontoon bridge that ran across the Tigris and throw him into the river.

"The next time I went back, the guy is out there waving to us," Perkins said. "Everybody got a chuckle out of that."

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In the ongoing propaganda war against President Chavez one of the opposition claims is that somehow Venezuela’s state oil company PDVSA is not forthcoming with information. This is completely false. PDVSA through its web-site and information bulletins published in newspapers providers more information to its owners, the Venezuelan people, than ever before. As an example below is a copy of the information bulletin published today by PDVSA in Venezuela’s largest newspaper, Ultimas Noticias. Today’s topic was the changing of the operating conventions (more on that later).

These bulletins, which are generally published two or three times a week have covered every conceivable topic related to PDVSA – from its financial performance to its production, from its overseas operations to its labor force, from its recovery from the “oil strike” to its participation in various social programs.

And of course we just recently saw that the some of the information published in these bulletins, namely its production numbers, was true all along while the lower numbers given by the Venezuelan opposition turned out to be erroneous. It is this supply of timely, revealing, in depth, and ACCURATE information that makes PDVSA an open book for the people of Venezuela.









Now what exactly are “operating conventions”? They are special agreements that the Venezuelan governments prior to Chavez negotiated with foreign firms to come in and operate older oil fields that Venezuela supposedly didn’t have the technology to operate. In exchange for operating these fields these companies would be reimbursed by Venezuela (PDVSA) for all their costs and were subject to very low tax rates on their earnings. Currently these “operating conventions” account for 499,000 barrels of daily production out of Venezuela’s total of over 3 million barrels.

Now if you turn over oil fields to private companies and tell them “don’t worry, well pay you whatever its costs to get the oil out of the ground” what do you think will happen? You guessed it – costs will be inflated and vastly overstated. For example, it costs PDVSA about $4 per barrel for its own in-house production. How much do the private companies say their costs are - $18.17 per barrel. Now the fields operate by those companies are more challenging and so it is natural that their costs will be higher. But $18 is way out of line. Just to show how out of line it is the extra heavy crude of the Orinoco Belt costs about $9 to produce and that oil is much harder to extract and has to be upgraded at special refineries. So the $18.17 is clearly inflated and is just a way for these companies to fleece PDVSA. And PDVSA has had no choice under the contracts negotiated by the previous governments but to pay that outlandish rate. This year PDVSA has to pay out $4 billion to these companies so if even a third of this cost is overcharging Venezuela is losing well over a $1 billion per year. Clearly this was something crying out for change.

Now here comes a little irony. In December 2002 the old PDVSA management, the same one by and large that negotiated these outrageous deals, went on “strike” to try and oust Chavez. They failed and were all fired for their refusal to work. So now that they are out and a new and more nationalistic management is in place (the government often refers to this as the “true nationalization of PDVSA”) PDVSA finally had its chance to change this. The main part of this change, besides other tweaking like imposing higher tax rates and aggressively collecting past taxes, is to force these companies to become joint ventures with majority PDVSA ownership. By PDVSA having ownership over these operations it gets to control them and their costs. There will no longer be a way for a private management to pad costs and rob Venezuela of money.

Now of course, there has been a lot of bitching and moaning about this from the usual suspects living in eastern Caracas not to mention the foreign companies themselves which are loath to see such a good deal disappear. But what can we say, all good things must come to an end. In any event about 22 of the 30+ companies involved in these operations have already signed on to these changes. And what about those who don’t companies who don’t want to accept these changes. Well, those dead enders (as Rumsfeld would say) will simply have their entire operations expropriated by PDVSA and that will be that. So I suspect they’ll manage to work something out.

So as can be seen not only is PDVSA more open and transparent it also is for the first time almost since its inception truly operating in Venezuela’s best interest. It is amazing what can be accomplished when you finally have leadership that is forceful in doing what is best for the country. The days of the vendepatrias are gone, hopefully for good.
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As I pointed out a year and a half ago as the military endeavor in Iraq sours the U.S. military has turned to using body counts in a propaganda effort to show progress in the war. Finally it seems, some others have noticed this too:

Eager to demonstrate success in Iraq, the U.S. military has abandoned its previous refusal to publicize enemy body counts and now cites such numbers periodically to show the impact of some counterinsurgency operations.

The revival of body counts, a practice discredited during the Vietnam War, has apparently come without formal guidance from the Pentagon's leadership. Military spokesmen in Washington and Baghdad said they knew of no written directive detailing the circumstances under which such figures should be released or the steps that should be taken to ensure accuracy.

.........................................

On Saturday, for instance, the U.S. military reported 20 insurgents killed and one captured in raids on five houses suspected of sheltering foreign fighters in a town near the Syrian border. Six days earlier, the 2nd Marine Division issued a statement saying an estimated 70 suspected insurgents had died in the Ramadi area as a result of three separate airstrikes by fighter jets and helicopters.

That Oct. 16 statement reflected some of the pitfalls associated with releasing such statistics. The number was immediately challenged by witnesses, who said many of those killed were not insurgents but civilians, including women and children.

Privately, several uniformed military and civilian defense officials expressed concern that the pendulum may have swung too far, with body counts now creeping into too many news releases from Iraq and Afghanistan. They also questioned the effectiveness of citing such figures in conflicts where the enemy has shown itself capable of rapidly replacing dead fighters and where commanders acknowledge great uncertainty about the total size of the enemy force.

...............................

During the Vietnam War, enemy body counts became a regular feature in military statements intended to demonstrate progress. But the statistics ended up proving poor indicators of the war's course. Pressure on U.S. units to produce high death tolls led to inflated tallies, which tore at Pentagon credibility.

"In Vietnam, we were pursuing a strategy of attrition, so body counts became the measure of performance for military units," said Conrad C. Crane, director of the military history institute at the U.S. Army War College. "But the numbers got so wrapped up with career aspirations that they were sometimes falsified."

The Vietnam experience led U.S. commanders to shun issuing enemy death tallies in later conflicts, through the initial stages of the Iraq war. "We don't do body counts on other people," Defense Secretary Donald H. Rumsfeld said in November 2003, when asked on "Fox News Sunday" whether the number of enemy dead exceeded the U.S. toll.

That policy appeared to shift with the assault on the insurgent stronghold of Fallujah in November, an operation considered crucial at the time to denying safe havens to enemy fighters. U.S. military officials reported 1,200 to 1,600 enemy fighters killed, although reporters on the scene noted far fewer corpses were found by Marines after the fighting.

The author of this article was being kind in my view. Body counts are just completely bogus. If a building is bombed does the U.S. military have any way of knowing how many people were inside or even how many of those were insurgents? Of course not. If they get in a firefight in an insurgent stronghold like Ramadi do they hang around to meticiously count the dead? No, they scurry away to the safety of their base. And of the dead bodies they do see do they have any way of knowing how many were really insurgents and how many were innocents whose only crime was to be in the wrong place at the wrong time? No, unless they just make the assumption that every male Iraqi between the age of 15 and 50 is an insurgent – which is probably what they do.

Again, body counts are nothing more than a propaganda exercise to boost flagging g morale and show some sort of progress when in every other respect they are losing the war. In fact what body counts do is confirm the fact that they are losing. When they are winning wars they don’t give body counts – they didn’t in WWII or the first Gulf War. Its when they are losing that they need them. That is why they were so heavily used in Vietnam and their use has now been resumed in Iraq.

And that is why in 2003 you heard Rumsfeld say "We don't do body counts on other people". Indeed. They didn’t need them back then when they thought they were winning. Now when they are losing they just keep pumping cranking out the bogus numbers.
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A little over a week ago the Venezuelan government threw out the “New Tribes” missionaries who they accused of being agents of the U.S. government, violating Venezuelan immigration laws, and trafficking in stolen minerals. I don’t know how much of that was substantiated but such were the accusations.

Today we found out that Chavez killed two birds with one stone. The Mormons have packed up their U.S. missionaries and left. And while I don’t know about the “New Tribe” ties to the U.S. government the Mormons are indeed well known for having a significant portion of their young missionaries wind up going into intelligence and military work due to their foreign language skills and detailed knowledge of their host country. So while the Mormons leaving Venezuela today doesn’t do much to affect U.S. intelligence capabilities against Venezuela it can help to dry up the pipeline of future spies. Was it intended that this happen? I don’t know. But at the very least it certainly is a very nice little side benefit to the New Tribes expulsion.
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Today opposition suffered a significant blow when the European Union agreed to send observers to the upcoming legislative elections scheduled for December 4th. Opposition moonbat Tulio Alvarez had worked very hard to try to keep the European Union from coming to observe elections. As a general proposition the opposition doesn’t want observation missions as having observers present makes it harder to scream fraud after the fact. For example, the audits and analysis performed by the Carter Center and Organization of American States observer missions to the recall referendum completely shot down the opposition’s cries of fraud. And given that the opposition has little chance of winning elections and abhors the idea of accepting Chavez as a democratically elected president they have little choice but to claim that there was electoral fraud. Hence its clear the opposition is between a rock and a hard place and this explains their desperation to try to prevent observers from coming.

Of course,the opposition isn’t easily deterred. So once the observers tell them “yes, you really did lose the election” they will simply say the observers were incompetent and didn’t do their jobs or are closet Chavistas. So a piece of advice for the EU observers – be sure to bring ear plugs so you can sleep in spite of all the pot banging.
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I don't normally just cut and paste articles. But this one on Venezuela's current poltical situtation was unusually comprehensive so I thought what the heck:

Venezuela's Chavez in for the long haul
By Bernd DebusmannMon Oct 24,


Venezuelan President Hugo Chavez, Washington's most influential foe in Latin America, looks set to stay in power for another seven years unless he is ousted through violence or the price of oil suffers a huge collapse.

Crystal ball-gazing in a country as volatile as Venezuela is fraught with risk. But both Venezuelan and foreign analysts here and in Washington find it increasingly difficult to envision scenarios under which pro-Chavez parties would lose congressional elections scheduled for December 4 and he would be voted out of office in presidential elections in 2006.

In his first turbulent six years in office, briefly interrupted by an abortive business-backed coup against him, the burly ex-paratrooper has steadily consolidated power at home and expanded his influence in Latin America as an advocate of socialist reforms and a vocal critic of the U.S. government and its free-market gospel.

Chavez peppers his speeches with references to "Mr. Danger" (George W. Bush), the "empire" (the United States) and "the desperate giant" (both Bush and the United States). Washington, in turn, labels him a "negative influence" and a man of "questionable affinity to democratic principles."

Venezuela's domestic opposition held mass protests before and after the failed 2002 coup attempt but it was defeated in a referendum that endorsed Chavez's rule in 2004. It is now weakened and divided and concentrates on criticizing the Chavez government.

A long list of complaints include undemocratic practices, cronyism, corruption, mismanagement, waste, intimidation, lack of transparency, politicizing the army and militarizing

"I'm asking them (the opposition) 'Where is your plan?'," Chavez said recently on his weekly TV show, "'Where is your alternative?' All they want is turn to Venezuela into a U.S. colony."

Not so, according to Julio Borges, one of the two opposition leaders who have already officially announced they will run for the presidency. "Ours is a broken country, divided and in need of a new generation of politicians," he said in an interview.

"We need to build a new majority, working town by town, barrio by barrio, house to house. This is a huge challenge." Borges, a conservative attorney, is head of the Primero Justicia party. He says his poll numbers are climbing toward 20 percent. Chavez's support in polls is regularly up to about 70 percent.

Political analysts say that splitting the anti-Chavez vote among several candidates is a recipe for defeat.

Apart from the personal charisma and popular touch even his enemies acknowledge, Chavez benefits from Venezuela's rich-poor demographics and from the high price of oil.

Venezuela is the world's fifth largest oil exporter and has the largest oil reserves in the Western Hemisphere.

According to a popular adage in Venezuela, the country never had good or bad governments since it became an oil exporter in the 1920s -- it had high-oil-price and low-oil-price governments.

The last time crude traded at levels comparable to today's -- more than $50 a barrel -- was in the 1970s, when the supersonic Concorde flew three times a week between Caracas and Europe and the Venezuelan middle and upper classes gained the sobriquet Damedos (Spanish for "give me two") because of their profligate spending in the malls of Miami.

Not much of the oil windfall trickled down to the poor, Chavez's base of support, who make up more than two-thirds of Venezuela's 26 million people. Over the past few years, vast sums have been spent on social projects for the masses, from education and health care to subsidized food.

Chavez calls this the Bolivarian Revolution, after Simon Bolivar, the 19th century Venezuelan general who freed Latin America from Spanish rule. A recent addition to the Chavez vocabulary: "21st century socialism." It adds to the discomfort of a middle class which tends to see the president as Fidel Castro with oil.

That oil is pumped by PDVSA, the state-owned oil company which finances social programs at home and underpins Chavez's ambitions for leadership in Latin America, where popular disenchantment with U.S.-inspired economic policies have brought left-leaning governments to power in five countries since 2000.


The oil wealth is helping Chavez spread his vision of 21st century socialism in the region and has given him the highest profile of any present Latin American leader. But at home, some of his followers are showing signs of impatience with the pace and scale of promised reforms.

In the first weeks of October, there were protests in different parts of the country, in support of a variety of complaints and causes.

They included delays in a promised sewage project, erratic electric power service, compensation for flood damaged homes, a mining project feared to inflict environmental damage to Indian ancestral lands, government foot-dragging in opening talks on wages for public employees, and a road linking a remote Indian settlement to the nearest market.

Even Chavez has shown frustration at the sluggish pace of programs, such as his drive to build housing for the poor, and has publicly reprimanded several ministers for failing to follow through with plans.

The protests were small, from a few dozen to a few hundred people, and paled in comparison to the hundreds of thousands who poured into the streets in 2002 and 2003 against his government. But they raised the prospect that growing disillusion among his loyalists could swell the ranks of what is know here as ni-nis.

A ni-ni (Spanish for neither-nor) inhabits neutral ground in polarized Venezuela and would not vote for Chavez or an opposition leader.

"The ni-nis are looking for a leader," said Alejandro Plaz, the head of the election activist organization Sumate. "But there is none in sight."

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The Venezuelan government recently came out with its budget for 2006. There are several notable features, such as the heavy investment in social programs, the very conservative assumptions about oil prices revenue (anticipated price - $26 per barrel !), and the increasing portion of the budget that will be financed by normal tax revenues instead of oil income in spite of the budget going up significantly. However, the budget is large and complex and I am not in a position to post on it in detail at this time. For those wanting a little more detail they can see the article on it in Venezuelanalisis.

But there was one item of the budget that did stand out – and not for good reasons. And that is the amount of money to be spent on the National Assembly ( AN - Venezuela’s legislature) itself. According to Ultimas Noticias the budget for the AN will be about $150 million for 2006. That is a 60% increase from 2005 when it was “only” about $90 million. In case you are wondering how out of line this is remember that the AN is unicameral and only has 165 members. In other words they are managing to spend about $1 million per member just to run the AN!

And what do they manage to piss away that much money on? For starters, they spend about $10 million just on the AN members salaries which comes to $60,600 per member. While not extravagant it is not a small amount either in a country where most people get by on a couple thousand dollars a year. On top of this the legislators get another $20,000 per person for vacation bonuses and other benefits. Another $60 million gets spent on other salaries, presumably each members support staff and general employees of the AN.

But then things get a little ridiculous. Approximately $10 million is budgeted for travel expenses and airline tickets - $2.5 million for international travel ($15,000 per member) and $7.5 million for domestic travel ($45,000 per member). As if that weren’t excessive enough another $4.5 million is budgeted for general travel (what is this - chauffer driven cars?).

Clearly, the A.N. is an important body. And clearly it has done a good job of helping steer the country through turbulent times and setting policies which have revitalized the economy and created an abundance of funds for important governmental programs. But just as clearly, this budget for the A.N. is wasteful and sets a poor example for the rest of the country. The opposition likes to unjustly slam the government over many of its expenses. It criticizes the high social spending as “handouts” and “vote buying” even though it is making up for a social deficit decades in the making. It criticizes money spent abroad even though this money often helps to accomplish important foreign policy objectives. And it regularly blasts Chavez for flying overseas in a presidential airplane – as if the President of the country, who has very legitimate security concerns, was going to fly coach on Delta. But with this level of unjustifiable spending the A.N. is just setting itself up for very criticism.

Unfortunately the head of the A.N. seems not to get it. “We serve the popular will with their proposals and complaints along the breadth and width of the country. It is a small amount compared with the responsibilities of the A.N.” said Nicolas Maduro. Mr. Maduro is entitled to his opinion on this. But he runs the risk come election day of finding out the electorate doesn’t necessarily agree with him.
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Some new poll numbers were released by Sejias today. And they are not at all bad for Chavez. According to this poll 76.6% have a favorable opinion of the job he is doing. Of that number 50.8% think his performance is good to excellent while 25.8% think it is fair to good. 21.5% don’t approve of his performance and think it is fair to terrible.

And it gives more bad news for the opposition – their politicians seem not to be very popular. When asked to rate political leaders, excluding Chavez, the two leaders with the highest favorable ratings were the current Vice-President, Jose Vicente Range at 44% and the governor of Miranda, Diosdado Cabello (a member of Chavez’s MVR party) with 40.5%. Those with the highest unfavorable ratings were opposition leaders Antonio Ledezma with 42.9% and Teodoro Petkoff with 42%. So even with no Chavez the opposition still loses.

At this point such high unfavorables for the opposition probably don’t stem so much from all the damage they did to the country when they ran it under the “4th Republic” but from all the damage they have done as a political opposition – the coups, the street violence, and the billions of dollars lost due to oil strikes and lockouts. And of course, that they are so thoroughly dishonest, as we have recently seen with the oil production numbers and poverty statistics, can’t be helping their cause any.
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