Saturday, March 25, 2006

And you think you have a crime problem 

Of late I've of given up on reporting on all the good economic news coming out of Venezuela because there is simply too much of it and it gets rather repetative after a while. How many posts can I write about automobile sales setting a new record when they do so virtually every month? And anyways, the point has already been made - the Venezuelan economy is booming.

I have the same problem regarding posting on Iraq, but in reverse. I've stopped posting on a lot of the dismal numbers comming out of that country because by this point they are well known, oil production is tanking and electricity is ever scarcer to name but two examples. Nevertheless, even when you think Iraq has hit bottom something comes along that shows it can sink even lower. Such is this
BAGHDAD, Iraq, March 25 — Mohannad al-Azawi had just finished sprinkling food in his bird cages at his pet shop in southern Baghdad, when three carloads of gunmen pulled up.

In front of a crowd, he was grabbed by his shirt and driven off.

Mr. Azawi was among the few Sunni Arabs on the block, and, according to witnesses, when a Shiite friend tried to intervene, a gunman stuck a pistol to his head and said, "You want us to blow your brains out, too?"

Mr. Azawi's body was found the next morning at a sewage treatment plant. A slight man who raised nightingales, he had been hogtied, drilled with power tools and shot.

In the last month, hundreds of men have been kidnapped, tortured and executed in Baghdad. As Iraqi and American leaders struggle to avert a civil war, the bodies keep piling up. The city's homicide rate has tripled from 11 to 33 a day, military officials said. The period from March 7 to March 21 was typically brutal: at least 191 bodies, many mutilated, surfaced in garbage bins, drainage ditches, minibuses and pickup trucks.

There were the four Duleimi brothers, Khalid, Tarek, Taleb and Salaam, seized from their home in front of their wives. And Achmed Abdulsalam, last seen at a checkpoint in his freshly painted BMW and found dead under a bridge two days later. And Mushtak al-Nidawi, a law student nicknamed Titanic for his Leonardo DiCaprio good looks, whose body was returned to his family with his skull chopped in half.

What frightens Iraqis most about these gangland-style killings is the impunity. According to reports filed by family members and more than a dozen interviews, many men were taken in daylight, in public, with witnesses all around. Few cases, if any, have been investigated.

Now, overlooking the heartbreaking details here lets look at just the cold numbers. Annualizing 33 murders per day gives over 12,000 murders per year in Baghdad. Given the population of Baghdad is about 5 million this gives a murder rate of 240 per hundred thousand. By way of comparison the murder rates in 2002 for the three most violent U.S. cities were:

Washington, DC 45.8
Detroit 42.0
Baltimore 38.3

I imagine this is yet one more reason why the U.S. occupation of Iraq is increasingly unpopular. And it gives more lie to the notion that the U.S. "liberated" Iraq. It seems what many Iraqis are being "liberated" from are their lives.


"I do want to encourage them" 

File this one under the heading of we'll see how its related to Venezuela 30 years from now. Although we all know (in spite of the oppositions ludicrious denials) that a coup against the Chavez government occured on April 11, 2002 and we also know, from the work of Eva Golinger, that the U.S. knew about it and most likely had some involvement with it, the true and complete extent of U.S. support for it is unknown. Of course, the U.S. government denies any involvement at all.

But as with similar events in the past the truth most likely won't emerge until decades after the fact as did this rather interesting little cable about another Latin American coup:

...the National Security Archive, a private research group based in Washington, has made public newly declassified United States government cables and transcripts relating to the 1976 coup.

Documents indicate, for example, that when a deputy warned Secretary of State Henry A. Kissinger two days after the coup to "expect a fair amount of repression, probably a good deal of blood," Mr. Kissinger was unfazed and ordered American support for the new military junta.

"I do want to encourage them," Mr. Kissinger said, according to the documents. "I don't want to give the sense that they're harassed by the United States."

And I don't know about you, but God forbid a miliary junta feel harrassed by the U.S.


Thursday, March 23, 2006

Drug Wars 

Ok this is going a little far afield, switching from the worlds best-known black commodity to the worlds best-known white commodity. Still, reading this made me sick enough to want to comment on:

A federal grand jury in Washington has indicted 50 commanders of Colombia's largest Marxist rebel group, accusing them of running an extensive cocaine trafficking cartel that protects its operations through widespread killings and intimidation, Attorney General Alberto R. Gonzales announced Wednesday.

The indictment accuses the group, the Revolutionary Armed Forces of Colombia, of being behind 50 percent of the world's cocaine trade and 60 percent of the cocaine exported to the United States.

"We believe these men are responsible for not only manufacturing and exporting devastating amounts of cocaine, but enforcing their criminal regime with violence," Mr. Gonzales said.

The practical impact is unclear, since 47 of the 50 commanders remain free in this vast country, leading thousands of fighters in the group's relentless effort to topple President Álvaro Uribe's government. Three are in Colombian custody, and the United States will seek their extradition, American officials said.

The indictment says rebel commanders ordered their fighters to shoot down crop dusters and to kidnap and kill American citizens, in an effort to dissuade policy makers in Washington from continuing to sponsor a fumigation campaign against the coca plant, from whose leaves cocaine is made.

Some charges in the document may be hard to prove, like those linking commanders to drug operations years ago when the rebel group was believed to be far less involved in the cocaine trade.

But high-ranking Colombian government officials interviewed in Bogotá on Wednesday welcomed the indictment, saying it demonstrated the Bush administration's long-term commitment to Mr. Uribe, the United States' closest ally in Latin America.

"We see this as a recognition of the clear relationship between terrorism and narcotrafficking," said Defense Minister Camilo Ospina. "This shows that a big decision has been made to carry out the final battle against narcotrafficking and terrorism."

This is so surreal it’s hard to know where to begin. First off, who appointed the U.S. the controlling legal authority of the entire world that they can now go around indicting citizens of other countries that have probably never even been in the United States much less committed any crime there? This is simply the unparalled arrogance that comes from having unrivaled military power.

Unfortunately this arrogance seems to actually be welcomed by the current Colombian political leadership. The reason for this would seem to be that these indictments are really a way of targeting an insurgency that is the enemy of both the U.S. and Colombian governments. Now I'm not all that knowledgeable about Colombia and its ongoing guerilla wars but I've always found it difficult to believe that the left wing guerillas are the prime interlocutors of the drug traffickers. I certainly don't think Pablo Escobar and the private paramilitaries he helped to create were any great friends of the FARC. What’s more, is always struck me that whenever the FARC is shown they seem to be a ragtag group with improvised weaponry. I would think that if they were really responsible for half the world’s cocaine trade they could at least afford to equip themselves with proper boots and not need to fashion their rocket launchers out of used gas cylinders.

But be the FARCs involvement in the drug trade what it may, its still manifestly absurd that the U.S. reserves to itself the right to prosecute the citizens of other countries. Or maybe this isn't arrogance on the part of the U.S. Maybe it is some new fangled aspect of international law that is just now being put in to practice. Any country now has the right to put on trail and punish nationals of any other country that it thinks have brought harm to it.

Well, if that’s the case, things could get interesting. Maybe Colombia should indict the 5 or 10 million cocaine users in the United States. I just saw a show on Bogotá’s "Modelo" prison. I'm sure the gringo crack addicts would really enjoy a stay there. Hopefully they would have enough sense to keep their heads down while the paramilitary half of the prison shoots it out with the FARC half. Of course, 10 million gringos wouldn't fit there so I'm not sure what they would do with the rest. Maybe they could use them to help bring in the coffee harvest or supply all Colombian households with free domestic help.

Anyways, I really hope this all goes forward. It should be fun to watch. I'll particularly enjoy watching Mohamed Karzai do hard time in Leavenworth for letting the Afghan poppy crop break all sorts of records. On sure he is next on the U.S.'s list of people to indict.


All's well that ends well 

About six months ago the hysteria of the week was that the Venezuelan government was supposedly promoting land take overs and destroying the last vestiges of private property by confiscating land holdings. Exhibit A was the government effort to assume control of land owned by the British magnate Lord Vestey.

However, yesterday it was announced, in the type of news that tends not to get much attention in the opposition controlled media, that Vestey and the Venezuelan government amicably settled the whole affair:

A British landowner has reached an amicable settlement with the Venezuelan government over a land dispute.

The Venezuelan terrain, owned by Lord Vestey, one of Britain's wealthiest men, had been occupied by landless peasants for several years.

The deal was signed by Venezuela's agriculture minister and a subsidiary of the British meat producer Vestey.

The firm is handing over two cattle ranches of about 55,000 hectares to the authorities in return for some $4m.

The subsidiary, AgroFlora, gets to keep its remaining 10 farms.

The deal draws a line under a bitter legal row over who owns the 300,000 hectares of land being farmed by the company.


This is a landmark agreement, as it is the first time the government of President Hugo Chavez has persuaded a foreign company to surrender agricultural property on friendly terms.

Mr Chavez's government has been carrying out a major land reform to give landless peasants the right to work unused land.

This redistribution programme has had mixed results. Some Venezuelan landowners are still putting up a legal fight, while others have given in to pressure from the president's supporters.

The government is pursuing a strategy of negotiations with the big landowners. So far, it has managed to expropriate around three-and-a-half million hectares by using these tactics.

Land invasions and illegal squatting are now prohibited by the authorities, who favour amicable settlements.

The end result is that previously landless farmers get the land they need. Lord Vestey gets fairly compensated for land he wasn't using much in the first place. And the Venezuelan laws are upheld and even reinforced. Sounds like a win, win, win situation.

Once again, what was a supposedly a huge crisis turned out to be not much of a problem at all. Bet you won't hear the opposition mention that though.


Wednesday, March 22, 2006

He sure has that right 

Some like to criticize Chavez's blunt language and his not being diplomatic. I'm not so sure I would agree with those criticisms. For example, lets look at what he said recently as reported by the Miami Herald:

Chavez says U.S. already has lost in Iraq
Associated Press

CARACAS, Venezuela - Venezuelan President Hugo Chavez said Tuesday that U.S. troops have been routed by a strong resistance movement in Iraq, but haven't pulled out because officials in Washington won't acknowledge defeat.

The United States would also suffer a tremendous military defeat if the Bush administration decided to invade Iran, Chavez told a group of foreign diplomats and government supporters at the Miraflores Presidential Palace.

"The U.S. empire is defeated in Iraq, they just don't want to admit it," Chavez said to rousing applause.

Using a Venezuelan slur to refer to President Bush, Chavez added: "Mr. Donkey thought they were going to be received as heroes."

"God forbid they dare to attack Iran," he said. "We want peace, but they would eat twice as much of the dust of defeat there, I'm absolutely sure of that."

Earlier Tuesday, Chavez defended Iran's nuclear program, accusing the Bush administration of falsely accusing Iran of trying to build an atomic bomb as a pretext for seizing control of the Middle Eastern nation's vast petroleum reserves.

"You know that one of the most serious problems the world has today is the energy problem, so much so that the North American empire has invaded Iraq just to look for oil and now threatens Iran because of oil," Chavez said in a nationally televised speech, referring to the United States. "It's an excuse by the empire, looking for energy."

Lets see, the U.S. has already lost in Iraq? Yep, it is looking that way.

They just don't want to admit it? Yeah, the US does have a recurring problem admitting when it has pissed away thousands of lives and billions of dollars for nothing.

The U.S. thought it was going to be recieved with roses in Iraq? Yep, Cheney sure did think that.

And Iraq is largely about oil? Well not only have we been over that topic numerous times on this blog but I don't think its lost on many people that the U.S. seems much more obsessed with countries that have oil reserves than, say, countries like North Korea, that don't.

So is Chavez somehow inpertinent or inappropriate here? Not at all. I think he is just being a straigh shooter. Too bad the U.S. has few such politicians.


Tuesday, March 21, 2006

Its amazing what happens when Chavez is allowed to govern 

The opposition used to be very found of talking about how bad the Venezuelan economy was doing, how Chavez was driving it into the ground, eliminating private property, scaring away investment, and having people standard of living plummet. Of course, what they generally left out when they were saying these things a couple of years ago was that most of the economic problems confronting Venezuela at the time were artificial problems created by the oppositions coup attempt and strikes. It was often said by Chavez suppoters at the time that the problem was that they (the opposition) didn't let Chavez govern.

For the past two years Chavez has had relative peace and his been able to concentrate his energies not on which generals might be plotting against him but rather what economic policies are best. The results should be abvious to any regular reader of this blog as a great many statistics have been presented documenting Venezuela's boom. In fact, so obvious is the boom that even this reuters reporter couldn't miss it:

CARACAS, Venezuela (Reuters) - Venezuelan President Hugo Chavez spends much of his time extolling socialism and deriding free-market values, but don't expect 29-year-old Steve Telleria to pay much heed.

In the huge Sambil shopping mall in eastern Caracas, Telleria joined the heaving crowds on a recent weekend browsing through expensive boutiques and shops looking for a bargain gift for a friend.

"This is fundamentally not a socialist society," a business administrator said, standing next to a rack of mens' jackets in a packed store. "People here would prefer to stop eating than to stop spending."

Even as Chavez promises a 21st century socialist revolution to end "savage capitalism," rejects the very rich and promotes collective values, Venezuela is enjoying a consumer spending boom as its oil exports bring in record revenues.

While the tough-talking former soldier has spent billions of dollars on social development programs that have made him popular among the poor, consumers in 2005 spent roughly $8.3 billion at the nation's shopping malls.

Whiskey distributor Diageo (DGE.L: Quote, Profile, Research) said Scotch whisky sales grew by 55 percent in 2005 with the largest growth in sales of 18-year scotch, which costs around $60 per bottle -- equivalent to a third of the monthly minimum wage.

Meanwhile, vehicle sales jumped a whopping 70 percent in 2005 over 2004, and the country's BMW (BMWG.DE: Quote, Profile, Research) distributor said its sales tripled last year.

"Honestly I can't understand -- I wish I could understand -- the parameters of this 21st century socialism," said Arnold Moreno, president of the nation's shopping mall chamber.

The group reported shopping mall sales shot up by almost 40 percent in 2005 over 2004.

Riding a wave of high oil prices, Venezuela's economy grew by 9.3 percent in 2005, and government spending left Venezuelans of all walks of life with more money in their pockets.

The state itself has helped fuel some of the boom. The government provides an exoneration of the country's 14 percent sales tax on certain family vehicles and maintained subsidies on gasoline allowing drivers to pay 25 cents a gallon.

Government mandated currency controls, credited with preventing massive capital flight, provide preferential dollar sales to some importers that may have contributed to last year's 45 percent increase in imports, economists say.


Many Venezuelans became accustomed to luxury consumption during the oil boom of the 1970s that gave the country unprecedented windfall profits.

Shoppers went on weekend trips to Miami, where Venezuelans became known for the catch phrase "Dame dos" in Spanish or "It's cheap, give me two."

Venezuelans also developed during this period their taste for whiskey, which nationalist Chavez has dismissed as an example of slavish adoration of foreign cultures. Venezuela currently consumes the most whiskey per capita in Latin America, according to industry figures.

Leoncio Barrios, a social psychologist and professor at the Venezuelan Central University in Caracas, said today consumption is similar to what Venezuela witnessed thirty years ago.

Chavez, a close ally of Cuba's Fidel Castro, has promised a socialist revolution to end poverty after years in which U.S.-backed free market reforms failed to help the region's impoverished.

Fearing he would copy Cuban communism, his adversaries in 2002 attempted to force him from office through a botched coup and later with a massive oil industry strike.

Chavez has often said "it's bad to be rich," and often quotes from the Bible passage about how rich men will have a difficult time getting into heaven.

Still, the Venezuelan leader, who faces an election in December, enjoys widespread popular support even though he repeatedly condemns the wasteful consumer culture of developed nations and in his own country.

Such concerns rarely come up at the Sambil mall, once considered a playground for rich Venezuelans, that is now packed with shoppers from all of the city's social classes.

"Venezuelans are much more likely to spend than to save," said Telleria. "You give me money today, I'll spend it today."

This is all well and good for the middle and upper classes you may think, but what about the poor and behalf of whom Chavez is supposed to be governing? Actually, they are doing quite well too. Stay tuned and you'll see. In the meantime we can just reflect on how well Chavez governs when he is allowed to.


Monday, March 20, 2006

What really pushes their buttons. 

Anyone who has followed the Venezuelan political situation over the past several years is familiar not only with the extensive social reforms being implemented by President Chavez but by the extremism of those opposing him. It has often been something of a mystery to many why President Chavez’s opponents are so vitriolic in their opposition of him.

I have often wondered what could be the source of all this vitriol. Could it be the oft referred to “repression” or “dictatorial tendencies” of Chavez driving the hatred? Not likely, given that the alleged repression or dictatorial tendencies are either complete fabrications or greatly exaggerated. Venezuelans enjoy personal and political freedoms on a par with any country in the world. Maybe it’s that Chavez is destroying the economy? Again not likely as the economy has performed well under Chavez save when the opposition itself has intentionally trashed it. Could it be Chavez’s sometimes belligerent style? Maybe. But even this is unlikely to account for most of the opposition fury. Words are, after all, only words.

So what then accounts for the almost pathological hatred the opposition has toward Chavez and his government? In traveling around Venezuela and talking to people, particularly opposition supporters, one primary factor quickly becomes apparent – taxes. There is probably no other accomplishment of the Venezuelan government more overlooked than its tremendous improvement in collecting taxes. Yet, it should not be forgotten that taxes hit the affluent right where it hurts, in the pocket book. And it is this blow to their finances that has contributed heavily to the business classes’ hatred of Chavez.

In the United States there is a saying “nothing is certain in life except death and taxes”. I have never heard a comparable saying in Latin America. This is mainly due to the rampant tax evasion that afflicts the region and starves governments there of the funds they need. Venezuela, prior to Chavez’s ascension to power, was no exception to this. Taxes were widely evaded both by the wealthy and by businesses of all types and enforcement efforts were lax and ineffective. Further, the political class, which was under the sway of well connected business people, exempted all sorts of groups from taxes – ranchers, fisheries, and mutual funds to name a few.

This has changed radically during the Chavez administration. Tax loopholes have been closed and tax collection and enforcement have been revamped and improved. Before getting into the details of how tax collection has changed lets go over some numbers to see just how much tax collection has increased. I will compare two years, 1997 and 2005. 2005 is the most recent year for which full numbers are available. 1997 is one of the last full years prior to Chavez coming to power. Further, much of the economic data in Venezuela is given in constant 1997 Bolivares facilitating comparisons between 1997 and other years. Lastly the Venezuelan economy was of similar size in those two years which, as we will see, means increased revenues results from improved tax collection much more than economic growth.

Now lets turn to the actual numbers. In 2005 38.4 trillion Bolivares were collected in non-oil taxes (SENIAT Boletin Mensual Numero 58). Dividing that by the official exchange rate of 2,150 Bolivares to the dollar this comes to $17.86 billion dollars. Now, lets turn to 1997. Non-oil tax collections in that year were 4.38 trillion Bolivares which when multiplied by the 500% cumulative inflation between 1997 and 2005 gives 21.9 trillion 2005 Bolivares. Putting this into dollars gives $10.2 billion dollars. So in 2005 the government collected $17.8 billion dollars in taxes whereas in 1997, before Chavez, the government only collected $10.2 billion in taxes. This means Chavez has boosted tax collection by more than $7.5 billion dollars. Quite a princely sum by Venezuelan standards and something that goes a long ways to explaining why the Venezuelan business class and wealthy hate Chavez. He has taken $7.5 billion extra right out of their pockets!! That was all money that they previously had free and clear to buy BMWs with, go shopping in Europe, or squirrel away in Miami banks. Previously profits were yours to enjoy in full with little worry about the tax man. Much to their chagrin, taxes are now being effectively collected by the Venezuelan government to fund its operations and massive social programs.

Now, you may ask, has growth in the economy played much of a role in this dramatic increase? The answer is no. The GDP of the Venezuelan economy in 2005 was $107 billion (if you think you’ve seen much higher GDP numbers for Venezuela you probably seen “purchasing parity” GDP which is GDP with significant adjustments to make it comparable to other countries) meaning that 16.7% of economic output was collected as taxes. In 1997 GDP was $97.5 billion meaning that the $10.2 billion collected in taxes represented 10.45% of economic output. So the increased revenues resulted not so much from a change in the size of the economy as from a boost of more than 6% percentage points of GDP being collected in taxes. Looked at another way the tax collection rate increased 62.5%!! Such a dramatic increase in tax collections in such a short period of time is an accomplishment of epic proportions. I can’t think of any other country ever accomplishing anything remotely similar.

Before moving on to how this has been accomplished let me give some additional numbers on Venezuelan taxes. First, there are two main taxes in Venezuela, an income tax which is progressive and goes from 6% to 34% and a value added tax (VAT) that has generally been 15% but was recently reduced to 14%. There is also a banking transaction tax which has been a .5% transaction fee on all banking activities and there are miscellaneous sin taxes on things like cigarettes, liquor, and bingo parlors (yes they collect taxes on bingo parlors which may explain why Carlos Ortega was at the forefront of the opposition to Chavez). Lastly, customs duties are levied on most imports. Here is what was derived from those sources in 2005:

Income taxes $4.77 billion (versus $2.24 billion in 1997)

Value Added Tax $9.23 billion (versus $5.56 billion in 1997)

Customs Duties $1.95 billion (versus $1.7 billion in 1997)

Banking Transaction tax $1.27 billion (did not exist in 1997)

Liquor taxes $220 million

Cigarette taxes $327 million

So how did the Venezuelan government increase tax collections to such an amazing degree? In a word, enforcement. Evading taxes is no longer risk free in Venezuela and getting caught doing so is no longer painless. The Venezuelan tax agency is known by the initials S.E.N.I.A.T., the National Integrated Service of Customs and Tax Administration. Seniat has initiated an enforcement program, called Zero Evasion, has been both comprehensive and innovative.

The first, and main, obstacle that must be overcome in most underdeveloped countries is poor record keeping. Heavy reliance on cash transactions and haphazard paperwork have always allowed tax cheats to avoid detection. It’s hard for a tax authority to make sure taxes are collected when it doesn’t even know what anyone’s income is. Seniat has solved this problem by putting the burden of maintaining accurate and comprehensive records squarely on the businesses themselves. They must generate receipts for all transactions and then tie those receipts into a detailed financial statement.

The legal requirement that receipts be issued is enforced in several ways. First, consumers are expected to request receipts for all their purchases. To encourage them to do this Seniat has actually set up a lottery where people can send in their receipts to be used in drawings for significant cash prizes and even cars. The more receipts you send in the better your odds, so their is a strong incentive for people to make sure they get their receipts and send them in.

If being a good citizen or having a chance to win a prize wasn’t enough of an incentive this past February made it a requirement that consumers ask for a receipt. Those who don’t, and Seniat actually carried out enforcement actions for this, are subject to fines from $12 to $60 dollars.

Businesses are then expected to keep copies of all these receipts and use them to create a detailed and accurate financial statement. These financial statements are used by Seniat to assess taxes. Most all stores actually post these financial statements on their doors or by their cash registers. I’m not sure if they are required to do so but they sure didn’t like it when I tried to take pictures of them which is why I only got this one not so good picture. I’m sure having their finances revealed to the public doesn’t make their day.

This was the only quick picture I could snap before being told to leave the store.

And suppose a business’s paperwork isn’t completely in order? Then they are potentially in big trouble. Seniat regularly sends auditors out to all business establishments to review their books and impose stiff penalties for any omissions or shortcomings. During 2005 Seniat auditors visited more than 29,000 businesses and fined 22,000 for not fully complying with its requirements. The fines alone brought in about $25 million. But the fines are not what the business fear most. Seniats strongest enforcement tool is temporary closing of businesses, generally lasting for two or three days. This literally involves pulling the gate down on the business or padlocking its doors and putting seals over them as happened to this business in Barquisimeto:

Note that this sticker gives not only the dates the business was closed, December 2 to December 4th, but the exact time it was closed and the exact time it will be allowed to re-open. That is what you call being detail oriented.

Every day, businesses all over Venezuela are subject to these inspections with dozens being shuttered. No one is exempt from this – big businesses, small ones, foreign and Venezuelan, even a government owned petrochemical company was fined. If a franchise or chain of stores is found to have a problem often times all their stores throughout the entire country will be closed. Heinz, Pfizer, Nestle, and Del Monte are some of the multinational sanctioned by Seniat in just one month. These methods of tax collection have proven so successful that even other Venezuelan government agencies have adopted Seniat’s methods.

This store in an upscale mall had been closed for not paying social security taxes

Of course the opposition and the business community have criticized these enforcement mechanisms as heavy handed and abusive. These complaints lack merit. Given the pervasiveness of tax evasion decisive action was needed to reverse the situation. There is no reason a business can’t keep an accurate set of books and Seniat is right to expect them to. When tax evasion , or poor record keeping that could be masking tax evasion, is found it must be heavily sanctioned. If the sanction is not costly then tax cheats will simply see it as the “cost of doing business” and continue using “sloppy” record keeping to hide tax evasion. So until a culture of paying taxes is firmly established these aggressive collection efforts are entirely appropriate.

Although the measure taken to collect the IVA tax from businesses is the most obvious collection action Seniat has used similarly aggressive methods to collect income taxes. Due to extensive exemptions it is generally only people with significant personal wealth, business owners, and well paid professionals who are subject to Venezuela’s income tax. Seniat has reduced evasion among their ranks by targeting members of various professional organizations for review. Seniat has culled the lists of the Venezuelan Medical Association and Bar Associations in an attempt to match people with significant income with those who have actually filed returns. Again, the stiff fines levied for non-compliance have sharply increased the number of tax returns filed.

All of this has served to illustrate why some are motivated to oppose Chavez. But what does it say about the nature of the Chavez administration? At the least it shows a couple of things. First, while the opposition likes to paint the Chavez government as being administratively inept is clearly not the case. Previous governments had for decades failed miserably to improve tax collection. Their excuse was that Venezuelan’s were incorrigible tax cheats. With the tax authorities now well organized and efficient the Chavez administration has now shown how wrong that notion was. In fact, given the billions of dollars they are now having to pay in taxes it is probably safe to say what really bothers the well-heeled opposition is not Chavista inefficiency, but rather the zeal and efficiency the Chavez administration has brought to tax collection.

Another common misconception spread by the opposition is that corruption has increased and the current government is doing nothing about it. Yet one of the largest and most persistent forms of corruption throughout Venezuela’s history has been tax evasion. Refusal to pay taxes is not a victimless crime. It is theft from the government which is starved of the funds it needs to provide services. Or it is theft from your fellow citizens who must now pay more taxes to make up for those who refuse to pay. Either way it is a form of corruption and Chavez administration’s success is combating it is probably the single biggest and most successful anti-corruption initiative in Venezuelan history.

So the next time you hear the howls emanating from eastern Caracas about how terrible Chavez is hopefully you’ll remember what is the real reason behind them – Chavez’s unprecedented and highly successful tax collection efforts.


Sunday, March 19, 2006

Economic notes 

The good economic news keeps coming in.

First, the Venezuelan closed 2005 with a budget surplus equal to 2.1% of GDP, or more than $2 billion. That is oil revenues and tax revenue exceeded expenses thereby allowing leaving money left over to pay down debt. Maybe the U.S. Congress will send a fact finding mission to see how they did it.

Secondly, it was reported today in Panorama that growth in the telecommunications sector is expected to top 10% again this year. Paving the way for this growth is large scale investments being carried out by some of Venezuela's larger telecommunication companies. For example, CANTV, which is Venezuela's largest phone and internet provider, is expected to invest over $500 million in 2006 alone. Other large companies such as Movistar and Digitel will be making investments that will push the total over $1 billion. Clearly these people have confidence in the future of the Venezulean economy.

And while we are on the subject of investment, the vertible boom in Barquisimeto is exected to generate 25,000 new jobs. The large scale projects there include three new shopping centers, hotels, a new bus terminal, a trolleybus system, a water park, and a new mixed residential/commercial complex.



If there is one thing that is even in worse shape than the Venezuelan opposition it is the U.S. anti-war movement. Yesterday, on the third anniversary of the invasion of Iraq, there were supposed to be demonstrations the world over against the war. By media accounts, it seems that they were lackluster at best.

At the demonstration I went to in New York the police estimated a thousand people showed up. Now, I'm not one to quible, but maybe it was two thousand. In any event, in a large, liberal, and anti-war city that turnout is absolutely pathetic. The sad reality is there is no anti-war movement in the U.S. to speak of. And no, Cindy Sheehan herself does not constitute an anti-war movement.

The sad part is the Venezuelan opposition has an excuse for why they can't do anything. All the polling shows they are a small minority. Yet the polling in the U.S. indicates that most Americans oppose the war. So what gives? When it comes time to actually stand up and take a pretty minimal activity against the war there is no one to be found. Going to the mall or the movies seems to take precendence. I guess this is the sad reality of what happens when the war is just background noise that 98% of Americans can just ignore and pretend doesn't exist.

Of course, none of this should let Americans off the hook. Even if they are not there their tax dollars are being used to kill Iraqi's every day. And every day there is no-one mounting an effective protest and against this war the next war just gets that much closer.

The pro-war rally was even smaller. Then again they have no reason to rally - they already have what they want.


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