"...nobody owns that [Venezuela's central bank] money"

Miguel, Daniel, and F. Toro have typically kept us blog readers very well informed about the ever so transparent debt bond purchases from Argentina. For those interested here is an article from the Economist that is worth a read, plus who might be getting rich?:

Oct 26th 2006 | BUENOS AIRES
From The Economist print edition
Venezuela's president tries his hand at financial arbitrage

JUST as Venezuela is known for its exports of crude, Argentina is famous for its exports of IOUs. Less than two years after it handed its creditors a world-record loss in a sovereign debt-exchange, Argentina's government has found an eager new patron in its oil-rich ally. Over the last year, the government in Caracas has bought some $3.1 billion in Argentine bonds. Is this a case of Hugo Chávez, Venezuela's tub-thumping president, putting political solidarity ahead of fiscal prudence? Look closer.

The roots of the deal lie in the currency controls Mr Chávez imposed on his country during the economic meltdown of 2003. To halt capital flight, he pegged the bolívar, Venezuela's currency, to the dollar (the official rate is now 2,150 to 1), and sharply curtailed opportunities to buy dollars at that price. As a result, a black market in foreign exchange soon opened up. The bolívar could not hold its value at the kerbside—a dollar has traded for anything from 2,400 to 2,900 bolívars in the past year—adding to inflationary pressures.

However, unlike most of his countrymen, Mr Chávez can help himself to dollars from the state oil company, PDVSA, or from his own central bank at the official rate. This he did to acquire the $3.1 billion he needed to buy the dollar bonds from Argentina's government, which started issuing debt with indecent haste after completing its huge bond restructuring in mid-2005. Argentina's president, Néstor Kirchner, was more than pleased to borrow directly from Venezuela. Doing business with a fellow Latin American leftist is more palatable than asking for money from the private international lenders he repeatedly bashes. Moreover, Mr Chávez was, in effect, offering to underwrite his debt issue. Venezuela's big purchases meant that Mr Kirchner did not need to test the market's appetite for his government's bonds too deeply.

But almost as soon as he got the Argentine paper, Mr Chávez began to sell it to local Venezuelan banks, at the rate of 2,400 bolívars to the dollar. All told, his government off-loaded $2.4 billion-worth of bonds, pocketing a tidy profit. How tidy? His finance team eagerly announced a gain of $309m to the press last month; though the true figure may be a bit different.
The banks too were happy. They were free to sell the bonds abroad for dollars, which they promptly did for a handsome profit. Some of them converted the greenbacks back into bolívars at black-market rates, others hung on to them. Either way, this new source of foreign exchange has relieved pressure on the black market; the bolívar has stabilised and one source of inflationary pressure has eased.

Within Venezuela, critics have complained not about the deal itself, but about who was in on it, and who wasn't. The government has still not revealed its method of choosing which banks would be eligible for a chunk of the massive return Mr Chávez was offering. “Any operation that hands out $300m discretionally, regardless of the mechanism, is a clear incentive for corruption,” says Alejandro Grisanti of the Caracas consultancy Ecoanalítica. In the absence of an open bidding process, government officials were free to route the Argentine bonds to banks already supportive of Mr Chávez, to tie the sale to future support, or to receive payments or favours in exchange for offering them.But despite this carping, can the two presidents not congratulate themselves on a clever financial manoeuvre that had something for everybody who was party to it? Argentina's government found a reliable customer for its debt; Mr Chávez achieved lower inflation and a $309m profit for the Venezuelan exchequer; and the local banks divvied up a further gain of $250m-300m.

Unfortunately, there are no free lunches, and there is one big, hidden loser in this transaction: the Venezuelan central bank. Mr Chávez, in effect, plundered its reserves for about $580m, both by forcing it to sell him dollars at the official exchange rate, and by taking dollars from the state oil company that traditionally went to the central bank. That is a heavy loss to the country, which might need its reserves in a pinch. “But no one's going to complain,” says Walter Molano of BCP Securities, “because nobody owns that money.”

So who could be getting rich? Well Juan C. Escotet the owner of Banesco seems to be doing quite well by expanding into the US market. Throw in deposits form the military and Banesco I'm sure is swimming in money. I also wonder if the Makarem and Valbuena family have expanded into the banking system. One would think they would since they already hold business dealings in the oil industry (Petrotulsa), fake polling agencies (North American Opinion Research) , and legal and consulting offices (click here to read more in depth on the topic), among a few other business ventures. So why not expand into the lucrative banking systems too?

Trying to save face

It appears that Chavez is realizing that his plans for a UN seat hasn't come as easy as he thought. Instead he is realizing it is taking up to much of his time and resources form his "love" campaign. Therefore he is trying to cut his losses and move on to the campaign trail. Politically though, he can't claim defeat by ceding to Guatemala. So what does he do? well he claims he taught the empire to the north a lesson and has prevented them from imposing Guatemala onto the UN seat and sends his foreign minister, Nicolas Maduro, to say that three conditions need to be met:

1. Guatemala has to give up its bid for the seat
2. The US has to stop pressuring countries
3. Open and transparent dialogue needs to be opened

"if these conditions are not met then Venezuela's candidacy remains."

To top it off Evo Morales claims Chavez will cease its bid in support of Bolivia yet Chavez has remained silent about the issue. But we all know that in Bolivia the one calling the shots is Chavez and Castro so what would be the difference between Bolivia or Venezuela. Plus a seat by Bolivia would be political capital for Chavez to be used in his campaign to show how powerful and influential Chavez really is.

The best possible outcomes are if Guatemala finally receives the votes to win the UN seat or if the fight for the UN seat remains. The former would be a continuation the Chavez imperialistic setbacks in Latin America. While the later would mean Chavez would have to continue with two fronts of defense 1) for his UN seat bid and 2) his reelection campaign. Since so few capable people are in his government and all decisions are made by him the government would be very stretched and could likely lose both battles. Personally, I hope the UN issue remains till after Dec 3rd.

The cartoonist Rayma hit the nail on the head:

US Chavistas Threaten Individuals in the United States

Chavez supporters love to claim how the opposition are violent and uncivilized. While I don't deny some very small minority may advocate violence, this behavior is not condonded by most of us. On the other hand violence is essentially the first method used to deal with issues by Chavez supporters, mainly since this what Chavez advocates in his public speeches.

On October 12th the documentary "La Lista" was shown at Northestern University in conjunction with a discussion session. The organizor of the event, in good faith, invited the local Circulo Bolivarinos to the event to view and comment on the documentary and participate in the discussion session. However, Dr. Jose Lopez one of heads of the circulos bolivarionos for the Chicago area apparently did not approve of the showing and resorted to intimidating and threatening the organizers.

Sources, tell me that Mr. Lopez had his professorship revoked (an almost impossible task to do), but was later reappointed with only 1/2 time. In addition, to the circulo bolivarianos he also heads Puerto Rican Cultural Center and the Puerto Rican student association "Que Ondee Sola". Apparently he is well connected with alderman Billy Ocasio representing the 26th Ward, and representative Luis Gutierrez representing Chicago's Fourth Congressional District.

Over one year ago Mr. Ocasio and Mr. Gutierrez helped organize a local party with CITGO, which footed the party cost plus a $100,000 donation. Present were the Venezuelan Consulate and the CEO of CITGO Felix Rodriguez, but as if that wasn't impressive enough they brought WIllie Colon from Venezuela to sing.

Digressing, the threats these non-Venezuelan Chavistas include anonymous letters to the presenters with statements including:

"we are following and monitoring your movements"; calling the organizers "gusano" and "oligarca"

The ironic thing is that one of the presenters belongs to her local socialist party who received a letter signed by "Venezuelan Students Movement for Black and Indigenous People's Freedom".

Now it isn't the content of the letters that is disturbing it is the fact that the individuals are not Venezuelan, probably have never been there, nor know the countries history yet they support a Chavez. why? My only guess is that they are resentful at society for some reason or maybe they were dropped as a baby. Either way it shows that it is hard to find a Venezuelan who supports Chavez and lives outside of Venezuela and who won't turn to confrontation and violence when defending Chavez.

be back soon!

I apologize for not posting much recently but teaching, work, writing a paper, and going to conferences makes life a little busy. I will be traveling for the next 5 days but hopefully I will get a chance to post something while away.

It must be the glasses!

Nuclear weapons:


Those that have


Those that tried


Those that want


Those that never will

Se Necesita Testigo de Mesa

Se necessita participantes como testigo de mesa para las elecciones del 3 de Diciembre. Por favor consulta la lista de abajo para buscar el centro mas cercano. Para registrarte porfavor visita la pagina de www.ivcdteam.org

"Login as a Guest"

Bush and Iraq

For those who are interested in American politics and the war in Iraq I highly recommend reading and watching Bob Woodward's interview by Mike Wallace on CBS's 60 min.

here are few excerpts:

“INSURGENTS RETAIN THE CAPABILITIES TO…INCREASE THE LEVEL OF VIOLENCE THROUGH NEXT YEAR.”

But just two days later a public defense department report said just the opposite. “Violent action, will begin to wane in early 2007,” the report said.

Woodward reports that a top general says Defense Secretary Donald Rumsfeld has so emasculated the joint chiefs that the chairman of the chiefs has become “the parrot on Rumsfeld’s shoulder.”

And, according to Woodward, another key general, John Abizaid, who’s in charge of the whole Gulf region, told friends that on Iraq, Rumsfeld has lost all credibility.

Cheney stunned Woodward by revealing that a frequent advisor to the Bush White House is former Secretary of State Henry Kissinger, who served Presidents Nixon and Ford during the Vietnam War.

"Now, what’s Kissinger’s advice? In Iraq, he declared very simply:
'Victory is the only meaningful exit strategy.' This is so fascinating. Kissinger’s fighting the Vietnam War again. Because in his view the problem in Vietnam was we lost our will. That we didn’t stick to it," Woodward says.

His new book "State of Denial" I'm sure it is a required read by anyone interested in this topic.

I find it truly shocking and disturbing to think that we the American public have re-elected Bush and Co. Not only is the financial and diplomatic toll huge but it is the lack of planning and sheer state of denial that the White House exhibits that is disturbing.