Lame Duck

State of the Union address

Most of my usual readers know that I discuss Venezuela a lot more than the US (should I change the blog name?). Tonight will change that a bit since Bush is giving his yearly State of the Union address. We are not as lucky those in Venezuela who get a weekly State of the Union.

Post speech
The biggest difference from previous Bush State of the Union speeches was how toned down it was he was less confrontational, less angry, and less antagonistic. The topics were not very surprising they included Iraq of course and sending more troops although he did lay a trap for the democrats by saying: And I ask you to support our troops in the field — and those on their way. this forced the democrats to stand and applaud to show support for the troops despite not supporting sending more to Iraq.

The beginning for the speech sounded more like the democratic party agenda during Clinton and the Gore campaign: balancing the budget, special earmarks, save social security medicaid and medicare. Bush also raised the issue on immigration which he asked for a comprehensive work visa program.

The biggest surprise was Bushes energy speech asking for the strategic petroleum reserves doubled in size to about 1.2 billion barrels (about 90 days worth of oil) this would be done by adding about 100,000 barrels a day for the next 20 years. BTW, this is the reason why oil jumped today. In other news Bush announced more clean coal (oxymoron), and an ambitions reduction of gasoline consumption by 20% over the next 10 years by increasing the production of ethanol to 35 billion gallons in the next 10 years (in 2006 5 billion gallons were produced).

Side note
The one down side with ethanol production in the US is that most of it comes from corn with is the most inefficient sources of ethanol. Ideally cellulosic material (needs more R & D) or more efficient sources of ethanol (i.e. sugar cane) should be used.

Overall, I think the US is overcoming the deep polarization that began 2000. How so? Well Bush only has 2 more years left and the Democrats control the House and the Senate.

Venezuela: Economics is a neoliberal concept

We all know that Chavez knows a lot everything from history, politics, culture, and science. However, the subject for which he deserves special recognition is in economics. Over the past 9 years he has proven himself to be a master in the field by taming inflation, keeping a stable currency, attracting investments, promoting the highest personal saving rate in Latin America, and diversifying the economy. Below are the latest economic measures he has decided for the country, economists take note!


Chavez raising the price of gasoline:

"Their shouldn't be a reason why things increase in price, because the person who is going to pay for the increase is the one driving the BMW or the SUV".

Two main issues here: 1) how exactly is Chavez going to prevent the price increase from affecting directly and indirectly (raise in food stuff) the poor? 2) Those driving the BMW's are the neuvo rich (Chavistas) including the Vice president who crashed his new Audi some months ago. BTW, the one who gave the Mission gasolina to the rich was Chavez. Prior the elected dictatorship prices increased on a monthly bases.


Chavez on nationalizing the telephone company:

"I'll pay what the law dictates and in the form the government decides,"
Well you see Chavez is now allowed to govern by decree so in effect he is the law and government. So what is the price El Supremo will offer? beats me, but I wouldn't be making vacation plans with the potential profits.

Chavez on taxes:

luxury tax on vacation homes, luxury cars, boats, etc...
Again the hypocisy, since the first that should have to pay are the same ones getting rich like the Vice - President and the National Assembly members who will have 18 months paid vacation since El Supremo is taking over the country.

Oh ya, something Chavez won't tell you though is that it looks like Venezuela will actually devalue its currency sometime this year. When? How much? don't know, ask El Supremo.
One interpretation of all this is that Venezuela's finances are not all that good. Why else would he be trying to get every last penny he can, Oh ya! I forgot he has a new 500 km highway to finance in Nicaragua.

www.Borev.net : links to Mark Weisbort and the Venezuelan Information Office

Most readers on Venezuela know that Mark Weisbort, co-director for the Center for Economic and Policy Research in Washington D.C., has become one of the foremost cheerleaders for the Chavez government. His links have been extensively documented over the years both by myself (here and here) and other bloggers.

Most recently I wrote about the blog that he and fellow friend and former co-worker Robert (Bob) Naiman have set up at the Huffington Post. In that blog they have been promoting the www.borev.net blog as an "Excellent New Blog on Venezuela" and "So it is refreshing to see a new blog that takes the media to task for its misreporting on Venezuela: www.borev.net , as in 'Bolivarian Revolution.'"

Since neither Weisbort or Naiman want to reveal who the owner is I decided to look it up.

Borev.net appears to have links (now confirmed as run by, see below) Eric Wingerter. Coincidentally, Eric Wingerter is employed by the Venezuelan government via its propaganda outlet in Washington D.C. the Venezuelan Information Office with his email address of "eric@veninfo.org". So why is Weisbrot peddling an obvious biased source? would it be because CEPR and VIO work together or VIO paying CEPR for their work? The evidence keeps pointing that way.

addendum

As if the links between the VIO and the CEPR were not obvious enough I found this interesting "study" published by the CEPR on May 5, 2004 titled "Working Moms and Child Care" [note PDF is a little large] in which the authors from the CEPR state: "David Maduram, Eric Wingerter, and Marya Murray Diaz provided valuable research assistance for this report." [page 2]. This while Eric Wingerter was working at the VIO. In other words Wingerter was working at the CEPR while also working at the VIO. Questions?

added 2/12/07
Someone left in the comments section a link to an article published by Eric Wingerter who "is a freelance writer with a special focus on Latin America. His blog, www.BoRev.net deals with Venezuela's Bolivarian Revolution and its portrayal in the U.S. press."

Like Weisbrot, Bigwood, Naiman, and Wingerter, they are all one happy PSF family and work together in coordination with the VIO and the CEPR in Washington D.C.

Venezuela and Iran: note to US leave them alone

Tonight the BBC had an interesting report about Mahmoud Ahmadinejad's travel through Latin America and how it is linked to his increasing unpopularity at home. In other words Ahmadinejad's confrontation with the UN and travels are to divert attention from high unemployment and inflation (~16%) and increased public demonstrations.

After watching this I came across this report in the The Christian Science Monitor stating:

The self-isolation of Iran and Venezuela comes out of a faulty vision in economics and a heavy hand in reducing democracy down to autocracy. The more they try to use oil wealth to win other nations over to an anti-US axis, the more they put their weak policies on display. Some revolutions aren't very revolutionary.

In December a series of news articles ran a story commenting on a study published in the Proceedings of the National Academy of Sciences (PNAS) about future Iranian oil production. Again one can simply change Iran for Venezuela and the study could be equally applicable.

For the mullahs [chavez], the short-run political return on investment in oil production is zero. They are reluctant to wait the 4 to 6 years it takes for a drilling investment to yield revenue. So rather than reinvest to refresh production, the Islamic Republic [Venezuela] starves [or its petroleum sector, diverting oil profits to a vast, inefficient welfare state.

added comments in [ ]

The recent declines in oil if permanent will likely put further strain on OPEC with Iran and Venezuela wanting to cut production to boost prices back above $60 in order to fund their "revolutions". With oil now testing $50 a barrel I expect Chavez and Ahmadinejad to increase their confrontational behavior to divert attention from internal problems and to try a boost oil prices. So my advice to the US, play nice the farce of the revolution will sooner or later be for all to see.

Venezuela: The dictatorship has begun!

The new year has started with a bang. There were changes in the government towards a more radical tilt, with the call to nationalize industries, remove the autonomy of the central bank, and calling the president of the OAS (a leftist by the way) an "asshole".

Today the president of the National Assembly, controlled 100% by Chavez, passed a resolution (that Chavez asked for) to rule by decree"ley habilitante", doing away with any appearance of democracy. Isn't it ironic even when he controls the institutions he can be bothered with them.

So how long will he rule by decree? Ask Chavez, he is the "decider".

2006 Venezuelan Presidential Election Analysis:

First I want to clarify that I always gave the Dec 3rd 2006 presidential election win to Chavez, even the Manuel Rosales campaign poll numbers showed a Chavez win. However, it was the voter numbers where I miscalculated I estimated that the election would be much closer, ~48% vs. 52% as the Roslaes campaign was estimating. In light of my miscalculation I felt I would try to analyze the electoral trends since Chavez arrived to the presidency in 1998 and put them into some context.

Presidential Elections 1998 and 2000
The clear election win by Chavez in 1998 is indisputable and in the context of the historical events understandable. Chavez campaigned on all the ills (i.e. corruption, insecurity, alienation of the electorate, etc..) of the old political establishment know as la cuarta republica "fourth republic". The candidates opposing Chavez were clearly marred with infighting and no longer were campaigning to seek the votes of the poor instead they were vying for the shrinking middle class vote. However, many in the middle class were unmotivated by the political offerings while others joined the poor in supporting Chavez, seeing in him a break with the corrupt old political establishment.

Two years in 2000 under Chavez's own new constitution, presidential elections were once again held. Like in the year 1998 Chavez again won a clear victory over the opposition "unity" candidate Aries Cardenas. Aries Cardenas commanded troops in the state of Zulia during the Chavez led coup of 1992 and ironically is now Venezuela's ambassador to the United Nations. Not suprising abstentions levels were higher than in 1998 and Cardenas "opposition" votes decreased, of course the tragic floods in the state of Vargas may have contributed to the abstention levels.



Presidential referendum 2004
Following the announcement that Chavez won the referendum with 5,800,629 votes for the "NO" vote (see table) members in the opposition have claimed fraud. These allegations were backed by evidence showing links between Smartmatic and the Venezuelan government and perpetuated by the sense that fraud was and did take place by the government controlling the national electoral council, creating obstacles and changing the rules leading up to the referendum at will, the use of fingerprint machines, allowing for bi-directional communication between the voting machine and the tabulation room, etc. However, any sense of fraud could have been avoided if the government had conducted a transparent audit and allowed a proper audit and count of the paper ballots. This general absence of voting transparency and government strong-arming set the biases for fraud allegations, of which I found very difficult to ignore. One could write a book on why Chavez won the referendum but essentially it boils down to incompetence on part of the opposition, but more importantly the countless "missiones" that Chavez had been announcing just a few months prior, including promises of jobs and gifts for votes.

Two pieces of evidence that are used "proving" fraud are the exit polls showing the referendum outcome reversed (40% for Chavez vs. 60% against) and the technical aspect of the electronic rigging. The main source of problem with the exit poll is that it was conducted by SUMATE which one could argue as impartial. Therefore, if SUMATE did not conduct the exit poll properly (i.e. by over emphasizing opposition areas) this could have significantly altered their results and affected the statistical analysis. The second issue I have is with the report outlining how the electronic rigging occurred. While technically speaking it was plausible to rig the elections as outlined the probability seems very low. It would require a level of technical expertise, efficiency, coordination, all of which the Chavez government lacks, and the involvement of numerous people and government agencies to pull off such fraud. In addition, no evidence has surfaced backing some of the claims.

Mendoza
After the referendum a documentary aired showing Mendoza, the head of the opposition movement (Coordinadora Democratica) stating the day before the election that the only way the opposition would win was if abstention was high. Clearly, Mendoza knew that any potential victory would be difficult especially if Chavez supporters went out and voted en masse. Since abstention wasn't particularly high it is difficult picture an opposition win by 60-40.

Maisanta List
The origins of the Maisanta list lie during the signature collection to hold the referendum, it also is the time in which it was first used, albeit in a more "democratic" way. The information collected was compiled into a very efficient database allowing the Chavez campaign team to mobilize and visit those individuals at home and persuade them to vote for Chavez in Aug 2004. It was only after the referendum did the Maisanta list become widely used to fire public employees and discriminate against Venezuelan citizens.



National Assembly Elections 2005
The next test for the opposition were the National Assembly elections. It was apparent at the time that the opposition candidates would not get a majority in the NA claiming (although technically possible) that they would not participate in the elections because the finger print and voting machines could reveal the identity and vote of each voter. The strategy had a second goal, in providing a referendum of sort on the popularity of Chavez. A Low voter turnout or high abstention would serve as evidence that the referendum results of 2004 were in fact rigged. Shown in the table and figure is that abstention was on the order of 75 - 80%, hence we were left with two conclusions, were the 2004 referendum results in fact rigged? or that Chavez was unable to mobilize his supporters (~40% of the them) to vote? If they were rigged than it meant that support for Chavez hadn't increased for the 1998 and 2000 elections. If Chavez wasn't able to mobilize his supporters the question would become, why not?

Presidential elections 2006

Pre-December 3rd
Leading up to the elections two groups of polling data were released all showing Chavez winning. The main differences were that one group, giving Chavez ~60% to ~40% win, conducted home to home polling, never taking into account the blatant government intimidation, and some polls having questionable ties to the government. The second group gave a closer margin of victory for Chavez ~52% to 48%, while trying to control for political intimidation by making the question process more secret.

The second source of data, although anecdotal, were the campaign rallies. Any observer could clearly see that Manuel Rosales could easily fill the streets while Chavez relied on small closed arenas. Such observation were clear throughout the campaign, including during the closing campaign rallies in Caracas where conservatively for every 1 Chavez supporter on the street there were 3 for Rosales. These facts, the political intimidation, my belief that the 2004 referendum were rigged, and the low pro-Chavez turnout in 2005 led me to conclude that the elections would be close while Chavez still winning the election.

Post-election Conclusion
How should one interpret the 61% Chavez victory over the 39% of Manuel Rosales. Form my perspective it suggests that the 2004 referendum were not rigged, at least not to the degree of the outcome being reversed as has been claimed. What about the 2005 national assembly outcome? why was participation so low? For one the Chavez appointed candidates were running unopposed, therefore many voters didn't feel the need to vote for them. Secondly, one should remember that while Chavez is clearly popular those around him are not, so why would someone vote for an unappealing candidate, who you know is going to win, and possibly you know nothing about? To conclude, it goes without saying that oil money is the primary reason why Chavez is popular. In 2004 just prior to the referendum Chavez embarked on his endless creation of "misiones" boosting his popularity, in 2006 Venezuela was amidst an unprecedented consumer boom bringing back the days of "esta barato dame dos" - "it's cheap, give me two". Sadly Chavez's popularity can be summarized with money for votes.

Post election interview of Manuel Rosales

I apologize to the language impaired but I don't have the time to translate this interview given by Manuel Rosales to El Nuevo Herald.

To read the interview please click here.

Marxist education for all in Venezuela!

So the government shake up began a few days ago with the removal of the Vice-President and the Minister of Interior and Justice. The most current change is Aristóbulo Istúriz the Minister of Education who will be replaced by Adán Chavez, President Hugo Chavez's brother and former ambassador to Cuba.

Clearly, the radical movement in of Chavismo is gaining the upper hand while the more moderate individuals are losing power. What can we expect from Andán as Minister? Below is an excerpt from an interview, to read the whole thing please click here.


AW: But you are Marxist?

A.Chavez: Of course.

AW: So, how do you see the role of Marxism in the Bolivarian revolution?

ACh: In the same way that we have reclaimed the ideas of Bolivar, Rodriguez and Zamora, I think that we must reclaim the genuine ideas of Marxism, applying them correctly to our society. The scientific method of Marxism is a necessity. We are a movement based on the “principles of the tree of the three roots”: Simon Bolivar, Simon Rodriguez and Ezequiel Zamora. But if you read these principles you will soon understand that they are not at all in contradiction with Marxism, they defend the principles of democracy, equality and humanity.

AW: And these principles, can they be carried out under the capitalist system?

ACh: I personally think they cannot.


Will the education system change? if so how? will private education be allowed? or will it be controlled by the state?

Slow growth and inflation in 2007

I am working on a rather long post analyzing the elections from 1998 to 2006, hopefully to be posted this weekend. In the meantime I will leave you with some predictions for 2007.

2006
Inflation for 2006 closed at 17% ( government aim was in the singe digits) one of the highest in Latin America and hurting the poor the most, while GDP growth was 10.5%. For 2007 inflation in Venezuela is projected to be 15.4%, the highest in Latin America, followed by Argentina at 11.4% then Costa Rica at 10.9%.

2007
As oil revenue levels off, the fiscal stimulus will begin to wane. Combined with the uncertain legal and regulatory regime and the maintenance of distortionary price and exchange controls, this will result in a slowdown of private investment and GDP growth from 2007. The combination of an expansionary fiscal policy and captive liquidity created by exchange controls is increasing inflationary pressures, despite price controls, the sale of subsidised imports by the government and an exchange-rate peg. In this context, the exchange rate is unlikely to be adjusted from its current level of Bs2,150:US$1 in 2007 as the government tries to anchor inflation. The external surplus will remain large, but reserves growth will be kept in check by transfer of US dollars to the national development fund.

For 2007 inflation will remain in the double digits, devaluation is unlikely, and GDP will slow to around 5%. - The Economist

Again it is safe to assume the ones most affected will be the poor.