Speaking about trust and distrust

International financial risk rating entities are once again issuing their results for Venezuela. And once again, everyone begins to tremble. There is confidence! Ooops, there is no confidence! The debate is once again on the table and I take advantage of this to share some of my reflections on this issue with the readers.

It could be that I am not exact in my appreciation, but then again, when dealing with something as subjective as confidence, it shouldn’t really make much difference. In 1982, the then Minister of Finance decided that the country should be paying interest rates well below those being required by the international banking community in order to renegotiate part of Venezuela’s foreign debt. This decision blocked the restructuring of our foreign debt and together with the crisis in Mexico and other indebted nations combined to unleash the events which resulted in the devaluation of Black Friday of February 1983.

Obviously, the Minister was severely criticized. I considered this criticism to be unjust since, as far as I was concerned, the Minister was in reality a hero of the nation; almost enough so as to merit a statue in some important plaza. In my opinion, his actions, which generated international distrust, saved the country from billions of dollars in debt, which would have bloated the amounts actually accounted for after the disaster. Few heroes can be proven to have undertaken such important deeds for the good of the nation.

In reality, to inspire confidence in others should be of no concern for the country, while it has not been able to find or generate an economic and administrative model which inspires the confidence of its own people. Trying to do so simply confuses the search for in depth solutions. 

In addition, the persons for whom instruments of measurement are designed do not include those foreigners whose confidence we really seek. Rating agencies rank a country’s measure, principally the latter’s ability to service its debt. As such, their market is comprised of bankers and investors who simply wish to make a short-term financial investment. Nothing of special importance to the country.

Those foreigners who could really interest us are the ones who come to the country with resources, the ones with the intention of remaining here for the long-term, to put up factories, cultivate the land, generate employment and maybe even raise a Venezuelan family. That is to say, the one whose objectives are one and the same as those of the nation. The opinions and confidence of these people are not measured at all.

In addition, both the methods and measuring instruments as well as the professionals actually doing the measuring, probably continue to be the same. They are the same ones that not very long ago argued that it was impossible for a country to be bankrupt, thereby justifying stratospheric limits for indebtedness with such enthusiasm that both bankers (who by the way proved to be unprofessional in most cases) and the common Venezuelan, upon hearing this siren song, joined forces and created the mix-up of the century.

For those of you who may have any doubts about this, I suggest you look at the ranking of six months ago. In those listings, the majority of the Asian countries looked like nothing short of marvel of creation. Haven’t you recently heard all of the crying over the Asian financial crisis?

We must evidently listen to the opinions of the credit agencies. Their measurements reflect many variables of great importance for the well being of the country. Unfortunately they also are the principal source of information about the country for many foreigners. In other words, to lie awake at night worrying about ranking doesn’t make sense.

You may remember the story about the anguished debtor who could not sleep, but found a way of finally getting a night’s rest by transferring his insomnia to his banker with the simple words “I can’t pay you”. In this case, something similar occurs. I personally sleep better when Venezuela’s ranking goes down, since I am then sure that lenders will not be making additional resources available (in my name as well as in the name of my children, grandchildren, great-grandchildren and other future debtors) to governments that insist on misspending them.

The day the government, during electoral period, pays more attention to the opinions of its humble subjects that to those of the glamorous international agencies, we will finally stand a chance of making it out of our standard situation. The latter, according to all international norms I know of, can be objectively classified simply as “poor and moody”

Electricity supply for Brazil

There comes a moment in life when one has to confront so many different problems that one doesn’t quite know where to start. The result is often that one begins by tackling a minor chore such as putting your bedside table drawer in order.

We have been reading during the past few months about the development of a project which will supply electricity to Brazil and which involves construction of extensive distribution systems. We don’t have many details about this project and it could indeed be an excellent one; we certainly hope so! However, we feel that it is of low priority, something like your bedside table drawer, and that it raises certain questions which could diminish its validity as a project.

I have no intention of joining the group of critics of the “I told you so” ilk who must now be gloating over the news of the negative effects El Niño will have on Venezuela’s hydroelectric generation capacity. Evidently, things like El Niño must completely alter any bases on which the project was developed, but since I consider the former to be an external and fortuitous event, I also feel it is an extremely poor foundation for criticism.

I must admit that my first reaction upon hearing about the project was sheer envy. This sentiment basically comes from my conviction that if we are to invest in transmission lines, the Island of Margarita for one, is probably more deserving than Brazil. I simply don’t understand how and why an important pole of development for the country such as Margarita is being forced into more expensive generation systems such as, for example, the time-worn idea of a gas pipeline from the mainline to the island, while we are simultaneously developing mega-projects in order to export power to Brazil.

You don’t have to be an expert in environmental affairs to suspect that a 217 Km. suspended power line which must be supported by 512 towers, each of them 36 meters high, spread out through environmentally sensitive areas such as the Canaima National Park, the Imataca Forest Reserve and the Southern Protection Zone of the State of Bolívar, must have serious implications. It is not enough to assert that there will be special care taken to camouflage the towers in order to reduce contrast with the horizon.

I propose that we study the possibility of a swap. A new power distribution system for Margarita, via suspended lines and submarine cables, in exchange for a gas pipeline (underground) to Brazil. The latter can then build it’s own power plants wherever and whenever it sees fit.

I may be accused of being Brazil’s enemy; I certainly am not! Venezuela has serious border problems for which it has not been able to develop a coherent policy. A power line aimed at developing an area in which we still do not have effective representation seems more like a humanitarian aid shipment of medicine, blankets and food parachuted into unknown neighboring foreign territory, thereby strengthening the latter’s hand without ensuring that our own side of the border is equally populated, developed and supplied.

How can a simple columnist dare comment on matters completely outside his direct scope of expertise? I believe the answer lies in the fact that it is not necessary to have technical know-how when the objective is to try to put projects into social perspective in such a way as to be able to analyze their priority for the country. We obtain proof on a daily basis that the country lacks a central entity who’s responsibility is the adequate allocation of priorities to projects in the pipeline. In this sense, it could be that the Brazilian project is valid, but would it not behoove us to analyze whether it is better and more important than others? A citizen that doesn’t raise questions is a citizen that will eventually end up with his photograph pasted on identity cards (cédulas) which would have cost us US$ 500 million.

One last comment. Frequent mention is made about an environmental impact study undertaken by a “specialized firm”. In cases such as the above, of such environmental importance for future generations, I would probably wish to know that the studies were entrusted to serious professionals with names and surnames rather than to an anonymous company. If we had the backup of names, cédula and telephone numbers and addresses, we could conceivably exact accountability from them; if anything, for the honor or shame of their descendants.

By the way, forty years ago, this responsibility would have been assumed by politicians personally. They would not be hiding behind the skirts of a political organization. If dictatorship in any way is superior to democracy it is because, at least in our country, dictators are held historically and directly more responsible for both good and bad; much more so than today’s executives of Political Party, C.A.

How good or bad is your municipality?

I recently had the opportunity to travel to a Central American country. I was impressed by the fact that many professionals, both from the public as well as the private sector, both local and foreign, were basically in agreement as to which municipalities were well governed and which were not.

Evidently, there are a great number of subjective factors that may influence or “color” opinions from municipality to municipality. Some of these we have seen before, such as the mayor’s looks and/or congeniality or how big a share of the nation’s global resources it has been awarded. Certain variables can, however, be objectively evaluated in order to allow a reasonable ranking of municipalities as far as effective government is concerned.

In many parts of the world, including Venezuela, we have seen that expectations of improvements in public services are based on decentralization of power. As a result, it would seem positive to be able to develop a methodology which would help the population measure the results and efficiency of its government(s).

Bad results are immediately evident; their causes are not. An inefficient municipality can easily justify its unsatisfactory performance by alluding to a lack of resources. On the other hand, a below par result can also be hidden behind a surplus of resources. Having to take care of his day to day duties, how is a simple voter to know which is which?

The absence of knowledge or of access to information based on very certain and objective data about municipal government as well as an accompanying aversion to the unknown, attempts against a healthy renovation of the latter’s authorities. This lack of benchmarks and standards of measurement may also mean that results which may seem poor in the short run but that are designed by provide meaningful long-term improvements are not suitably rewarded.

Just imagine the chaos and confusion if our system of education all of a sudden decides to do away with the report card. How would parents evaluate the scholastic capacity of their children, especially when many of them haven’t even heard about the existence of the subjects currently being taught. This is very similar to the confusion of most voters when the time comes to choose their authorities for the next period.

We have about 300 municipalities that hold official elections in Venezuela. Few voters, so much so that I personally don’t know of one, have even the remotest idea whether their municipal government is better or worse that his neighbor’s. A ranking such as that mentioned above would help us comply with our obligations as voters.

Evidently, nobody can say that the measurement of results, however objective, will result in the correct analysis of any particular administration. However, a reasonable ranking could at least go a long way toward becoming a valuable tool to identify extreme situations. It would certainly identify those governments which one should hang on to for dear life and flag those that should go as quickly as possible. For example, the list of ingredients printed on packaged foods such as levels of calories, proteins, vitamins and chemicals is not meant to prohibit ingestion of the food but to inform and allow you to control your diet.

At a time when the country is betting the farm on decentralization, even in the face of certain risks such as runaway federalism, I am under the impression that one of the best possible investments we could make would be the creation of an evaluation committee whose task it would be to review efficiency at municipal levels. This committee or group, in addition to having solid methodological knowledge and ample resources with which to ensure that the job is done, must be totally independent of all political movement and of all people who could aspire to posts in municipal governments.

Perfection is the enemy of good. We don’t have to be overly precise. I don’t doubt for one minute that the 50 municipalities that are ranked at the top of the list would realistically belong at least in the top 150 and that the bottom 50 would really belong in the bottom 150.

A country of this composition that manages through elections to keep 50 good ones and trash 50 bad ones is certainly on the road to a better future than a country that bases its choice primarily on election period jingles. This means taking firm command of our future based on realistic information.

By saying all this, I’m not saying that I want our rights to vote reduced. By having declared myself incapable of saying with reasonable certainty whether things in my municipality are going well or not (in terms of what can be done and what can’t), I don’t wish to disqualify myself as an electoral illiterate. I simply wish someone would give me some spectacles with which to see better. And while you’re at it, throw the state governments in the pot as well.

PDVSA’s shadow budget

Once again we read that PDVSA has been given instructions to purchase goods and services it requires to operate from sources outside national borders, limiting thereby local purchases. The reason for this policy is purported to be the fight against inflationary pressures. Although we have continuously heard declarations issued by Government sources to this effect, the official petroleum sector vehemently denies it.

Evidently, it did not take long for local suppliers of goods and services to raise the roof with severe criticism. The latter is obviously based on the outright injustice brought on them and the local economy by an evident preference given foreign suppliers. The brief observations that follow address other aspects of this initiative.

Above all, it is important to note that there is no direct link between local purchases and inflation, specially in the case of PDVSA. Should the oil industry purchase goods locally instead of importing them, the State always has the option of selling hard currency against Bolívares, thereby soaking up the possible excess liquidity caused by these transactions. By the way, in order not to be disqualified from the roster of possible suppliers of services to the oil industry, I am willing to invoice any services they could possibly require in US$ and from the location they prefer. The only thing left for me then is to make my peace with the tax man.

Evidently, it is necessary to import should PDVSA’s demand of local goods and services eventually result in such strain on supplies that prices go through the roof. In this case, imports would not be the result of the application of economic policy (hare-brained or not) but of a simple and usual business common sense that dictates that you buy where it is least expensive.

These observations bring us around to the real question about the real scope of the oil industry’s operative independence or, if we look at the other side of the coin, the scope of the direct influence exerted by the National Executive on PDVSA and its operations.

If it is true that the Government has the power to instruct PDVSA to direct it’s purchases towards one source or another, when to pay its bills, etc., etc., without being subjected to legal norms and regulations such as the Law of Safeguarding of Public Patrimony (Ley de Salvaguarda del Patrimonio Público) and running circles around the Central Bank’s independence without so much as a polite salute, then I’m afraid we are in the presence of a parallel government of some import.

I am not a public servant, but I feel that should I be one and be appointed to sit on the Finance Committee of Congress, I would definitely consider my job belittled. Should I be called on to collaborate with the development of the national budget, which is evidently based on the use of a few small printed bills, it is possible that the game of Monopoly would have immediately come to mind. In addition, I would surely be intensely jealous of those who, being directly in charge of budgeting the use of real resources such as PDVSA’s, have much more to say in the future of our country.

By saying this, I am not inferring that Congress should be the entity in charge of PDVSA’s budget. A democracy is based on the existence of a system of checks and balances. Therefore, if the National Executive, with or without reason, insists on intervening directly in the oil industry’s activities, it is clear that it is necessary to regulate the limits of this interference.

A few months ago for similar ends, I suggested the creation of the figure of the “Oil Ombudsman”. Initially this was aimed at simply informing the common citizen, objectively and truthfully, about the state of the national oil industry. In Swedish, the word “Ombudsman” means something like the spokesman and representative of public interest. It is a figure used in many countries in areas that are infinitely less important than the oil industry is to Venezuela.

Today, we are all trying to evaluate the consequences of the recent reorganization of PDVSA and would all like to clear up the issue of the instructions supposedly issued as far as PDVSA’s purchases are concerned. We all must feel the need to go talk to someone credible who could clearly answer our questions about matters related to the efficiency of the industry as well as about possible consequences of Government intervention in the same. If accusations of intervention are false, would it not be comforting to hear this from a neutral source as well?

It is probable that neither the National Executive nor the petroleum industry is keen about the possibility of having an external observer hanging around the halls. However, due to the all-important nature of the oil industry for Venezuela as a whole, it is our responsibility to request the existence of one.