Pay now and pray for the light

Over the years, the nation’s public sector has slowly but surely built up a relatively widespread infrastructure base. This was evidently financed basically by income from petroleum sales. Among these infrastructure systems we can find the Nueva Esparta State power and energy system (SENE). Today’s cash crunch has forced the government to study the possible sale of SENE by its owner, i.e. the Venezuelan Investment Fund (FIV), hoping thereby to recoup its investment.

SENE’s value today, as a power concession, is based more on the cash flows that are derived from the tariffs, than on the value of a bunch of electrical baggage. As a result of this, the FIV, in its role as seller, is interested in proving to potential buyers that there is a real possibility of charging high tariffs for its electricity.

FIV’s spokesmen have pegged SENE’s value in the market at US$ 100 million. Should this actually be the final value of the sale/purchase transaction, the island’s population, industry and commerce, whether they like it or not, will have to repay the investment, including corresponding dividends, by way of increased tariffs. The same happened with CANTV. Today’s high phone bills are a direct result of the elevated price paid the government by the investors that acquired the communications monopoly.

In the case of the Margarita power system, we must add the investments that are urgently required in order to provide satisfactory service to users on the island to the initial investment. The result is evident; a horrifyingly high electricity bill.

Any privatization of a public service should be aimed at insuring that a continuous and acceptable service is made available to its users, at a reasonable cost. On the contrary, the SENE privatization looks like a totally different concept, one in which the sale is used cover up ulterior fiscal necessities. This is clearly evidenced by the fact that the allocation will be made to that bidder that “offers the highest price, on strictly cash terms and without any financing from the Venezuelan State”.

On the FIV’s Web Page on the Internet, the agency declares that: “As far as the supply of primary energy to the before mentioned Island is concerned, the Economic Cabinet has decided that the winning bidder must present the National Executive, after the public bid, and no later than six months after the same, with an investment plan detailing the minimum cost associated with the delivery of the service, which must in turn reflect the tariffs to be applied”.

The above declaration, could in the layman’s terms be interpreted as saying “Pay us now and let us know within six months what you are going to do with regards to the Islands needs”. As such it would confirm the existing fiscal voracity and the general indifference of authorities with Margarita’s well being. I am one of the most arduous defenders of privatization around, and therefore I hereby express my most vehement protest.

In this same context, another example of fiscal voracity related to the Island’s needs is the gas pipeline. This alternative was never designed to include the possibility whereby the owner of the gas (Corpoven) would have to lay the pipeline in order to insure sales of the gas to Margarita. On the contrary, this alternative was always based on the scheme whereby the island was to pay for the pipeline in order to acquire the “right” to purchase the gas (nice guys, what?). Most assuredly, as instructed by the IMF, the price of this gas is to be pegged to international market levels.

Everyone is well aware that the energy problems on the Island must be solved, and quickly. I have been one of the victims of burnt-out compressors, rotten food in my refrigerator, etc, and therefore am among the first to assert that the costliest service is the bad one or worse, the one you don’t receive at all. However, I do believe that celerity is not incompatible with intelligence.

Before allowing the Venezuelan State to get rid of SENE and therefore of a responsibility, which it had taken upon itself voluntarily in the first place, in the search for political benefit, Nueva Esparta should request authorities to lay a submarine cable that would allow it to purchase cheap hydroelectric power from Edelca. This it is done in most other parts of the country, even in more remote areas such as the State of Zulia. We had also planned to do the same with exports of power to Brazil and Colombia. Why, then, not Margarita?

As a minimum, the Island should try to ensure that all income raised by the sale of SENE should be deposited in an escrow account aimed at financing sorely needed investments on the Island.

If I were president (II)

In yesterday’s installment I mentioned the fact that the first thing I must receive in order to responsibly comply with my presidential obligations are certain special powers. Supposing I actually received these powers, I then began to list some of the concrete measures as an example of what I would do during the first 100 days of my term in some specific areas of concern. Here are some more.

Education: A single, all encompassing data base must be put together, identifying each and every active teacher on a school-by-school basis. These teachers will immediately receive an increase in pay and an additional fixed percentage of the payroll amount will be awarded each school to cover administrative expenses. Evidence of false information will result in the immediate suspension (for lying, aiding or abetting) of all the teachers of that particular school. All others that are unduly receiving pay without working from the Ministry of Education will be awarded eternal vacations without pay.

Reduction of public spending: In order to rationalize public spending, as similar strategy as the one above will be implemented. All personnel that are to be dismissed will be paid the equivalent of three month’s salary and all other severance payments will be paid in the form of negotiable Public Sector Restoion Bonds (PSRB). The value of these bonds will increase in the measure that restoration of the public sector is successful.

Infrastructure: All savings from the restructuring process will be invested, after covering fiscal deficits over 3% of GNP, in infrastructure projects, such as energy and water for Margarita and Zulia and a truly nationwide railway system.

Housing: The Central Bank must immediately make available through the private banking system, a credit facility to the tune of US$ 2 billion aimed at issuing long term loans in US$ and fixed rates for acquisition of housing.

Foreign investment: Foreign capital investments will be regulated in order to minimize damage caused by short term capital flight (i.e., the Mexico syndrome). Other countries in Latin America have such regulations in place.

Economic diversification: The oil sector does not create employment. Venezuela’s commercial policies must be renegotiated to achieve the equilibrium of our trade balance in terms of employment generation and not balance in monetary terms as it stands now. An annual budget will be allotted to allow for the protection of certain sectors of the economy, specifically agriculture. Cover under this scheme will be allocated to those sectors within agriculture that we can be competitive in without excessive costs (i.e. rice rather than apples).

Petroleum/Petrochemicals: PDVSA will continue to manage the development of our petroleum industry. However, a special Office of the Petroleum Ombudsman (OPO) will be created. This will allow the common citizen to get closer and to increase his knowledge and control of what is the country’s principal asset. The members of this office will be elected at random from among a list of candidates that have been carefully screened, have complied with some basic requirements and have been presented as such by the Venezuelan people. The Office will be initially asked to analyze why the industry is spending its precious resources in rebuilding a slew of gas stations. In the same sense, I would like to insure that our petrochemical industry is not just reopening Sidor’s covered grave with its new investments.

Taxes/Duties: There will be no more value added tax (VAT) as long as the country continues to perceive significant income from oil. Customs at our ports will be handed over to the private sector management. This will ensure that income that should reach government accounts does not continue to feed unscrupulous individual pockets.

Superfluous functions: Until the State begins to perfectly comply with its responsibilities in fundamental areas such as education, health and security, all other superfluous functions will be suspended. For example: if the local stock market really needs a regulatory entity such as the National Security and Exchange Commission, the market must cover the costs incurred. Today, it is preferable to stamp each issue with the words “Beware – Not Regulated” than to create the false illusion that some control is imposed, and in some instances, actually abet fraud through simple omission.

Day 100 – Evaluation: If my team and I are not able to successfully implement our government’s plans, we must resign and convene new elections. Remember, I have initially made a promise to resign without pension and without a seat as Senator for life in order to avoid a) further degeneration of the stature of the office of the President and b) wasting another four years and nine months of this poor country’s destiny.

If I were president (I)

I have been writing articles that have been published in the Daily Journal for almost one year now. I realize that most (although not all) have been quite critical. As a result, I have been the target for calls from acquaintances who ask me things like “quit criticizing so much; what would you do­?” I herewith try to answer these questions. This is the first of two parts, the second of which will appear in tomorrow’s issue.

Upon contemplating the current state of affairs, it is evident that we urgently need to restructure everything (or almost everything), and that the latter should probably be much more radical than what our official presidential candidates imagine or would dare talk about. The following would be my agenda for the first 100 days, were I to sit in Miraflores as President of Venezuela.

Day 1 / Morning: There would be a very simple swearing-in ceremony that would not be attended by visiting dignitaries. At least 50% of the attendees to this ceremony would be young people, less than 18 years old. Immediately thereafter there would be an emergency session of Congress during which Venezuela would be declared in a state of emergency, a state that is in perfect sync with reality. Emergency powers that would allow the President to confront such a situation would be requested. These powers would be similar to those awarded anyone out to perform a salvage operation and without which nobody reasonably sane could be expected to assume the responsibility of restructuring our country.

During this same session, Congress must approve a Bond issue under the acronym Public Sector Restoration Bonds (PSRB). These bonds are to be 30-year instruments, US Dollar denominated and carrying interest rates similar to those paid by the United States. These resources will be used to liquidate public payrolls. Immediately thereafter, two constitutional reforms should take place as follows:

First Amendment: A total reform of the mechanisms that are used to elect Judges. Any of the many projects that have been tabled recently can be used, most of which are useful but none of which have found their way to implementation.

Second Amendment: A total ban on any new net foreign indebtedness for the public sector (including PDVSA). In addition, the country must accept the obligation to amortize a minimum of 1/30th of the current global debt annually. Venezuela’s current oil income should be sufficient to cover all public sector spending. If it is not, the government is being inefficient and the last thing we should be doing is accepting further a heavier debt load.

Day 1 / Evening: Should Congress balk at these requests, I, as National Executive must strive with all available means, including that of closing Congress, to achieve the reforms. Should this still not be enough, I would immediately offer my resignation and convene new elections. This would avoid a) further degeneration of the stature of the office of the President and b) the wasting of another five years of the country’s destiny.

Days 2 through 99: We would initiate a series of emergency measures aimed at the reorientation of our nation’s destiny. As an example, among these would be the following:

Social Security: A single central system would be put into place to implement the payment of pensions for public sector employees. The regulations for this would establish that a) the minimum and maximum payment amounts; the maximum cannot be more that three times the minimum; b) any pensioner that is eligible for various pensions can add them up until he reaches the maximum established; c) payments will be made in strict inverse order, that is, the lower payments will be handled before the higher ones; no way will we pay out millions while our grandparents (los viejitos) have to take to the streets; d) we will unify, downwards if necessary, the pension amounts to be received by retired people of the same category and seniority; we will not differentiate between teachers with 30 years’ seniority that retired in 1976 from those retired in 1996.

If all of this means that some current obligations are not covered, so be it. Remember, the country has been declared in a state of emergency. The default of these obligations will be explained face-to-face, and not as it has been done until today, by hiding behind the curtain of inflation.

Government team: The government’s duties will be executed by a multidisciplinary team, small enough to be housed in one building. We will initiate the relocation of Congress and the administrative and clerical functions of government other cities in Venezuela.

Part II will follow tomorrow with more examples of my government’s agenda.