Orimulsion vs. tower of terror

This week's television reported on a small incident in one of the Florida amusement park attractions (Tower of Terror) whose causes are being investigated. Some users apparently suffered minor injuries, however, we doubt that this will reduce the public attracted to this type of recreation.

Imagine the existence in Venezuela of some amusement park owners who, upset by the competition from Florida and with the aim of forming a support movement, recruit and seduce a group of mothers who all suffer from pathological anxiety. Imagine this aggressive and vociferous Opinion Group demanding that the authorities of the Federal District prohibit children from traveling to Florida parks.

The absurdity and smallness of the accident, the Florida protests, the children's protests, everything would make it impossible to think that the Prohibition Decree would be approved.

However, if we are allowed to assume that: a.- there are other parks as good as those in Florida, "Mommy, we can go to Disney in France!", b.- that the administrators of the Florida parks do not care. It matters a lot, "with fewer visitors we work more comfortably"; and c.- the support of the citizens of Florida is neither requested nor received, then suddenly the possibilities of the Decree do not seem so remote.

"Guys, even though I have family in Florida and it could cause harm to them, since no one cares about this, let's pass Prohibition, at least this way we can get these screaming crazy people off our backs."

In a somewhat similar way, the state of Florida banned the use of Orimulsion. The Orimulsión that has so much meaning for Venezuela. For a Venezuela that today needs any help it can receive. But, for a Venezuela where this, apparently he doesn't give a damn. For a Venezuela where we drink orange juice from Florida and read that simultaneously “currency transfers to Florida grew 400%.

This week a trade mission from Florida visits us in Caracas. Its purpose is to sell us products and investment opportunities. Neither a candidate or member of the government, nor a business or union organization, nor a director, executive or employee of PDVSA, nor a parliamentarian, nor a university student, no one, probably no one will use the occasion to at least indicate that we are harmed and upset. for the decision on Orimulsion.

We should all be ashamed. If in Venezuela we had to choose a popular saying that was known and applied by all our people, it would probably be "he who doesn't cry doesn't suck." Apparently we don't use it outside our borders.

For a long time I have maintained that one of the main problems that Venezuela has in correctly adapting fashionable economic policies, such as trade liberalization, is that the vast majority of our economic leaders, in the public and private sectors, are very recent converts. . Since originally they held other points of view and today they are terrified that someone will recognize them in their new clothes, they maintain and apply their dogmas with the fervor that we can occasionally detect in a nouveau riche, eager for recognition from the "establishment." or in a believer recently subjected to an inspiring call.

The truth is that globalization and trade openness do not diminish in any way the need to group around the concept of nation to meditate and negotiate the economic strategies convenient for the country. Quite the opposite. Before with closed borders, with tariffs and general import bans, this did not matter much. Today, with open borders, we really need intelligence, will and cunning to prevent the “world from eating us alive.”

I am not and have never been a protectionist. However, my pulse or intellectual conscience would not tremble if when negotiating on behalf of Venezuela I had to resort a little more to hypocrisy. To that hypocrisy that all countries apply with mastery but that Venezuela apparently considers in bad taste.

What would be difficult or almost impossible for me would be to negotiate on behalf of our country without being able, in a concrete way and as support, to refer to a will, a clamor and a true national demand. In other words without the support of a good and exportable collective cry. Let's globalize the plantain!

Talking about amusement parks reminded me of a full page I saw in a newspaper less than a week ago. It described a country that, unlike the red deficit suffered by Venezuela, was illuminated by a “blue; color of the surplus.” A country with resources to generate microenterprises (granted through “more expeditious channels than those of Corpoindustria”), a country with resources to take care of the environment, develop hospitals. A beautiful country where “it seeks to promote a new relationship with society” establishing in a splendid way

From Economía Hoy

Translated by Google

Hit in the head by the SENECA sale

On Tuesday, September 14th, the power system of the State of Nueva Esparta, SENECA, was finally privatized. The Venezuelan Investment Fund (FIV) and Cadafe, both representing the Nation in this case, had established a base price for the sale of US$ 35 million. The price finally paid by the winning bidder was US$ 90 million, awarding the sellers a premium of US$ 55 million.

There is no doubt that this is a great achievement and it would be very selfish not to congratulate those involved in this transaction for a job well done. Evidently, this privatization bodes well for the supply of electricity for the State and in this sense its population can celebrate the happening.

I have, however, time after time maintained the thesis that the privatization of a public service company should be aimed at improving the service while minimizing the cost of the same for its users, and not at maximizing the central government’s income. It is in this sense, then, that I express the following reservations with regards to this particular transaction. I am not criticizing the privatization SENECA per se, but am raising the flag with regards to the ‘morning after’ effects of the same.

Evidently, should the SENECA have been sold for US$1, the tariffs for electricity required in order to amortize the investment would have been much lower. Today’s financial community has awarded Republic of Venezuela long term debt a tax and project risk free return of over 20% per annum. In this sense, it would not be exaggerated to say that SENECA’s buyers will expect a return of at least 20% on their own investment.

This implies that Margarita will have to come up with US$ 18 million (i.e. 20% of US$ 90 million) every year and that this flow must come from the tariffs paid by the end users of the service. In tourism terms, this is like paying for a small brand new five star hotel every year. To this amount, we must also add the outlays represented by salaries, new investment, purchase of electricity and taxes.

It could very well be that this annual toll of US$ 18 million for the right to liberate itself from Cadafe’s management is actually a great deal for Margarita. However, since Cadafe and the FIV obtained US$ 90 million for the privatized entity while projecting tariffs on a base price of US$ 35 million, there is room for the following questions:

First: Who, if anyone, went overboard when promising potential investors what future tariff levels were to be paid by Margarita’s population? Who calculated these tariffs? Did they make a mistake? If so, was it made on purpose or was it simply incompetence? It is obvious that if the tariffs offered in the bid documents had been lower, the investors would not have put a premium of US$ 55 million on the table.

It bothers me to no end to be treated as a moron by public officials. When they maintain that they obtained this premium simply due to the excellence of their management of the transaction, I feel they are sticking their tongues out at all of us. Why then didn’t they establish a base price of US$ 25 million? The premium would then have been US$ 65 million instead of US$ 55 million. Why didn’t they offer an even higher tariff structure and obtain, say, US$ 120 million instead of US$ 90 million?

We obviously understand the laughter and back slapping by State officials. We can almost hear them say “Marvelous. We have gotten rid of the responsibility of the supply of power to the island. On top of this, we have received a front-end tax payment of US$ 90 million on top of all the other taxes we will be able to charge in the future! Nobody was the wiser for it! What a deal! Let’s do the next one!”

Second: If Cadafe and FIV say they would have been happy with the base price of US$ 35 million, why then, will the take the US$ 55 million premium away from the island? We must remember that the entire US$ 90 million, and specially the premium of US$ 55 million, will be ultimately footed by Margarita’s population.

Immediately after the sale, one official celebrated the event by saying he felt like Sammy Sosa of the baseball Chicago Cubs when he hit home run No. 61. As a user of the electrical system in Margarita, I felt more like I had been hit in the head by the very same baseball.

I suggest we analyze the possibility that the US$ 55 million premium by retained by the island. This would at least assuage some of the pain caused to my head by the falling baseball. Some direct benefit for the island could then be gleaned from the affair, for example, another pipeline for potable water. Evidently, if the entire US$ 90 million were left on the island, so much the better.

In summary, there is no doubt that as Venezuelan’s we should all be applauding the success of the privatization of SENE in the face of tough times. However, as an assimilated Margariteño, I find it difficult to celebrate since its cost, a mortgage of US$ 90 million, has been placed directly on the island’s shoulders.

What is it we really need in Venezuela?

We are being confronted on a daily basis with an endless litany of proposals, some fanatical and others just irrelevant and misguided compliance with a perceived social obligation. Both types are bad and make it harder for us to focus on how to really solve our problems.

The fanatics, who all share the wish of looking good on CNN's "Crossfire", cover the extreme sides of the advisory rainbow. On one side we find those who want us to foster nationalism and patriotism through isolation in true Robinson Crusoe style while casting old Fidel as young Friday. On the other are those who hype the benefits of economic opening and globalization to such a degree that we begin to feel that the only ones with the real right to be called Venezuelans are our compatriots in Miami.

Some twenty years ago, I used to vehemently oppose excessive use of protectionism, considering then that this was causing us to slowly degenerate into an inefficient and lazy nation. Additionally, having studied in Sweden and therefore carrying the social democratic values of that society on my back, I found the pockets of political patronage and power this protectionism created very disagreeable.

Today, however, I consider that in many ways Venezuela has opened itself up to the world excessively. In our effort to be part of every economic fad the world developed, we have actually become poorer and run the risk of slowly being wiped out as a nation. 

In spite of this switch, I am convinced that I have not changed my way of analyzing economic problems one bit since at all times my only goal has been to search for what is best for the nation, at a given moment and under a specific set of circumstances. 

I honestly think that a majority of my colleagues, all advisors and consultants, some formally assigned to this role, and others, volunteers, self-empowered and nosey, have been, albeit not on purpose, basing their recommendations more on how they fit a specific model of thought than on what the country really needs to get ahead. This is tragic.

The second category of proposals are those generated by all the individuals and organizations who seem to live by the motto “if we don’t have a Web Page on the Internet we don’t exist” or in this case, "if we are not able to develop a ‘do-it-in-20-easy-steps’ proposal on how to save Venezuela we have not fulfilled our social duty". Most of the proposals that fall under this category, some more relevant than others, are basically harmless. Even I recently published a humble proposal about what I would do if I were to become President (obviously in an allegorical sense) which had to be published in two articles in order to satisfy its boundless degree of ambition.

Other entities, given their importance in the development of public opinion due to their ample presence in the national scene and in the media, simply do not have the right to treat the process of the generation of proposals lightly. Among these entities we can mention Fedecámaras.

I know there is a wealth of material on the politics of oil and it could very well be that the last Fedecámaras General Assembly generated some others I do not know of. However, what you can find in the document known as the Assembly’s Central Document, all 36 pages of which can be downloaded off the Internet, and that is certified as Copyright© Fedecámaras, seems to me to be a relatively poor proposal. The document includes a list or mix of 63 vital proposals. Obviously, he who has 63 vital issues on his mind, really has none.

In addition the Fedecamaras document does not grasp the realities. It barely touches the issue of how to reactivate the internal economy and it ignores the need to improve the distribution of wealth while urging increased use of the General Sales Tax rather than the Income Tax. The issue of reducing government spending is treated with kid’s gloves; trivial matters such as privatization of jails and the approval of the Code of Ethics of Public Servants are addressed; the creation of the Macroeconomic Stabilization Fund is belatedly discussed; and even further confusion is created when the reform of the Judicial Sector is mentioned by saying that “Maybe it would be convenient to hand over all responsibility to the Supreme Court of Justice”.

In a moment such as this, when there is hunger and unemployment in Venezuela, when the economic crisis becomes worse every day and when the world is full of uncertainties, an organization such as Fedecámaras must either present a well developed and thought out proposal or simply keep quiet. The duty of those members of the private sector that feel they are or should be represented by Fedecámaras is to express their opinions.

Of oil, income and the Constituent Assembly

Absolutely incredible, there is no anthropologist who can understand it. In a country so given to celebrations of holidays, national, religious, pagan and others, there is not one, not even a parish festival, whose purpose is to celebrate what from every point of view is something of the most important for Venezuela, its oil.

A few months ago, the IESA Debates magazine published a brief essay of mine and in which, in order to provoke a debate, I suggested the possibility that the entire national custom of presenting oil as something bad and unpleasant, going so far as to describe it as "excrement of the devil" to something that in any other civilization would be considered a gift from God, is derived from an intelligent compromise to prevent the national country from being more severe when demanding accountability.

As long as oil revenues are "dirty" and have not gone through our pockets (as they say so as not to corrupt us), there will be little importance that we give to the function of supervising the performance produced by those who have graciously offered to manage them on our behalf.

If at Sunday Mass, the oil income was worthy of a few simple thanks. If in primary school children were taught the need to thank God by correctly assuming responsibility for this income. If souvenirs alluding to oil were sold at the airport. If when traveling to Florida we proudly displayed t-shirts selling the benefits of Orimulsion. If from time to time and together with some virtuous maiden we sacrificed some Minister of Energy and Mines to try to ensure a season of good prices for oil. If all of the above were true, then as they say: "another rooster would crow!"

The most important thing to develop a solution to a problem is to clearly identify the resources available. In Venezuela it seems that this does not apply. Here colleagues, social planners, notables and other well-intentioned opinion leaders insist on proclaiming that the optimal development model for Venezuela must try to ignore oil revenues. Something like assuming that we leave the oil buried and then pray a hundred "ceteris paribus" to compensate for continuing to exploit it.

The oil income is still there and the opening efforts are aimed at increasing it. In view of this, I expressed in my article the thesis that perhaps the model that Venezuela should adopt is that of rentierism. Of course, not that of easy-going and lazy rentism but that of responsible rentism, which requires the formation of a solid character that responsibly assumes the management of wealth for the benefit of future generations.

If one were the owner of a company where the manager is useless, fails and continually squanders resources, the simplest rentier model would indicate that before ensuring a true reorganization of the company, the owner should not contribute new capital or allow the manager to continue putting the company into debt.

Consider the lack that we have of the simple previous wisdom in order to better be able to face the current demands of the IMF experts and the politicians eager for resources and who prescribe to the country, based on strange models that I believe are more sadomasochistic than of a cutting nature. macroeconomic, that the disastrous administrative experience of the State should be ignored and continue giving more and more resources to the treasury.

There is much talk today about a Constituent Assembly. I am not an expert but I am sure that somewhere in that Constituent Assembly there is a need to include matters related to how Civil Society can monitor, supervise and influence the management of its oil industry.

When the previous Constitution was drafted, the country, although it enjoyed income derived from oil, was not in charge of managing the industry. Today, when witnessing programs of all kinds by PDVSA and related companies, when contemplating how PDVSA is called to collaborate in government management and when simply measuring its economic significance, it is clear that there is a significant power, whose performance and form of expression can that is not properly regulated.

Nor sufficiently regulated to ensure that the Government of the day does not squeeze PDVSA for the necessary resources it needs to ensure its own development and survival. Nor sufficiently regulated to ensure that a technocracy does not take root in it and implements its own agenda behind the country's back. Nor regulated enough to ensure that the Government and the Petrocracy do not collude against the rest of the country.

When discussing the separation of powers, for example that of the judiciary, let us not forget the need to also separate the monetary powers, PDVSA the generator of resources and the FISCO the spender of these. A truly independent NATIONAL OIL BOARD

From Economía Hoy

Translated by Google