What is the financial world to do with Venezuela?

A letter to the Financial Times

Sir, In Venezuela, as in most other countries, Congress is supposed to exercise control over the executive branch. For instance, its Constitution establishes that ‘No contract in the municipal, state or national public interest shall be entered into with foreign states or official entities, or with companies not domiciled in Venezuela, or transferred to any of the same, without the approval of the National Assembly.’

Now, even though Venezuela is currently known as a very polarized nation, the fact is that after the elections of December 4, 2005, its Congress includes 167 members who are in favor of and obedient to him who wishes to be called ‘Commander’, and 0 representation for those many who are not in the least in agreement with chávez´s confused ramblings of his vision of a twenty-first-century socialism. This indeed poses some serious questions about its legitimacy and therefore some serious challenges for those who issue opinions.

For instance, what are legal counselors or credit-rating agencies to do after they might receive a letter from a Venezuelan citizen (or perhaps even read this letter in FT) informing them that sooner or later the debts now contracted by Venezuela might be questioned as ‘odious debt’, as they are not duly approved by a legitimate congress (167-0), nor are they needed, as can be evidenced by the many donations Venezuela, with its own so many very poor, has recently made, among them, to the relatively few somewhat poor of Massachusetts.

Sir, if a company like Nike has to worry about the labor conditions in the factories to which they outsource their production, why should the financial world be allowed to ignore civil representation issues in those countries it helps to finance?


This is an extract from Voice and Noise, 2006, a book that I wrote after my experience as an Executive Director of the World Bank (2002-2004) and that now, after having duly marked the extract above, I give freely to any lawyer who might have to prepare a due diligence on Venezuela and to anyone from the credit rating agencies who has to rate Venezuela with the words... “and do not forget that a citizen from Venezuela, who has all the intentions of tomorrow, when given a chance, to protest all the odious debts and gifts told you so… I have not the faintest idea if I have a legal case… but are you really sure I don´t?”

A victory for Hugo Chavez?

Last Sunday’s presidential elections in Venezuela have been hailed as a victory for Hugo Chavez. Far from it!

In the previous election in 2000 all the votes of the opposition against Chavez added up to 2.5 million while in this election, certified by the Chavez influenced, the home based opposition against this self proclaimed world leader almost doubled as it came in with more than 4.3 million votes, and that does not include of course all those who did not manage to pass all the electoral obstacles.

Another fact that perhaps also should be reminded to the international Chavez adoring community, is that not one single of these 4.3 million voters is represented in Venezuela’s 167-loyal-to-Chavez-and-zero-against congress.

So you might all understand Chavez better!

I would just like to introduce here a small piece of information quite frequently ignored and that could help to shed some light on who this Hugo Chavez is and whether he is a good president and a good leader for Venezuela.

At this moment, almost eight years into Chavez’s XXI Century Socialism, gasoline is being sold in Venezuela at 3.7 cents of dollar per liter or less than 15 dollar cents per gallon.

With this marvel of a public policy Chavez, besides stimulating a runaway consumption of gasoline with all its environmental consequences, based on the international cash-opportunity cost manages to transfer a regressive subsidy of about 10 billion dollars, or about 10% of Venezuela GDP, or about 100% of the GDP of a country like Bolivia, from the poor who do not buy gasoline, to those that love to guzzle it up.

For comparison the gasoline price in an oil country that seems to been doing things right is 52 times higher and in the USA of Mr. Bush, Chavez´ sworn enemy, and the Cuba of Castro, Chavez´ best buddy, the price is only about 25 times higher. Even in the land that has inspired the term of oil-Saudism the price is seven times as high.

Now you try to draw your own conclusions of what Chavez is all about! Are you clear now?

Now so to also help you understand the current opposition groups that are against Chavez, let me inform you that they do not mention this issue either. Are you clearer yet?