What would have happened if America’s Founding Fathers had, with something like the “Mining Ordinances for New Spain”, concocted runaway statism?

“The Ordinances of San Lorenzo”, issued in Spain by Felipe II in 1584, incorporated all mines into the royal patrimony. 

These remained in force in America under Spanish dominion until 1783 when they were repealed by the "Mining Ordinances for New Spain", promulgated by King Carlos III. These stipulated that "The mines [including bitumens or earth extracts] belong to my Royal Crown."

1829, Simon Bolívar, Venezuela's “Liberator”, issued a Decree that tacitly established that the mines passed from the Spanish Royal Crown to the domain of the Republic... whose government grants them in ownership and possession to the citizens who request them, under the conditions expressed in the Mining Laws and Ordinances, and with the other provisions contained in this decree." 

As if to reaffirm their origin, the Congress of Venezuela, in the Law of 1832, resolved: "in accordance with the Decree of October 24, 1829, the Ordinance that shall serve as a rule for the Government regarding mines, is that of New Spain of 1783.

And from there, to the Constitution of the Bolivarian Republic of Venezuela of 1999.

Article 12. Mineral and hydrocarbon deposits, whatever their nature, existing in the national territory, under the seabed of the territorial sea, in the exclusive economic zone, and on the continental shelf, belong to the Republic, are public domain assets, and are therefore inalienable and imprescriptible. The seacoasts are public domain assets.

Article 302. The State reserves for itself, through the respective organic law, and for reasons of national interest, the oil industry and other industries, exploitations, services, and assets of public interest and strategic importance. The State shall promote the national manufacturing of raw materials derived from the exploitation of non-renewable natural resources, in order to assimilate, create, and innovate technologies, generate employment and economic growth, and create wealth and well-being for the people.

Article 303. For reasons of economic and political sovereignty and national strategy, the State shall retain all the shares of Petróleos de Venezuela, S.A., PDVSA or of the entity created for the management of the oil industry, with the exception of those of its subsidiaries, strategic alliances, companies, and any other entity that has been or may be established as a result of the business development of Petróleos de Venezuela, S.A. PDVSA.

Since then all Venezuela’s natural resources, oil, gold, rare earths and other, have been owned by Venezuela’s government, de facto empowering whoever are in command of it, to be the redistributors of all the revenues this nation derives from the exploitation of its natural resources.

What would have happened to the United States, if America’s Founding Fathers had concocted similar Statism?

https://petropolitan.blogspot.com/2015/06/disculpa-pero-simon-bolivar-fue-el.html

Having fallen so low, Venezuela should take that golden opportunity to try reach the stars.

Moisés Naím and Francisco Toro describe well the utter current horrors of Venezuela in “Venezuela’s suicide: Lessons from a failed state” Foreign Affairs, December 2018.  But they conclude in that: 

“Even if opposition forces—or a U.S.-led armed attack—somehow managed to replace Maduro with an entirely new government, the agenda would be daunting. 

A successor regime would need to reduce the enormous role the military plays in all areas of the public sector. It would have to start from scratch in restoring basic services in health care, education, and law enforcement. 

It would have to rebuild the oil industry and stimulate growth in other economic sectors. It would need to get rid of the drug dealers, prison racketeers, predatory miners, wealthy criminal financiers, and extortionists who have latched on to every part of the state. 

And it would have to make all these changes in the context of a toxic, anarchic political environment and a grave economic crisis.”

That mission impossible sounding reads like placing all responsibility on the government to fix it all by going back and repeat, this time differently, all that got Venezuela to where it is today.

That to me is unacceptable. After all the blood, sweat and tears Venezuela has had to spill during the last decades, it really deserves a brand new future.

Here are eight tweets that imbed my action plan and dreams for my country.

"So Venezuelans can eat, quickly, PDVSA must be handed over in payment in full to all Venezuela’s creditors quickly, so they put that junk to work quickly, so they can recover some money quickly, and so as to pay us citizens, not the government, royalties quickly"

“Let then the government tax those oil revenues received by the citizens (like with 10%), so that those in government are clear about who they work for, and let what the citizens have left, then flow through the market and help oil the economy of Venezuela.”

“The result will be a different and better Venezuela, freed from those oil revenue distributing profiteers that have always found ways to keep more for themselves or their crony friends. No longer will Venezuelans have to live in somebody else’s business”

“New government debt should be contracted only to help pay for investments needed by its core infrastructure; Guri’s hydroelectric dams and central transmission lines. Privatizations should be designed to provide good and low priced services to the public ” 

“Expropriated properties should be returned to original owners, and all efforts made to recover what has been stolen the last 20 years, including by paying a bounty on any money recovered.”

“The government employees should be reduced to a fraction of their current number. With their individual share of oil revenues, and not having to go to work, most of them would anyhow be better off than today”

“The government’s initially ultra low revenues should be used almost exclusively for law enforcement (not military spending). Make Venezuela’s streets safe again, and Venezuela’s citizens, including returning migrants, will take care of the rest”.

“The best way to eradicate forever that economic human rights violation of giving away gasoline domestically, would be to have all citizens to participate in the revenues generated by the sale in Venezuela of gasoline at international prices”

These tweets are not just based on current realities. In 1974, as a 24 years old recently graduated MBA, I was appointed to be the first diversification manager in the Venezuelan Investment Fund that was being created to manage the oil revenues from the oil boom of those days. I resigned after only two weeks, the same day my desk arrived, already convinced by outside pressures exerted, that oil revenues redistribution profiteers would never allow the Fund to have the independence needed.

Three decades later, as an Executive Director of the World Bank 2002-04, a chair that Moisés Naím had also occupied before me, during and after the Iraq war I tried to push for an oil revenue sharing scheme as best I could. No luck, the crony statism interest of concentrating these revenues in the hands governments, were they could be more easily exploited, proved much too strong for me. 

Now Venezuela has a golden opportunity to free itself from the most malignant part of its oil curse, the excessive concentration of power in its government. I pray it is able to keep away any neo-redistribution profiteers. Let us make sure that having fallen this low we Venezuelans will aim for the stars… that way we will, as the Chinese saying goes, at least reach higher than if aiming at something seemingly more reachable.

“Venezuela would need to get rid of [all] who have latched on to every part of the state.”  What better way than assuring there is much less to latch on?

Here are some of the articles I've written and that relate to my desires about Venezuela’s future.

https://www.carnegiecouncil.org/publications/archive/policy_innovations/commentary/000083

https://perkurowski.blogspot.com/2012/03/my-tax-paradise.html

https://perkurowski.blogspot.com/2017/06/a-simple-but-complex-question-from.html

http://unsustainabledebtsustainability.blogspot.com/2006/05/debt-sustainability-analysis-sdl.html
https://theoilcurse.blogspot.com/2015/07/cidhdenunciasoas.html

http://theoilcurse.blogspot.com/2016/05/the-last-thing-venezuela-needs-is-to.html

A simple but complex question from a humble Venezuelan economist to any outstanding Venezuelan international lawyer

The 1999 Constitution of the Bolivarian Republic ofVenezuela establishes:

"Article 12. Mining and hydrocarbon deposits, whatever their nature, existing in the national territory, under the territorial sea bed, in the exclusive economic zone and on the continental shelf, belong to the Republic, are the property of the Public domain and, therefore, inalienable and imprescriptible. "

Suppose a Revised Constitution would establish: "Article 12. Mining and hydrocarbon deposits, whatever their nature, existing in the national territory, under the territorial sea bed, in the exclusive economic zone and on the continental shelf, belong to Venezuelan citizens, as long as they live and, therefore, inalienable and imprescriptible."

Suppose also that the current PDVSA bankruptcy and all its assets are acquired by a PDVSA II or by any other national or foreign company that, on behalf of the citizens of Venezuela, has been entrusted to extract and market that oil providentially deposited in Venezuela. 

So then a tanker would be transporting, not the oil of a sovereign country, but the oil privately owned by millions of Venezuelan citizens.  My question to expert lawyers would then be:

Could the financiers of the Bolivarian Revolution of Venezuela, or old PDVSA, embargo that tanker? Could a tanker for instance belonging to ExxonMobil, be seized by creditors of the United States or the state of Texas in the event that any of the latter fail to meet financial obligations?

Of course, current Venezuela and Pdvsa creditors would claim before judges they always lent against estimated future oil revenues. But, can a government mortgage something that the constitution itself declares as inalienable?

Would the world, knowing then that the oil revenues carried by the tanker would be delivered directly to millions of Venezuelans, the rightful owners of the oil, and which will help these to satisfy some basic human needs, like food and medicines ... allow that tanker to be embargoed in order to satisfy the cravings of a few speculating financiers?

Dear friends, our Venezuela has been ransacked. It is the obligation of every Venezuelan to seek to try to save our nation in any way we can. 

If expert lawyers respond to me with a "You’re crazy Kurowski, that’s not possible", then, shamelessly, I’ll try to find other ways.

And if that means governments’ of Venezuela will not get access to credit in the future, I would almost count that as a blessing.

And don’t tell me I did not warn the creditors before!

PS. This is loosely translated from here

Risk premiums and ethic ratings

And again, for the convenience of those who do not have sufficient political leadership, the government of Venezuela, and PDVSA, announced new bond issues, in order to pay for social "investments" today ... leaving the bill to the Venezuelan youth of tomorrow.

And all this while the Financial Times of London described that soaring interest rates paid, for example by Venezuela, "tempts investors to ignore the fears of civil war, crippling inflation and legal battles."

And indeed Venezuela ( PDVSA and ) pay for ten year credit interest rates that are about 10% higher rate about 10 % than the U.S.. 8% more than Mexico ! That means in essence that already after the first year we have paid the creditor an additional 10 % ... and still owe him 100% of the loan. And that means in essence that at end of the tenth year, when we have already paid the creditor additional 100% ... our children still owe 100% of the principal. This is simply something abominable.

In fact, when a sovereign country is required to pay an interest rate that exceeds by more than 4% the rate of those who pay less, the risk premium, I consider we are in the presence of an economic crime against humanity being committed, fragrantly, against future generations.

And we citizens of the world should do something about it ... for example:

All stock exchanges of the world should suspend trading of all sovereign debt that show a risk premium higher than 4%... (as that would indicate a basic incapacity of the government)

Besides credit ratings, we should develop and use a system of ethic ratings.

All those who purchase sovereign bonds carrying a risk premium of more than 4% risk, and which do not meet minimum ethic ratings, should be exposed publicly as financiers of Sovereign Evils.

We the people should refuse to pay taxes while our sovereign bonds pay a risk premium higher than 4% and do not possess some minimum ethic ratings... and that should be a clause explicitly included in all bond issues.

PS . Whoever believes that China treats us Venezuela as accommodating as we treat Petrocaribe, is a dreamer.

Translated from El Universal

You, who are about to finance Pdvsa, are you sure crimes against human rights are not committed in Venezuela? Ask your children!

Creditors of Venezuela, read our Constitution!

Odious credit

Odious debt

To the last penny

I was heading a delegation in Tanzania, which at least was thought to be important, when we were seated around some modest tables to hear a report on the use of a donation that for 7,614,873.60 TZS (approximately $8,000) had been given to a very humble school for its total renovation. Its Head Teacher, for about ten minutes that seemed immensely long for us due to the litany of figures, explained to us in great detail how the money was used, down to the last penny. We thanked him and left. 

After a while, reflecting on what we had witnessed, I realized that more than an accountability, the act represented an important reminder for all of us that when accepting responsibility for management, this should always be based on the principle of “to the last penny” and cannot, as is so often, taking it lightly rounded up “to the last trillion”. I was very sorry that I had not thanked the Head Teacher more effusively for his report. 

I say all this because the "La Negra" program offered by Manuel Rosales and which consists of giving the 2,500,000 poorest families a direct participation of 20% in the income that we obtain from the liquidation of our oil, would necessarily create the need to report every penny of 100%, so that the promised 20% can be set aside and delivered to those for whom every penny counts, without a doubt. 

Since the State cannot be allowed to compensate the income that it delivers with La Negra with greater public debt, which could lead us to where the rope breaks, the program also implies the need to create a Supreme Audit Entity so that autonomous, report to society everything related to our public indebtedness, down to the last penny. 

Likewise, with 2,500,000 families directly interested in the results of oil activity, it will also be necessary to consider creating what I have always requested, an office of the type of oil Ombudsman so that, on behalf of society, it can monitor everything that PDVSA and the Ministry of Energy are brought up and defend us, to the last penny. 

There are those who accuse the "La Negra" program of being populist, but the truth is that if executed correctly, it would transform the political-economic realities of our country, producing a modern participatory democracy, so we all have an interest in the daring it now and in the guarding it thereafter.

Translated from El Universal

I privatize you, I privatize you not

The sad truth is that for a very long time now - decades really - the country simply has not had anything even remotely close to a coherent economic policy. Without one, it will be very difficult to drag the country out of its current emergency, the bottom line of which is serious unemployment and poverty. I still have fresh in my mind that infamous cocktail of eighty “urgent” measures presented to the previous administration by Fedecámaras.

It is even more difficult to find a good direction due to the fact that our dilemma as a country is situated within the context of globalization process that seems to threaten national identities even further.

In these circumstances, it is no wonder that magic, instant solutions, and quick fixes seem to be coming from everywhere. Among these, none is more beautiful and tempting than the privatization of PDVSA. It seems to be to the economy what the Constituent Assembly is to politics.

Before I continue on this track, I wish to make the point that by referring to a state- run oil industry I refer only to activities in exploration, extraction, refining and distribution to basic markets. All other downstream business such as the petrochemical field, among others, is subject to such intense competition that the cruel efficiencies of the private sector are required for it to be successful. Any intervention by the State in this secondary business, can only result in the loss of part of the riches initially created by the basic activities mentioned above. There is not doubt that downstream business must be privatized.

We return, then, to the beautiful siren song (the sirens themselves are not so beautiful): The sale of PDVSA and oil reserves, Nirvana, Shangri-La and immediate gratification.

Evidently, it is not logical for a country as potentially rich as Venezuela to be in the state it is in. The sale of PDVSA could mean, among other things, that we could cancel all of our public debt. If we were able to resist taking on new debt, there is no doubt that the country would have a rather promising future, at least in the short and medium term.

Evidently, any industry that is not subjected to the critical and continuous surveillance by a greedy owner, can easily be led astray and would produce unsatisfactory results.

Evidently, it would not seem to make any difference who really owns PDVSA’s assets. The source of business would remain in Venezuela and the country would continue to benefit from royalties and income tax.

Why is it then, that like Ulysses, I would want to be strapped to the main mast in order to resist the siren song? My reasons are partly intellectual and partly from the heart.

On the intellectual side, the most important reason is that I am not convinced that the country can maximize the value of its oil without OPEC. The privatization of PDVSA would in essence mean our disincorporation from OPEC. This does not mean I am expressing satisfaction with the management of OPEC, which leaves much room for criticism.

The interests of the current players, management and the government, may be in conflict with those of the Nation. Additionally, there is no effective way to evaluate management of the industry. The sirens affirm that the privatization of PDVSA would solve this problem since its valuation in the open market would be a measure of management’s success, and would indicate the way forward. Personally, I believe one way to solve the problem is to require the transparency of information and to create the Office of the Oil Ombudsman. This would allow for the introduction of some national and long-term variables, which are frequently ignored in an increasingly globalized, and short term oriented marketplace.

Notwithstanding, I do admit that in these times, irrational reasons driven by the heart may be weightier by far. To begin with, I am not among those that disqualify the government as a manager.

Defense of oil requires decisive protest against those that prohibit the use of Orimulsion without reason, and against those that impose confiscatory taxes on oil derivatives, meaning that we receive only a fraction of its value. I still have not lost hope that this need for defensive action could rally us to unite as a nation and not simply as greedy individual shareholders.

I do not believe that as a generation that has failed in its management of oil resources we have the moral right to continue to anticipate even more cash flow. 

Should PDVSA actually be privatized and should there be a surplus that can be distributed, I hope it will be distributed among Venezuelans under 21. This opinion will most likely be contrary to that of those people that preach privatization of PDVSA in the same way children try to get to the end-of-party gifts in order to get away early from a boring piñata.

On the other hand, I recognize the value of all the arguments against centralization of fiscal income. Quickly, please... tie me to the mast!

Close to crying 'Yankee go Home'

I am a Venezuelan of European background and was born a few years after the end of World War II. I grew up under the influence of Audie Murphy movies and comic strips that extolled the valor and sacrifice of American soldiers in their efforts to save Europe from the clutches of fascism. As an adolescent, although against the Vietnam War, my little piece of American heart prevented me from participating in public protests outside the US Embassy, and even more so from flag burning.

However as I am nearing my fiftieth birthday, I suddenly have an incredible urge to yell “Yankee Go Home”. This occurred most recently when I read another of Rowan's articles, in this case blasting away at the latest changes implemented at PDVSA.

Theoretically, had we successfully arrived at the end of the opening of the oil industry, the recent cuts in production, which have had such positive effects over the last few months, would have been impossible to execute since the private sector would have to be compensated. The oil opening per se implied a departure, albeit clandestine, from OPEC. Since I have never been convinced that OPEC was losing relevance, I publicly opposed this oil opening policy, asking that its implications be democratically discussed.

I also considered that the Venezuelan oil industry benefited from being divided into several different entities. Even though this evidently represented additional costs, it was a good way of achieving mutual and cross supervision by experts in the industry. 

Therefore, when we were sold a restructuring based on supposed and overestimated savings (an annual figure of US$ 2 billion was brazenly bandied about) and which simply implied a total centralization of power, I loudly cried foul.

We were told that due to the lack of internal resources it was necessary to invite foreign capital to participate in the development of basic activities such as exploration and production.

Soon after, as if by magic, resources suddenly appeared tand were quickly invested in the “strategic” but very poorly explained building of gasoline stations that could also sell fast food. I felt misled and publicly informed PDVSA that the risk of Kuwait building a gas station in Las Mercedes in Caracas in order to compete directly and sell its ultra-light gasoline to the local market was really very slight.

I also protested, and continue to do so, when PDVSA, in the face of an upward trend in outsourcing of services, created the CIED in order to sell seminars and courses to captive clients. I protested and continue to protest when PDVSA, without much explanation, used an inmense amount of resources to finance studies of commercial ports in rivers in the eastern part of the country, for example.

The President of PDVSA should occupy his post as if he were a soldier on a battlefield on a sacred national mission. It wrenched my soul to see how he thinks he is a General Patton instead, and finds his way onto an entire page of the Wall Street Journal as Executive of the Year. Perhaps it should have been Entrepreneur of the Year.

Three years ago, as I traveled in the interior of the country, I observed how high interest rates, new taxes and a foreign exchange policy that in real terms strongly revalued the national currency were taking the country on a wild ride towards recession. 

At that point, while expressing my anguish at the possibility of a permanent loss of jobs, the then President of PDVSA, as if he were any common politician on TV, happily informed whoever would listen, that Venezuela was "condemned to success”. I almost cried with rage.

Last week, Rowan wrote that PDVSA’s ex-President, Luis Giusti, had produced a bonus of US$ 2.3 billion for the state with the oil opening - as if this were not simply the fruit of oil income perceived in advance, unfortunately already frittered away.

Rowan wrote: “Giusti’s strategy was brilliant. From a national perspective, Giusti was a patriot”. With respect to the recent changes at PDVSA, he wrote: “The development of this country has just been set back twenty years. The only institution in active transition to modernization, professionalism and meritocracy in Venezuela has been sacked. It’s been vandalized, ruined by ideologues from a Dark Age”.

I recently registered a NGO called Petropolitan, and through it I am fighting against the taxes on oil products imposed by a majority of the oil consuming countries of the world. These charges prevent oil-producing countries from receiving what they should rightly be receiving from the sale of their non-renewable resources.

The real value of an item of goods is normally measured at the consumer level, and in this sense the average value of a barrel of oil in the world might have already surpassed US$ 100. Of that value, up to a few months ago, the producer only received US$ 10, and today still has to settle for a meager US$ 20. I hope that someday when the absurd confiscation by taxmen in the developed world is eliminated, they will receive, say US$ 40 or more. If this defense of what is rightly ours classifies me in Rowan’s world as being one of the ideologues of the Dark Ages, then that is exactly what I am, and am proud of being so.

Daily Journal, Caracas, September 24, 1999

Petropolitan: http://petropolitan.blogspot.com/1999/09/close-to-crying-yankee-go-home.html

An e-mail to our accusers

We were recently surprised by a lawsuit brought against Venezuela by an organization of independent oil producers in the State of Oklahoma in the United States. The suit was based on the charge of dumping oil. 

In simple terms, 'dumping' occurs when one country exports products at a price lower than their real cost of production or at a price lower than the sales price in its domestic market. In order to calculate the real cost, one must consider the effects of all state subsidies. Dumping is considered to be unfair competition and is therefore prohibited. If proven in this case, it will also give rise to serious retaliatory commercial measures. 

As an outside observer, I feel that this suit is a real threat to Venezuela, but I also think that if may be an opportunity as well. To understand this, it is important to analyze who is really behind this lawsuit. 

There is an incredible amount of oil wells in the United States, hundreds of thousands. In Texas alone, it is said that there are at least sixty thousand wells that produce less than one barrel per day. Due to low oil prices, the number of wells that have reportedly been shut down is equally as incredible. An organization known as IPAA estimates that more than 136,000 wells were shut down between November 1997 and February 1999.

Behind these wells are not only large oil companies, but also hundreds of thousand people, small businessmen, workers, widows who receive royalties, suppliers of goods and services, all of them voters at one time or another. It should, therefore, not surprise us that this sector possesses great political clout. 

To Venezuela, this means that, even though the lawsuit may not be based on solid ground, it may be more successful than we at first thought. We just have to remember that a small interest group in the State of Florida managed to block the usage of Venezuela Orimulsion. Can you imagine what a large group can do? Since I have always thought that Venezuela was lax in protecting its interests in the case of Orimulsion. I honestly hope that in this more recent case, authorities will be more careful, and will take the necessary measures. 

However, as I mentioned above, this lawsuit may not just be a threat, but may present an opportunity for Venezuela as well. For months now, I have been promoting a movement I have named Petropolitan. The purpose of this group is to protest and make known the fact that oil producing countries are subjected to commercial discrimination when the consuming nations apply taxes or duties so that producers receive only a fraction of the real value of their oil. 

For example, according to the Retail Motor Industry Federation of the United Kingdom, the price of premium unleaded gasoline on June 4th, 1999 (one month ago) at the pump was US$ 4.17 per gallon. Out of this elevated value, evidently real since the English motorist is willing to pay it, only US$ 0.43, that is 10%, ends up in the producer’s pocket. The distributor receives US$ 0.26 and the English tax authority, the only real rentist in this chain, stays with US$ 3.48, representing 83.5% of the retail sales price. 

When we compare the US$ 3.48 levied by the [UK] taxman to the US$ 0.43 received by the oil producers in lieu of a non-renewable asset, it is evident that the duty is more than 800%. This duty is unquestionably a main reason for the low oil income, not only ours, but of those in Oklahoma as well. 

The situation gets worse with every day that passes. Based on laws already passed,we can foresee that the price per gallon of gasoline in Europe will be US$ 10 by the year 2006, of which the producer will receive only US$ 0.50, that is, 5%. Germany, for example, has recently approved a “shift from personal income tax to an energy users tax”. These taxes will be used by the German government to “finance the lowering of old age security premiums”. 

By the way, it is not only Europe to which I refer since most of the world is currently levying taxes and duties on oil. One of the few exceptions is the United States where there has been more moderation. Because of the above, and were the decision mine, I would be on the next plane to Oklahoma in an attempt to educate our accusers as to who our real enemies are. I would tell them that the latter are laughing while we fight over the crumbs, and I would try to convert them into powerful allies. 

Executives at PDVSA are either not seeing the forest for the trees or have been lulled to sleep by their own internal realities. In any case, they do not seem prepared to take radical steps. Likewise, the common citizen is too far away from the industry to react with strength in the short term. 

Who knows? Maybe the small Oklahoma producer, the one that suffers and personally feels the current injustices of this situation, the one that most likely has the will to go out and avidly defend his interests, the one that belongs to a country that can defend bananas it does not produce, the one that today is our accuser, may ultimately be the ally that Venezuela really needs. Just in case, I have already sent them an e-Mail.

https://petropolitan.blogspot.com/1999/07/an-e-mail-to-our-accusers.html

A comparative look at Venezuela, Honduras

I have just returned from a few days of work in Honduras, which as everyone knows has been ravaged by Hurricane Mitch. During this trip I had the chance to jot down some observations about our own country.

On volunteerism: I saw young men and women of the Peace Corp arriving at the airport in Honduras, ready to cooperate as best they can by helping poor communities combat hunger, educate their children and fight AIDS among many other things. These young North Americans, all graduated, will work in a strange country for two years without remuneration of any sort and under immensely difficult circumstances given the comfort they leave behind at home.

In Venezuela, on the other hand, we have had to set aside a budget of Bs. 2.4 billion to entice our local “volunteers” to come forward to supervise what is to be an event of immense import for our country, i.e. the referendum calling for its own Constituent Assembly. 

When I think that our heroes of independence sacrificed their lives I can’t help but feel that it is a sad state of affairs when today we cannot even contemplate giving away one free day for our country.

On the evidence of crisis: I had the opportunity to visit many public offices in Tegucigalpa, Honduras, in which I found that most officials had to work in truly uncomfortable conditions in any small space or cubby-hole they we able to find.

God knows it is not my purpose to compare a crisis such as the financial one we are going through in Venezuela with the type of emergency, misery and loss of human life that nature has saddled Honduras with. In spite of this, I cannot help observing that in Venezuela, in which the financial crisis also created economic conditions that in turn created hunger (much of it due to the mishandling of the situation), many of the public offices today work in brand new offices which were recuperated during and after the collapse of the banking system, like the spoils of a war.

On information about the administration of government: I also had the chance of reviewing the Management Information System which allows Minister Manuel Zelaya Rosales, President of the Honduran Social Investment Fund (FIHS) to have exact information, day after day, about all the projects being undertaken by his office.

According to the information I have, the portable computer carried by the Minister wherever he goes contains information on at least 1,000 projects, schools, bridges, etc. that are currently under construction. 

On top of this, there is historical information about over 5,000 finished projects. 

The cost of a similar system is not very high today. Since the capture of the original information occurs only once and the system serves multiple purposes such as control, accounting, statistics, etc., it also has the potential of providing great operational savings.

In contrast, I recently read in the local press in Venezuela that it is impossible to find actual and up to date information as to how many employees are on the public payroll today. 

Having seen how the FIHS system works in Honduras, the only thing I can think of is that this level of information should be absolutely obligatory in any democracy worth its salt. One of the principal innovations our Constituent Assembly should produce is the right to total and instantaneous information about our government, something technically quite feasible today.

On gas stations: One clear coincidence between the two countries is the existence of a great number of sparkling new gasoline stations that offer, one way or another, to satisfy the consumers’ other needs. 

It is difficult for me to understand and accept that countries such as ours, with unattended basic needs such as food, education, health, transportation, water, electricity, etc., can develop models of economic development which offer this type of infrastructure as “evidence” of their success and potential.

I can perfectly understand that some of the up-scale neighborhoods have luxury gasoline stations for those who can and wish to pay more for service. Nobody can convince me that the recent epidemic in investment in gasoline stations responds to local free market decisions. 

“Someone’s” hand is manipulating the market in the name of free markets, and that must and will be paid for. For the moment, it seems that PDVSA will have to pay a part of the requirements for subsidies it has itself created.

Excited about the Constituent Assembly 2000

Like many Venezuelans, I have reflected on the Constituent Assembly. At first, I was one of those who believed that although it was true that it seemed necessary to make some changes to our Constitution, these, in any case, could be made through reforms, without the need to resort to what would undoubtedly be a process cumbersome.

Today, when the Constituent Assembly, due to its reception, is almost an accomplished fact, my approach becomes one of "if we are going to do it, let's do it well." Analyzed from this point of view, shaken off the fear of the process and embraced the hope of its potential, I must admit that I have become a fervent and enthusiastic defender of the Constituent Assembly.

My enthusiasm multiplied when I discovered that Venezuela has, at this moment, the unique opportunity to create, for the world, the first Constitution of the next millennium. To be able to live up to these circumstances, I believe it is essential to apply the Chinese proverb, which asks us to aim high for the stars because, even when we do not reach them, we will reach much higher than if we aim for something closer.

I do not downplay the importance of history and I believe that we can and should extract a lot of knowledge from it, when drafting a constitution. However, giving excessive importance to constitutional experts could make us lose an opportunity to thoroughly modernize our constitutional reality.

I accept that there are necessary reforms, which are situated within the context of a traditional constituent debate, such as those that concern the judicial power and the tax capacity of states and municipalities.

Likewise, we require reforms that arise from our own realities. Among these and given our disastrous experience, is that of limiting the State's debt. Because I am absolutely certain that, from time to time, we will have governments incapable of resisting the siren songs, ending up, at no cost, by mortgaging the future of other generations of Venezuelans, I believe that the limitation on the State debt must be have constitutional rank. If Venezuela had not incurred its external public debt, because there is a constitutional provision that prohibits it, I swear to you and I bet you my entire professional career, that thanks to that Constitution, Venezuelans today, "would go better to the supermarket."

Another reform, one of those originating in our own reality and that I consider necessary, is one that establishes the obligation that in the administration of State companies, there is effective representation of civil society. For example, I believe that a PDVSA Board of Directors, whose members were elected by popular vote, rotating a certain percentage of them in each national election, could be an excellent option, to ensure that there is no undue pressure from the political sector or of the oil technocrats.

Notwithstanding all of the above, at this time, what I most wish to highlight is the fact that, as a result of the great changes that have occurred in the world, there is an urgency to introduce constitutional considerations on aspects that have never been contemplated. , in their Magna Cartas, for any country. Allowing me, for these purposes, to suggest the following:

• The information revolution. If it can be stated that "a Democracy with hunger is not Democracy", it must be more valid to say that "a Democracy without information is not Democracy either." Is it not a citizen's right to be able to know the public payroll, the amount of the country's external debt, the “real” recoveries of Fogade, etc.?

There is no doubt that the technology that exists today, to collect and disseminate information, allows a society to have the right to demand from its rulers a level of information, dramatically different, than what could be contemplated when the constitutions currently in force were drafted. I believe that in our 2000 Constitution, the right of the citizen to be informed about government management, in a valid, detailed and real-time manner, should be enshrined.

• The power of advertising. Had they known, in their time, the impact that advertising media have today, I am sure that the drafters of the current constitutions would have introduced limitations to official advertising. The Nation, states, municipalities, government entities and/or state companies should be prohibited from spending a single cent on paying for advertising, clearly aimed at promoting the personal and political image of any public official on duty.

• The globalization. Without a doubt, just trying to redefine the concept of Nation, within what is a world, where global relations intensify, second by second, is a challenge whose importance is lost from sight. How proud it would be for Venezuela to be able to rediscover itself, in a way that guides and illuminates other countries that are lost, which is probably all of them.

Let us enthusiastically face the challenge of showing the world that Venezuela is capable of producing a Constitution that will be an example for the next millennium. Otherwise, not only will we have wasted a historic opportunity, but, to make matters worse, soon after, we would surely have to convene another Constituent Assembly...

Economía Hoy January 12, 1999

My Constitutional wish list

As do many Venezuelans these days, I have dedicated some time to reflection about the Infamous Constituent Assembly (La Constituyente). 

At the beginning I was among those that believed that, although it is true that our Constitution requires some changes, these changes could be made without having to go through what seemed to be an unnecessarily complicated process.

Today, this assembly, due to its enormous public appeal, is basically a done deal. My outlook, therefore, is now more in the realm of “if we are going to do it, let’s do it properly”. Having analyzed this point of view, having expunged my fear of the process and having embraced the hope in its potential, I must admit I have now become a fervid supporter of the Constituent Assembly.

My enthusiasm is based on the fact that Venezuela now has the opportunity to create the first new Constitution of the next millennium in the world. It is our challenge and our responsibility to ensure that this Constitution is in line with the requirements of this next millennium. To achieve this, we must follow that ancient Chinese proverb that states something like: aim for the stars, and although you may not reach them, you will surely reach higher than if you had aimed at something within easy reach.

I certainly don’t wish to minimize the importance of history. Certainly, we must take heed and learn from the past if we wish to come up with a good Constitution. 

However, if we allot excessive importance to the gaggle of “constitutional experts” that surround us today, we will most surely miss the opportunity to truly modernize our Constitutional reality.

I accept the fact that there are various reforms that are based on traditional constitutional debate. Among these are, for example, those that correspond to reforms in the judicial system and in the fiscal capacity of decentralized entities such as the States and the Municipalities to create and collect taxes.

Likewise, there are other reforms that are born out of our own particular realities. Among these, I have given special attention to the following two reforms.

The first is a strict constitutional restriction on public indebtedness, specially in light of our disastrous experience in the past. This is vital for our country, since we know with absolute certainty that every now and then, the government of turn will not be able to resist the bankers’ siren song, incurring in debt and mortgaging the futures of several generations of Venezuelans without producing tangible results. These limitations on indebtedness should be established in our Constitution.

The second reform born out of our own realities, is one that inserts an effective representative of civil society between the political and technocratic sectors. I personally consider that the Petroleum sector as well as other productive activities undertaken by the State (Sidor, CVG and Pequiven) should be governed by a Board of Directors whose members are elected by popular vote, rotating a percentage of them at every national election.

Notwithstanding the above, what I really wish to address is the fact that as a result of the profound changes that have occurred worldwide, it is urgent that we introduce aspects based on today’s realities that were never taken into account by any country in the world when drafting previous Constitutions, simply because similar problems never existed before. Among these I can highlight the following:

The information revolution: If we can say that a democracy with hunger is not democracy, we can also safely state that a democracy without information is also not democracy. 

Without a doubt, new technological advancements that make the collection and dissemination of information quick and easy also give societies the right to demand of its governments a level of information that dramatically exceeds the level present at the moment the world’s existing Constitutions were drafted. 

In this sense, Venezuela’s next Constitution must include the citizens’ right to be informed as to the government’s management of the Nation’s affairs. This information must be valid, truthful, detailed and in real-time.

The power of publicity: Should the drafters of previous Constitutions have been aware of the immense power that the public media can wield, I am absolutely sure that they would have included an article that limits the amount of publicity that governmental entities can undertake. 

To begin with, they would have put a stop to the spending often undertaken by a Nation, a State, a Municipality or a governmental agency or company on behalf of, and to promote the name of, a particular public official.

Globalization: Without a doubt, to try to redefine the concept of a “Nation” within a world in which global relationships intensify second by second is a challenge of incredible importance. 

What a source of pride it would be for Venezuela if we could find our way forward in a way that would guide and illuminate the other countries around the world (probably all of them) that have lost their way. 

Let us face this challenge with enthusiasm and show the world that Venezuela is capable of producing a Constitution that is an example for the world of the coming millennium. 

If we don’t achieve this, we will have wasted a golden historic opportunity. Worse still, we will soon have to call for another Constituent Assembly.

PS. 2023 I asked ChatGPT and in 2025 Grok: Can you visualize Artificial Intelligence being used to measure the effectiveness of governments? They both say YES!

https://perkurowski.blogspot.com/2023/08/ai-chatgpt-openai-can-you-visualize.html

https://perkurowski.blogspot.com/2025/03/grok-can-you-visualize-artificial.html

 

How can we all keep quiet?

Last week Venezuela issued 20-year bonds for a total of U.S.$500 million at an interest rate of close to 14 percent per annum. This implies service outlays of U.S.$70 million. The United States would pay only 6 percent for a similar issue. This means Venezuela must annually pay U.S.$40 million more than the United States. In spite of this, government officials qualify the issue as successful. Who are we kidding?

Although I am sure these Venezuelan officials were formally authorized to contract this debt, I am certain that they were not authorized morally.

I say this based on the certainty that capable, responsible and patriotic administrators would not have rested in their efforts to develop a healthier alternative for the country. An alternative different than simply paying more, so much more, in fact, that people queued up to purchase these instruments.

I also maintain that there should be limits to the cost at which the country is allowed to subscribe new debt. There should be a limit to the cost at which we, as a failed generation, have the right to saddle future generations with. I consider we have reached that limit. What’s is our government’s limit? Is it 25 percent, 100 percent, or is there no limit at all?

What other alternatives do we have? If there were a real political will to fight for the future of our country, the alternatives are infinite. Cut costs, use reserves, achieve the consensus necessary in order to use the vast real guarantees the country possesses in order to contract debt at lower interest rates, or simply contract debt at shorter maturities. Any which way, anything other than what was actually done.

For example, if the interest rate for Venezuela’s debt drops within one year to the levels Mexico’s debt is currently traded at (9.8 percent), then, considering that there would be 19 years left to maturity and that the paper carries a fixed 14 percent interest rate, the country would have to pay U.S.$675 million to retire this particular debt issue. In other words, in one year the country would have incurred losses of U.S.175 million.

Someone could object and say that the situation could become worse and the 14 percent could actually become a bargain. I don’t believe however, that any government has the right to impose its pessimism for future decades. Should the country now actually implement some of the alternatives being discussed today, such as the partial sale of PDVSA in order to cancel existing debt, the rates the country could command would fall to the same levels as those of the United States.

In this case, the losses incurred with our most recent issue would be stratospheric (hypothetically, if this were to occur within one year from now, the losses would reach U.S.$450 million).

Some may argue that the political conditions that would allow the development of an alternative that was not of least resistance do not exist. I can’t accept this since it is the responsibility of leadership to create these political conditions or, if it fails, to resign. The governability of a country must mean more than simply being able to avoid a coup d’état. The damage caused is not limited to the fact that we must now pay higher interest rates for the U.S.$500 million.

The fact that we forced the issue upon a market with low receptivity by simply raising the interest rate, means that this will be used to measure future opportunities in Venezuela.

It is enough to note that this increase in interest rates will be reflected immediately in an increase in financing costs for the private sector and in a reduction in the income we could receive from future privatizations.

The interest rates fixed for Venezuela are approximately 3 percent higher than those applicable to Mexico and Argentina today. This means a difference of U.S.$15 million per annum.

Our official spokesman explained that the international markets unfortunately perceive a higher credit risk in Venezuela since the latter is an oil producing country. I am truly amazed by the sharpness and realism of this analysis.

As if they were rubbing salt into the wound, the announcement of the bond issue was published simultaneously with an ample, and probably costly, campaign launched by Fogade in which they exhort failed Banco La Guaira’s debtors to “comply with the payment of their obligations.”

This exhortation comes a full four years after the day this institution was intervened by the government. The tranquility with which the government went about the collection of these debts doesn’t seem compatible with the urgency reflected by the high interest rate accepted in the latest bond issue.

I have three beautiful, intelligent and talented daughters. Thank God they have had opportunity to visit various parts of the world and enjoy them immensely. Their good knowledge of languages and computers, as well as their open-minded thinking about the new realities make them ideally suited for a globalized world. 

My eldest daughter recently told me that, in spite of all this experience, the place she likes the most and in which she wants to live is Venezuela. How can I keep quiet?

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.