domingo, 20 de abril de 2014

Venezuela: A Call for Democracy

A repeated misinformation screed by Venezuelan government officials is that opposition plotters want to overthrow the government, trash the constitution and return to the failed policies of the pre-Chávez past. This refrain is used in public appearances and pronouncements under the Goebbels theory that if repeated enough, enough people will believe it to be the truth. Facts, however, belie these statements. Despite blatant electoral distortions, the opposition has repeatedly participated in elections. Opposition leaders have recognized the failings of the political model that led to the unrest of the 90’s, and in most instances defend the social net created under Chávez. Some, like the imprisoned Leopoldo López, have done community organizing to improve conditions in poor neighborhoods, using the Chávez model. That is the positive Chávez legacy: recognition of the need to redress social and economic disparities.

Negative aspects of that legacy include the virulent sectarian discourse used to belittle and prevaricate about the opposition and any perceived enemies. Chávez’s famous smelling of the sulfur in the UN, referring to President GW Bush, is pittance compared to the epithets and lies used against domestic opponents. A new low is the constant homo-hateful innuendos used by Maduro during the presidential campaign and to this day against his rival Henrique Capriles, as well as blatant dismissive sexism against opposition assemblywoman Maria Corina Machado.

Mud slinging could be comically entertaining if the stakes were not so high, as pervasive sectarian speech is a threat to any democracy. Belittling the opposition, characterizing opponents as enemies, and the call to “Socialist Homeland or Death!” used to end public appearances has created a fractured society—and is probably behind the disregard for life reflected in the 70 murders a day in 2013. Hate speech comes in many forms but is always a creeping social cancer.

Polls reflect a majority of Venezuelans consider their nation to be in crisis. In a recent Op-ed in the NYT Venezuela’s president, Nicolás Maduro, sought to defend his government and policies with facts supporting his position (Venezuela: A Call for Peace). But many of those facts are either outright misrepresentations or panglossian distortions. His sound-bite essay needs a reply with long facts.

Per Capita National Income and the GINI Coefficient, Revisited.

Economic and social numbers are sometimes difficult to read and with propaganda masters behind them can be obfuscating. Despite information limitations,however, inferences can be made that contradict Maduro’s assertions of increased social welfare under chavismo.

On its face, Gross National Income per Capita (GNI/pC) in Venezuela has increased from a little over $4,000 in 2004 up to almost $12,500 in 2012. During this period, it should be noted, the price of oil increased nearly 90%. The Gross National Income, as calculated by the World Bank, quantifies the GDP in local currency converted to US$ and adjusted for inflation. Unfortunately, the official GNI/pC may not reflect realities on the Venezuelan kitchen table.

It is illegal since 2010 to inform or publicize or use any ForEx number that is not the official rate of exchange, i.e. 6.30 bolivars per dollar. Brokers went to jail for posting “parallel market” exchange rates, and at least eight websites doing the same have local access blocked while their authors remain anonymous to avoid prosecution.  Any official number, such as the GNI/pC can legally only be calculated using that official exchange rate. 

In 2010 the parallel (black) market rate—the rate at which many businesses were forced to operate due to the Byzantine and corrupt bureaucratic entanglement that the dollar allocation system has engendered—went from 6.30 to 9.14 bolivars per dollar at year’s end. That, on its face, would imply a devaluation of close to 45%. It is estimated that the government itself has been deficit financing by intervening in black market transactions, supplying about 20% of commercially needed dollars. To be fair, not all transactions are in black market dollars, but if only 30% (including government participation) of them are, as companies and individuals are forced to this market for their needs, the estimated devaluation for 2010 would have been around 14%.

estimated supply
Value (rate) in 2004 (Bs per US$)
Bs 1.92

Official Rate 2010
Bs 6.30
70% of demand
“Black” Rate end of 2010
Bs 9.14
30% of demand
Weighted Value 2010
Bs 7.15

“Black” Devaluation Jan-Dec 2010

“Black” Devaluation 2004 to 2010

Weighted Devaluation Jan-Dec 2010

Official Rate 2012
Bs 6.30
70% of demand
“Black” Rate end of 2012
Bs 17.33
30% of demand
Weighted Value 2012
Bs 9.61

Weighted Devaluation 2010 to 2012

Official Rate 2013
Bs 6.30
65% of demand
“Black” Rate end of 2013
Bs 63.70
15% of demand
SICAD I (Preferential allocation rate)
Bs 10.00
25% of demand
Weighted Value 2013
Bs 20.19

Weighted Devaluation 2012-2013

The same calculation implies a devaluation of over 52% by 2012, as the black market rate shot up to Bs 17.33 per dollar. What this means is a brutal recessive adjustment in the real GNI/pC from US$10,140 in 2009 to $5,916 in 2012, a 52% decrease in the official numbers. The seeds of chavista economic disaster were already bearing fruit during this period, under Chávez.

Lack of transparency and arcane multi-tier rates make it difficult to estimate accurate numbers but certainly a decrease in national income per capita has occurred. Even being generous, the Gross National Income per Capita was reduced at least by a third over 2010-2012.  In 2013, with a black market rate of 63.70 Bs per dollar, the estimated devaluation over 2012, notwithstanding the new preferential allocation rate tier, was around 120%. Maduro claims solutions are in the works to diminish the pressure on the currency, including a market-based auction rate, which at its launch placed free market dollars over 50 Bs per dollar, and a tourist/visitor rate, which in effect will extract hard currency from anyone visiting Venezuela (current black market rates - note: distribution of this information is illegal in Venezuela).

The pressure on the currency has a twofold origin. First, the productive sector collapsed; after a frenzy of repeated expropriations and takeovers, many industries and farm production shut down. This led to increased imports of even basic staples—flour, cooking oil, sanitary napkins... Second, the greatest generator of foreign currency, the oil company PDVSA, sells its products to the government which in turn barters oil for services or sells it below market prices in petro-diplomacy efforts. The government has not paid PDVSA and has a gigantic debt with the company: $23bn as per PDVSA’s 2012 financial statements.

This is not sound economic policy. The economic consequences threaten hyperinflation. The immediate result is negative wealth distribution and this is what the Coefficient of Equality of Income Distribution (GINI) reflects. Equal distribution of increasingly scant resources is not progress. The GINI coefficient for Venezuela (39 in 2011) indeed points to a greater equality in distribution of wealth than in the past, it is the same as countries like Mauritania and Malawi, more equal distribution than in the US and a little less than in Bhutan, India or Uzbekistan. But to use the GINI the way Mr. Maduro used it in his commentary (“Venezuela has consistently reduced inequality”) is to misrepresent it as an indicator of social progress. Unless the economy as a whole creates wealth (measured by proxy with GNI/pC), this coefficient is meaningless.

Claims of poverty reduction solely by chavista policies are also dubious at best.  Poverty and indigence have decreased in Venezuela, but ceteres paribus, likely it would have been the case regardless. Chile and Colombia, countries with similar societies, reduced poverty in the same magnitude if not greater than that of Venezuela, while not using anything close to the Chávez model. According to the World Bank between 2005 and 2011 poverty declined in Venezuela by 22.16%, while in Colombia and Chile it declined by 31.14% and 20.88% respectively. 

Indicators such as literacy and infant mortality (according to UNESCO) have had positive trends over more than forty years and, during chavismo, these trends continued. Education from elementary to graduate has always been free, as a constitutional right throughout the 20th century and before that by presidential decree promulgated by president Antonio Guzmán Blanco on June 27, 1870. Health care as a universal right has always existed in Venezuela and all governments have attempted to provide it in the past. These are not chavista achievements or ideals, as Maduro claims.

Reasserting policies to entrench chavismo, the Minister for Education, Héctor Rodríguez, recently said “it’s not as if we’re here to raise people out of poverty and have them become middle class squalids.” Squalid is the routine derisory term used by the government to describe the opposition. This statement was made while announcing mandatory rules for teaching Chávez-socialism, starting from Pre-K, in all schools, public, private or parochial. A continuous history rewrite.

Legitimacy of the Government and the Protests

“Since 1998, the movement founded by Hugo Chávez has won more than a dozen presidential, parliamentary and local elections through an electoral process that former American President Jimmy Carter has called ‘the best in the world.’ Recently, the United Socialist Party (USP) received an overwhelming mandate in mayoral elections in December 2013, winning 255 out of 337 municipalities.”  Thus spake Maduro in the New York Times.

This statement has several problems. The USP in fact won 240 municipalities. The other 15 Maduro claims are from splinters from that unity, including so called “true chavistas” that reject him. Overall in those elections, the USP lost 23 municipalities to the non-leftist opposition. This opposition now holds 75 municipalities, including all major cities in the country. The Maduro regime has responded by curtailing access to federal services and depriving legally entitled funds to opposition municipalities; in the same way it has done to states held by opposition governors.

But the use of former President Carter to defend elections held in Venezuela is most egregious and upsetting. Maduro refers to a Carter speech from September 2012, yet fails to mention that it was regarding the technology of the balloting system. The article he links to is about the fully automated touch-screen voting system, developed in Venezuela, which uses thumbprint recognition technology and prints receipts to confirm voters’ choices.

Maduro fails to mention the Carter Center for Democracy findings on the 2012 and 2013 presidential elections summarized as: “There is not agreement, however, about the quality of the voting conditions and whether every registered voter is able to vote one time, and only one time. In addition, the report finds a series of inequities in campaign conditions in terms of both access to financial resources and access to the media, which diminish the competitiveness of elections, particularly in a legal framework that permits indefinite reelection of public officials.”

It is noteworthy that in 2003 a drive to recall then president Chávez was sponsored by the opposition. Over three million signatures were gathered. Hugo Chávez announced in February 2004 that the list of names had been seized by the government. The list was published on-line and, in effect, became an enemies list with many signatories fired from their jobs, expelled from their schools and generally persecuted in an electoral intimidation tactic by the regime to fight the recall referendum later that year.  To this day, intimidation continues.

In April of 2013 the special election called on account of Chávez’s death resulted in the election of Nicolas Maduro, his hand picked successor. The official results were 50.61% to 49.12%, a difference of close to 230,000 votes over opposition leader Henrique Capriles. Despite calls by the opposition for a full recount and requests by UNASUR and the OAS for the same, the National Electoral Council, stacked by government loyalists, did a selective sampling audit and certified the results. The opposition has never conceded the legitimacy of this election, only acknowledged the de facto regime. In light of the Carter Center report regarding the abusive use of incumbency and media by the government and the continued intimidation of the electorate, these results at the very least are suspect, reflect a souring of chavismo among the population, and indicate massive opposition to the regime.

The legitimacy of the incumbent Maduro’s ascension—notwithstanding birther claims by the opposition—is constitutionally questionable.  Article 229 prohibits the vice president or any governor from being elected president.  Henrique Capriles resigned as Governor of Miranda state on June 6, 2012 to run against Chávez to whom he lost in October. Capriles was reelected governor in December 2012 and subsequently ran against Vice President Maduro upon Chávez’s death. No record of Capriles’ resignation for this election is available but that does not give Maduro a free pass. Any waiver to either candidate would contravene the constitution.

On the other hand the protests on the streets are constitutionally protected not only by guarantees of freedom of speech and assembly. Article 350 recognizes the right of “the people of Venezuela… to disavow any regime, law or authority that goes against democratic values, principles and guarantees, or that infringes human rights.”

Besides the undermining of democratic values and principles described above, over the last two months there have been arrests of opposition leaders, divestiture of elected officials and at least 81 documented human rights violations. There is continued harassment to opposition newspapers through millionaire lawsuits and withholding of foreign currency to buy paper, and intimidation and outright closures of media in general, including CNN and the regional news channel NTN24.

An Illusion of Democracy

What began as a student protest against crime in the streets has become a festering unrest.  It is hard to gauge the scale of the protest because the government suppresses information, while the opposition magnifies and publicizes any incident. But by calling the recent round of exploratory meetings to create “dialogue” roundtables the government tacitly acknowledges there is a political crisis.

This call for dialogue is a savvy political move by Maduro to splinter the opposition, trick an international audience into believing in a mirage of conciliatory moves, and attempt to create a puppet opposition for an illusion of democracy. In 2002, after the failed coup against Chávez, similar talks were held and promises of tolerance made. Those promises were all broken by the regime. Signatories of that accord include the current president. The record is not good, but internationally talk of sanctions has been suspended while the “dialogue” unfolds. Dialogue talks--live on TV-- that began with Maduro asserting: “I am not here to negotiate or make any deals”.

Just because a regime holds elections it does not mean it is a functioning democracy. Otherwise places such as North Korea, Cuba, Syria, Saddam’s Iraq and Mubarak’s Egypt would be considered showcases of democracy with reportedly massive happy voter turnout. As of Jan. 2014 Venezuela was ranked 133rd out of 150 countries in the World Democracy Profile by, labeled a “hybrid regime” (ranks below “flawed democracy”) by the Economist Intelligence Unit, and ranked 121 out of 128 in the BTI (Bertelsmann Stiftung’s Transformation Index) measure of democracy and freedom.

National Assembly Member Maria Corina Machado
leaves a rally attacked by tear gas.
Symptoms of lack of democracy include:jailing opponents, suppressing protests, repressive militias, media control,and a rigged electoral process. In a cynical turn of events on the same day President Maduro’s essay “Venezuela: A Call for Peace” was published,opposition leader Maria Corina Machado was being tear gassed in a public rally and divested of her congressional seat. Venezuela is not a “participatory” democracy. At best it can be called a Totalitarian Democracy.

The situation in Venezuela has parallels to Iran 2009. At that time, after a contested election, images of popular protests and counter repression by government militias and hit squads filled TV screens and news outlets.Social media was awash with feeds of the protest. The death of Neda Agha-Soltan seared many an eye and there was a belief that change would come out of the sacrifice and pain of so many youths.
To this day Iran, a staunch Venezuela ally, remains under a totalitarian regime that keeps the peace with an iron fist.

Background and references:

Leopoldo López:
WikiLeaks – LL goes to the Barrios to Gather Political Support:
LL in Popular Barrio Forum:

Henrique Capriles
HC has Sex with Gorillas:
HC Leads a Homosexual Prostitution Ring:

Maria Corina Machado
MCM is an Empty Doll:
MCM Needs to Keep Her Place:
MCM is not Smart, Needs Help:
MCM is Pitiful:

Illegal Dollars
New Law makes it Illegal to Buy/Sell Dollars as Commodities:
History of Foreign CurrencyExchange Regulations:
Failed Attempts to Curtail Black Market Dollars:
Arbitrage and the Bolivar:
Currency Inflation:
History of Bolivar devaluations:
Historic Value/Black Market Rates of the Bolivar:
Economic Snapshot Venezuela 2013:

Income and Income Distribution (GINI)
World Bank Data, Venezuela:
World Bank Data, Chile:
World Bank Data, Colombia:
GINI Index, World:
Our Goal is not to Make Squalids out of the Poor:

Oil/Oil Prices
PDVSA Financial Statements:
Historical Price of Oil, in Constant Dollars:

Industrial and Farming Collapse
Despite Official Numbers, Shortages Increase:
Venezuela Economy in Numbers:
Structural Productivity Problems:

Electoral results, Municipal Elections 2013:
Official electoral results, Municipal and Presidential Elections 2013:
Concentration and influence - undermining opposition districts;
Municipal results 2013:
Carter Center for Democracy Report on Venezuela:
Carter speech in Atlanta:
Human Rights Watch report on Chávez:
Electoral enemies list by the Venezuela government (Human Rights Watch report)

No Negotiation or Deals
The Implosion in the US’ Backyard:
The Revolution is Non-Negotiable:

Shutting Down the Opposition
Close the Radios:
Control Print Media:
Not a Democracy:

Carlos J. Rangel
The Failures of Chavismo:
The Social Explosion In Venezuela:
Blogspot – On Iran 2009:
Campaign Journal 2008:

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