Venezuela...

Well, the death throes of Venezuela continue apace.  I will not reiterate how I've been predicting this for years because it was, well...predictable.  Where Venezuela is now is where ALL SOCIALISM ends.  Always.  Full stop.

And, frankly, the Venezuelans deserve their fate. They bought the bill of goods that Chavez and his criminal gang were selling for years.  Enthusiastically too.  They fell pathetically into a trance under the transparently cynical cult of personality that Chavez built around himself.  And they had the misery of nearby Cuba as well as the recent examples of the USSR and Argentina to learn from.  But learn they did not.  They were dupes of a world-historical magnitude...some of the greatest suckers ever to walk the planet.

Now the New York Times (and others in the liberal MSM, redundancy alert), who can't avoid the situation any longer (hey, where are Sean Penn, Harry Belafonte, and Bobby Kennedy Jr. now, huh??) are reporting on it, but in a classic libtard way.  Here is the Crimes reporting on the "public health" crisis.  Public health, huh?  Venezuela has an EVERYTHING crisis.  Yeah, a total meltdown of every aspect of society will affect healthcare, but yeoman work there NYT for finding a liberal hobbyhorse angle rather than the all-encompassing destructive force that is authoritarian socialism.

Other coverage seems to chalk Venezuela's problems up to bad luck in the form if collapsed oil prices.  Yeah, low oil prices hurt, but Venezuela's problems are not solely oil-related, they are, again, everything-related.  The entire economic system was wrecked by the destruction of productive capacity, both in physical and human forms.  This wasn't bad luck, it was a conscious policy crusade of the Chavistas, and oil was just the mechanism by which the Potemkin facade was propped up.

Many lessons here.  First and foremost, for Americans, is to see how the media aid and abet this kind of destruction, by turning a blind eye, soft-pedaling and obfuscating.

Road to Serfdom 70% Travelled in Venezuela

On the occassion of F.A. Hayek's 110th birthday there are likely alot of commentators rightly quoting or otherwise employing material from Hayek's classic The Road to Serfdom. If you haven't read it, you should, but if you don't have the wherewithal right now, you don't necessarily have to read it because the what the book talks about is literally happening in real time, right now in Venezuela. (Truly handy if you missed the last time this book was re-enacted in real life a few years ago in Zimbabwe.) In Venezuela, it's been slowly unfolding now for awhile, but it has been as predictable as the sunrise. This latest development sets the stage for another easily predictable turn of events. So, Chavez steals all this oil and gas infrastructure. He'll be hard pressed to find people to work the equipment. The equipment will also suffer wear and tear. I doubt Hugo has a very large maintenance capex budget. Actually I bet that it is not much higher than zero. In time - a short time - this equipment will cease to be operable and no good to him. So he'll have to try to steal some more stuff, but most of the potentially stealable equipment will be long gone out of Venezuela. Without equipment and manpower you can't get oil out of the ground. Ergo, Chavez is spiralling fast toward the point at which he has no more oil, which is the point at which most people in Venezuela will have almost no prospects, little food, and alot of anger.

Death Throes for Venezuela

Belmont Club Guy Richard Fernandez pens "Death of a Nation" in re Venezuela.

I've been saying this for awhile...always early but never wrong, baby (OK, sometimes wrong).

Also, there was an article on Bloomberg.com the other day that Venezuela was stiffing the printing companies that are printing up planeloads of bolivar notes.  Not good, at some point those guys will need to get paid or they'll cut Maduro off.  No more printing money, in Venezuela's situation, and the economy will crater into a barter system.

Finally, there is alot of misery in Venezuela, but we should have ZERO sympathy.  In fact we should cheer it. Chavismo is just another iteration of the inherently flawed organizing principle that is socialism, and we need constant reminders that it is a failure, lest we resurrect and maintain an enthusiasm for it in other parts of the world.

Look Up "Political Risk" in the Dictionary...

and this is what you'll see:










After months of demanding that foreign oil companies agree to cancel long-standing operating contracts and sign joint venture agreements (where Venezuela gets controlling equity stakes virtually for free), the Venezuelan government is now strong-arming its foreign oil company partners to comply by claiming they owe hundreds of millions of dollars in back taxes. Bloomberg is reporting that Venezuela, the fifth largest oil exporting nation, will oust foreign oil companies from the county if they don't pay the taxes that the tax authorities have just recently realized that these oil companies owe. Venezuelan dictator Hugo Chavez has been desperately spending his nation's oil wealth on keeping the lid on revolutionary, pro-democracy forces that are boiling over. The national oil company still hasn't recovered from the 2002-03 general strike against the Chavez regime, and the reduced production has meant less oil profits to buy support in the form of subsidized food and healthcare. So Chavez needs to expropriate the production and the revenues of foreign companies. Chavez is taking his cue from Vladimir Putin. Taking a cue but not learning a lesson. Prior to Putin's similar expropriation, via those back taxes, of Khodorkovsky's Yukos, foreign companies were tripping over themselves to invest in Russia and Russian oil exports were growing at 10%. Now, Russia is an investment pariah and exports are growing 1%.

Venezuela is fast becoming a pariah for investment capital and will soon feel the pinch even harder as the inevitable retreat of capital causes infrastructure to erode and supply to slow. The supply picture coming out of Venezuela can only add to the upward price pressure of gas in the US. Someone tell Bill O'Reilly.

UPDATE: More here. I'm afraid Chavez is going to gain in popularity, not necessarily in Venezuela, but worldwide. Soon Fidel will be gone and the world's naive utopians need an idol. Stupid college kids ten years hence may well be wearing Hugo t-shirts.

Oil to Venezuela? Send It C.O.D.

It's not a new story but it remains evergreen as it appears there somewhat of a resurgence in affinity for socialism in the West, but Venezuela, with the world's largest repository of petroleum reserves, must import oil.  Such a scenario is always a good time to highlight the great quote from socialist British MP Aneurin Bevan.

Famous British Labor politician Aneurin Bevan once dismissed the possibility of radical unionism hurting Britain's coal industry by saying " “This island is made mainly of coal and surrounded by fish. Only an organizing genius could produce a shortage of coal and fish at the same time.”

Of course, a shortage of coal is exactly what Labor's policies went on to produce, highlighting leftists' typical ignorance of the workings of the world.  Plentitude of a useful commodity is meaningless as to whether humans get to benefit from it.

The latest twist is that Venezuela is on credit watch and oil suppliers are demanding cash up front.

A build-up of tankers has been reported off Venezuela as oil suppliers began to ask for pre-payment from state-controlled PDVSA for crude and products cargoes.

Reuters cited five companies involved in deals as saying there are worries over PDVSA’s cash flow.

The report said Maran Tankers’ 158,000–dwt suezmax Maran Pythia (built 2009), chartered by Statoil, loaded on 19 October in Angola and has been waiting at Curacao to discharge since early November.

The evidence is piled to the heavens, but we always forget and fall prey to the siren song anew -  socialism is destruction, socialism is anti-human, socialism is evil.

Chavez Invents New Basis for Legitimacy

Is increasingly stupid and desperate-sounding rhetoric a sign that Hugo Chavez is getting scared? Latest wisdom from El Commandante: The Russians want me to rule Venezuela.

Venezuela: Chavez Says Other Nations Want Him In Power
Stratfor Today »-->February 4, 2010
Venezuelan President Hugo Chavez announced Feb. 4 that Russia and other nations with major investments in Venezuela want him to continue in power, Globovision reported. Chavez said that if the opposition returned to power, oil in the Orinoco Belt would belong to the United States.

That's rich. The Russians! Um, er, what about the people of, say, Venezuela? Do they factor in?

Once Again...Early But Never Wrong...Venezuela Version

Well, I've been early on this call for awhile but it seems that Venezuela is finally, not just circling, but going down the drain.  I view Mary O'Grady at the WSJ as a suitable authority, and she says civil war is either here as we speak or inevitable now.  There's not much more to say at this point, except to take ongoing digs at all the useful idiots like Danny Glover and Sean Penn and Robert Kennedy Jr. who touted Chavismo with patently asinine assertions such as 'Venezuela has great healthcare.'  That and to watch the bodies pile up.  Such a tragedy.  Anybody with a cursory understanding the history of the 20th century could have seen this coming.  Worth reprising my view...

Where Venezuela is now is where ALL SOCIALISM ends.  Always.  Full stop.

And, frankly, the Venezuelans deserve their fate. They bought the bill of goods that Chavez and his criminal gang were selling for years.  Enthusiastically too.  They fell pathetically into a trance under the transparently cynical cult of personality that Chavez built around himself.  And they had the misery of nearby Cuba as well as the recent examples of the USSR and Argentina to learn from.  But learn they did not.  They were dupes of a world-historical magnitude...some of the greatest suckers ever to walk the planet.

P.S. Here is my next prediction, which may take years to prove true - the Obama administration clandestinely propped up the Chavez/Maduro regime

Is Venezuela Finally Going Over the Falls?

I've been charting the disintegration of Venezuela almost since the beginning of this blog eight years ago.  If you've read Hayek's Road to Serfdom or been even marginally familiar with the history of Soviet Russia, you could have predicted Venezuela's demise with stunning accuracy. 

Has any country ever followed the classic playbook of self-destruction as faithfully and fallen apart as predictably as Venezuela?

In the latest, the military has taken over an electronics chain in order ensure "fair" prices on things like wide screen TVs.  I don't have to go into how stupid this policy is, but suffice it to say that the bond market, which has been surprisingly unconcerned about Venezuelan socialism for some time, is taking notice.

Venezuelan bonds tumbled, sending yields to a 22-month high, after President Nicolas Maduro dispatched the military to take over a retail chain as part of his effort to quell inflation that’s soared above 50 percent.

The country’s benchmark bonds due 2027 fell 3.75 cents to 72.25 cents on the dollar as Maduro’s seizure of electronics retailer Daka and his warnings to other businesses to cut prices to “fair” levels deepened investor concern that growth is being choked off by government controls. Yields on the bonds soared 0.76 percentage point to 13.79 percent, the highest since January 2012, at 12:38 p.m. in New York.

Maduro, who took over as president this year after his socialist mentor Hugo Chavez died of cancer, is stiffening government-imposed price controls that have contributed to food and goods shortages across the South American country. Maduro blamed the “parasitic bourgeoisie” and said he’d impose limits on profit margins throughout the economy after inflation surged to 54 percent in October, the fastest pace in 16 years.

Chavez ruined the country but was at least able to paper over the destruction with his charisma.  Maduro won't be able to do the same.  This could the beginning of the end for Chavismo.

A Case Study In Economic Descent

Venezuela has enormous deposits of oil and natural gas. They want and need to extract those resources. Venezuela used to enjoy the willing cooperation of the global energy services industry that would happily supply the latest technology in the effort to tap the country's resources. Then Hugo Chavez started stealing (expropriating is the more polite term) the industry's property. So leading companies stopped working in Venezuela or at least they stopped bringing their most prized, modern technological assets to Venezuela. Thus you have the situation where valuable offshore deposits are being worked by aged and obsolete equipment, which tends to not work out so well. The Aban Pearl rig that sank was built in 1977 and had a bad history.

Long Predicted Fate Finally Coming to Venezuela...

Often early...

Chavez ruined the country but was at least able to paper over the destruction with his charisma.  Maduro won't be able to do the same.  This could the beginning of the end for Chavismo.

but never wrong...

President Maduro’s socialist government apparently has no strategy to deal with the impending catastrophe. It shapes up as one of the most appalling economic and fiscal collapses in world history.

and, as a bonus to those who have long understood that Venezuela followed a well-known path to its own destruction, we give you a classic maneuver of the state in economic death throes ...

Millions of pounds of provisions, stuffed into three-dozen 747 cargo planes, arrived here from countries around the world in recent months to service Venezuela's crippled economy.

But instead of food and medicine, the planes carried another resource that often runs scarce here: bills of Venezuela's currency, the bolivar.

The shipments were part of the import of at least five billion bank notes that President Nicolá s Maduro's administration authorized over the latter half of 2015 as the government boosts the supply of the country's increasingly worthless currency, according to seven people familiar with the deals.

Chavez Gets His Capital D

"The people never give up their liberties but under some delusion." - Edmund Burke

Today Hugo Chavez goes from being a dictator to being a Dictator. He will now embark on an aggressive transformation of Venezuela that will plunge Venezuelans deep into oppression.

Note this passage:
"The law also allows Chavez to dictate unspecified measures to transform state institutions; reform banking, tax, insurance and financial regulations; decide on security and defense matters such as gun regulations and military organization; and "adapt" legislation to ensure "the equal distribution of wealth" as part of a new "social and economic model."

Two of the time tested tactics of subjugating a populace are denying citizens the ability to benefit from installment credit and disarming them. The lack of installment credit quashes entrepreneurial activity and any other source of self-sufficiency making your only source of sustainment the government. The second tactic should be obvious, it is easier to take over someone's home, business or other property if you have guns and they don't.

Venezuela's economic collapse will be hastened and individual freedoms will disappear. Depending on the pace and extent of Chavez's transformation, Venezuela could erupt in chaos and bloody mayhem in a few short years.

I fear for the Venezuelan people, but I don't weep for them, they are getting exactly the government that they asked for. They have fallen for the delusion whereof Burke spoke.

On another note, Rafael Correa isn't wasting any time in Ecuador launching his post-election putsch, and they wonder why so many Ecuadoreans are hightailing it out of there.

Price of Pasta and Bread in Venezuela to Go Up 30%+

Anything with wheat in it is going up big time in Venezuela. Maybe ole' Hugo can get Ben Bernanke to come down and tell his citizens not to be worried because "core inflation remains well-contained", although I doubt that they eat iPads in Venezuela either, so this may not fly. So, here the Venezuelan people get yet another kick in the teeth from Chavismo, while El Jefe Himself says he ain't going anywhere, even if voted out. Are the Venezuelan people going to take this in stride? It'll come down to how much of that $100+ per barrel of crude gets lavished on them between now and and election day. Could get ugly.

Venezuela Imports First Ever Oil

Alas, the wonders of Socialism.  First coffee, now oil...

Venezuela, the country with the largest reserves of oil in the world, has just imported its first cargo of crude oil.  Ever.

Cue the Aneurin Bevan quote:

Famous British Labor politician Aneurin Bevan once dismissed the possibility of radical unionism hurting Britain's coal industry by saying " “This island is made mainly of coal and surrounded by fish. Only an organizing genius could produce a shortage of coal and fish at the same time.”

Of course, Labor policies went on to produce exactly that before Margaret Thatcher had to right the ship.

Of course, you could say that only an organizing genius (or socialism) could produce a shortage of oil in Venezuela that sits atop vast oceans of oil...

Venezuela Embarks On Well-Trod Path to Starvation

The WSJ has an excellent piece today on the front page that sheds some light on the agricultural collectivization that Hugo Chavez is inflicting on Venezuela. The article illustrates clearly the economic fundamentals of how collectivization results in failure - price controls induce supply shortages, inappropriate human capital is applied to the task, eroding property rights diminish the incentive to invest, etc.

History, not too distant history I might add, has stunning examples of the failure of farm collectivization and this article makes clear that Venezuela's experiment will be no different than Mao's or Stalin's. We can only hope for the sake of the Venezuelan people that the magnitude of the outcome will diverge from historical precedent. Having said that, let me repeat that I have little sympathy for the Venezuelan people, they have voted time and again for this fate, and are getting the government that they asked for. I'm afraid that the only way for them to get their country back will be through violent means. The only question is how much economic failure and loss of their liberty they will endure before they choose to adopt those means.

Chavez Making Final Push

Page 1 of today's WSJ has an article about Hugo Chavez's final push to take full control of Venezuela's oil industry. No doubt he will succeed, but you can mark it as the beginning of the end of Venezuela's decline. The foreign oil companies will leave, and their money, technology and know-how will go along with them. Venezuela's oil infrastructure will decay and not be replaced or upgrade with the latest, more efficient gear. Production will fall off and the only sector of the Venezuelan economy that isn't already dead will itself decline rapidly. This will spread economic misery as Chavez will have less money to spread around to buy poor folks loyalty. This will put a strain on his power and he will have to be more ruthless and authoritarian to maintain power.

While I have been reluctant to blame average Venezuelans because they have shown a degree of courage in the face of Chavez's depredations, they know where this is going and they seem to want it to get worse before it gets better so as to increase the chances of Chavez's eventual demise. I'm not ready to claim that Venezuelans are getting the government they deserve but I am not sure they are doing enough to save themselves. We'll see.

Water Water Everywhere, But Will Chavez Allow a Drink?

I like to highlight on this blog anytime an oil & gas exploration company finds a big-ass shitload of 'hydrocarbon resources'. I like to do this to stick it to the Peak Oilers, the greens and the luddites who moan all the time that "we can't drill our way out of our energy problems." Um, yes we can, and for a very long time to come. Frankly, though it's getting old. Big discoveries are coming at a fast and furious pace (the consequence of almost a decade of serious drilling - most countries love drilling, and the one country that matters that doesn't like drilling, had a Texas oil man in the White House for eight years) that it has become so routine.

But today brings news of a massive discovery with an interesting twist. The discovery is of natgas and it is a monster - something like 7-8 trillion cubic feet. And it is in Venezuela. I know what you're thinking - 'Great, more petro-wealth for sociopathic communist nutball Hugo Chavez!' Not so fast. This almost certainly doesn't mean instant wealth and power for the Bolivarian Bozo and it might actually be bad for Chavez. This is a classic example of Dan Yergin's claim the the principal risks in the energy business are above ground.

Let's start the analysis with the basics. OK, the gas is there, but how do you get it out? Offshore natural gas extraction is incredibly expensive and technologically demanding. Not every O&G company is good at it and very few companies have the massive capital resources required to secure the extraction equipment and build out the infrastruture needed to get the gas to market. Sure, state-owned energy companies like PDVSA have large resources, but Chavez has turned PDVSA into a basketcase by purging talent and skimping on reinvestment. There is no way that PDVSA could undertake gas extraction on such a large scale on its own. It would need outside help. Can Repsol do it? Unlikely. The majors - Exxon, Chevron, Shell, BP - are really the only players to have taken on massive offshore natgas projects. Many of these companies have gotten the shaft from ole' Hugo recently as have numerous, smaller oil service players. Needless to say, there will not be a stampede of capable players beating a path to Hugo's door to tap this big gas play. His only hope is Asia, but even if Japan (long shot) or China are willing to pony up the billions needed for investment, they will still have to hire some outside help. I doubt any oil service firm is going to do business with PDVSA, so some other entity, like a CNOOC, will have to be in charge of the project, depriving Chavez of the opportunity for patronage and graft.

The next sticking point is what do you do with the gas once it is out of the ground. The domestic economy in Venezuela is on its knees and could not possibly provide adequate demand for that much gas, nor could it support prices that would make the investment economical. Chavez is already tapped out on subsidizing his economy; so either he has to create demand by investing further billions into petrochemical plants, an option which suffers from that same "I've already screwed everybody" problem (who's going to build a multi-billion $ petrochemical complex on Venezuelan soil given the current political situation there?) or he has to send that gas abroad. Essentially that means it has to be compressed into LNG and put on boats. That's several more billions for the gasification infrastruture and those nifty boats. And then he'll have to get off that pesky shipping black list.

Having pissed off the global energy industry, all Chavez really brings to the table is the real estate. To get this project done, he'll need some very gullible and very deep pocketed partners, but they just don't exist. The gullible don't have deep pockets and the deep pockets aren't gullible anymore. If he gets a partner, it is likely to be the Chinese and they won't allow themselves to get ripped off, so they'll be in control. Chavez will become just another ward of the Chinese state's energy strategy. You don't go around rattling your sword and stirring up the pot when you're hosting tens of billions of $ in Chinese state property - you shut up and keep the factory running. This is not how Chavez operates, he would have to change his stripes or the partnership will crash.

Furthermore this is not a clear homerun for Chavez even if he can find a partner. If anybody does invest in tapping this big natgas find, it will almost certainly be with an eye toward the post-Chavez era. You don't want your investors yearning for the day you are gone.

Finally there are the people of Venezuela. They know what living standards are around the world in nations with huge energy deposits. If they see Chavez failing to make use of the country's resources because he has cut himself off from the civilized world, they will demand leadership that can.

For Chavez this could be an embarassment of riches.

Not Shortages of Food, Supplies (and Freedom); Venezuela's Unrest Is Caused By...Crossword Puzzles

Have the decrepit Latin Bolshevists who run Venezuela finally lost it?

Crossword puzzles in a local Venezuelan newspaper are calling readers to violent protests with conspiratorial messages, the country’s information minister said today.

Delcy Rodriguez called for an investigation of El Aragueno daily from the industrial town of Maracay, 120 kilometers (75 miles) west of Caracas for putting “encrypted messages” in its puzzles, she said in a post on her Twitter account. She didn’t give any details. 

Actually, given what we know about Mao, Stalin and assorted other authoritarian sociopaths, the better question is , "Did they ever actually have a grip on reality?"

Death Spiral

I notice that even the WaPo is using the phrase "death spiral" to describe Venezuela's economic plight.

Remember folks you heard it here, maybe not first, but over and over and over...

Also, remember, the lefties will try to convince you that this is all about low oil prices.  That's BULLSHIT.  High oil prices allowed Venezuela to avoid, temporarily, the inevitable terrible  consequences of very stupid economic policies that were driven by a fervent, quasi-socialist ideology.  Low oil prices removed the ability to hide the disaster underneath.  There are low oil prices all over the world - Texas, North Dakota, Iran, Kuwait, Norway, etc.  Do we read about looting and food shortages in Norway?  No.  And, I'm pretty sure you can buy toilet paper in Calgary.  Don't let some lefty tell you this is about oil, it's about socialism.

Is Venezuela About to Boil Over For Good This Time?

There has been a shortage of news coverage in the US media regarding the goings-on in Venezuela. Things are getting dicey and on the current trajectory Hugo Chavez's days could be numbered. At the least he is going to have to survive another intense period of danger for his regime. Bolivarian Socialism is caput, finito. It's all over but the crying for this doomed experiment, and all that remains is for the final act to be written (does our protagonist join his buddy Manny Zelaya on the beach in the DR or does he get Ceausescu'd?). Oil revenues, the life-blood of the regime, are declining because he destroyed the country's oil infrastructure through neglect and he's driven away all the international oil service companies by stiffing them on their bills and stealing their capital assets. Food shortages are escalating because he's nationalized farmland and food processing businesses. Imports are difficult to get because he got his country put on the maritime insurance industry's black list. Crime has soared. All old news. But now things are coming to a head. There are rolling blackouts because he's neglected the power grid and generation capacity. He's closing the last of the unfriendly media outlets, RCTV. He's devalued the bolivar, robbing citizens of their private savings and driven most of the country's private capital stock overseas. Finally, he is on the verge of calling out his goons to crush a newly-revived opposition movement, but both the police and the army are thought to be less inclined to put down the protests as willingly as they have in the past. Chavez is warning the police of a major restructuring of their ranks and warning citizens not to urge soldiers to join a rebellion. It's snowballing. Stay tuned. Hugo may not see year end.

A key variable will be the behavior of the Obama administration. Unfortunately, given their terrible performance in the Honduras crisis, there is a good chance that Obama will come to Chavez's aid. I pray that I am wrong for if he does, it will be a second mark of indelible shame upon the United States after our abandonment of the courageous Iranian people. I am sad to say that we could wipe out two centuries of leadership in the cause of liberty in just two years time. Two centuries of standing tall, two centuries of being a beacon, two centuries of growing into who we are as a nation...gone in two years, just like that. That'll be change alright...profound, regretable change.

UPDATE: Mary O'Grady weighs in. I think she is saying that a "boil over" is not yet clearly in the cards, but that it's going to get ugly starting...now.

Venezuela In a Death Spiral??

Back in January I speculated that Venezuela's crises might be too deep for the Chavez regime to survive much longer. Things for ole' Hugo are spiralling down quickly. Imports are barely keeping the country in the necessities as Chavez has wrecked the agriculture sector and smashed manufacturing, so this ain't good.