Atlas shrugs Venezuelan style as banks close

www.manilatimes.net Saturday, January 11, 2003 By David DeRosa

New Canaan, Connecticut — Venezuela is beginning to sound like something out of Ayn Rand’s novel Atlas Shrugged — where the middle class and professionals literally walk off their jobs.                               

Banks have started to join the 40-day-old strike paralyzing the country. Yet things are still at a stalemate with President Hugo Chavez’s opposition demanding that he resign or at least hold a referendum on the continuation of his administration.                                                            

Rand’s novel has workers and management refusing to work at jobs requiring more than manual labor skills because they know any wealth they create will be looted from them by an oppressive government. As Rand once wrote: “The man who produces while others dispose of his product is a slave.”                     

Venezuela has foreign debt payments on principal and interest this month of $76 million, said Luis Oganes, a Latin American strategist with J.P. Morgan Securities Inc. in New York. That will rise to $173 million in February, $601 million in March, and $1.2 billion in the second quarter.                                 

This, in large part, is the crux of the beef against the autocratic Chavez. In fact, the opposition started to materially coalesce when he began suspending private property rights.                                                               

Since then Chavez has been alienating one group after another while supposedly retaining some support among the poorest classes. The strength of that support is questionable. El Nacional reported yesterday that a poll taken last week of 1,200 Venezuelans by Cifras Enuestadora CA found about 63 percent of Venezuelans are in favor of broadening the strike to force Chavez from office.                             

Oil practically shutdown

The fear is that Chavez may incite a civil war. Venezuela’s political problems appear intractable, and, to make matters worse, they have spilled into the economic sector.                                                                         

Some banks closed yesterday and today to express sympathy with the strikers. If the banks reopen Monday, hours of operation are likely to be shorter than normal.                       

The partial shutdown of the banking sector caused a flight to dollars. The bolivar sunk to a record low against the dollar, plunging 10 percent Wednesday but rallied by five percent yesterday.                                                             

Even more damaging to Chavez is that the strike has crippled the state-owned oil industry. Venezuela before the strike was the fifth largest oil-exporting nation with daily crude production of $3 million barrels.                                        

Current oil exports are estimated to be a mere 10 percent of the pre-strike levels. Venezuela’s oil company gets to sit back and watch as its problems, combined with a possible war in the Middle East, have sent oil prices soaring. Oil was trading on the New York Mercantile Exchange yesterday at over $32 a barrel.                                                

Debt concern

That is not the worst of it. Even if the strike were settled today, it could be up to four months before the full resumption of oil production. The killer there is that by then oil prices may have plunged if tensions in the Middle East have been resolved. The market could be awash in crude just when Venezuela is ready to sell.                                          

The loss of revenue has increased concern that Venezuela might be forced to default on its debt. The 9.25-percent bond due 2027 yesterday yielded 14.87 percent, up 187 basis points since the strike began on Dec. 2. 

Venezuela has foreign debt payments on principal and interest this month of $76 million, said Luis Oganes, a Latin American strategist with J.P. Morgan Securities Inc. in New York. That will rise to $173 million in February, $601 million in March, and $1.2 billion in the second quarter.                                                                       

“During the first two months of the year given the amounts are relatively low, they have some room to maneuver,” said Oganes. “But after February, the situation complicates itself tremendously.”                                             

‘My brother’

Meanwhile, on Monday two radio talk show hosts in Miami who like to be pranksters on the air succeeded in pulling one over on Chavez. They synthesized an amalgam of sound clips from the speeches by Cuban President Fidel Castro and used them to actually get Chavez on the phone on live radio at his private telephone line at the presidential palace.                      

Chavez, apparently thinking he was speaking directly to his idol, greeted him with “Good morning, my brother.” The “Castro voice” then began making disjointed comments and asking bizarre questions, like, “What’s the day of the week?” and “Did you get my package?”                                       

Chavez appeared to have been taken in until it became totally obvious that something strange was going on.

This must have been an absolute scream in Miami, the center of gravity for Cuban refugees who make no attempt to hide their visceral hatred of Castro.                                          

People in Caracas probably weren’t laughing so hard because for now they are saddled with Chavez and the ideology of “his brother” in Havana. --Bloomberg