The Center for Economic and Policy Research, the Washington think tank that saw the housing bubble when everyone else was saying “this time it’s different,” has a paper out about Venezuela’s economy (PDF). Marc Weisbrot and Rebecca Ray say the country’s economy may already be out of recession and is poised for a much healthier recovery than the big-time bank economists think. Weisbrot repeats his main points in an editorial in the Guardian of London, saying that the broadcast and print is ignoring good news.
As regular readers know, I try not to be polemic here. This is mostly a news blog. And to be clear, I like CEPR. I am a contrarian by nature and I appreciate that they are there, pointing out groupthink on economic issues. This is especially important in cases like Venezuela or Chile, when there is indeed groupthink in press and political circles, causing people to see only foolishness in Venezuela and only valor in Chile. Weisbrot is right to criticize the Chicken Littles who have for a decade insisted that oil output is on its way to negative numbers and taking Chavez down.
However, there’s a lot to complain about in this paper, and since nobody else is taking the bait…
Sonia, can't you read your own sign? It says "Safety first, No smoking."
A very bad maintenance week for PDVSA and a tragic week for the southern Caribbean.
Curaçao: two oil tanks separately catch on fire after being struck by lightning. Fires put out.
Bonaire: Two 200,000-barrel oil tanks burn after being struck by lightning. One is extinguished quickly while other is allowed to burn through all the fuel. The island runs out of firefighting supplies.
Lake Maracaibo: 20-inch oil pipeline on lakebed bent 15 or 20 degrees, causing a leak that prompts the deployment of oil boom and cleanup vessels. PDVSA blames sabotage. (By the way: the lake has been under lockdown since the 2002 oil strike, and it would be very difficult for anyone to get out there with a big enough boat to do something like this without being detected by PDVSA’s widely feared security division, Loss Control and Prevention, or PCP. This is most likely to do with the company’s loss of skilled labor when it nationalized the Maracaibo maritime industry last year.)
Cardon refinery: Oil pier burns while tanker Sonia is being loaded, temporarily halting shipping. The cause is under investigation.
More oil explosions elsewhere in Latin America:
Pemex Cadereyta refinery: Explosion kills 1.
Straits of Magellan: An oil production platform belonging to Enap, Chile’s state oil company, burns; they say they shut off oil and gas valves before evacuating.
Saturn at Jubilee
PDVSA has hired a new drill ship
for the Mariscal Sucre offshore natural gas project after sending away the rent-a-wreck Neptune Discoverer and losing the semisubmersible Oban Pearl to the seafloor. The new machine, Songa Saturn, is like the earlier vessels the product of the late-70s oil boom rather than being a new and expensive piece of equipment. However at least the Saturn has had some luck recently. It drilled
the successful assessment well for the Jubilee field off the coast of Ghana. People close to the situation say the ship will be especially useful in Mariscal Sucre thanks to its new temporal displacement drill, which will allow the first LNG production from the field to be shipped on schedule in 2005
I said "boom". (Photo courtesy of John Smith, who posted it. Click image for many more sad and impressive images.
Best wishes to the firefighters and most of all to the people, birds and fish of formerly pristine Bonaire. Note in this story that Isla refinery on Curacao, which is normally the most polluting site in the Kingdom of the Netherlands, did its damndest to keep up, having not just one tank of naphtha but two tanks catch on fire during the same lightning storm.
Excuse me for being stupid but isn’t lightning protection one of the easiest pieces of HSE technology there is? As in, 18th-century easy? Asdrubal Chavez, already responsible for the Putreval scandal, you have some more explaining to do. Or you would if you weren’t in the president’s family. Never mind.
Venepiramides has this very interesting article (Spanish) about the new parallel currency market in Venezuela. It used to be that people would buy Venezuelan bonds with their bolivars and sell them in dollars. The two prices would move up and down, with the ratio between them creating an effective exchange rate, which became known as the swap rate or, in Spanish, the permuta.
Now, the same thing is happening with gold. People can buy gold with bolivars and sell it in the exterior as a way of getting foreign currency. Venepiramides says Swiss banks are the main intermediaries.
This opens ever less traceable paths to capital flight and money laundering. It’s harder to track a gold bar than a bond.
It also creates ever more powerful incentives for illegal gold mining in Venezuela and nearby lands, as this market is bound to push the Venezuela gold price (in bolivars) well above the world price. When the bond swap market was shut down, a Venezuelan bond that sold in the States for $1,000 would sell in Venezuela for 8,300 or more bolivars, or about $1,930 at the official exchange rate. That same sort of ratio will apply to the gold price.
The Central Bank, which is supposed to buy a big chunk of all domestic gold production, pays world-market prices at the official exchange rate. That is to say, they pay the price of gold (around $1,200 an ounce) times the official exchange rate of 4.3 to the dollar. If a miner can go underground and sell for twice that, well, let’s just say it’s not good news for Venezuela’s plan to bring all its gold production into official channels.
Best wishes to all of those affected by the New Zealand earthquake. It’s worrysome to see an epicenter that’s practically in a city, even if it’s a smallish sort of city.
Oops, probably not the best moment for the head of research at the New Zealand earthquake authority to be in Chile (Powerpoint, 5 MB). Enjoy Santiago, sir!
Managers of Guri Dam in eastern Venezuela opened the floodgates Aug. 29 as water levels approached their maximum. This is certainly notable, as everyone was talking just a few short months ago about the posibility of the biggest dam in northern South America running so low on water that some generation would have to be halted.
Good news: The government is portraying this as good news, evidence that a rationing and conservation plan paid off. This is sort of true, as slashing production at the state aluminum and steel mills cut power use.
Bad news: Petrofinanzas does a good job of seeing the cloud on this silver lining. That is that the floodgates were opened, rather than using the water to generate power. The daily electricity system report shows that Edelca, the utility that manages the dams, produced a maximum of 229 gigawatt-hours of electricity in the days since the floodgates were opened. To convert that into how much power is being produced — that is, how many turbines are spinning — you divide gigawatt-hours by 24 hours (because it’s a one-day period) and get the number of gigawatts — 9.54 gigawatts of turbines were spinning on average. That is 68% of the utility’s total installed capacity of 14 gigawatts. Now, nobody ever produces 100% of installed capacity, because some units are being maintained and most should be run more slowly than 100% power. But two-thirds of installed capacity is low. So ok, it’s bad news.
No news: The Venezuelan commercial press seems to have ignored the news. I haven’t seen a single photograph or article about the floodgates opening. Ultimas Noticias, a pro-government tabloid, had a story quoting the vice-president saying that the dam was full. The government accepted the donation of electoral arguments from the self-proclaimed unbiased press.