Fiatch

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Hat tip to Reason Magazine.

The IHT reports “Chavez sends troops to Venezuelan rice companies.”

Highlights:

President Hugo Chavez on Saturday ordered troops to temporarily seize control of all Venezuelan rice processing plants to ensure they produce at full capacity amid soaring inflation and persisting reports of food shortages.

Chavez told the National Guard to “take control of and intervene in all of these businesses that process rice in Venezuela,” including at least a half-dozen local and foreign private companies.

Agriculture Minister Elias Jaua said troops would occupy company installations as “the first measure” in an unspecified takeover process, beginning with a rice plant owned by Empresas Polar, the country’s largest food producer.

Other major rice producers operating in Venezuela include Minneapolis-based Cargill, which owns the Santa Ana Rice Plant in Portuguesa state. Jaua said Caracas-based Corporacion Mary, which produces four types of rice under the brand name “Arroz Mary,” will be affected.

On Saturday, Chavez warned that any rice processing company that threatened to halt output would be permanently seized by the government.

In the past two years, Chavez has nationalized four major oil projects and some of the country’s biggest electricity, telecommunications, steel and cement companies.

President Chavez is a thief and a thug, which is to say, a Communist leader.  Nationalization is a menace. His tyranny threatens us all.

Always and especially as such crooks are on the rampage, it is irresponsible of the United States government to attempt to scapegoat capitalism for the failings of state policies.

Do not lose heart.  Not all are fooled, and thus not all is lost.  Let’s do what we can.

[photo source]

Reality is the ultimate intervention:

• USA: Bloomberg reports that “The U.S. Treasury is considering taking stakes in insurers, as it prepares a new round of capital injections to target regional banks and other financial companies.  The Treasury, which had planned to announce investments in about 20 banks, reversed course and will let firms disclose their own share sales in coming days, the person said…
  
  “Some life insurers have asked the government to make the participation of life companies mandatory because firms don’t want to identify themselves as needing funds, the person said…
  
  “AIG may need more than the $122.8 billion available, Chief Executive Officer Edward Liddy said Oct. 22 on PBS’s “The NewsHour With Jim Lehrer.”

• France: Bloomberg reports that “Since the era of Charles de Gaulle, France has rebelled against the American-style capitalism that put a ‘Made in U.S.A.’ stamp on the world economy.  Now, as convulsions on Wall Street shake the global financial system, French President Nicolas Sarkozy is seizing the opportunity to remake the free-enterprise model along more state-managed Gaullist lines.  Emboldened by the U.S. pursuit of a European-style bailout, Sarkozy has packed his wish list for an upcoming international summit with calls for everything from stiffer bank supervision and limits on executive pay to state aid for hand-picked industries.”
  
  “Official French antagonism to global speculative capitalism is sometimes difficult to disentangle from a standoffish attitude toward the U.S., the country that invented it. De Gaulle spent a decade chafing at the dollar-based post- World War II monetary system, complaining in 1965 that it gave American businesses an unfair edge by allowing them “to take out foreign debt at no cost.”
  
  “While tipping his hat to a ‘capitalism of entrepreneurs,’ Sarkozy reads from a similar script, with a preference for more state intervention in the economy, a weaker euro, greater political influence over the European Central Bank and greater freedom to subsidize industries.  The French model has failed to deliver growth that keeps up with its European peers… Sarkozy is promoting ‘a French statist approach toward society,’ says Charles Calomiris, a Columbia University professor in New York who was on a U.S. congressional commission that studied the global financial system in 2000. The result would be an ‘extremely damaging Frenchification’ of the world economy.

• Pakistan: Business Week reports that “This is what it feels like when a country faces bankruptcy. The electricity goes out for as much as 12 hours a day, the gasoline lines get longer, and depositors rush to banks to pull out their meager savings. After weeks of begging in vain for help from the international community, Pakistan’s foreign exchange reserves have dropped to just $4.3 billion, down nearly 75% in the past year because of soaring prices for commodities, particularly oil, which accounts for about one-third of imports.
  
  “The country presently has only enough cash to pay for about 45 days of imports at current rates. Already the country has cut its oil imports so it holds no more than 10 days’ supply at any given time. Inflation is raging at more than 24%…”

• Russia: The Telegraph reports that “Russia’s financial crisis is escalating with lightning speed as foreigners pull funds from the country and the debt markets start to price a serious risk of sovereign default.” 
  

• Hungary, Ukraine, Belarus, and Romania: The same article from the Telegraph also relates that “Moves by Hungary, Ukraine and Belarus to seek emergency loans from the IMF have now set off a dangerous chain reaction across Eastern Europe.  Romania had to raise overnight interest rates to 900pc on Wednesday to stem capital flight, recalling the wild episodes of Europe’s ERM crisis in 1992. The CDS spreads on Ukraine’s debt have topped 2,800, signalling total revulsion by investors.”

These terrible developments extend a dreadful line that has not yet reached conclusion.  Unfortunately for people at the mercy of their leaders’ mounting mistakes, consequences ignore intentions.  Action and principles matter. 

As such, it could be worse.  Much, much worse.  Aided and abetted by a willing and inept media, our government exploits this crisis to accumulate more power.  Thankfully, though, here not all is lost.  Imagine surviving this deepening crisis from within a communist disaster:

• Venezuela: Reuters reports that “Despite having some of the world’s largest energy reserves, Venezuela is increasingly struggling to maintain basic electrical service, a growing challenge for leftist President Hugo Chavez. The OPEC nation has suffered three nationwide blackouts this year, and chronic power shortages have sparked protests from the western Andean highlands to San Felix, a city of mostly poor industrial workers in the sweltering south… The problem suggests that Chavez, with his ambitious international alliances and promises to end capitalism, risks alienating supporters by failing to focus on basic issues like electricity, trash collection and law enforcement. “

• North Korea: The Times Online reports that “North Korea is clamping down on mobile phones and long distance telephone calls to prevent the spread of news about a worsening food crisis…
  
  On Tuesday, [World Food Programme] announced that some 2.7 million people on North Korea’s west coast will run out of food in October, and that, because of the worsening food situation, it was increasing from 1.9 million to 6.5 million the population which it seeks to help with food aid.
  
  “Rumours have been swirling that Kim Jong Il, the supreme leader, has been treated for serious illness, although this has been officially denied and there is no way to independently confirm either claim. Whatever the truth, the Government is still in firm control of the country and its grip on the lives of citizens shows no signs of easing.”

Reconsider these recent themes:

• In the long run at least, crime does not pay.

• What builds trust?  What destroys it?  Whom do you trust?

• Not all is lost.

• Study the ideas and insights of the Austrian school of economics.

• Begin and become the recovery.  The government simply cannot be the rescue.

“Venezuela’s oil output slumps under Hugo Chavez” via the Telegraph

To win allies and forge an anti-American front, Mr Chavez sells oil to friendly countries at low prices. Ironically, the only big customer buying Venezuelan oil at the full market price is the United States, which the president routinely denounces as the “Empire”.

“As production falls, the sales to the US become more important,” said Pietro Donatello, an oil analyst from Latin Petroleum in the capital, Caracas. “Only the US is paying the full amount for Venezuelan oil and in cash, the rest are in some kind of barter agreements.”

The state oil company, PDVSA, produced 3.2 million barrels per day in 1998, the year before Mr Chavez won the presidency. After a decade of rising corruption and inefficiency, daily output has now fallen to 2.4 million barrels, according to OPEC figures. About half of this oil is now delivered at a discount to Mr Chavez’s friends around Latin America. The 18 nations in his “Petrocaribe” club, founded in 2005, pay Venezuela only 30 per cent of the market price within 90 days, with rest in instalments spread over 25 years.

The other half - 1.2 million barrels per day - goes to America, Venezuela’s only genuinely paying customer.

Meanwhile, Mr Chavez has given PDVSA countless new tasks. “The new PDVSA is central to the social battle for the advance of our country,” said Rafael Ramirez, the company’s president and the minister for petroleum. “We have worked to convert PDVSA into a key element for the social battle.”

The company now grows food after Mr Chavez’s price controls emptied supermarket shelves of products like milk and eggs. Another branch produces furniture and domestic appliances in an effort to stem the flow of imports. What PDVSA seems unable to do is produce more oil.

All this means that Venezuela has missed much of the benefit from the oil boom and, now that prices are falling, Mr Chavez faces huge financial problems. Nobody is sure at what point his government would be unable to pay its bills, but most sources consulted believe this would probably happen if oil falls to $80 a barrel. Yesterday, oil was trading at $79.80.

[photo source]

President Chavez continues to plunge his nation into darkness.  Unfortunately for the people of Venezuela, we know all too well how this saga will end:

“President Hugo Chávez said that wholesale gasoline sales by private companies in Venezuela will soon disappear after his congressional allies pass a bill nationalizing the business.

“Under the measure, which received initial approval in the National Assembly on Wednesday, the state-run oil company Petróleos de Venezuela will control Venezuela’s fuel distribution network but will not nationalize privately owned gas stations.  Dominated by Chávez allies, the National Assembly is expected to give its final approval to the legislation later this week.

“Distributors, including subsidiaries of British Petroleum, Exxon Mobil and Chevron, had hoped to persuade the government not to seize total control of their businesses.  But Chávez ruled out allowing private minority stakes, accusing operators on Wednesday of making money at the country’s expense. ‘This was an old scheme through which some private sectors seized the nation’s wealth without a drop of sweat,’ Chávez said. ‘That’s what they defend.’

“The Chávez government has never raised gasoline prices and Chávez has ruled out any increase in the fixed pump price of around 12 U.S. cents per gallon, the cheapest in the world. Wholesale fuel distribution in Venezuela generally offers limited profitability because of the combination of fixed prices and high inflation.

“Under Chávez, the government has nationalized Venezuela’s largest telephone, electricity, steel and cement companies and has assumed majority control over four major oil projects.

“Also Wednesday, the president said in talks with the Mexican ambassador, the government has negotiated a deal that will let the Venezuelan authorities take full control of the local plants of the Mexican cement company Cemex.  He gave no details on what his government might pay for a majority stake in Cemex’s three Venezuelan cement plants, 30 smaller concrete plants and shipping terminals.  Venezuela seized the facilities on Aug. 19 after compensation talks failed.

“Chávez also said that ‘time has run out’ for an agreement on compensating the country’s largest steel maker, Sidor, and that Venezuela will determine on its own what shares in Ternium, the parent company, are worth.”

“Venezuela moves to nationalize fuel distribution” via International Herald Tribune.  The photo is not directly related to this news.