The Fidel Castro we didn't know

Authors:
José Alberto López Rafaschieri and Luis Alberto López Rafaschieri
www.morochos.net

In 1962, Fidel Castro threatened the U.S. with nuclear missiles, however, in the XXI century, the former Cuban dictator seems to prefer to launch rockets against other targets, this time directed at Latin American leftist ideology, of which himself was a notorious representative.

"The Cuban model doesn't even work", echoed last week across the international press. Normally someone would hear this phrase and would think it is from a speech by Ronald Reagan or George W. Bush, but no, not even are words from a neo-conservative Republican, they belong to the commander of the Cuban Revolution, Fidel Castro, no more and no less.

For less counter-revolutionary phrases than this, Castro sent to jail dozens of people, many were shot and several others were beaten, tortured, or lynched. Notwithstanding, Castro now says something similar and his words receive the respect of all the spokesmen of the revolution, and there is no one who dares to imprison him. A fact that, paradoxically, is in agreement with the sentence Fidel said about the Cuban model, since it is also an example of the double standard of Castro's socialism.

Amazingly, Castro spoke these words when the world is just emerging from the financial crisis that many believed would destroy capitalism, and less than 20 days before the parliamentary elections in Venezuela, where his main wannabe, Hugo Chavez, will face a tough fight for the control of the legislature.

This year, Fidel has made several controversial comments. Initially, he said that socialism and communism are the same, then admitted that he made a mistake by brutally persecuting homosexuals (they were imprisoned and made to work in concentration camps), then he called for respect for the Israeli people, and now claims that the Cuban political-economic model, that that the Latin American left presented as an unparalleled wonder, is not adequate to generate social welfare even in Cuba, which debunks some of the ideological tenets of radical leftism both in and outside Latin America.

They said the poverty in Cuba was the product of the U.S. trade embargo, but Fidel's words show he's aware that the real culprit is the socialist model that he copied from the Soviet Union.

Years ago, Gabriel Garcia Marquez, in his article "The Fidel Castro I know," spoke about the same legendary leader who was promoted by the Cuban Revolution's propaganda. But the current is a more real character, the Fidel Castro we didn't know.

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Venezuela: A less rigid exchange rate regime?

Authors:
Luis Alberto López Rafaschieri and José Alberto López Rafaschieri
www.morochos.net

Since chavistas removed, in May, the way to buy dollars through stock brokers, we've heard rumors that Chavez would relax currency controls due to the upcoming election and the shortages of certain food items. But given the realities described below, we are inclined to think the government has in mind something different.

The exchange rate controls are for chavismo a domination mechanism, perfect to reward allies and punish enemies. Plus, it's wonderfully useful to weaken the big companies that have not been socialized.

Moreover, Chavez don't has the same amount of international reserves than before, which, among other things, prevent the government from burning dollars, as in the past years, through ridiculous semiannual bond issues -purchased with bolivares but sold for foreign currencies-.

We must also take into account the relationship between some chavista businessmen and the subsidized dollars, of which there is no need to say much...

Additionally, it's necessary to talk about the Cubans in Venezuela. We should recall that the free exchange of foreign currency does not exist in Cuba, the country that supply the chavismo's most important advisors and Hugo Chavez's ideological inspiration. On the island of Castro, the control over the currency is used as a method of subjection and economic decisions are based in primitive socialist notions, according to which, if paralyzing controls are imposed on the private sector, the fullness of economic anomalies are corrected. Ideas that have found influential fans in Venezuela.

All of which leads us to conclude that it is quite difficult that Chavez will soften his exchange rate policy in the near future. In fact, this scenario seems unlikely before, after the September election, or even in the next two years.

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The dynamic of macroeconomic populism

Authors:
José Alberto López Rafaschieri and Luis Alberto López Rafaschieri
www.morochos.net

Allende, Peron and Chavez are examples of this. Each time a populist government comes to power in Latin America, the economic scenario is quite similar: The regime begins a crazy monetary policy, printing money in excessive quantities and generating spectacular rates of economic growth in the medium term. The first few years everything is going well and the finance ministers of these governments believe they are the makers of something unprecedented in human history, so they compliment each other due to the revolution's achievements.

But time passes and the wild printing of money begins to cause side effects. This stage is characterized by an uncontrolled increase in the general price level, a serious budget deficit and an economy in recession or very slow growth. In this hangover, the massive electoral spending is insufficient to stimulate consumption because of the neglect of the real economy, while hyperinflation makes commodities become unaffordable. Then, everything degenerates in maxi-devaluations to balance the public accounts, a drop in domestic production due to the low private investment -driven away by the grim scenario- and desperate governmental controls that attempt to stop the disaster.

Therein comes the inevitable, the economy plunges into a deep recession until things return to some sense of normalcy after traumatic macroeconomic adjustments. Then start again, repeating the process over and over till the revolution and the currency can withstand.

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Poll for Venezuela's Parliamentary election

Authors:
Luis Alberto López Rafaschieri and José Alberto López Rafaschieri
www.morochos.net

The shortage of basic commodities, the national electricity crisis, the out of control crime, the long socialist recession, the endless corruption scandals, the Cuban colonization of Venezuela, the inflation of 30%, the attacks on private property and the eleven consecutive years in power are the main factors leading to the Chavez's current low approval ratings -close to 40%-.

Unfortunately, popularity and votes are not always the same, much less in a country governed with anti-democratic schemes such as Venezuela. When dealing with any election, chavismo relies on unfair practices that tarnish the image of the procedure, as the abuse of public institutions, the use of public resources to finance the PSUV's campaign, intimidation and voting processes that leave much to be desired due to their questionable transparency. Tricks that distort any electoral event and we think increase in more than 10% the real votes of Chavez's party. So we do not believe that chavismo will lose the majority of the National Assembly in September.

But although we do not expect a change of command in the Venezuelan Congress, we do believe that the reasons set forth above have adversely affected Chavez, so it seems very likely a change in the percentage of votes the parties would get. This should be the second hardest election Chavez had faced so far and it is probable that he will obtain the second lowest percentage of votes for his political project since 1999.

To put it in numbers, chavistas should obtain a 53% of the total votes counted, a figure that, in spite of giving them a majority in Parliament, would mean a substantial weakening of Chavez's electoral power.

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Colombia, Venezuela and economism

Authors:
José Alberto López Rafaschieri and Luis Alberto López Rafaschieri
www.morochos.net

As easy as when Paul the octopus chooses his oyster: “economic interests will prevail,” says almost everyone who has an opinion on the current Colombia-Venezuela border spat.

They do not take into account the ideological factor, because, apparently, some experts believe that modern man is born without the brain's right hemisphere, which makes him a perfectly rational being who does not know of emotions, superstition, prejudice, or imagination.

They also do not consider the position of other sectors in both countries, because, according to them, the only ones that count in this matter are certain Colombian exporters who are apparently lobbying to recover the Venezuelan market. What about the Armed Forces, the electorate, the media, politicians and businessmen that do not trade with Venezuela? All this is out of their speculations. The division of Venezuelan society is neither mentioned in their analysis, nor the position of other interested countries, such as Cuba, Brazil or the U.S., for example.

Everyone that analyzes the diplomatic tensions between Colombia and Venezuela is based, mostly, on economicist hypothesis to predict that conflicts between Chavez and Colombia will disappear with the arrival of Santos. Unfortunately, we suspect they will soon realize that homo economicus existed only in the imagination of John Stuart Mill.

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Poll for Brazil's presidential election

Authors:
Luis Alberto López Rafaschieri and José Alberto López Rafaschieri
www.morochos.net

Some Brazilian polling firms said, first, that Jose Serra was the favorite to win the presidency with a 10 point lead. Afterwards, they said Dilma Rousseff was ahead by a small margin, and they say now that there is a technical tie between the two main candidates in Brazil.

Initially, Serra was favored not so much for his work, but because of the economic downturn and the ruling party's time in government. Notwithstanding, economic conditions have improved significantly in the last months and Rousseff has managed to launch a more attractive proposition than simply being the Lula's candidate. While we note a weaker effort by Serra, currently.

Also, Brazil's electoral system has several deficiencies that compromise its transparency -fully automated and without manual audits of votes- which is an extra advantage that favors the ruling party, in this case, the coalition that supports Rousseff.

The pollsters expect a close fight and surely they will be jumping from one candidate to another when asking for the favorite in the remainder of the campaign. However, from our perspective, we don't see good possibilities for Jose Serra, so we think that Dilma Rousseff will be the next president of Brazil.

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Venezuela: Estimate of 2010-II GDP growth

Authors:
José Alberto López Rafaschieri and Luis Alberto López Rafaschieri
www.morochos.net

According to our calculations, Venezuela's GDP should have dropped by 5,4% in the second quarter of 2010 over the same period last year.

This would mean the fifth consecutive quarter of economic contraction, while most other Latin American countries recovered growth since months ago.

Unemployment showed a slight decline during this period, but this was not enough to counter the electricity crisis and the fall in private investment. In addition, in this quarter the inflation rate had the largest increase so far this year and two extraordinary factors were added to the Chavez's recessive cocktail: There was an intense monetary trauma due to the insertion of the dollar-SITME in the exchange rate system, and the prosecution of almost all stock broker firms and “Banco Federal”, which caused a financial nervousness that did not do any good to the economy.

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