Castaways at a funeral

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Now that the Capybara has compared us to La Hojilla, I’ve been thinking about good’ol CAP.

Acción Democrática, the party he belonged to most of his life before it betrayed, impeached and expelled him, will celebrate him as a hero of democracy. Many of the same people who conspired to undermine his government will yearn for the days when he was in charge.

It all makes for grand theater. I guess the whole idea that we mourn for our enemies is very Venezuelan. Bygones are bygones, and deep down, everyone is really honest, right?

Having just finished Mirtha Rivero’s brilliant “The Rebellion of the Castaways,” I must defer to better, more accomplished authors for an assessment of the man’s life and work. But there is a curious glossing-over of CAP’s darker side that is as unjustifiable as it is unsurprising.

This most Venezuelan feature – that memory is short, that mistakes seem less egregious from afar – reminds me of a thread that Rivero somehow left loose.

Again and again, she quotes people saying ministers in CAP’s second government did not enrich themselves. Time and again, people tell her CAP’s impeachment on corruption charges was ironic given how it’s clear that neither Ricardo, Moisés, Miguel, nor the rest of the IESA boys ever took a lick from the public lollipop.

But what about Pedro Tinoco?

Tinoco was the helmsman of CAP’s second administration, a lifelong friend and one of the leftover cronies from his first administration that had come to be known as “the twelve apostles.” When CAP was setting up his team in 1988, he thought it would be great to name Tinoco chairman of the Central Bank (BCV), making him chief of the nation’s monetary policy, and one of the architects of the set of economic policies known as “El Paquete.”

Problem was: Pedro Tinoco owned one of the country’s largest banks, the Banco Latino.

Handing the reins of the nation’s monetary policy to a banker creates a conflict of interest the size of a tanker ship. The incentives to engage in insider trading, give cushy loans to fellow cronies, and play favorites are simply too tempting to ignore. They make any academic discussion of monetary policy somewhat meaningless. The whole thing becomes one big racket.

CAP’s decision is even more egregious once you know what happens later – Banco Latino goes under, the government has to bail it out, the CEO takes off with the bailout funds, and the whole banking sector is engulfed in a massive crisis that costs 12 percent of GDP.

Imagine, for a second, what would happen if Barack Obama were to name the CEO of Goldman Sachs to head the Federal Reserve. Or if Angela Merkel named the majority shareholder of the Commerzbank to head the European Central Bank…without asking him to divest his shares. Imagine what would happen if said CEO’s bank later took a bailout from the government, ran with it, and the bank went belly up, setting off a panic that engulfed the rest of the financial system and took down thousands of people’s life savings with it.

It would not only be scandalous, it would be an impeachable offense, an egregious violation of the public’s trust. But in Venezuela in the 90s it was simply seen as, you know, just one of those things.

For some strange reason, this kind of outrage is missing in Rivero’s book, and in Venezuelan society at large. The assessment of CAP’s government suffers from the same amnesia that makes the castaways at CAP’s funeral forget they were the ones who brought him down.

The politicos at CAP’s funeral, once sworn enemies of the man, will be there yearning for the olden days. They will pat themselves in the back, unable to remember what the hubbub about CAP was all about, convinced that his government really wasn’t all that corrupt, and will wonder whose crazy idea it was to impeach the man.

1 COMMENT

  1. It’s always easy to put on the pink colored glasses when looking back, innit?

    CAP certainly had a dark side. A good friend of mine lived in the house behind CAP’s in Prados del Este, before he became president. She they had to hide his daughters more than once from him, since he had a thing for coming home drunk and beating the piss out of them and Blanquita. Eventually he stopped this, but it did happen more than once.

    I will never forget the day he came to our factory, when campaigning for his first term. Man could he speak obrero (blue collar to you gringos out there)! He really made you think he was talking to you and you alone.

    I really never understood why we elected him twice. The second time around I kept hearing “He and his cronies stole, but they leave enough for the rest of us” Implied was that the other folks, Copei &/or El Chiripero stole but left less on the table! Small wonder Chavez cleaned up!

    On a personal note, I got a chance to almost close him on a limo once, bulletproof everything, Chrysler. Deal fell through, but he was fun to sell to!

    • i agree with you and also would like to add that our present doppleganger also beat the piss out of his daughters and his first wife when he was living in the same street as the heinz factory in caracas. he was infamously famous as the wife beater on that street. and later his pretty blond second wife. so… i guess these brutal abusing macho men covered afterwards by their seemingly adoring and forgiving daughters are a sign of our past and present caudillistic leaders. how sad…hopefully we shall evolve to a new wunderkind of leaders?

  2. Fantastic post.
    I was already 18 when CAP took over for the second time, so my memory is pretty clear about it. Taking a look at those few years from our stance today is dangerous because things are so screwed up nowadays that all that happened then seems childsplay, or at worst some sort of political golden age. Notwithstanding, we cannot negate the fact that corruption was still rampant, light years from what we see today, but also very far from the minimum required of a government.
    It seems to me that just the act of remembering how bad things were done back then is tantamount to high treason. It seems that to be an integral part of the opposition you have to swallow everything IV Republica and you cannot even raise questions about it. I´m sure you´ll get a lot of heat from this post, not because you may be wrong, but because you are on the wrong side of the political divide.
    CAP had some good traits, and those have been dealt with at lenght here and elsewhere, but we must not forget either all the other stuff, from his first tenure as well as from the second. We can and should aspire to better politicians, and the fact that CAP was opposed to Chavez, and that he in his very peculiar way defended with his life the Republic and our democratic regime should not be ebough to simply gloss over the rest of his deeds.

    • i couldn’t stand CAP for what he represented. once my ex wanted to introduce him to me and i refused to shake my hand to a wife beater and a crook, and after almost 13 years of suffering chavez i still think the same. his politics were the cause we have this gorilla on our heads. the fact that he will be interred here doen’t make a difference to me. he was one of the most perverse of the “graveyard digger presidents” that began the unraveling of this country. RIP+

  3. I also just read the book. I thought it was pretty sad. It is pretty crazy to read about how Humberto Celli says that CAP’s biggest mistake was not to follow AD’s lead, and the way he says it… It was also disappointing to hear Moises Naím take little responsibility about his role in not selling El Paquetazo, but I think that Juan has already discussed this matter in a previous post. At the end I realized how we lost a great opportunity to improve things a bit. Chavez had the same opportunity and he squandered it.

  4. I agree with you but one thing: The banking crisis cost 12% of GDP because of the way it was handled by caldera. Caldera mishandled everything form day one. With a weak currency, he shut down banks, removed Krivoy from BCV and appointed clueless people to the important positions. Many banks that went under had runs that could have been avoided if handled correctly. In fact, once they realized it, the Caldera Government changed the way it handled things and avoided a more severe problem.

    • I agree that it was mishandled by the Caldera administration, but I think it would have still been expensive had it been managed differently.

      By the way, Miguel, I would love to hear what you think the root cause of the banking crisis was.

      • The root cause was a very weak Superintendence of banks (same old, same old) which allowed them to acquire leverage and disguise operations with related companies, particularly in real state. The “bad” banks did this, while the “healthy” banks did not. However, in the middle there were many banks that were caught by the runs, as Caldera’s Government decided to shut down the first few banks that failed. At the time, I worked for a bank that was #15 in the country and overnight became #8 because of the dissappearance of so many banks.

  5. Quico,

    Nos you need to look back at the weird links between CAP and Esteban’s life.

    Their lives seem to be joined by some metaphysical thread down to the grave.

    Wonder what the consensus is among the Babalaos.

    Do you know ?

  6. Not that deep down you seem to have a lot of trust on human behavior (the same streak that gives us Venezuelans that selective memory you talk about). Do you really think that, as you say “without asking him to divest his shares” would make any difference for people at those levels of (finance) power? I know I am going off on a limb here, but in a skewed way, Tinoco’s behavior is not that far from Timothy Geithner’s…

    • I was thinking the same thing, fombona. Can you imagine:

      Epa, vale, you have to divest your shares of X bank..
      Cómo es la cosa? Nooo, chico, pa qué? Mira, vamos a hacer esto. Ahorita mismo llamo al abogado Fulano…

      Here, there and everywhere.

    • “I know I am going off on a limb here, but in a skewed way, Tinoco’s behavior is not that far from Timothy Geithner’s…”

      Except for a stint at Kissinger Associates, Geithner has never worked in the private financial sector, so a comparison with Tinoco is totally unwarranted for that and other reasons. On the other hand, a comparison with Hank Paulson may be appropriate. However, Paulson sold every single share he had in Goldman Sachs before becoming Treasury Secretary. A conflict of interest, of course, may have persisted there but you have to hand it to him the way he managed the financial crisis of 2008. He clearly showed that his priority was to salvage the financial system no matter who went down. In contrast, Tinoco just took the money and fled. In my book, that is just a freaking crook. I hope he is in the “quinta paila” forever.

  7. I think you are missing Rivero’s point. Even though she mentions several times how CAP’s Ministers didn’t steal. Her main point is that CAP’s government was not nearly as corrupt as it was portrayed in the media. In the end he got arrested for money spent to support Violeta Chamorro which was -according to the court- not what the partida secreta was for. She does ignore Pedro Tinoco but, for example, she suggests several times Cecilia Matos’ fortune was probably illegitimate.

    The main reason why CAP had such negative coverage from the media was that he repealed currency controls -making him unable to blackmail or bully the media anymore. Also, he was going against several groups including businesses that benefited from Lusinchi’s regulations and AD itself. These two things made criticism against CAP ubiquitous.

    Plus, in the US it’s pretty common to hire someone from Goldman Sachs to head the SEC and/or the department of treasury. Even if they divest their shares this is a clear conflict of interests. In Germany the former Chancellor, Gerhard Schroeder works for the investment bank Rothchild.

    • You’re right about all of that, and I did catch these points. I just thought the Tinoco angle was left unexplored, and that it was a pretty blatant omission, not only on the part of Rivero, but also on the part of the Iesa boys the book is so clearly lionizing.

    • In Germany the former Chancellor, Gerhard Schroeder works for the investment bank Rothchild.

      The key word is “former”. How many government folks get hired by law or consultancy firms, after they finish their term of office? Plenty.

      And the key concept for Venezuela is ‘conflict of interest’. It’s time that phrase be fully incorporated into the landscape of political consciousness. Even though the concept may be mocked, eventually, and with a stronger and independent judiciary, it’ll start filtering through.

      Then again, like everything, the change would be a drop in an excessively large bucket.

      • Henry Paulson worked at Goldman Sachs for decades before being appointed secretary of the treasury…

        I actually think it’s a Noble gesture by adecos to receive CAP with honors. After all, he was a democrat and he certainly took the right steps when he was President the second time. It’s normal that now that he’s dead he is praised for the good things that he did, that’s what funerals are for! I don’t think this is exclusively a Venezuelan trait

        • Yeah, and look at how that turned out!

          Having said that, there’s a difference between being secretary of the Treasury and heading the Fed.

          • A huge one, indeed. All those guys at the Fed have been impeccable in terms of personal honesty. Did you know that the Bernanke’s household has only one car for personal transportation, and that it is a … Ford Focus? Can you picture Tinoco driving such a car? Didn’t think so.

          • I don’t want to branch out too much. But even if Mr Bernanke is honest, someone must have been held accountable for that financial crisis. There was a huge lobby to make sure the federal government didn’t regulate the derivatives market. Yes, Banco Latino went bankrupt, but how much did the 2008 crisis cost?

            I agree with you guys in that corruption in Vzla is not comparable to the US’. It’s just that you can’t say appointing Pedro Tinoco made CAP II a corrupt administration ipso facto.

          • “I don’t want to branch out too much. But even if Mr Bernanke is honest, someone must have been held accountable for that financial crisis. There was a huge lobby to make sure the federal government didn’t regulate the derivatives market.”

            True. Agree. But, deregulation began in the Reagan years and continued under Clinton’s. Fed chairmans are not in charge of regulation. That is congress purview. Republicans and Democrats cooke this one until it was ready in … 2008!

          • “Bernanke’s household has only one car for personal transportation”

            Funny thing about factoids or urban myths, there’s always something missing. Like maybe Bernanke rides a limo to work every day? After all, he’s a valuable asset and needs some protection. It sure would save the mileage on the Ford Focus, to be used for his trips to Target on the weekend… but I’m being unfair. Here’s another myth: Warren Buffet drives an old station wagon. Well, maybe at one time. Long ago. Now he drives a Cadillac DTS, but the myth persists. (Not that there aren’t reasons for it.)

  8. Juan, excellent post. Short memory, together with lack of morals, are the mother and father of Venezuela’s many problems IMO.

    On a different note, none of the stuff that had gone on, and goes on in Venezuela, would be accepted in a ‘first world’ nation. Therefore, as infuriating and unbearably frustrating as it is for us, those comparisons with Goldman Sachs and Commerzebank don’t hold water.

    Merkel would have needed Sarko’s permission for that appointment though…

  9. I can hardly think the US government as an organization were there are no conflicts of interest.

    In particular if you consider Hank Paulson’s / Geithner decisions in 07 & 08.

    Why was it so clear that Bear and Lehman should fail while Goldman could use universal banks rescue funds by declaring itself an universal bank.

    BTW Paulson got a US 50 Mil tax break by accepting the treasury job.

    Again the conflicts here flow through the Lobby money that allows Wall Street firms to write the letter of the regulations. Or have them repealed.

  10. I had the chance of translating between Olaf Palme and Carlos Andres, perhaps in 1976, in another direct encounter with the oil curse… We must never forget when we judge a man to also judge his circumstances… both CAP I and Hugo forever, would have behaved absolutely different had the net oil revenues been handed over to the citizens, instead of being managed by the one and only Chief of turn.

  11. “Short memory, together with lack of morals, are the mother and father of Venezuela’s many problems IMO”
    “… We must never forget when we judge a man to also judge his circumstances… ”

    Too much money managed by the few govermental minions, and no oversight, formal or moral, make for an explosive incentive mix.
    “Remove the power from this, distribute the wealth, kill the petrostate and do your best to manage the new status quo (hard sell line for any presidential hopeful I say!)

  12. WTF??? Do you realize that you don´t make a single claim against Pedro Tinoco in this post? All you say against him is that he had a conflict of interest but it was a potential conflict of interest for all we know because that I recall there was no specific charges against him. The fact that the bank he partially owned went bankrupt would suggest that the “help” (that you imply) did not work out very well, and that his CEO escaped has nothing to do with him or is he responsible for all the actions of people the he employed?

    Show some specifics.

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