Last week, the opposition WhatsApp rumor mill exploded with false rumors about Francisco Rodríguez, the controversial Chief Economist for Torino Capital. All week, anonymous attacks against him ricocheted around influential Caracas phones at warp speed: Francisco was at Hotel Cayena cooking up some crooked deal between the government and the opposition, or to line the pocket of this or that bolichico, or God-only-knows what else.

We actually spent some time trying to verify the rumors, and it was like chasing smoke: third-hand stories of outlandish conspiracies that people swore up and down were definitely true, except there was not a bit of evidence to back them. “Me contaron que una persona que estuvo dijo que,” kind of stuff. Garbage.

I spoke to three separate sources who were at the Cayena pow-wow, and they uniformly rolled their eyes at the stories, describing instead a relatively standard investor trip of the kind investment banks put together up and down the hemisphere all the time: Q&A sessions with analysts and policy-makers, drinks with sources. The usual.

Serious, level-headed opositores are ready to believe, well, more or less any story anyone is willing to peddle about him.

That such far-out conspiracy theories  get widely shared —and that they get widely believed— is one indication of how unusual Francisco’s position has become. Not to put too fine a point on it: people hate him. He’s intensely distrusted by a wide range of people in the opposition. Serious, level-headed opositores are ready to believe, well, more or less any story anyone is willing to peddle about him.

I always find this a little bit jarring because, well, Francisco Rodríguez is my friend.

I say that with some trepidation; I know how people react. Their body language shifts, the way yours might if you found out an old friend is into Scientology. I can just about see the little gears turning in their heads as I get reassigned to the “not-entirely-trustworthy” category.

And it’s had real consequences for me, too. Some people straight-up refuse to write for Caracas Chronicles because they know I’m friendly with him. It’s that intense.

But Francisco is my friend, and not in the bullshit, paper-thin way journalists and politicians sometimes call each other friends. He’s someone I ask for personal advice. I’ve stayed over at his apartment in New York. And I make no apologies for it, not just because Francisco has a reasonable claim to the title of “smartest person I’ve ever met,” but because, in person, he turns out to be kind of a mensch: warm and hospitable, generous with his time, funny, and continually in possession of some outrageously good booze. Put him together with Maria Eugenia, his enormously charming wife, and it’s not easy to find better company.

So it’s always a bit jarring for me to see how intensely people despise him, though it’s not necessarily that surprising. FRod offers a unique combination of personal and political traits more or less optimized to make a certain breed of opositor deeply uncomfortable: he’s a fiercely smart, unrepentantly ambitious, enormously cerebral leftist with a huge appetite for risk-taking who has a contrarian streak as big as the Ritz and an ego to match.

The key to grasping his worldview is certainly that contrarian streak. FRod never saw a cosy consensus he wasn’t minded to challenge. Profoundly allergic to groupthink, the guy finds deep fulfillment in swimming against the intellectual tide. The more you think a given economic fact is obvious, the more Francisco needs to take it out and probe it for weaknesses. It’s a mindset that’s made his clients a lot of money over the years, but hasn’t made him a lot of friends. I don’t think that bothers him one bit.

That comfort with standing alone probably accounts for a good deal of the passions he arouses. In the end, he always reminds me of that clip from Futurama when Emperor Lrrr of Omicron Persei 8 is handed a Valentine’s candy that says “I wuv you” and just flips out:
I think FRod is up against something similar: “this concept of a hardcore leftist who is also a genius Wall St. economist confuses and infuriates us!” the WhatsApp-roots rage. I get that.

But just because Francisco is widely loathed for silly reasons doesn’t mean there aren’t some good reasons to question him, too. And just because he’s my friend doesn’t mean he gets a free pass. So let’s do a bit of probing of our own, starting with:

The Credibility Issue

The sophisticated alternative to the knee-jerk school of FRod hate centers on the peculiar role he’s come to play in the Venezuelan public sphere. At Torino Capital, Francisco is the Chief Economist of a Wall Street broker-dealer that’s heavily specialized in Venezuela and PDVSA bonds. He can’t really claim to be a disinterested observer of the Venezuelan financial scene.

Thing is, he kind of does.

A Chief Economist’s job description is straightforward: to describe the world as it is and as it is likely to be. And nobody disputes Francisco is good at this kind of positive analysis: back in 2014 and 2015, when Credit Default Swap markets were giving an overwhelming probability of default to Venezuelan debt in 2016, Francisco bucked the trend, telling clients Venezuela would pay. He was way out on his lonesome on that call, and he got it right.

The problem is, Francisco doesn’t limit himself to positive analysis: he has, over the years, continually dipped his toes into the world of normative analysis, too. In public fora, again and again, he’s gone beyond saying Venezuela can pay and will pay to saying Venezuela should pay. That paying is in Venezuela’s best interest.

Trading Venezuela debt is Torino’s bread and butter.

And he hasn’t made that case once or twice. He’s made it again and again, in Venezuela and abroad. On Bocaranda and on Globovision and on Bloomberg View and at the Brookings Institution and at AS/COA. (I should know, I moderated that last panel.)

And advocacy of this type is…problematic.

Why? It’s not that Francisco owns the bonds whose payment he’s counselling: he doesn’t. It’s that trading Venezuela debt is Torino’s bread and butter. His firm’s business model relies on the commission clients pay when they buy and sell the bonds that he then earnestly advises Venezuelan policy-makers should be paid.

Multiple sources I consulted for this post told me that, in the event of default, Torino’s business would likely dry up. It’s possible the firm would face some near-term upside from default —there’d likely be one last big wave of trades as existing institutional investors unloaded their holdings to vulture fonds— but, on the whole, it’s hard to imagine that windfall would make up for the death of the goose that lays the golden eggs.

What Francisco wants us to believe is that, by some odd coincidence, his clients’ interest match ours. By a fortuitous confluence, the policy that’s in the best interest of Venezuelans also happens to be the one that our creditors favor, which by an amazing stroke of luck happens to coincide with the policy that would keep his firm’s business going.  

This isn’t, to be sure, impossible —hell, Francisco makes a pretty good argument that it is indeed the case. But it isn’t the consensus view. Not even on Wall Street.

Some people see this situation and smell a conflict of interest. I talked to three separate lawyers for this story, and I’m convinced that’s not the right way to look at it. A conflict of interest arises when one person has a legal duty to act as an agent to two different principals. That’s not the situation Francisco faces, because he has a legal duty to just one party: Torino’s clients.

So we come back to the question of credibility. From the point of view of the debtor (i.e., the Venezuelan people), taking advice from someone who has a legal duty to answer to your creditors is…well, let’s just say it may not be the smartest thing you could do.

“Look, yes, my institutional position is one of the things people should take into consideration when they assess my policy views,” is how he put it.

It’s not so much that FRod is doing something wrong in offering his view, it’s that the Venezuelan public probably has powerful reasons for taking that view with a pinch of salt. (Or, depending on who you listen to, a truckload of salt.)

I put this view to Francisco, and he pretty much conceded the point.

“Look, yes, my institutional position is one of the things people should take into consideration when they assess my policy views,” is how he put it, hurrying to add that it should be weighed against other factors, like the quality of the analysis itself. After all, he says, if all you care about is getting your analysis from a senior economist unsoiled by contact with Wall Street, you might as well get your policy views from Jorge Giordani.

Fair enough.

How heavily you choose to discount Francisco’s policy stances due to his professional commitments is, of course, up to you. For plenty of FRod-haters, it’s all the reason you need to discount every last word that comes out of his mouth. I think that’s throwing the baby out with the bathwater.

For one thing, because the conflicts I really worry about are the ones that aren’t disclosed, and Francisco’s position couldn’t be any more disclosed: the guy is always introduced as Torino Capital’s Chief Economist. Short of tattooing “I represent bondholders” across his forehead, it’s hard to see how much more spelled out it could be.

But the bigger reason behind my skepticism is that the strength of feeling that attaches to FRod-bashing seems to me out of all proportion to the alleged misdeed. Indeed, other Venezuelan economists on Wall St. who take stances closer to the opposition-consensus view and also take part in the public sphere don’t get anything like the level of pushback Francisco gets (cough-cough-grisanti-cough).

The point is broader, though: in a public sphere brimming with economists who have a ministerial sparkle in their eyes as well as a dazzling variety of interests that are rarely if ever disclosed, it feels unfair to me to go after the one guy who levels with us about where he’s coming from.

Ultimately, I can’t shake the feeling that the pearl-clutching over his ethical conflict gets the causality backwards: it’s not that Francisco is saying Venezuela should pay bondholders because he works for bondholders, it’s that he works for bondholders because he thinks Venezuela should pay them.

A firm like Torino was always going to recruit a Chief Economist from the ranks of economists who are genuinely convinced Venezuela should pay.

It’s a messy old world we live in, and I for one am not really comfortable crucifying Francisco for getting a cush job working for people who recruited him because they agree with him.

But the other reason I don’t get all that worked up about this is that I see it as a red herring. It’s not really Francisco’s ethical conflict people hate. The pass other economists get in a similar position proves it.

No, lurking just beneath the surface is a whole other set of reasons people hate FRod: substantive reasons, political reasons and, to my mind good reasons. Reasons that keep me up at night asking myself if it can really be ok to be friends with this man. Reasons that strike me as a million times more damaging than some half-baked story about a supposed conflict of interest that is A-disclosed and B-not even a real conflict of interest to begin with.

And those reasons, to my mind, all stem from:

The UNASUR Job

In May, 2016, just after quitting his job at Bank of America, and just before joining Torino, Francisco Rodríguez took a peculiar ‘working holiday’. For two months, he led an international team of economists put together by UNASUR (the chavista “Union of South American Nations”) to advise the Venezuelan Regime on economic policy.

From May through June of 2016, Francisco worked side-by-side with such luminaries as Mark Weisbrot to advise characters like then-minister and economics VP Miguel Pérez Abad, alleged teen-rapist (and demonstrated bolivar-rapist) Nelson Merentes and the semi-legendary Rodolfo Medina on a package of reforms to pull the Venezuelan economy out of its tailspin.

The team eventually presented a reform plan to Pérez Abad on June 10th, though the resulting document was never made public (the government didn’t agree to that.) Francisco was slated to meet Maduro himself to present it the next day, June 11, but the meeting never happened: Francisco went to Miraflores, but Maduro left him waiting. The cabinet never voted on the reform proposal.

A defeated Francisco schlepped back to New York and took up his post at Torino on July 9th.

His “My Summer Vacation” essay for 2016 might as well have been titled: “How I tried to save the Bolivarian Socialism from itself.”

Now, I don’t know exactly what was in this proposal, but having followed his career over the years I can hazard a pretty good guess: ending the multi-tier exchange rate regime and unifying the FX system will have been central to it, alongside some of the other basic reforms needed to re-establish something like a working price system and wringing out the worst of the distortions that were pushing the economy into depression.

Francisco, in other words, spent two months working full time to try to stabilize Venezuela’s dictatorship economically just enough to remain politically viable. His “My Summer Vacation” essay for 2016 might as well have been titled: “How I tried to save the Bolivarian Socialism from itself.”

The problem here not is not that Francisco is a chavista. He isn’t. The guy has an Economics Ph.D from Harvard and a nuanced understanding of the need for markets if societies are to operate at all. But his politics are pretty far to the left, and he doesn’t seem to me to be immune to the damaging fantasy that, given minimally competent economic stewardship, the revolution could be redeemed. And worse, that he’s just the person to redeem it.

For my money, this is sooooo much worse than anything else the guy is alleged to have done it’s hard for me to figure out why people even spend time talking about the other stuff.

Let’s spell this out in detail:

Towards the middle of last year, Francisco Rodríguez looked Diosdado Cabello up and down, looked Tareck El Aissami and Nelson Reverol up and down, looked people like Maikel Moreno and Luisa Ortega Diaz and Francisco Rangel Gómez up and down and thought to himself “let’s play ball!” Francisco took an economic rescue mission to people who’ve stolen hundreds of billions of dollars and trafficked hundreds of tons of coke, people who’ve jailed thousands of political dissidents and destroyed Venezuela’s democracy, people who’ve jailed my friends, people who’ve forced me and my family into exile, people who’ve destroyed the hopes and aspirations of a whole generation of Venezuelans and turned our country into a goddamn dystopian nightmare. He looked them up and down, took in their yachts and their blood-soaked hands, their surgically enhanced teenage mistresses and their utter contempt for Venezuela, and thought “you know what, I’m comfortable working to stabilize the economy in ways that’ll make it easier for these people to stay in power.”

Fuck that guy. Seriously. fuck. that. guy.

Look, if you’ve read this far, you know I’m obviously minded to give FRod the benefit of the doubt. And I tried, I really did. Trust me, I tried all the rationalizations.

I tried thinking that, as it turned out, the regime stabilized itself even without his reform proposal, so in the end we wound up with the same dictatorship, only built on top of a much deeper layer of misery.

I tried telling myself that regular Venezuelans do not and did not deserve the hardship the regime’s catastrophic economic policies have forced upon them, that it took courage to say “people need relief now, and while maybe I can’t do anything to overthrow the regime I can do something to lessen the deadly human cost its cluelessness has imposed.”

I tried telling myself that, as an economist, Francisco is subject to something like the Taxi cab rank rule British lawyers face: in principle, he should be willing to dispense expert advice to anyone who seeks it it without regard to their political ties.

I even tried contorting myself into the counterfactual pretzel it takes to think that if the government had accepted his advice and the economy today was less awful, Maduro would’ve faced fewer pressures to turn virulently autocratic and maybe Venezuela could have preserved more democratic features than it has.

But the smell of bullshit hangs heavy over all of these narratives.

It was a monstrous conceit from day one.

The reality, I think, is simpler. It is possible, in the end, to be too smart for your own good: too persuasive, so persuasive you manage to mojonearte a ti mismo, to bullshit yourself into believing helping Nicolás Maduro stay in power is a good idea somehow.

And my sense is that this is what happened to Francisco on the UNASUR file: he persuaded himself that he had some sort of special power able to overcome the hard, criminal core of the chavista regime. That he, and only he, could redeem the chavista experiment for the left somehow.

It was a monstrous conceit from day one: a gambit born of an out-of-control ego bordering on the ridiculous in its overestimation of its own powers.

No, Francisco, coño, you were not going to fix chavismo, what were you thinking!?

The UNASUR mission was FRod at his most dangerous and worst. It created an atmosphere where his later closeness with Henri Falcón couldn’t help but throw shade on the governor, seeming to confirm everyone’s suspicions about both of their allegiances. It was UNASUR that created the conditions for last week’s WhatsApp bullshit tsunami to be believed. It’s a bed he made, and now he has to lie in it.

And the UNASUR episode left even those of us who want to sympathize with him in an impossible position. If someone walks up to me today and says “that guy tried to help the dictatorship stay in power, we can never trust him again,” I got nothing. Just nothing. There’s nothing I can say to that person.

Does that mean I don’t consider him my friend anymore?

Not at all. I still do.

It’s just that sometimes your friends scare you, and Francisco very definitely scares me sometimes. There’s a messianic streak there, a deep-down, to-the-bone conviction that his name will end up inscribed in Venezuela’s history books that I find alternatively intoxicating, silly, terrifying, and inspiring.

I don’t have any other friends like that. It’s enormously compelling.

And dangerous, too. Enormously dangerous.  

 

61 COMMENTS

  1. Some smart people fall in to a trap where they are so bent on applying their talents to doing something challenging as well as possible that they turn a blind eye to who ultimately benefits from what they do….., Albert Speer who served Hitler as his armaments minister tells in his biography of brilliant engineers who had no nazi simpathies and who couldnt resist workiing like crazy to keep the german armaments industry going despite the incessant bombardment of german weapons factories , to them it was an intellectual challenge they couldnt resist, there are others ( some fomer Ministers of military dictators in Venezuela ) who challenged by their children ‘how could you have served that tyrant? , replied that ‘even working for a tyrant you can serve your country by dong things well’, you have the example in the Bridge over River Kwai ‘ film where the british Alex MacGuiness officer character , eveni if an ill treated prisioner cant help but try his best to get the bridge built for his japanese captors…

    Cant believe that FRod sympathizes with the regime , but he is a pragmatist highly professional economist and he has the idea that serving to improve the govts economic performance cant help but benefit not only the govt but the people of Venezuela , specially as getting it a removed is such a dire difficult enterprise , maybe he is tempted by the possibility of changing the regime from the inside so that its governance is less destructive and its policies less economically corrosive. If all Chavistas were like FRod things wouldnt be as bad as they have become , maybe we would have a regime like that of Bollivia or Ecuador or even Nicaragua that maintains some semblance of economic rationality such that people can have a living standard which is half decent …despite the savage ideological pronouncements and their harsh authoritatian vocation .

    What has bothered me in the past is how he fudges on some very doubtful oil and financial data to support his rather favourable view of where the govt stands in its financial travails ….., which makes me think that he is not beyond manipulating certain data to make whatever point that he wants to make !!

    If he is to be effective in selling his recommendations to the regime he has to win their trust and that means not saying or doing anything that wakens their already paranoid suspicions ……so maybe he sounds more favourable than he actually feels but then one never knows…!!

    His latest predictions are that the Govt will be able to make the bond payments due this april ( of course tightening the dollar supply used to fund the imports needed to cover the wants of the population) but that come the payments due next October they will be probably be attempting a repeat of a swap mechanism of old for new bonds with longer expiration periods , but with the added difficulty that they no longer have Citgo to serve as leverage to the transaction…..so that next october Pdvsa may be facing the dreaded default that the regime so fears….!!

    • I would take the Speer angle not with a grain of salt, but with all the salt in the universe; Speer was a liar, very much invested into cleaning himself and presenting himself as the “good Nazi”

  2. Very interesting and honest. Thank you for this.

    Although I’m still puzzled about how can anybody be Chief Economist of a Wall Street firm and a “hard leftist”. What definition of “hard” are we using here…

  3. Very enlightening article, thanks Quico.
    I deeply admire Francisco Rodriguez, even though I’m a neoliberal and despise the left, I think he’s probably the most brilliant Venezuelan economist out there.
    Personally, I don’t think the UNASUR job was morally wrong. You spelled the arguments yourself, if stabilizing chavismo is what it takes to save the lives of hundreds of Venezuelans dying of stupid diseases because of lack of medicines and a collapsing health system, and fill the stomach of many others going to bed hungry, so be it. I think lives are more important than justice, many in history have fortunately disagreed with me, and given their lives for the sake of justice. If I was given the opportunity to entice Chavismo into applying sensible economic policies, I’d take it as well.
    Hopefully, the time would come when Chavistas will face justice.

  4. Good article and opening interesting points for discussion although I don’t agree with your reasoning about UNASUR. Let’s take it one by one:

    1) “…around influential Caracas phones”

    Huh? Why are Venezuelans so “noveleros”? Influential? Give me a break. Bunch of brain amputated people circulating Whatsapp e-mail chains about rumours along pictures of naked women and malandro funerals. I have seen many of this chains and I know exactly the kind of groups where they are shared.

    2) “…And advocacy of this type is…problematic” “…Why? It’s not that Francisco owns the bonds whose payment he’s counselling: he doesn’t. It’s that trading Venezuela debt is Torino’s bread and butter”

    So it seems some people didn’t read the “How Wall Street Works Memo”. Do you think that all those research articles on various asset classes done by all the bank’s research teams are not carefully framed to ultimately favour the banks by generating VOLUME? It’s not only about the direction of the trade, but the volume. The only thing that banks care is that you keep buying or selling. And if you believe in the so called “Chinese Wall”, I suggests you pay a visit to the real world so you can see how those same “independent” research publications are pushed by sales people towards investors to make them trade or take a stroll down memory lane (2007-2008) to evidence how conflicted is the international financial system. But the most moronic thing is that still today you can find people that put down others who have skin in the game in precisely the topic those are bringing up. I much prefer to hear views of someone who is very involved and has a vested interest, and therefore empirical expertise, than someone who doesn’t. You are then free to decide whether you want to dismiss the claims or not. Skin in the game is a concept that IYIs (intellectual-yet-idiots) find hard to understand, they much rather prefer to elucubrate all sorts of complicated analysis and Excel forecasts with no accountability (and which time after time has been proved wrong, just look at the track record). For more reading about IYIs: https://medium.com/incerto/the-intellectual-yet-idiot-13211e2d0577#.ua3l08d6dhttps://medium.com/incerto/the-intellectual-yet-idiot-13211e2d0577#.ua3l08d6d

    3) “…That paying is in Venezuela’s best interest.”

    Anyone who disputes this is again brain amputated and lacks historical perspective. Only an ignorant person would argue that defaulting is the best course of action as it risks pretty much the ONLY source of income that the country has in the first place. Arguing that money used to pay bonds should otherwise be redirected to import medicine and food to be sold at subsidised prices to people who lost their purchasing power is an argument that doesn’t hold from an economic perspective. People can argue that it is the government’s fault that people lost the purchasing power in the first place, which is correct, but this doesn’t change my point. You don’t decide to just risk the only income and redirect it to things that don’t produce income in the short-term, that is surely a way to speed up a bankruptcy. It would be useful for people to read a bit of history and go back to the times of Venice or event more recent times like those of the Argentine crisis and understand the implications of shutting down the supply of credit to countries. As some people know and understand, the country has a liquidity problem, not a solvency problem. All it takes is for someone to do a credible plan and monetise a handful of oil fields in the Faja to solve the cash crunch, it is not too hard. There is plenty of equity to tap. Of course, some people will talk about fracking etc and the prospects of fossil fuels in the long term. Prospects here and prospects there but the truth of the matter is that today, the country is not insolvent.

    4) “But it isn’t the consensus view. Not even on Wall Street.”

    Who gives a toss about consensus views? How many times and years has the consensus been way off the mark? Do you just keep looking at consensus because it matches your political thoughts? And do you not think that Wall St. makes money out of CDS swaps (which are highly obscure and no one knows the clear rules of how they are triggered)? How about having sold “protection” a year ago giving a 99% probability of default which is now at 60%? No conflict of interests there right? I know you don’t particularly favour the conflict of interest of arguments, but those who do, are just naive.

    And if you don’t want to take the rant about consensus views from me, take it from Warren Buffet and Charlie Munger:

    “Usually, I don’t use formal projections. I don’t let people do them for me because I don’t like throwing up on the desk, but I see them made in a very foolish way all the time, and many people believe in them, no matter how foolish they are. It’s an effective sales technique in America to put a foolish projection on a desk. And if you’re an investment banker, it’s an art form. I don’t read their projections either. Once Warren and I bought a company and the seller had a big study done by an investment banker, it was about this thick. We just turned it over as if it were a diseased carcass. He said, “We paid $2 million for that.” I said, “We don’t use them. Never look at them.

    5) “…it’s that the Venezuelan public probably has powerful reasons for taking that view with a pinch of salt.”

    Right, because it is always better to keep relying on anonymous Whatsapp chains circulating among “influential” Venezuelans and which are sandwiched between videos of naked women and malandro funerals.

    6) “…No, Francisco, coño, you were not going to fix chavismo, what were you thinking!?”

    So what do you propose? In my book, he tried and that is a positive thing. You want to crucify someone? Start by crucifying oppo politicians who are more conflicted than FRod will ever be as WE HAVE SEEN FROM HISTORY.

    7) “…that guy tried to help the dictatorship stay in power, we can never trust him again,” I got nothing. Just nothing. There’s nothing I can say to that person.”

    You can also say he tried to unlock exchange controls which would have made goods MORE ACCESSIBLE to that same population that is starving and used by politicians just for their own benefit.

      • Bill, why do you always need to take the simplistic route? Just stick to debating the arguments I am raising. Although I am very much flattered that you think I am FRod.

        FYI – If I remember well, FRod has commented in this blog in the past under his name, Francisco Rodriguez.

        • Defaulting on the bonds would be an admission of failure.
          This is the same reason that Maduro will not allow humanitarian aid into Venezuela.
          Maduro did not make an economic decision. He made a political decision.
          The bonds were priced for an expected default and a lot of money was made by investors when the bonds were paid.
          Venezuela is a bankrupt country. This is not like Argentina needing to settle with bondholders in order to access capital markets and maintain the country’s credit.
          This was simply an attempt to get as much money from Venezuela before the inevitable collapse and for Maduro to save face for a short while.
          Regardless of the harm that is done to the people and institutions.
          If you were in such a dire position that you had to make a decision between paying a car loan or buying food or medicine for your children, would you choose to have a car to drive to their funeral or feed them?

          • John, it would most certainly be an admission of failure, I don’t disagree.

            You are stating that Venezuela is a bankrupt country, do you know what the definition of solvency is? Let me write it down for you:

            “The possession of assets in excess of liabilities; ability to pay one’s debts”.

            So, are you saying that reserves of oil, coltan and other minerals are worth essentially zero? Because I don’t see how all the liabilities added up are higher than the equity of the country. And even though some of those liabilities are not really liabilities (often misreported and which typically include elements like the pending awards, some of which we know will not materialise like that of Exxon, or the pending invoices to “suppliers” which many people know are overstated to justify for CADIVI rackets). Some others are, but not all. Still, my argument stands: unless you assign a value of zero to all the mineral and oil reserves, the country is not insolvent.

            Venezuela is not a bankrupt country, it has a liquidity problem. However, a majority of its citizens are bankrupt indeed.

            So let’s get this straight, what you are proposing is restarting the subsidies of food and medicine to the majority of the population who can’t afford it. How do you suggest that the people pay for that? Who will pay for that and how are you going to execute it? You got the order of things on reverse: it is the money from PDVSA that pays for the car loan, the food and medicine for the children; it pays for everything because the country lives off of it Go ahead and risk receiving the money to pay for those, and you end up with no money.
            I just want someone to tell me how are you going to magically produce money out of subsidies in the short term, please tell me how.

    • “So what do you propose?”

      Actually strive to move away from an autocratic regime to one with minimally competent bureaucrats and minimal economic and civil liberties.

      Is a well-run dictatorship what venezuelans deserve?

      • That sounds like a reasonable proposition and I don’t disagree with it Rodrigo.

        The difference is that I actually believe that all in all, Venezuelans will be better off keeping current than not keeping current. Under any government.It is a very different situation from say Greece.

        The government in Venezuela is still subsidising all that gas for free, all those dollars for free, etc and all with what purpose? So that military and other guys can get rich.

        So sure, lets go ahead and free all price controls, I am up for that. People won’t have money to pay for many things though. Have you thought about that by the way?

        It is PDVSA that is paying for everything, so how does risking the supply of revenues to to pay for everything that people here seem to want to be handed out to society for free solve anything? Can we not just try to rationalise the expenditure side of equation in the first place? I believe that it what FRod try to do and it is what actually makes sense.

        I am not the one who determines what Venezuelans deserve or not deserve.

        • “Have you thought about that by the way?”

          Yes, a lot. As in being part of forums, discussion groups, read papers, books, etc. I organized get-togethers and talks to discuss this specific thing.

          There are ways to create safety nets for those in need. There are ways address these shocks. There are experienced and savvy venezuelans that have made careers around how to manage these transitions. But none go through chavismo. It implies capable, competent folks in government.

          • Great. Once and if those safety nets are put in place and the economy is rationalised, there will be no need to default.

            Venezuela’s doesn’t have a $40bn-$70bn. debt problem (or even a higher number if you wish to use other estimates), it has a a revenue management problem driven by irresponsible spending. The country received about $1tn. of revenues in the last 10-12 years, yet people are fixated by $40-70bn. of debt (which by the way trades at distressed levels and can be easily repurchased for 40-50 cents on the dollar).

            A good example of a way to raise more cash: http://www.reuters.com/article/us-venezuela-pdvsa-rosneft-idUSKBN16N2E9

            For example, Venezuela doesn’t have money to take advantage of its 70% stake in this field and produce oil barrels that can be converted into cash. Therefore, the most reasonable thing for the country to do is to sell part of its participation and raise cash for it so that that part of equity in the Faja can eventually be monetised. So what the country needs to do its improve its ties with capital markets and funding sources, not repudiate funding because a large portion of Venezuelans are poor and don’t have enough money to pay for products at real prices. If the debt were unsustainable (as some argue that it was in the case of Germany after World War 1, for instance, or in the recent case of Greece, to put another example) then it would be a different story and I would be arguing differently. But it is not unsustainable because the country is not insolvent.

            The country needs to raise more money and money needs to be invested in productive assets which can eventually generate more jobs, not subsidies.

  5. A very enlightening article, indeed. Rodriguez is no Albert Speer. If he were, Maduro would be spending his days in revert with him rather than refusing to meet him.

    Rodriguez reminds me more of the leadership of the American Trade Consortium established to invest in the USSR and bring it back from near-death. Or maybe he’s an analogue of Bill Browder, the grandson of Earl Browder. The former made money for his clients on the corpse of the USSR, but ended up partly responsible for some terrible behaviour by Russian oligarchs he had helped to create.

  6. Can we draw some parallels with the “Arab Spring” ? What is happening in these countries? What would happen to the colossal amount of corruption and ilegal trade currently supported by the regime? The prans, malandros, border mafias, the military, what would happen? is this a necessary evil to allow for a transition in the long term?

    These are questions, not statements.

  7. SI HAY un conflicto. Nadie sabe que es Torino Capital ni que hace. Nadie sabe que Torino y sus clientes se benefician de que sigan pagando los bonos. Que digan “Economista en Jefe de Torino” en Vladimir a la 1 no significa absolutamente NADA para los Venezolanos.

    Mientras la gente en Venezuela come papel periódico de la basura, el tipo habla como si fuera un Venezolano comun y corriente, sin ningun interes en los bonos, y dice que los pagen todos, oh sorpresa! Puede ser que tenga razón pero que me lo diga alguien independiente NO el. Si quiere hacer política que renuncie a su cargo y sino que deje de andar dando “consejos” que le convienen.

    Poco serio que un tipo de Wall Street venga aca como pedro por su casa a decir que paguen los bonos cuando lo que hay es hambre y poco serios los periodistas y políticos lo escuchan sin nisiquiera saber quien es. Por dios…

  8. I had this crazy (and millenial) thought: FROD thinks of himself as Galen Erso in Star Wars: Rogue One. Like…”see, the Death Star is going to be built with or without me. So I’d rather be the one building it, in order to at least have the chance of letting a small flaw in it to be exploited by the rebellion”. But dude…you’ve just built the Death Star that killed your daughter and billions in Alderaan. Or in FROD’s case, he didn’t do it, but oh boy! he did tried so hard…

  9. I love Venny trader insights, and, i do personally know FRod, he doesn’t strike me as the best economist i’ve know, and, seriously, he doesn’t need to be. Any decent economist would vow for a cease on lifting Forex policies, among other obvious things over Venezuela’s economy.

    What i should point out, is that, hating him is missing totally the point, no es la flecha, es el indio.

  10. Hitler loved Children.
    Stalin was charming. FDR called him Uncle Joe.
    FRod profits from human suffering. It may be legal but it is morally wrong.
    I invest in the stock market. I will not buy tobacco stocks even though I am a smoker that has been unable to quit. I could look at the argument one way and say that the large dividends these companies pay is a way for me to get back some of the money spent on my addiction.
    I look at it the simple and honest way.
    Tobacco companies profit from human misery.
    No matter how charming your friend is, he is benefiting from other people’s suffering.
    I takes a psychopath to disconnect oneself from the consequences of one’s actions.
    The access that FRod has to information makes it impossible for him to honestly claim that depleting foreign reserves to delay the inevitable default was a good move for Venezuela. He took away the money that might have provided food and medicine to the people that have to bear this awful government.
    He has the benefit of living in New York City. Good booze, fine restaurants, health care and police protection.
    If he is so sure that what he did is right, he should move his office to Caracas.
    You make this a complicated argument.
    All moral dilemmas are not complicated.
    There is a line between right and wrong. FRod is on the wrong side of that line and you cross it to maintain that friendship.

    • John, do you drive a car? The people who are the principal supporters of the Maduro regime are people who buy and rely on oil from Venezuela. Who might they be?

      Quit smoking. Quit driving a car. Then tell me all moral dilemmas are not complicated.

          • That telling someone to “quit driving a car because the oil comes from Venezuela” isn’t logical.

          • I don’t think any distinction between buying Venezuelan bonds and buying Venezuelan oil, from a moral standpoint, is logical. The argument *for* both is that you are helping feed venezuelans, the argument against is you are perpetuating the regime. So on that basis, tell me who should cast the first stone against the Venezuelan bond trader? I don’t think it’s so clear cut.

  11. I didn’t have to wait for FRod to join UNASUR. It was evident that, not only that he was willing to help chavismo, is that he wanted to help chavismo. At one of the AS/COA panels, I remember Hausmann saying “The only advice I have for Maduro is that he should resign”. Rodriguez chuckled.

    He is smart. His analysis are good. But he gets it wrong. He got it wrong many times over when Ramirez was in charge.

    Also, the his analysis backed what his ties in the government told him, that the venezuelan government was committed to pay. It was against the consensus because many thought that servicing debt in the face of famine is insane.

    But here we are, in our tropical leap forward.

  12. “Economic freedom is an essential requisite for political freedom. By enabling people to cooperate with one another without coercion or central direction, it reduces the area over which political power is exercised.”

    That’s Milton Friedman’s quote. I think he used that idea to justify the advise and help he and the Chicago Boys gave to the horrible, cruel regime of Pinochet in Chile.

    So, while I shudder at the simple thought of helping chavismo stay in power, I do not resent FRod for trying to get us some economic freedom. I think Mr. Toro makes some fair points, but I still believe it’s harder to fight for your liberties when you are starving and wasting 8 hours a day in a line to buy some food.

    • It’s good to keep in mind that economic freedom could come at the expense of other types of freedom, and sometimes, at the expense of people’s lives. Especially under regimes such as ours.

      • Friedman’s point was that economic freedom usually precedes other types of freedom. Would that be the case for Venezuela? I don’t know. It was for Chile, but hasn’t worked for China (yet?).

        Is it worth trying, like Rodríguez did thorugh the UNASUR plan? Hard decision, but I think there’s a good case to be made in favor.

        • Does FRod see himself as a Chicago boy, the Friedman of Venezuela, or is this just your wishful thinking (imagination)?

          I think this is curious, because I’ve always seen him as leftist.
          However, it wouldn’t be that surprising if in 2017, following the rise of the right in the US, he’s impersonating his ‘Chicago boy persona’. One must adapt to the tides of time, hehe.

          • I don’t know much about his personal views, but most reports about the UNASUR plan, including Rodríguez’s comments in Prodavinci (http://prodavinci.com/2016/06/12/actualidad/transparencia-y-planes-economicos-una-respuesta-a-ricardo-hausmann-por-francisco-rodriguez/) and on TV, seem to indicate that the purpose of the program was to liberalize the economy by eliminating exchange and price controls.

            You raise a good point, though; I would say that Venezuela’s Overton Window has moved so far to the left that even a centrist program like this could be seen as libertarian shock-therapy policy. That does not make Rodríguez our own criollo version of Milton Friedman, of course (haha). I actually think that he wouldn’t like that comparison, since everyone says that he is a leftist. But I’m just guessing here.

        • Chile was a very healthy Democracy before Pinochet so I have no idea what are you talking about.

          Yes, Allende did horrible things to the economy, but prior to that it was a very healthy nation in all fronts and one of the most developed countries in the region.

          • Allende robbed Chileans of almost every fundamental liberty they had. If you think that Chile was a very healthy (liberal) democracy under his government, we’ll have to agree to disagree.

            When Pinochet came to power, Chileans hadn’t recovered the freedoms Allende took away. The country was divided and destroyed, its economy in ruins. The Chicago Boys’ view was that the most pragmatic way to advance the cause of liberty would be to improve the economic liberties first, then work on the rest.

            I don’t completely agree with that. I think that you shouldn’t disregard political freedom as easily as they did. But I wouldn’t completely dismiss the argument made by the Chicago Boys either; as I said before: there seems to be a good case to be made in favor of giving priority to improving economic freedom in authoritarian countries.

          • Allende’s government was brief and toxic. Before him Chile was an extremely healthy nation.

            Allende’s damaged the economy and some democratic institutions but not to the extent of damage done by Pinochet or Chavismo. And that damage to democratic institutions happened right in front of those Boys’ noses.

            The problem is that you are limiting chilean republican history to the very stale Pinochet vs Allende section. If you want to know what Chile was like do read on Frei.

            The chicago boy group was also diverse. Some advocated for democracy while some were very comfortable with authoritarianism.

        • Friedman’s quote is wishful thinking. Singapore has been a one-party dictatorship with limited political freedoms for about 50 years yet it is one of the freest economies in the world.

  13. There is a war-time concept called “giving aid and comfort to the enemy.” This is what FRod is guilty of and it is what makes him so reviled by the Opposition. It may be hard to define but, as U.S. Supreme Court Justice Potter Stewart said about pornography, “I know it when I see it.”

    Whether or not we name it as such or not, this is a war. No one actually connected to Venezuela gets the luxury of being neutral.

    • It seems to me that if moral considerations should govern things like the buying and selling of Venezuelan bonds (i.e. there is a war going on and we should not be lending economic support to the enemy), then that is a compelling argument for economic sanctions against Venezuela.

      Is that not what people are condemning this man for: promoting and selling something on the free market that should not be bought and sold on the free market?

  14. There were many interesting things in this post, but I just want to comment on the following:

    “The reality, I think, is simpler. It is possible, in the end, to be too smart for your own good: too persuasive, so persuasive you manage to mojonearte a ti mismo, to bullshit yourself into believing helping Nicolás Maduro stay in power is a good idea somehow.”

    I don’t know if F. Rodriguez thinks that helping Maduro stay in power is a good idea or not, but I found the quote above really interesting. I have the following question:

    Do you really believe that, by now, improving the economy really helps Maduro stay in power that much?

    Answering yes to this question seems to assume two things: 1.- The government is going to (or can be forced to) allow free elections, and 2.- It takes very little for disaffected ex-chavistas to come back and support the government once again, so any little improvement in the economy should be enough for PSUV to become again the most voted party in the country.

    I think this is delusional.

    There is no way for PSUV to regain their voting base, no matter how much the economy improves. Under normal circumstances, in a normal country, then yes, an improvement in the economy always helps the incumbent in an election. But not in present day Venezuela, not after people have been eating from the garbage, not after children have starved to death, and not after sick people have died from lack of medicines.

    The government reached a point of no return. Only by withholding elections (or committing outright fraud if they allow them) can they stay in power. Maduro and his combo have become increasingly authoritarian, and once you go that route, politics and economics start to decouple (in some sense).

    Not even if tomorrow oil reaches 200$ a barrel (and stays there) can PSUV win a fair election ever again.

    • No one in the regime thinks about FREE elections, nor can Venezuela accept any compromise with these criminals. Doing so will just correr la arruga once more.

      Adecos y copeyanos did so for 40 years, and then chavismo peaked in an insane climax.

      Unless rule of law and accountability, crime costs people a consequence and the best Venezuelans come forward to public service, all the resources in the ground will account for little.

      The regime is not a Venezuelan agency but a sátrapa for cuban masters. How else can it be explain that these people continue cavando su propia tumba….

  15. Indications coming out of the administration seem to indicate that they will continue to forge the path ahead by making bond payments. I am aware that PDSVA and the government are separate entities on paper but in reality, does not the gov’t control PDSVA’s foreign currency? What amount of bond payments does the government have coming due this year? If I remember correctly, this year is a make or break year for both. If payments are much higher this year for the two then last, with the deterioration that was seen, all indications are that things are going to get much much worse this year.

    The gov’t has been to the pawn shop with many of its assets and they have been hocked, never to be seen again (hopefully not). What is left to mortgage off?

    http://af.reuters.com/article/energyOilNews/idAFL2N1GY0JO

  16. El articulo es tan bueno como los comentarios. De los comentarios me gusta el de uno que se hace llamar “Venny Trader”…quien será en la vida real? De repente lo conozco.
    El choque de argumentos esta entre la moralidad de permitir que la gente se muera de hambre y por falta de medicinas, vs pagar la deuda. Todos aquellos que negocian/”trade” y analizan los bonos, presumiblemente para clientes inversionistas, lo hacen sin pensar en las consecuencias de que el gobierno siga pagando y sirviendo los intereses de la deuda en bonos. La realidad es que si estas en ESE negocio, si esa es tu profesión, eso es lo que debes hacer. Consideraciones morales y éticas no tienen lugar en un mundo de inversionistas y de pura ganancias financieras.
    Creo que el problema de Venezuela va mucho mas allá de este aspecto, de este subsector. Venezuela es un país colapsado, haciendo implosión, sin contrato social que rija las relaciones civiles y mercantiles entre las personas. Como lo he notado anteriormente, se convirtió en un agregado de organizaciones delictivas todas trabajando en función de ganar dinero sin importarle las leyes, la constitución, los tratados internacionales y, los derechos humanos. Frente a esta terrible realidad, el aspecto/tema de la deuda externa vs la ausencia de divisas para comida y medicinas, no es sino una pequeña parte de un problema mucho mas grande y complejo.

  17. Messianic, or mercenary?? In any event, you may not get invited o those luxurious digs/libations for awhile. A Harvard PHD does not guarantee rational non-self-interested critical thinking, much less does it guarantee morally compassionate advice. Anyone who thinks that Chavismo, especially with oil revenues drying up, is a going proposition, even on strictly economic grounds alone, should have his head examined–or is the Cuban example not sufficient (oh, yes, the Embargo, the Embargo)….

  18. Great read. Economic policy should react swift way to the empirics of the complicated real world. Nice try to build up a solar panel industry in the less developed eastern parts of Germany, but when they can’t compete with China, they shouldn’t receive public subsidies. I am all for redistribution, but if huge social welfare features seems to damage the international competiveness of our industry too much, lets cut it a bit. If capital income rises much more than work income, lets change the tax rules.

    The rich peoples casino of Venezolean Bonds at Wall Street should close asap. These people just postpone the inevitable collapse. The costs of each day keeping afloat this disaster are way too high.

    Investors with huge amount of gamble money and their consultants do have moral responsabilities beyond the rentability of their deals.

  19. FRod is advising his clients to buy PDV/Venny bonds in the secondary market. He does not dictate monetary/fiscal policy in Venezuela, he tried but couldn’t!. So, the fact that people are starving / lack medicine has NOTHING to do with him or bondholders. That he has political aspirations or bends to the left. Who cares, that is his choice.

    Now, that Quico has a serious man-crush is another matter altogether.

  20. I quoted Albert Speer not because I thought he resembled FRod in any way but simply to repeat what he said about the ENGINEERS that worked under him to maintain the war machine running even if they were not Nazis…..people do get mixed up , The tone in which Speer mentioned the fact was one of amazement , not of approval . I was making a point about Human Nature not about Albert Speer. !!

    The one thing were Venny and FRod coincide ( other than in their smudgy defense of the regimes debt policies) is in their giving support to the idea that Pdvsa and the regime have lots more assets than they really have …….the production figures are always overstated , their assumption on how the oil business really works are simplistic in the extreme , there is a loose screw somewhere in how they asses the govts capacity to handle the debt payments. FRod at least is now saying that april payments will be made but that the October payments will need the repetition of something like the bond swap done last year but without Citgo and in a panorama of stalled or sinking prices ….!! which is very very dicey…!!

    If Venny knew something about the Oil business he would know that oil reserves are not all that valuable until you figure out how much you have to invest and spend to get it out of the ground and sold at a profit , and Venezuelan oil reserves are now competing with lots of other cheap sources that are more profitable to exploit that Venezuelas now troubled extra heavy crude oils ….!!

    What the regime can do is squeeze even further to starvation levels the forex it uses to import basic staples so as to have more available to pay for coming debt payments ……..!!

    Pdvsa needs a total overhaul just to keep going and that’s no happening because the regime is pretty blind about what it must do to keep Pdvsa running ….!! They still think of it as the eternal cash cow with huge udders ….!!

  21. Todo lo que está malo con Wall Street y más, revisen las conexiones entre el presidente (origen venezolano) de Torino Capital Victor Sierra y la campaña de Hillary Clinton, nasty nasty shit indeed, no wonder so many of these venebond-guardians were so butthurt by Tintori’s visit to Trump, hey.. they guy is a chupetica de ajo, sure, but has no one in his close circle, that we know of, with close financial ties to the stability of the venezuelan dictatorship.

  22. This article is a joke. As a lawyer, I can tell that this article has conflict of interest written all over the place. Francisco Rodriguez’s firm will go bankrupt if he doesn’t recommend the Venezuelan bonds and convince buyers they are a worthwhile as a junk bond investment. Francisco Toro defends a morally and legally objectionable actions of his good friend in New York. Moreover, he presents his friend as a sucessfully Wall Street guy. Selling junk bonds and stocks doesn’t make anyone a sucessfully banker. It makes you a corrupt fraudster.

    Maybe it is time that Francisco Rodriguez and Francisco Toro look themselves in the mirror. Maybe they should watch together ‘The Wolf of Wall Street’ in Netflix next time they meet for nice drinks and food in Francisco Rodriguez’s apartment in Manhattan.

    • If I sell cars, the issue of whether or not I’m in a conflict of interest involves a different set of considerations than the issue of whether what I sell is good or is junk.

      I don’t see you pointing to any factual basis to support a claim for conflict of interest or of fraud much less distinguishing the two.

      With this kind of case the Wolf of Wall Street would chew you up, spit you out, and thank you for making him look like a hero.

    • Wall Street Thesaurus: “Conflicted Interest”: investment bankers, investment advisers, brokers, research analysts, et. al., ad infinitum….

  23. I think we need to separate the economics from the politics, hard as that may be. I dont see a problem with an economist trying to convince a sitting government to change their awful policies; that’s what economists are trained to do. The IMF does exactly that on a regular basis, regardless of whether they are dealing with a brutal dictatorship or a peace loving democracy.

    I personally dont care whether Francisco Rodriguez tried the Unasur move for egomaniacal reasons. At least he tried; many lives could have been saved and unnecessary suffering avoided had maduro and co listened.

  24. I met F Rod in 1994. We invited him and Roberto Rigobon (the only Venezuelans doing their PhDs in Economics at Harvard and MIT, respectively at that time) to discuss the Venezuela case study we had as our final exam. The case study was focused on the “Dutch disease” and the collapse of CAP regime. Some of us were surprised on how much Francisco talked about income inequality and even “distribution”. Some of my friends were angry and even mocked him “how did this guy get into Harvard”. Roberto did not disappoint to say the least. BTW Leopoldo Lopez was also so there, completely unnoticed. We were small group of Venezuelans. At that time he was just another Venezuelan grad student like us trying to learn from Dornbusch, and Hausman whenever he was in town. I am not an economist, but after reading this article, F Rod’s response and the Panorama article, I wanted to leave a comment. First, I agree with your characterization of the current regime. My father was a holocaust survivor and heard stories about Hitler all my life, and as a Venezuelan, I think we are approaching a holocaust of our own if there is no change in the regime soon. I was a believer that the change could be democratic until Maduro eliminated the National Assembly and eliminated any chance for a referendum. However, in FRod’s defense, it is clear he is trying to help the Venezuelan people with orthodox economic advice. I read the recommendations, and there is nothing new that all the economists that I respect including Hausman, Grisanti, Oliveros, LVL, and many more recommend on a daily basis. There are differences, of course, especially on the implementation, but the basic concepts are all there. The difference is that F Rod thought that there was a chance Maduro may listen to him this time. The issue is that they know what to do but don’t have any desire to do so. Their only desire is to stay in power by any means necessary. It is clear now that they don’t care about even children dying from hunger. You can throw all the “Chavista” ideology out the window. It is all about staying in power. The military could stop this disaster, but clearly they are benefiting. If giving advice is keeping the regime in power, then you could argue the U.S. is keeping Maduro in power by not putting an embargo. Money keeps regime in power not advice. We saw how well the Cuba embargo worked to remove the Castros. Anyway, I hope F Rod is now fully convinced by Maduro’s regime true desires by fully refusing to even look at his recommendations. Further Maduro truly believes that following these recommendations and going for the IMF for financing would be the end of his regime.

  25. El régimen chavista ha demostrado con hechos que tras su retórica anti capitalista y anti Wall Street se esconde el más dócil de los clientes que tiene Wall Street en el mundo. Ahora bien, si usted está convencido de que para Maduro el pago de la deuda internacional está por encima de cualquier otra consideración, entonces los concejos de FRod a Miraflores deben ser bienvenidos y tomados como un intento de introducir cierta racionalidad a la economía venezolana para mejorar sus balances externos e internos, aminorar los sufrimientos del pueblo venezolano, y reforzar la capacidad futura de pagos a los bondholders de Torino Investments. De ser así ahi no veo conflicto de intereses Win-win. Pero si el propósito de F Rod es solo y exclusivamente asegurar que se preserve esa capacidad de pago a los bondholders de la república y de PDVSA, entonces FRod si es verdad que enfrenta un dilema ético indudable. Otra cosa muy distinta es si esos concejos a Maduro son suficientes o si están bien orientados para resolver los imbalances macro económicos y las distorsiones que existen. O si la venta de activos externos de la república y PDVSA son suficientes para seguir pagando esa deuda o para usarlos como colaterales de nuevas deudas m^s allá de 2017. Y allí es donde me parece que sus concejos pecan de un optimismo infundado. No hay manera de no acudir a la banca multilateral en búsqueda de nuevos fondos y con un plancito debajo del brazo para tratar de persudirlos de que nos presten plata. Y a FRod jamás le he escuchado o leído que apoye esta idea. Pero quizás sea yo el desinformado. No sé.

  26. What an unbelievable clusterfuck. A rogue faux government so compromises the countries capacity to function democratically, profitably, and institutionally, that the only sage course is to help prop up the government lest the human suffering would multiply. The bottom is going to totally fall out anyway, regardless of the potential mineral/petrol wealth in the ground. You have to have a system in place to transform that potential into liquidity, instead of having it squandered and burgled and pissed away for projects that merely provide lifeblood to a failed socialist regime, as they all must be in the end. Insisting that Venezuela pay what little money it has to make good on bonds, so Arod can keep his current job and bondholders will get paid, seems strangely evil, even if defaulting will hit the country hard in the short term. On a level deeper then economics and a journalist showing loyalty to a friend, paying the bonds and propping up the government sadly plays into the stasis that Venezuela seems locked into, the torturous, yet axiomatic position or state of being totally resistant to change.

    Do people actually want to change? Or do they only want the conditions to get better. What would it take to foment change, if change is not even desired? Is Venezuela doomed to keep stumbling along even, so to speak, as Rome burns?

  27. One point where Im skeptical in what FRod and Venny say is that they apparently believe that monetizing oil/ mineral reserves or Pdvsa participation in Venezuelan oil fields by selling it to offshore investors can be done so as to bring in enough ready funds to allow for its foreign public debt to be paid and avoid default WITHOUT STARVING venezuela.

    I am rather skeptical of this view because I know the big gap that exists even in the best of circumstances to bring a reserve to profitable production , the obstacles and difficulties that must be met to achieve such result , obstacles not just financial but managerial and operational and of course plain human , the degree of expertise required to manage such monetizacion , the unforeseen problems that rise every step of the way , a task made more difficult where there is no TRUST in the capacity of the leaders or the regime or country conditions to allow for such effort to succeed, and most of all the long long time which carrying it thru requires.

    Same thing applies to ‘signing papers’ to sell Pdvsa shares in existing oil fields , the papers can be signed with great fanfare but then nothing really substantial happens , because country conditions and past experience have created a climate of mistrust that makes the investor be very cautious and slow about parting with any amount of money ……very recently the news came out that while Pdvsa financial statements reported several billions of US$ as having entered Pdvsa coffers from a certain Russian Oil Company the financial statements of the latter did not report such disbursement having been made…..and this story of great announced new investments and nothing happening is something we see happen again and again and again ……, Where there is no trust there are no investments and the current regime has done nothing to make itself appear more trustworthy with its supposed partners and investors …..also the conditions which the country can get from these deals are very tough on Venezuelan interests because they know we are in a distressed situation and beggars cant be choosers !! The extremely miserly offers Pdvsa got from its failed attempt to sell Citgo are proof of this .

    Im not so certain that somekind of default can be avoided , perhaps it can be done in an orderly manner but the consequences arent going to be easy on the people in Venezuela , they will be forced to endure even harsher declines in their living standards , because what the govt has shown itself very willing to do is to sacrifice them to maintain international debt payments for as long as possible ……!!

    I dont say this with glee but with much personal sorrow…..!

  28. It is not a secret that Francisco Rodríguez was a Chavez supporter,at least until late 2006.Parece que están descubriendo el agua tibia.We can argue about his motives to support such a destructive project but the point is that his ideology is leftist,so not surprise.At least for me.

  29. “trading Venezuela debt is Torino’s bread and butter. His firm’s business model relies on the commission clients pay when they buy and sell the bonds that he then earnestly advises Venezuelan policy-makers should be paid.

    There is your answer. He’s going for the gold. Delusional grandiosity afflicts many. He was very close to the power according to Quico and that power is intoxicating.

    BTW, who is Nelson Reverol? You mean Néstor Luis Reverol Torres?

    There is no excusing him. This is black and white. Quico, you do not have the “bug” that others have. That is what defines you and makes you who you are. If FRod is so smart, he would get out of the Venezuela business. Cashing in on the regime is what many do.

    Quico, economists are not going to change the world. Much less Venezuela. You are well meaning comeflor but after 15 years you still have a lot to learn IMO. We all do and this includes myself.

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