The Power and the Money

Is the madre patria scamming the Républica Bolivariana? Probably not.

  Over at Caracas Chronicles, they’re perplexed by a deal just signed to build a combined-cycle gas turbine power plant in Cumaná, Venezuela.  The Spanish contractors, Iberdrola and Elecnor, want to charge €1.45 billion to build two 500-MW plants.  The cronologistas caraqueños have done some digging, and found that €1,450 per megawatt is a lot to charge for a CCGT installation.  The closest was a €1,225/megawatt project in Algeria.  The highest that I knew of before they started investigating was a UAE project that came in around €890. 

They conclude corruption.  Are they correct?

Well … maybe.  But to be fair, I suspect not.

Venezuela, you see, maintains exchange controls.  Official transactions need to be made at the approved exchange rate.  On the one hand, this shouldn’t bother the contractors all that much:  they’re getting paid in euros, and the price of imported equipment is the price of imported equipment regardless of the denomination.  The problem, however, is that the relative price of all of their domestically-sourced inputs will be much higher.

Think of it this way.  Imagine you imported €1000 worth of machinery to Venezuela in 2004, after paying Venezuelan tariffs (around 20 percent) and taxes.  In that same year, a manufacturing worker cost €7,388 to employ for a year at the official exchange rate.  You could buy a worker-year for 7 units of machinery.  By the middle of 2009, after several years of high inflation in Venezuela, that same worker cost €12,720 to employ — a worker-year now cost you the equivalent of 13 units of machinery.  Unless you figured out a way to use half as much labor as you did in 2004, your labor costs (in euros) have just doubled.  (All data comes from the Banco Central de Venezuela.)

In fact, the same problem applies for all domestic inputs.  According to the Venezuela central bank, the bolívar cost of construction materials (including taxes) rose 230% between 2004 and the middle of 2009, while the official exchange rate remained the same.  That’s going to further drive up your costs.  

If it turns out that the Bolivarian Republic has agreed to let the contractors use the parallel exchange rate to purchase bolívares, then this analysis goes out the window.  But if the contractors have to use the same exchange rate as everyone else when buying local inputs, then the price that they are charging for the plant seems entirely reasonable ... even without taking into account the political and economic risk.  (Will PDVSA pay everything up-front?  Will inflation in Venezuela accelerate?  Will there be labor trouble?)   

In other words, unless the contract exempts the Spanish companies from exchange controls, then I doubt that there is much corruption to be seen in this case.  Bad economic management yes, corruption no.   

Does anyone have more details about the contracts?

Brazil annexes Venezuela

 OK, not quite.  But our friend Chávez just did something that will put meat on the bones of his somewhat jokey promise not to expropriate Brazilian investments in his country.  What did he do?  He agreed to plonk around $4 billion into a refinery located in the Brazilian state of Pernambuco. 

Refineries are notoriously hard to liquidate.  The market is thin; prices for similar installations in the United States have jumped around by a factor of ten.  This is part of the reason why the big international oil companies continue to operate them, despite low margins and big liabilities.  It's also why PDVSA has been unable to unload Citgo for a reasonable price, despite the fact that President Chávez would clearly like to do so.  Add in the fact that PDVSA will be a minority shareholder with Petrobras, and there's no way it's going to get out of this investment easily.

Which means that the Bolivarian Republic just gave the Brazilians a big fat $4 billion hostage.  More so since (1) the only other reasonable outlet for Venezuelan crude is in the United States; (2) civil law, unlike common law, allows Brazilian companies to sign contracts that spell out a predesignated list of damages to be paid should the government take certain actions; and (3) Brazil is basically independent of foreign oil, and therefore well-positioned to exercise a threat to embargo Venezuela.  Viva the not-empire!

It is quite brilliant.  I stand in awe.  How did he sucker Hugo in that one?  Is the prize of Mercosur really enough?  Then again, our Bolivarian friend seems to have just signed a contract paying a Spanish company a ridiculous amount of money to build a CCGT plant, so who knows?

What? Already???

  This is not a political post.

As some of you know, I like zombie movies.  One of my favorite genres.  Don't ask me to explain it.  Dawn of the Dead got into my head when I was a kid, scared me to death, and I suppose I never got it out. 

I also have no problem with remakes.  Some, like Cape Fear, beat cold the original. 

But a remake of a movie that only came out last year?  What??  And a Spanish movie at that.  It doesn't even qualify as a foreign-language film.

So go rent Rec.  Don't see Quarantine. 

That's filmmaking.

Volando el avión el la madre patria

We managed to travel from Barcelona to Sevilla and back without showing any identification at all.  Travelling from Brussels to Berlin wasn't quite so easy, but the security check could best be called perfunctory.  Even returning to the U.S. of A. from Heathrow wasn't that bad ... it's amazing what a difference not needing to take out your laptop or remove your shoes will make.

I'm far from the first person to complain about airport security theater.  I'm certainly not the first person to point out that most of the measures don't seem to make flying any safer.  Hell, I'm not even the first person to point out that the TSA blog manages to consistently undercut it's own objection to the idea that most of the measures are just for show.  (Love the badges and blue uniforms!  Of course, that doesn't mean that the TSA people have police powers, but it sure makes it look like they do.  But it ain't theater, no.) 

I will, however, put in a brief for the defense.  Given that so many people have an irrational fear of flying, there may in fact be an economic return to security theater.  After all, if it makes people feel safer, they may be more likely to fly.  In theory, the return should even be calculable.

Has anyone tried to calculate it?

Piratas atacan la madre patria

Newsflash:   pirates just captured a Spanish fishing boat off the coast of Somalia.  A Spanish frigate has been dispatched from the Red Sea and Madrid has requested assistance from NATO countries with a naval presence in the area. 

Considering as I just posted about pirates, I figured that it'd be remiss not to mention that the French raid doesn't seem to had an immediate deterrent effect.  Not that there's anything surprising about that.

Estar de acuerdo con el sentimiento en la madre patria

The post after my next post will be about the Dominican Republic.  The next post will be controversial.  In preparation, therefore, I am going to resurrect something from the madre patria about which I am sure that we can all agree.

And we're all a part of the:

Although I'm not so sure about this:

UPDATE:  Here's a close-up of the above building, with the sign in question more visible.

Cuidando a los niños en la madre patria

I am a firm believer in the power of personal experience.  Of course, it’s dangerous on its own:  you never want to reason by anecdote.  On the other hand, some abstract hypotheses are just hard to accept in the face of personal experience.  When the data are ambiguous, I turn to my lying eyes.

There has been an increasing amount of discussion given to low European fertility in recent years.  One problem with the whole discussion, among many, is that there is low fertility and then there is low fertility.  Almost all of Europe is “low fertility” by historical standards, but some countries like France and Norway are certainly going to replace themselves, and others like Ireland and Denmark and the U.K. are quite likely to follow suit.

But there are the superduperultralow fertility countries, like España, where people seem to have given up on child-bearing as a bad deal.  As many people besides me have pointed out, TFR is a really bad measure of fertility, but for what it’s worth Spain clocked in at 1.4 in 2006.  Unlike some other countries, however, in Spain the pictures match the impression given by the TFR.

Some very rough thoughts below the fold. 

No saben lo que hacen en la madre patria

Okay, this had to rank up there among the things that we never expected to see in Sevilla.

It isn’t as bad the two clueless dudes wearing swastika T-shirts whom I ... what’s the word? ... accosted back in Mexico City around 2004.  (There was short-lived fad for the symbol among young chilango working-class wannabe rebels; no political significance whatsoever, except maybe to show up the abysmal state of world history education in Mexico’s public schools.  Thank you Mike and Tom and Pat, for protecting me from myself.)

But still, a Confederate flag?  Even if it was a souvenir shop, my negative reaction is visceral. 

ObMusic:  Jason Ringenberg, “Rebel Flag in Germany.”  Download it now.

Dando las propinas en la madre patria

Do Spaniards tip too much?

Of all the things that I never would have expected to be a public controversy, tipping too much had to rank up there with charity and motherhood.  But there it was, a major topic of discussion in a local Café de Indias.  (Spanish cafés, save Starbucks, serve lots of alcohol in their coffee drinks.  I happen to think that this is a Good Thing, but the Starbucks explosion bodes ill.)

Why?  Well, the Economy Minister, Pedro Solbes, told his countrymen that the reason they think inflation is higher than it is might be because they’re all too stupid to realize that a one euro tip is too high on, say, a €2.00 drink.

I took an utterly unscientific poll of Sevillana waitresses on the topic.  The reaction?  One snort, two guffaws, an eye-roll, and two exclamations of the word “puta.”  (The latter two were born in Honduras.) 

The idiocy wound down when reporters found out that the minister and his friends regularly dropped only four euros on a €60 lunch.  The fact that food prices have skyrocketed also helped.  Food prices jumped 0.5% in November (6.3% at an annualized rate), after a similar increase in October, and the Economy Ministry managed to stick its foot in its mouth again by recommending that people eat more rabbit to save money.

Anyway, this all begs the question:  how much should you tip in the madre patria?  I’ll be damned if I know.  Everybody gives you a different answer, ranging from “nothing” to “just like in the United States.”  Help!  Leticia?

Manejando el auto en la madre patria

Haven't driven a car in Europe since 1986, and that probably wasn't legal.  Closest I came this trip was taking a taxi from the Barcelona airport (which is less than necessary, since the train is quite good), and while the taxista made great conversation — “Both parties are the same.  But that's fine!  The country is going well, so why change anything?” — his driving was quite boringly professional. 

Same thing for Sevilla.  The most interesting thing that cabbie from the airport did was explain that the green-and-white flags we saw waving from all the buildings on the outskirts of town were either the Andalucian provincial flag (the striped one) or the flag of the Betis soccer team (the one that vaguely looked like Saudi Arabia's). 

I can, though, say something about being a pedestrian in the madre patria, which is:  good, but frustrating.  Good, because this is one of those countries where drivers don't seem to want to kill you.  (Well, unless you're a jaywalker in Barcelona.)  Frustrating, because Sevilla (Barcelona, not so much) is one of those places where pedestrians will stand and stand and stand and wait for the light to change, regardless of oncoming traffic.  Now, I'm from New York, so on my own I made like Eminem and just didn't give a ****, but when I was with Amma we hewed to local customs ... it wasn't easy.

And I can say something about scooters.  Don't.  Ride them.  Vehicular craziness in Sevilla seems to be reserved for motor scooters.  And Barcelona leaves me at a loss for words, but thankfully still with my life. 

On the whole, I found car-people interactions to be far superior to Boston, where the f****** drivers honk at pedestrians.  That says more about Boston than Barcelona, though, because cars don't routinely honk at pedestrians anywhere else in the United States. 

What's the matter with Boston?

Tomando el tranvía en la madre patria

There are two types of rail transit systems in the United States.  The first are actual genuine rail transit systems, you know, that get people around and without which their cities would collapse.  Or at least not work very well.  New York’s subway, Chicago’s El, Boston’s T, Philadelphia’s SEPTA, San Francisco’s much-hated Muni, even (after many years in the second category) Washington’s Metro.

And then there’s art.  Take Miami-Dade’s Metrorail.  In fact, the county went so far as to deck the tracks out in neon tubing, just in case you missed that the point was public art, not public transportation.  And there are others.  How many people would notice if San José’s light rail shut down?

Barcelona’s Metro (above) falls into the first category.  It’s incredibly efficient:  never did we have to wait more than two minutes for a train.  It’s got these signs that tell you when the next train will arrive, and it does.  The old trains are comfortable, and the new trains have arrived out of the future, with open articulated connections between the cars and bright video screens.  There’s even this bitchen feature that you first think is stupid until you realize that it really speeds things up:  to get the doors to open, you got to push a button.

One of the things that Amma and I like to do when we’re in a strange city is grab a public conveyance and take it to the end of the line.  You can learn a lot that way.  And Sevilla has a futuristic streetcar that runs along the pedestrianized downtown.  So ...

... we got on.  And a minute later, we got off.  Along with everyone else.  Was there a criminal in the train?  A police check?  Should we be smelling something?  Nope, just the end of the art exhibit. 

The thing runs a whopping 1.4 kilometers, all within the historic center, between the “New Plaza” near city hall and the bus stop at Prado de San Sebastián.  (See below.)  You can walk its whole route in less than 15 minutes. 

Then again, they’re building a rather extensive metro, so maybe it won’t always be art.  But right now?

All I can say is that when we first saw the strikers blocking the train, we thought that they were pretty damn militant.  And after riding the thing, we think they’re pretty damn mild. 

Leyendo los archivos en la madre patria

I’ll try to keep up the slack while Doug’s in Germany this holiday season.  This one goes out to Carlos’s paternal grandparents. 

The Republic of the Philippines is unique in Asia in how well it’s assimilated it’s Chinese population.   Chinese-Filipinos have served their country in every position from private to President of the Republic, and nobody seriously questions their Filipino-ness.  As a result, for all their communal solidarity Chinese-Filipinos consider themselves Filipino first, Chinese-Filipino a rather distant second, and Chinese-Chinese not at all.  (I have a sneaking suspiscion that future Chinese governments will find themselves unpleasantly surprised by that fact.)  This didn’t happen in Burma or Thailand or Vietnam or Malaysia or Indonesia. 

So why did it happen in the Philippines, and what does any of this have to do with the madre patria? 

Amma and I were in Sevilla because I was looking for tax and budget data on the Spanish Philippines.  The first place to look for that is the Archivo de Indias.  You can see the main building behind the beautiful woman in the above photo.  The reading room is across the street behind the main building:  look for the sand-colored edifice to the right of this group of Sevillano pedestrians.

In 1864, Madrid decided to modernize the Philippines’ tax system.  Since specific taxes laid on Chinese generated about 7 percent of the islands’ revenue, the Crown commissioned some fascinating reports before deciding on the specifics of the reform.  Extracts below the fold:

Comiendo los alimentos en la madre patria

Somebody ... probably my mother ... once described Spanish food as “letting the ingredients speak for themselves.”

“Hearty peasant food,” Amma says.  “Solid presentations of uncommon meats.  Satisfying to the stomach, but not so much to the tongue.” 

I wouldn’t call it bland, exactly.  But comida andaluza does, I think, explain the Philippines.  The Philippines got the full force of a cuisine that liked to “let the ingredients speak for themselves,” only without the ingredients.  Philippine food is, perhaps, Andalucian food before the conquest of Mexico brought the ingredients to the peninsula.   

Or not.  It’s a hypothesis, anyway. 

Anyway, Spanish cuisine is just plain food — alimentos — more than a “cuisine.”  Maybe I’m just too used to it, having grown up on a faintly Americanized version of the stuff.  Meat-heavy fried food with very light seasoning. 

Overcooked venison is actually pretty good once you get used to it, and I’ve already mentioned croquetas.   

Plus, tapas are fun, although much better in America (or Catalunya, for that matter) where the substance comes from Mexico and Southeast Asia but the style is español.

Imitando a la iglesia en la madre patria

How is Starbucks like the Catholic Church?

In América, and especially in Mexico, the Catholic Church sited its cathedrals on the former sites of indigenous temples.  That way, the local populations faced a minimal change in their daily habits, making (in the view of the prelates, at least) their conversion easier.

In España, and especially in Andalucía, Starbucks locates its branches right next to the former (or soon-to-be former) sites of the Café de Indias chain.  It’s new enough that you can actually spot some of the dead old branches, and you never see a Café de Indias without a corresponding Starbucks.  It’s not just downtown:  we saw the same phenomenon in a most unfashionable section of Avenida de la República de Argentina on the other side of the Guadalquivir.  It was too dark to get a photo of that Starbucks, unfortunately, but here you can see a dead Café de Indias on the far right of the picture. 

One sure-fire way to make a Sevillano crack-up with uncontrollable laughter is to paraphrase this story.  Just be sure to mention the giant robots.

Mirando la tele en la madre patria

I came to Barcelona in order to present “Gunboats and Vultures” at a conference on sovereign debt. 

I was having some trouble figuring out what I could say about Spain or Catalonia or Barcelona, until I turned on the television in our hotel room. 

I used to think that Florida had the most lurid news programs in the world.  Not after seeing Gente on TVE-1, I don’t. 

The first story involved a woman killed by her husband in a long-term abusive relationship.  Marital abuse is a hot issue in Spain (even if it is unclear whether the problem is any worse than anywhere else in Europe), and the story certainly sounds newsworthy.  The second story was about a man who tortured his wife to death over a three-day period.  A little surprising, but it was the same topic, and perhaps TVE was making a political point. 

The third story covered a man who’d burned his wife alive, provoking his children to renounce their last name, followed by a bit about a father who killed his daughter’s boyfriend, a little girl crushed by rubble falling off a construction site, a fatal automobile accident, another fatal automobile accident, a decision not to prosecute a participant in yet a third accident under the country’s Good Samitaran law, and a fellow who shot his dog. 

Finally, after a bit about a calendar for homeless puppies, we got to hear about a woman who takes care of her completely incapacitated father and (perhaps in compensation) a final piece about “in-shape grannies.” 

Dulce María.  I’m going to shoot myself.  I mean, Primer Impacto back home isn’t the best news program on the planet, but this makes it look like Sixty Minutes.   

Adelante, Juan Carlos, Adelante

I am not a fan of monarchy in general.  And with grandparents who fought on the losing side of the Spanish civil war, I certainly find it difficult to be much of a fan of the Spanish monarchy in particular.  Similarly, and for much more concrete reasons, I am no fan of José María Aznar. 

But I am a fan of José Luis Zapatero.  And King Juan Carlos did good facing down that coup back in '81. So much as I enjoy Hugo Chávez's bluster, I gotta give props to the King here.  It might almost be enough to make me a monarchist, were I not just so bloody American at heart.