Tuesday, September 9, 2008

My minimum minimorum on exiting Iraq!

I was never in favor of the invasion of Iraq but, once it occurred, I pleaded for a scheme that would put its oil revenues directly into the pockets of all the Iraqis, and thereby set an example that could help to empower the democracy in all the other countries that are cursed with the centralization of their oil revenues… the mother of all oil curses. Unfortunately, the supposed builders of democracy forgot to bring with them to Iraq such a fundamental building block. 
Now, when exiting Iraq, as a minimum minimorum, we should at least aspire that the next Saddam Hussein, whenever he will appear, should not find it easier to be the next Saddam Hussein.

Below is the link to one place where I pleaded


Friday, August 8, 2008

The historical origins of Venezuela's oil curse

Translated from El Universal

1. The Ordinance of Alcalá (Spain) by King Alfonso XI, in1348 established: "All mining of silver, gold, lead and any other metal, of any kind, belong to Us; therefore, no one dares to work without our special license and mandate".

2. The Ordinances of San Lorenzo, issued by Felipe II in 1584, which incorporated all the mines into the royal patrimony, were in force in America until 1783. Then these were repealed by the Mining Ordinances for New Spain, promulgated by King Carlos III, which precepted "The mines [including the bitumen or “juices of the earth”] are the property of my Royal Crown".

3. "In 1829, Venezuela’s “Liberator”, Simón Bolívar, promulgated a Decree in Quito that tacitly established that the mines passed from the Royal Spanish Crown to the domain of the Republic of Venezuela... whose government grants them ownership and possession to citizens who request them, under the conditions expressed in the Mining Laws and Ordinances, and with the others contained in this decree". As if wanting to reaffirm its origin, Congress, in the Law of 1832, resolved: "according to the Decree of October 24, 1829, the Ordinance that should serve as a rule for the Government in relation to mines, is that of New Spain of 1783".
4. The first Mining Code of 1854, which incorporates aspects of the French Mining Law of 1810, caused some confusion. Although it indicates that the property corresponds to the State, it also talks about the possibility of a perpetual ownership of a mine... a transferable property without the need for authorization from the Executive Branch. Between the Constitution of 1864, which establishes the federal regime, until 1909, we read that the property belongs to each Federal State. Between 1910 and 1925 seemingly "nothing was said about the ownership of the mines."
5. And in 1920 the first Law on Hydrocarbons and other Combustible Minerals was enacted and which to this day establishes that "the State can directly exploit... discuss freely, like a private owner, the conditions of the assignment. It is not obliged, however, to grant the assignment of his right".

That centralization of the net oil revenues in the state guaranteed, sooner or later, these would be captured by inept profiteers or simply by vulgar bandits.
Simón Bolívar was without doubt a Liberator, at least in a geographical and political sense, but sadly, when it comes to the economy, he de facto doomed us Venezuelans to not live in a nation but, sadly, only in somebody else’s good business.

Thursday, June 26, 2008

Let us sit down and talk about oil!

On June 26, 2008 I published in Caracas an imaginary letter from Arnold Schwarzenegger to the citizens of Venezuela and in which he offers to buy, on a rolling five years average price, 2 million of oil barrels per day, so as to satisfy the needs of his California constituency and also to take the worst of that volatility out of the market that keeps his electorate running crazed between Hummers and hybrids.

To provide the Venezuelans with the incentives to entering into such a contract Arnold is offering to pay an equal share of the proceeds, to each one of the 26 million citizens of Venezuela, in the currency and in the account each one of them would order… instead of giving all that money to chávez.

Economics is about making the most out of scarce resources and so when seeing the oil suppliers in OPEP exercising their powers successfully, which is OK since oil in a non renewable resource and since the world at large should benefit from consuming less of it, one cannot help but ask why the consumers do not exploit their powers as consumers. I suspect because there are some not wanting them to do that.

I wonder what the Venezuelans would say if they would formally receive such an offer from Arnold since today the primary reason for which Venezuela is not exporting more oil, even though its citizens might need the money, is that its government gets more oil revenues than it can handle… in fact so much that they even give away some of the oil to London and Boston.

Fellow citizens from oil supplying and oil consuming countries, why do we not sit down and talk about it all, without intermediaries like oil companies or oil dictators?