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The arb trade
Enviado 4 de mayo de 2004 - 8:52 por Christopher Whalen- Oil. Well, when Fidel gets his oil from VE below cost (or no cost at times), he resells some on the spot market and pockets the difference. Probably has accounts in London. Lavanderia 101. Oil, drugs, it does not really matter. Cuba is in the classic middleman position in the region -- like the relationship of Sicily to Italy.
- Fairness. If Hugo is not getting a gratuity from his Cuban mentors, he needs a new agent. Doctors, etc. are wonderful. Also, I am not nearly as pessimistic about Cuba's "cash flow," broadly defined, as the stats would suggest. Between the VE oil and various other commodities that come via sea and air, I think the commisars have more than enough kopeks to hit Paris this summer.
- Neoliberal model. Like the efficient market theory, the notion of a neoliberal world view is a facade for criminality and other bad acts. Remember Carlos Salinas and reform? Became an excuse to loot Pemex, etc. Likewise those on the left like Castro and Chavez promising "democracy" while acting like despots are poor examples for the type of transparent, accoutable structures we all agree are necessary. There is no effective difference between Cuba's "democratic" government and the evolving rule of Hugo Chavez. The VE economy is admittedly a function of many bad decisions that came before (who all live in Miami, London or Madrid now, thank you very much). Unfortunately, oil seems to predispose LA economies to ever higher levels of statism to provide for revenue sharing by elites (see #2 above).
- Oil. Don't get to steamed up about "oil giant" status. Oil giant VE is problematic compared to Cuba. As a person of average means, where would you rather live? More, if Chavez keeps messing with PDVSA, he'll push it down to the types of poor efficiency levels we see with Pemex, which is twice the size but produces half of output of the VE state oil entity. VE's oil industry has historically avoided the political nonsense in Caracas, but the political rot is now so profound and the purge of pre-Chavez professionals in the military and PDVSA is so broad that this may not be the case in the future.
- Default. Incidentially, my colleague Molano reports that Argentine tax revenues continue to boom. Argentine tax receipts were up by a third this year, allowing the federal government to raise public sector wages and pension payments. Does LA's battered citizenry become more committed to their own economies when they tell the gringos to take their paper and stuff it? This is the fifth Argentine default since the Eurotrash first invaded the American paradise, so maybe they'll get it right this time around.
Saludos,