The Social Media Secret’s Out! Now, Share It!

January 21, 2011

I have recently been considering the marketing applications of the ‘dictator’s’ dilemma as coined by Clay Shirky*. It strikes me that social media, which has been used so successfully by the masses politically in the Philippines, China, Spain and Thailand and is feared by the governments there, is exactly the application and embodiment of effective marketing that is also being pursued by Facebook; recently Venezuela enacted a new law to tighten control of the internet and this could be a sign that President Hugo Chavez fears the power of social media.

Facebook in particular is proving to be a phenomenal hit in the Americas, and here are recent figures for Facebook usage in selected markets in the Americas:

Country Users Dec 2009 Rank Users Dec 2010 Rank Growth
US 101,303,240 145,749,580 44%
Mexico 6,505,040 18,488,700 184%
Argentina 7,387,120 12,359,260 67%
Colombia 7,243,520 11,665,860 61%
Brazil 2,413,900 8,821,880 266%
Chile 5,808,020 7,586,060 31%
Venezuela 4,952,340 7,552,760 53%
Peru 1,510,480 3,888,560 157%

Note that all of these countries are in the top 30 global markets for Facebook, demonstrating a real interest in social media in the region. The main social networking site in Brazil remains Orkut (owned by Google) for the moment, but the explosive growth of Facebook there may threaten this status as happened with MySpace elsewhere.

Targeted advertising to Facebook accounts, which is how the social networking site earns revenue, sees friends having the choice whether to recommend the ads to other friends. Facebook has been one of the first to pick up on the power of this advertising technique in a big way. Conveyance by social media is good, but not always enough; real effect comes in the two step process, where the message is seen via social media, but then importantly transferred to a close associate, friend or family member. A recommendation from someone known is far more influencing than from a stranger and the fact that it is being conveyed through an admired medium, technology, is also legitimising.  This has the effect of both media influence and then conversational influence.

It is like learning: when it is reinforced and engaged with, it is remembered and embedded. It is in this second step that opinions about buying or not buying are formed. Mass texting of shared communications saw this second conversational step form political opinions and action in China, Thailand or the Philippines. This social ratification and recommendation is very powerful. In the commercial world it is what every brand is hoping for; it creates an intense bond between the product and the consumer and then potential friend of the consumer. This is the essence and aim of viral marketing and social media is the mechanism by which it happens.

There are clearly lessons to be learned from modern political struggles and regimes who have tried to clamp down on access to media like Google and The New York Times online. Some have even closed down whole networks to avoid viral response, but in so doing, they have also closed down their business communications and negatively impacted their economy.  Such lessons convince me of the power of viral marketing especially when you want to reach distant/remote populations such as in the Andean regions. Although, it has to be noted that effective viral marketing often takes place in compacted populations. Then products can most easily be located and distributed to large concentrated populations e.g. in Sao Paulo, Mexico City or Bogota. Concentrated populations, being touched by viral communications, offer rich pickings potentially, but the message has to be targeted, clear and meaningful.

It has to be remembered that social media is not only the Internet, but probably more importantly for Latin America, and arguably for the rest of the world as well, cell phones, especially smart phones. Vodaphone has seen this opportunity and it has introduced a fairly simple phone in India in July 2009, marketed at an accessible price point, and has determined relevant features for the target market including text, calculator and radio. This then gives a greater population improved communication and obvious personal and business benefits; it also provides access to information which is socially relevant and even health related and urgent. This however presupposes a certain amount of numeracy and literacy. Still, it gives marketers an opportunity to reach distant and dispersed segments of society in a very economic and personal way and a way which may well encourage a sharing of this marketing information for compounded effect!

This also means that viral marketing – using social media – is creating a fairer playing field for SMEs as it has been doing for uniting opposition to unfair political practices around the world. As authoritarian or conservative governments fear social media, so do large corporations and oligopolies with huge marketing budgets.  Introducing a product which is clearly superior to theirs, and which begins to erode their market share, will no doubt generate a backlash. Social media is however not only a good marketing mechanism in order to introduce a product; it is also a relatively cheap defence mechanism against such corporate responses. In the past, prohibitive marketing and advertising costs, especially in order to reach remoter less concentrated markets, would have made this impossible for SMEs. Today this is not the case. The question then is which products or services lend themselves to viral marketing in Latin America, America or elsewhere for that matter of fact. Is there any that do, more than others? Are there any limits? I’m not sure that there are.

Another question again is culture; does it raise its head? Personally, I think not. From my experience of living and working on four continents, I think that technology not only physically crosses all borders, but social media communications, through the means of technology, is also more trusted than many face to face communications with ‘strangers’. Technology is not a strange bed-fellow; in fact it is a desirable one which is part and parcel of marketing targeted at people who aspire to be ‘more’. People want to improve and be seen to be improving; technology facilitates that and social media messaging for viral marketing can benefit from that receptiveness.

*Sirky, C. (2010) The Political Power of Social Media Technology, The Public Sphere and Political Change Foreign Affairs Volume 90, No.1, pp. 28-41.

Authored by Pam Mason

Is Doing Business in Latin America Getting Easier or Harder?

January 20, 2011

As always with Latin America, we do not think that there is one single answer as the region is not one homogenous unit but a myriad of different markets and cultures.

The Doing Business Project, launched by the World Bank in 2002, publishes an update each year with objective measures of business regulations and their enforcement across 183 economies, including all of the LatAm markets. It offers measurable benchmarks for reform, and serves as a resource for everyone interested in the business climate of each country.

The recently published Doing Business in 2011 Report has significant detail on all of the markets measured, and also gives good examples of reforms achieved. One example quoted that demonstrates the effect of red tape is for a business in Kenya that wished to export to the UK:

Consider the story of Bedi Limited, a garment producer in Nakuru, Kenya. After spending 18 months pursuing a trial order for school items from Tesco, one of the largest retail chains in the United Kingdom, Bedi lost out on the chance to become part of its global supply chain. Bedi had everything well planned to meet a delivery date set for July. But the goods were delayed at the port. When they arrived in the United Kingdom in August, it was too late. The back-to-school promotion was over. Changes to regulations and procedures can help improve the overall trade logistics environment, enabling companies like Bedi to capture such growth opportunities.

In terms of regional performance, Latin America & the Caribbean had the lowest percentage of economies in which at least one reform  was made that make it easier to do business (47% vs. 84% of economies in the Eastern Europe & Central Asia area). Many of the reforms introduced have involved simplified online procedures.

The following table gives the respective 2011 and 2010 ranks for ease of doing business for selected countries:

Country DB2011 Rank DB2010 Rank
US 5 5
Mexico 35 41
Peru 36 46
Colombia 39 38
Chile 43 53
Panama 72 62
El Salvador 86 80
Guatemala 101 100
Paraguay 106 105
Argentina 115 113
Nicaragua 117 119
Uruguay 124 122
Costa Rica 125 121
Brazil 127 124
Ecuador 130 127
Honduras 131 128
Bolivia 149 148
Venezuela 172 170

The ranks are relative to the 183 markets measured, so a drop in the rankings does not necessarily mean that business has become more difficult but rather that other countries have reformed more. In fact over the last 5 years, only two LatAm markets have in fact become more difficult in which to do business: Argentina and Venezuela; unfortunately these were also the lowest ranked two countries globally in which doing business has become harder.

Over the same 5 year period, several LatAm economies have made significant reforms to make doing business easier: Colombia, Peru and Mexico. Chile, which is now ranked #4 in LatAm for ease of doing business, made few reforms over the period, but the Chilean President, Sebastian Pinera, has made it clear that it his government’s intention to be more business friendly. Brazil, which has potentially the most to gain from reform, has made some progress, but it needs to do more and faster if it is to make real progress.

In terms of ease of importing goods, the averages for the region are as follows:

Documents required to import: 7.5

Time to import: 22 days

Cost to import (US$ per container): $1,441 (excluding any tariffs or duties)

These figures of course mask wide variances within the area. In Venezuela the report estimates that a typical imported container will take 71 days and cost US$2,868, as opposed to 9 days and US$915 in Panama.

In terms of ease of exporting goods, the averages for the region are as follows:

Documents required to export: 7.1

Time to export: 19 days

Cost to export (US$ per container): $1,310

Again, looking at the same countries as an example, in Venezuela it takes 49 days to export a typical container and costs US$2,590, whereas in Panama it takes 9 days and costs US$765.

The protection for investors shows some of the highest variance in the region: Colombia is ranked #6 globally, but neighboring Venezuela is a very poor 179, perhaps not surprising given the arbitrary expropriations made by the Venezuelan President, Hugo Chavez.

Registering property in the region is generally complex, taking 7 procedures and 69 days on average; often it is because visits to different agencies and in Brazil there are 14 separate procedures required. Brazil could also benefit from tax reform; at present the project calculates that a typical entrepreneur in Brazil takes 2,600 hours each year to process the tax payments.

Our own experience with trade in the region typically correlates with the information provided by the Doing Business Project, and certainly it is generally far easier doing business in countries such as Mexico, Colombia, Peru and Chile as opposed to Venezuela in particular, but as we have noted it is Brazil that has the most potential to gain from fresh initiatives and cutting red tape. With elections due in a number of countries we hope that new administrations will take bolder and wider reforms and push LatAm forward faster.

Is Peru the Cheap Chile?

January 13, 2011

Peru has come a long way since the dark days of the insurgency led by the Shining Path movement that, although still not entirely ended, significantly wound down around ten years ago after 20 bitter years of internal conflict. It now represents an excellent example of what Latin America can achieve with thoughtful, progressive reform and a will to break with the past; together with Colombia, Peru represents perhaps the most improved Latin American country since 2000, and a positive counterbalance to unorthodox policies of Chavez’s Venezuela.

The country has a rich, almost magical history, perhaps best symbolized by the glorious Incan city of Machu Picchu. The famous Nazca Lines, left by a long-vanished civilization, have evoked theories as exotic as the use of hot air balloons hundreds of years ago to a runway for extraterrestrials.

The estimated GDP growth in 2010 was 8.7%, and is forecast to be at or above 5% p.a. over the next five years, with inflation in a 1-3% band, and the current account is only -0.2% of GDP; despite these positive numbers and the fact that its 30m citizens represents a population almost double that of Chile, Peru often appears to be overlooked by multinationals looking to business in the region, even exporters that struggle with the duties of the Mercosur trading group, and the cost of entry to the market is generally more favorable, especially with a concentrated central population in the capital, Lima.

Key indicators include the following:

GDP (PPP) per capita $8,626, 87th out of 181 markets measured (Source: IMF 2010)

Ease of doing business: 36th out of 183 nations (Source: World Bank 2010)

Human Development Index: 63rd out of 169 (Source: UNDP 2010)

Economic Freedom: 45th out of 179 (Source: Heritage Foundation 2010)

Corruption Perception: 78th out of 178 (Source: Trasparency International 2010)

Competitiveness Rank: 73rd out of 139 (Source: World Economic Forum 2010)

Peru compares favorably to Chile on many of these indicators, and generally ranks ahead of Colombia, which appears to be getting far more positive press than Peru. Only in competitiveness does Peru rank outside the first or second quartile of the markets measured by each respective indicator, a long way from Venezuela, which more often than not ranks in the fourth quartile.

Since 2006, Peru has signed trade deals with the US, Canada, Singapore, and China, concluded negotiations with the European Union, and begun trade talks with Korea, Japan, and others, and the country has committed itself to endorsing free trade.

A wide open presidential election in April 2011 and a run off likely in June perhaps do not help with the markets, which always dislike volatility and the unknown, but the current incumbent, Alan Garcia, has managed to sustain growth following the reforms made by his predecessors, Alberto Fujimori and Alfredo Toledo, despite a previous term as president in 1985-1990 that is accepted generally as disastrous. In the last election, President Garcia narrowly beat Ollanta Humala, a left leaning ex-army Lieutenant Colonel supported openly by Venezuela’s Chavez, which gave rise to concerns about the true political progress made by Peru and was a reminder of its “flawed” democracy.

The country still needs to make progress in a number of areas, particularly its over dependence on commodity exports, and education as more than one-third of 15 year olds are classified as borderline illiterate by the OECD, but an orderly transition to the next government and a continued independent and orthodox central bank should ensure that Peru continues to grow faster than the rest of Latin America and together with at least Colombia will join Chile in a group of truly emerging nations. As with similarly placed markets it is the emerging middle class that offers the greatest opportunities in the medium to long-term, particularly as many of the presidential candidates are pledging to reducing the current 35% poverty rate (down from 44.5% in 2006).

A Tale Of Two Cities: Bolivia

January 6, 2011

Bolivia, a landlocked country in the heart of the South America land mass, perhaps represents the popular image of old of Latin America best: it has struggled with political instability (and more coups than any other nation), conflict with its neighbors in which it has lost more than half its territory, a diverse multi-ethnic population, and economic difficulties best represented by mega inflation that hit 60,000% on an annualized basis in mid-1985. To put the inflation in context, we heard the anecdote that the rate for a taxi ride from the La Paz airport to the city center would double on the return trip. A friend once told us that he was in a restaurant in La Paz at the time and when it came time to pay a fellow diner took a stack of notes and a ruler and measured out the payment.

It is here that Butch Cassidy and the Sundance Kid met their end, Che Guevara perished at the hands of the CIA and the local police, and Klaus Barbie and other Nazis fled to after WWII. Many of the indigenous women wear bowler hats as part of their “traditional” costume, yet these hats were introduced to them from Britain by an enterprising company in the 1920s.

Bolivia itself is divided politically between its two largest cities, La Paz and Santa Cruz, and the contrast between these two could not be greater. Visitors to Latin America often remark on the differences between cities in the same country, such as Sao Paulo and Rio de Janeiro in Brazil, or Quito and Guayaquil in Ecuador, but La Paz and Santa Cruz are far more polarized and diverse, both geographically and culturally.

La Paz is the highest capital in the city in the world at around 3,800 m, approx. 1,000 m higher than the second highest, Quito, and visitors arriving at the airport in El Alto are often plagued by ferocious headaches. It is the seat of most of branches of government, ethnically has a highly indigenous population, a relatively cold climate in the oxygen starved altiplano, and economically has a large informal sector and on the whole light industry. There seems to be little dynamism and many parts of the city often appear to be mired in its colonial past.

In comparison, little visited Santa Cruz is a hot, dusty new-town, a melting pot of ethnic and cultural diversity and famed for the beauty of its women. It’s a brash, often chaotic city that is proud of its zestful nature and the wealth generated by its proximity to the gas fields; its inhabitants want everyone to know that they are independent of La Paz and often tell you that their town is now the largest and most important in Bolivia (which is technically true but La Paz and neighboring El Alto form a larger overall urban conurbation). Santa Cruz appears to want international trade to succeed, and perhaps with other cities such as Cochabamba seems to offer Bolivia a real hope for the future; international brands are everywhere and many of the businessmen ask foreign visitors why no one has heard about them.

On paper perhaps Bolivia does not appear to offer very much: a population of 10 m, one of the lowest GDP per capita in Latin America (approx. $4,700 on a PPP basis), and a populist president, Evo Morales, that appears to often get his cue from the economically incompetent president of Venezuela, Hugo Chavez. In addition there has been strife with the US over its willingness to tackle the drugs trade (not helped by the fact that President Morales was previously head of the coca farmers union), which has led to the removal of certain trade preferences, and the government has often mishandled political challenges (and its reputation is not helped by the botched attempt to cut fuel subsidies recently).

Nevertheless, despite the frequent political turmoil a surprisingly orthodox fiscal policy and strong commodity prices have allowed economic growth to continue, hitting around 6.1% in 2008, with forecast growth just below 4% p.a. for 2011 and the medium term; no China or India indeed, but comparable to that forecast for most of the rest of Latin America. We would also expect the middle class in more dynamic areas such as Santa Cruz to grow much faster than that, offering modest but real potential for an exporter willing to brave trade with this distant market.

Watch Out President Chávez : You’re Opening Pandora’s Box!

December 26, 2010

Former Venezuelan President Carlos Andres Perez, who died on Saturday, December 25 in Miami, is said, by President Hugo Chávez, to have led governments from 1974-79 and 1989-93 that violated citizens’ rights and were subservient to US interest. This is what we can politely term ‘the pot calling the kettle black!’ Speaking from the grave through his daughter, Maria Francia Perez, who confirmed that, despite rumors, her father would never have agreed to be buried in Venezuela while the ‘antidemocratic’ government of President Chavez remains in power; the two arch enemies continuing the fight even from different worlds!

After ten years as president, Hugo Chávez has polarized Venezuela even further, and arguably has the “Don’t Cry for Me Argentina” magnetism of Evita Peron, charming the poor with projects like Take El Valle, a hillside slum on the edge of Caracas. Over the past few years it has seen social programs: Cuban medics manning a health clinic, soup kitchens and supermarkets with subsidized rice prices. According to government figures, extreme poverty dropped from 16.9% to 7.9% between 2000 and 2007. These figures are not only challenged by the opposition, but also by failure to address day to day issues like frequent muggings and the soaring price of milk.

Maybe it is the bubbling social consciousness that is being created that is the most important legacy so far, and the gradual awakening of the poor to their rights. Pandora’s box, now opened, and there will be no going back, but for the same poor to then exert their rights. This 21st century socialism, however, like revolutionary Cuba before it is showing similar reactions to overt opponents like those on the Tascón list. They are reported to be excluded from the government’s benefits and even blacklisted. The national identity numbers of more than 2.4 million Venezuelans who had signed a petition for a recall referendum against President Chávez was published, though later recalled, and the continuing persecution of this politically segregated people is suspected. Democracy? Social Reform? Students protested Cuba forty years ago. Looks like Venezuela is the new Cuba right enough.

Meanwhile President Chávez remains the US’s most uncensored critic. What is the US’s reasoning? What does oil have to do with it? (A rhetorical question)

By Pam Mason

Don’t Cry For Me Argentina

December 23, 2010

In the Peron tradition, Argentina continues to be governed by the few who charismatically engineer smokescreens that seduce its proletariat. For those of us who have traveled to Argentina and fallen in love with its charm, we also want to be able to believe the latest government figures. The charming people we meet there make us want to return and do more business, but the government figures defy belief and make it impossible for the time being to have the confidence to do so without considerable caution.

Superficially at least, Argentina appears to be re-emerging as a global player, providing its own indicators of creditworthiness.  It is a member of the G-20 club, ranks among the top 30 global economies, and it is a stable and peaceful democracy; many of its main economic indicators, including per capita income measured in current dollars (>$9,000), look very healthy for a developing country.

Urban unemployment is stated at around 8%, down from 20%, and many low value-added jobs in inefficient companies have disappeared. Commodity export price booms have created a significant trade surplus and stimulated higher investment and output, most notably in agriculture. Consequently, merchandise export earnings have more than doubled over ten years to $60 billion annually in 2008-2010.

Argentina has therefore seen an unprecedented expansion of government income with revenues at 33% of GDP from that of about 21% in late 1990s, witnessing higher private sector incomes and government spending. Unfortunately, Argentina does not have a market-based exchange-rate regime, as the Argentine Peso would have benefited from the flood of foreign exchange. The Central Bank of Argentina’s interference has weakened the currency by 36% in nominal terms while most Latin American neighbours have appreciated. Instead Argentina has been significantly building its dollar reserves, with $50 Billion in the first six months of 2010. Currently, external debt liabilities are at an all time low of two-and-a-half times the level of reserves, representing a foreign debt level which is compatible with higher sovereign credit ratings.

The problem is that the current administration is delusional if it believes that the rational among us, those not in the ‘Don’t Cry For Me Argentina’ camp, are convinced.  Argentina, for the present and immediate future, has lost its allure. When private pension funds are ‘nationalised’ to save them, effectively hijacked, what could foreigners expect? A rhetorical question and most of us don’t suffer from memory loss.

Argentina is the only G-20 member government that is in default on its loan obligations to its fellow members – and it has been in default to them for nearly a decade. Potential foreign investors in, and lenders to, Argentina are likely to get ensnarled in the claims as a concession to any future accord between Argentina and its official creditors. Argentina bears the burden of the debts to the Paris Club – $7 Billion, $1 Billion arbitration awards, with many pending through the ICSID (84% of all cases brought against any of the G-20 member nations) and $850 Million protracted arrears to foreign commercial banks and suppliers. It is the only G-20 member that refuses to abide by its treaty obligations to the International Monetary Fund (IMF), blatantly committing transnational financial crimes. Until debts are settled international credibility, as a trusted player, is a tarnished reality. Argentina has to step up and pay up.

The international comparative platform further supports the conclusion that Argentina remains a stealth operator and a relatively oppressed and non-business nor investment friendly place. Argentina ranks 115th in the World Bank’s “Ease of Doing Business” category, out of a total of 183 economies, 87th in the World Economic Forum’s Global Competitiveness Report 2010-2011, out of a total of 139, and 105th place out of 178 countries in Transparency International’s 2010 Corruption Perceptions Index and is 135th out of 179 countries in the Heritage Foundation-Wall Street Journal 2010 Index of Economic Freedom.

Therefore, there is clearly a great deal of country risk that is not captured by the Argentinean government produced indicators. Steady now in rushing to invest in Argentina! Argentina has been on a spending spree with this inherited revenue leaving little to meet the existing or what would become new public indebtedness. The IMF, producing more comprehensive figures, configured on an accrual rather than cash basis, has realistically included all payments due to be made by the government and revealing operating deficits not surpluses.

Then there are the serious accusations concerning the accuracy and integrity of official inflation data generated by Argentina. Notably, the IMF’s leading publication, the World Economic Outlook, refers to Argentina as the only country in the world whose inflation and GDP statistics need to be accompanied by a footnote explaining that the numbers cited have been challenged by private analysts.

Government inflation figures showing an average of 8.4% per year while independent analysts challenge them with an average of 20.5% and some suggesting as high as 30%. Argentina, being the only G-20 country to refuse inspection of its books by the IMF, does nothing to refute this. This translates to prices not having risen by 50% but 130% since 2006 and infers unsound and imprudent fiscal and monetary policies featuring unsustainable exchange rates which eventually, once the ‘Don’t Cry for Me Argentina’ camp has come out of its trance, will turn emotive tears and compliance into national social and political unrest.

Despite substantial market and default risks, Argentina has nevertheless managed to raise $3 billion through to the end of October 2010, offering bond yields mostly in the range of 9½% to 12½% while European and American bonds unattractively offer only 1 to 5%. The problem is that these attractive returns are based on high risk, single B rated credits. Replacing a culture of capital flight, some global investors are also making a showing in stock purchases and equity investments there, and should be credited with bravery as well as short term memory loss.

Santa Claus is apparently savvier than some, avoiding exporting to Argentina this Christmas, as he knows that he may not get his sleigh back and Rudolph might even become Christmas lunch. But, being a smart Santa, he’ll be keeping an eye on Argentina as Christmas has not permanently ended there; it will be celebrated again, just not quite sure when. Until then, we will indeed not forget Argentina. While we all enjoy the sentiment of the song, we are waiting for the Argentinean people to forego it, for its leaders to acknowledge that statesmanship is more than entertaining the masses and to open up to global opportunities that will give the country back its self respect.

Now sing along with Evita … I mean President Kirchner … err … whoever … (will bow out myself if you don’t mind!)

‘Don’t cry for me Argentina
The truth is I never left you
All through my wild days
My mad existence
I kept my promise
Don’t keep your distance

And as for fortune, and as for fame
I never invited them in
Though it seemed to the world they were all I desired
They are illusions
They’re not the solutions they promised to be
The answer was here all the time
I love you and hope you love me

Don’t cry for me Argentina’

(Lyrics: ‘Don’t Cry For Me Argentina’)

Author: Pam Mason

Is Venezuela Headed to Become Cuba?

December 22, 2010

On September 28, 2010 voting took place for the National Assembly, due to commence on January 5th 2011; the result of the election is that the opposition, who decided to boycott the last elections in 2005 and thus handed President Hugo Chavez complete control of the Assembly, gained approx. 40% of the 165 seats (note that the opposition in fact gained more than 50% of the popular vote, but blatant gerrymandering by Chavez before the election meant that they ended up with proportionately fewer seats.

Since the elections tensions have risen in Venezuela in recent weeks as Chavez has been put into an uncomfortable position as he requires a two-thirds majority to pass important legislature, and that will be very difficult given the seats to be controlled by the opposition.

There have been a series of articles published that express increasing concern that we would like to examine here and ask the question as to whether Venezuela really is headed to become Cuba? This is taking place at a time when Cuba, which is highly dependent on significant transfers of oil of around 100,000 barrels per day from Venezuela to balance its finances, appears to be headed in a different direction.

The economy, after several years of rapid growth, has been the worst hit in Latin America and is not forecast to start growing again until 2012, inflation at 28% is one of the highest rates in the world, and there is a significant budget deficit – Oil production, on which Venezuela depends for FX and government revenue, appears to be in significant decline and the state company, PDVSA, is poorly run and over staffed. In addition, importers face a plethora of highly bureaucratic obstacles to obtain FX through three different schemes (in addition to a black market for those brave or desperate enough).

On December 17 Chavez used his control of the Assembly to put through an Enabling Law, called a Christmas gift to Chavez by the Economist Intelligence Unit. The Enabling Law has been put in place just before the opposition take their seats using the pretext of recent floods in Venezuela, and in essence allows Chavez to rule by decree, without the support of the National Assembly, for 18 months. According to the BBC “His new powers extend beyond relief and reconstruction to cover areas including infrastructure, banking and finance, rural and urban land use, telecommunications, defence and security.”

On December 20 the BBC has also reported that the Venezuelan parliament has voted to tighten internet rules, which could lead to further censorship in a country where several news organizations that Chavez believes are favoring the opposition have been harassed or even closed down.

Miguel Octavio, who runs a great weblog in English on Venezuela called The Devil’s Excrement (which is a term coined by a Venezuelan poet for oil in case you are wondering), is very concerned and goes so far to say “To all those that always say that Venezuela is a democracy under Chavez, the President’s proposal that the Enabling Bill extend for up to 18 months is simply a Constitutional coup and a disregard for the mandate given by the people to the new National Assembly that will be sworn in on Jan. 5th.”

Armando Duran, Resident Fellow at the University of Miami’s Center for Hemispheric policy has just published a paper “Cuba and Venezuela: Long Live the Revolution!” in which he concludes “Under the Cuban banner of “socialism or death,” now begins a new stage in the transition from representative democracy to totalitarian socialism in Venezuela, with unknown consequences for the rest of Latin America.”

Chavez himself faces presidential elections just before the Enabling Law ends in 2012, and now observers at looking at his administration to see whether any semblance of democracy survives. The real test will come if Chavez loses the popular vote in 2012, as it seems unlikely that he will hand over power peacefully. There is far greater risk of violent confrontation between supporters of Chavez and the opposition and social unrest in the months ahead.