Wednesday, December 31, 2008

A Sophist Must Die

Will 2008 go in the history books as the year when the Information Age signals the end to the Deception Era? Time will tell.

Until the tide recedes, let Leonard Cohen's A Singer Must Die accompany our transition to 2009:

Now the courtroom is quiet, but who will confess.
Is it true you betrayed us? the answer is yes.
Then read me the list of the crimes that are mine,
I will ask for the mercy that you love to decline.
And all the ladies go moist, and the judge has no choice,
A singer must die for the lie in his voice.

And I thank you, I thank you for doing your duty,
You keepers of truth, you guardians of beauty.
Your vision is right, my vision is wrong,
I'm sorry for smudging the air with my song.

Oh, the night it is thick, my defences are hid
In the clothes of a woman I would like to forgive,
In the rings of her silk, in the hinge of her thighs,
Where I have to go begging in beauty's disguise.
Oh goodnight, goodnight, my night after night,
My night after night, after night, after night, after night, after night.

I am so afraid that I listen to you,
Your sun glassed protectors they do that to you.
It's their ways to detain, their ways to disgrace,
Their knee in your balls and their fist in your face.
Yes and long live the state by whoever it's made,
Sir, I didn't see nothing, I was just getting home late.

Tuesday, December 23, 2008

The Loan of Your Dreams

That would be a government guarantee like the one MK just got. Perhaps you will remember that it was the presence of a government guarantee that enabled the infamous Illovo Deal to go forward.

And it's not just any loan we're talking about here: it's the best you can get in the land for no one should be able to borrow at a rate the goverment does because of its monopolies to print legal tender paper and tax us to death. But it's definitely not a substitute to lapses in corporate governance. 

It appears that Air Mauritius seriously messed up its liquidity with its hedging and has been bailed out with the guarantee. As such we need to know what has happened, who did what and what is the downside so that the decisions which are in the best interests of the citizens are taken.

What's Missing in MK's Press Release

What's in italics in the next sentence. The Company's fuel risk management strategy aims to provide the airline with protection against  sudden and significant increases in oil prices while ensuring that the airline is not competitively disadvantaged in a serious way in the event of a substantial fall in the price of fuel. That's taken from page 50 of the 2007/8 Annual Report of Air Mauritius.

I guess that includes not doing anything stupid to throw the company over a cliff.

Bubble Gum Economics

In the wake of the government's stimulus plan, Paul Krugman has issued a strong warning in New York Times yesterday. Whereas the American economy will hopefully start its stabilisation process some time after July next year, it is very unlikely that the business as usual mode promoting a bubble-to-bubble expansion will be enough to prop up the desired vibrancy. Unless the deep structural challenges are addressed, reversing the nationwide bearish mood will remain an uphill task. Nevertheless, America can rely on its innovation-driven ethos for recovery. Will Dodoland's survival instinct prove resilient in the face of official self-delusion?

Sunday, December 21, 2008

The 5.2% Growth Means Almost Nothing

Especially when used in isolation or by an intellectually dishonest politician. Just like if you were in an operating room as the chief surgeon to do some brain surgery, you wouldn't send the patient home instead just because you thought she had great nail polish, would you? Or would you fly across the Himalayas aboard a plane having only a speedometer on its dashboard? I don't think so.

And what is there to brag about a 5% growth rate anyway? We've been growing at that rate for the past 17 years or so with and without Sithanen in government.

Rapidly Depreciating Rupee Shrinks Economy by More Than 20% in Dollar Terms

There are two ways of computing this. Given that I'm kind of lazy I just compute the rate of return on the exchange rate after grossing up the 25 rupees we needed to make a dollar six months ago by about 1/2 the expected growth rate of 5.2% for 2008. The long way is of course to compute the size of our economy in USD on these two dates and get a rate of return.

So Ramgoolam is absolutely right to say, at least in dollar terms, that we're not in a recession: we're in a depression!

Should Have Called it Paragraph 271 Instead

Because that's what the Economic Stimulus Package unveiled yesterday is really about and the relevant document is last June's budget. Click on the picture below to get an immediate sense of deja vu and to find out why Sithanen has failed here too.

Why Government is Awash With Cash

Because it has been taxing us to death (we've been paying way too much for everything including oil prices since Sithanen returned as Finance Minister in 2005), has cancelled personal exemptions with the dumb flat tax (an independent study recently confirmed that) and has been budgeting billions without actually spending them (Empowerment Fund spent only Rs 400 million over two years instead of the Rs2 billion budgeted and I wonder what percentage of the last three capital budgets has been spent). 

Ramgoolam obviously doesn't know what he is talking about when he's saying that they got all this money from the so-called 'reform'. Or is he taking us for a bunch of idiots?

About the Political Spin on the Rice/Flour Subsidies

Ramgoolam would have us believe that his government has a heart because he has kept these subsidies even though they are costing Rs1.3 billion instead of the Rs700 million they did a few years back. Not exactly what happened. Sithanen in his first bean-counting budget cancelled them but had to quietly reintroduce them after the civil society raised its voice.

We also have to put things in their right perspective. We could do this by looking at how much money is left if we subtract these subsidies from the VAT receipts that government has collected on super-high oil prices from us. Which is what I've done in the graphic above. Turns out government has a billion more left after paying the bigger subsidy.

Saturday, December 20, 2008

50% of the Financial Year Gone Already

So we should expect that half of the six billion rupees -- equally spread across six funds -- that were announced with so much fanfare in the last budget has already been spent. I have a couple of doubts that this has actually happened. Let me briefly explain. 

One of these funds, the Human Resource Development, Knowledge and Arts Fund, was hastily setup to give access to tertiary education to all of those who qualified for it. A few weeks after the budget speech the University of Mauritius announced that admissions had actually decreased by 17%! 

Another billion was suppose to be spent to ensure food security. Well, I only got back some absent looks when I asked someone close to the project back in September to confirm that at least Rs150 million had been spent which would have indicated that they were on track.

And then there's the billion for the ile durable stuff. Can't see really where Rs500 million has been spent since June. 

Do I need to go on?

Data Miners of the World, Unite

Asked about the paucity of statistics while he was implementing the policies that turned postwar Hong Kong into a thriving global financial centre, John Cowperthwaite replied: if I let them compute statistics, they’ll want to use them for (scenario) planning. Asked about some of the measures he would advocate for a turnaround, Nassim "Black Swan" Taleb replied: I don’t like scenario planning, because people don’t think out of the box. I would also ban the use of statistics because unless you know statistics very, very well, it’s a dangerous, double-edged sword.

In one of his latest posts, Sanjay demonstrates how per capita shrinks with a sinking rupee. Statistics are always relative. They depend on the elements factored in their computation, and these are never constant. That's why dogmas such as 1)VAT reduction automatically boosts consumption, 2) exchange rates invariably affect imports and exports and 3) PRB provision is systematically inflationary are all flawed.

As a matter of fact, we do not need statistics that feed trite debates and provide a smokescreen to incompetence. We nevertheless need them to decipher patterns and measure supply and demand to reduce inadequacies and improve flow everywhere.

Friday, December 19, 2008

Less Than 60% Effectively Passed the CPE this Year

How I got that number? Easy, I included the number of students that the press told us back in October were going to take part in these exams, 26,689, instead of the number of students who actually took the exam, 23,664. So that some 3,025 kids did not take the exam which works out to a little over 11%.

They didn't show up for probably some of the same reasons that 30% grown ups don't show up at their CFA Level I Exam. One such reason is fear. Which kind of makes the case to lower the difficulty of the CPE. Of course you realise that overlooking little details like this will make us a lesser nation than we ought to have been.

Why We Are Not a $7,000 Per Capita Country Anymore

Simply because when that number was computed you needed 25 rupees to make a dollar. As today you would need about Rs7.50 more for a greenback that per capita number falls approximately to USD 5,385. Which illustrates an interesting point: as a nation we become poorer when our currency loses value. And it loses value because we don't do the right things and/or we do too many dumb things. Of course we should not read to much into statistics like averages because they don't tell us the whole story. Still, it will be a little while before it reappears in the speeches of our local cherry-pickers.

Majority of Voters Didn't Need The Global Economic Crisis to Fall into A Recession

Indeed, Sithanen and Ali Mansoor had already put them there right after the first of a series of bean-counting budgets back in June 2006 when they "let inflation come loose out of its moorings". The damage is substantial: cumulative inflation for the last 42 months will hit 30% by next week while the more vulnerable voters got clobbered with more than 40% cumulative inflation over the same period. And that's before the mess of the flat tax reform and playing Russian roulette with SC/HSC subsidies to quickly name just a few. 

And unsurprisingly, as the above graphic shows, inflation in the country where both Sithanen and Mansoor studied economics has behaved much better. 

Tuesday, December 16, 2008

Lider Maximo's Last Stupid Move?

Berenger's threat of having MMM MPs collectively resign in January is a desperate and unambiguous sign that the guy has been in politics for way too long and has been leading his party for even longer. That's after he threatened to get us out of the Commonwealth a few years back simply because he did not get an appointment with the then British PM, Tony Blair.

If he thinks he is intimidating the people of Mauritius he and the MMM better think again. If they do resign Ramgoolam should, as soon as that becomes possible, organise bye-elections in the handful of ridings where the MMM managed to get candidates elected in 2005 and be prepared to win all the contested seats. 

Of course the almost super majority Ramgoolam would command would be short-lived: voters would not yet have had a chance to say loud and clear what they thought of the totally crazy policies of Rama Sithanen.  

Friday, December 12, 2008

A Rebuttal to a Vicious Call

Here is an excerpt from the current print edition of The Economist to expose the ongoing twisted propaganda on our monetary stance by some spoiled brats:

"In setting its interest rates, the Federal Reserve worries about growth and inflation. It does not concern itself unduly with the dollar. Policymakers in emerging economies, by contrast, cannot afford that luxury. In countries prone to high inflation, a stable exchange rate helps to anchor prices. Such economies have also usually borrowed in dollars or euros, because their creditors insist on being repaid in hard currency. A precipitous fall in the currency can make these debts insupportable.

For these reasons, emerging economies must often raise interest rates in the teeth of a slowdown in an effort to defend their currencies. This “procyclical” monetary policy damages the economy, inflicting losses on banks and their clients. But it may be the lesser of two evils. Rich countries can afford to treat their currencies with benign neglect. Emerging economies cannot".

Thursday, December 11, 2008

Patrice, Serge, Francois et les Autres

Patrice, Naiade Resorts boss, yesterday said that layoffs are out of the question and hinted that he may even pounce on a couple of hotels in the Seychelles. Serge, Soniawear's managing director said recently that he is confident that he will recoup any losses he might sustain now and then by raising his game. Francois, Miniature Models chief, thought big when he said a couple of years ago that he's gonna remove the little sugar cane he's got and expand because that doesn't earn anything. Kind of refreshing from the crap we're hearing from MEXA these days, don't you think? 

7,707 Failed the CPE Because The Exam is Too Difficult

And the Minister of Education should simply have bell-curved the results to make 5,340 more students pass. This would have brought the pass rate to 90% which is probably a more reasonable number. The other 10% could have been offered a seat in a vocational school to become great manual workers as I suppose we would like great plumbing jobs to become standard in Mauritius in the future.

And students should be given many opportunities to switch streams throughout their lives. In the meantime it's a good idea to have psychometricians start working immediately to bring the exam to the right level.

Wednesday, December 10, 2008


Paul Bérenger est un homme intelligent. Mais il est trop excessif... Par example, au Parlement, mardi, la PNQ sur les gaspillages des fonds publics était très pertinente. Le rapport du directeur de l'audit étant effectivement accablant. Il a reussi a acculer le minstre des finances et le gouvernement avec. Mais je ne sais pas pourquoi il a sorti des remarques personnels sur les cheveux de Ram Sithanen. Outre l'expulsion de l'hemicycle, il donne a l'alliance sociale "enne lezo" qui permettra aux David, Valayden et autres d'utiliser cet incident pour faire diversion. Dommage.

Tuesday, December 9, 2008

Repo Rate Drops by 100 Basis Points Even Though Inflation is Still High

And inflation is still high because back in the second half of 2006 Rama Sithanen and Ramesh Basant Roi issued a fatwa on our rupee after Sithanen removed subsidies on rice and flour in an environment of agriflation and ferocious bean-counting, rapidly rising oil prices and record FDI pouring into Mauritius.

Although inflation came down to 8.3% at the end of last month it's still more than twice the level that would be consistent with the notion of price stability. For instance in the UK it's 2%, at the ECB it is less than 2% (thanks to the Bundesbank) and in Canada it is between 1% and 3%.

Our rate of inflation would have been even lower if Manou Bheenick hadn't been working in difficult conditions: he inherited double-digit inflation and entrenched inflationary expectations from his predecessor and a Minister of Finance who appoints far too many people at the Bank of Mauritius even though he doesn't believe in an independent Central Bank.

For sure appointing Bheenick at the Bank of Mauritius has improved the odds of Ramgoolam staying on as PM after 2010 by containing Sithanen's pathological addiction to robust inflation. These odds can be further improved if the Bank of Mauritius Act is modified so that its Board and Monetary Policy Committee members are nominated in consultation with the Prime Minister and/or if the ultimate Bretton Woods puppet is sacked unceremoniously. The Government Audit Report is the latest of a long string of blunders that could be used as justification.

Friday, December 5, 2008

Top 10 Reasons Why Mauritius Was the Best Managed Country in the World With Berenger as PM

No. 10. Wait till we hear the reason why expensive sports coupes have been purchased for the SIDS conference. Will 20% of the revenue shortfall be footed by senior citizens?

No. 9. We won’t send Buckland and Milazar to represent us in the 100m dash and quarter-miler anymore – we’ll send 2 folks that live closest to the airport as measured by the GPS.

No. 8. Dead bodies of stray dogs have to be routinely avoided on our motorways and main road arteries.

No. 7. An economy that was in the doldrums in the morning is made to roar back with a vengeance in the afternoon. The same economy is pronounced lifeless the following morning.

No. 6. We lose a number of spots in several competitiveness and corruption rankings year after year - Management Guru, Tom Peters is definitely nuts to say that perception IS reality.

No. 5. The response to soaring unemployment has been to change the way it is computed.

No. 4. The two oil shocks of the 1970’s and the Volcker deflation never happened - revisionists are having a ball!

No. 3. Actual bye-election results are not as good as opinion polls.

No. 2. A very strong link between an ethnic wardrobe and delivery of a stellar economic performance has been established. The Royal Swedish Academy of Sciences may be missing something here.

And the No. 1 reason why Mauritius is the best managed country in the world is 

No. 1. Nobody in his right mind would say so!

Berenger is Da Man!

This is what the MMM would have us believe now. They could have a point here when we refresh our memory of how we used to be the best managed country in the world between 2000 and 2005. Are you ready? I am too. So stay tuned!

Tuesday, December 2, 2008

Who Should Get the Top Job at the CEB

That's kind of easy. He should remind Ramgoolam of his one-year old promise of bringing down electricity prices to more competitive and reasonable levels. That's very important because abusive energy prices kills our competitiveness and makes the poor poorer.

A no-nonsense approach should also be preferred over depreciated qualifications. That is he should make sure that the customer is not taken for a ride irrespective of whether oil prices are USD 10 a barrel or USD 150 a barrel like has been happening for way too long now. In other words we need someone like Clency Bibi.