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| Caribbean-Latin America |
| The generous commander |
| 2011-01-09 |
| After five years following up official reports on public expenditure, economist Franklin Rojas Penso paraphrases ex Venezuela's President Jaime Lusinchi: "What did they do with the money? Where is it?" And another unanswered question is still worse: where will the money come from to keep the promise of making quite a few investments? Rojas, the head of the Economic Research Center (Cieca), has systematically counted each promise for disbursement made to any nation where President Hugo Chavez meant to prove how generous he is. And the list is long as well. "The Venezuelan government has announced expenses in or for 94 countries or regions." Between 2005 and December 15, 2010, an upward curve reaches an outrageous total amount: USD 424.24 billion. All in five years. However, The infamous However... the matter should be put into perspective. They are mere announcements -direct investment, imports from any country, subsidies or payments. Another thing is whether they will come or not come true. This is easy to prove in most cases. For Rojas, however, the situation is clear. "In general terms, the government cannot keep such promises." It is not only because Rojas distrusts the goodwill of the revolution, but the account does not balance. In that same period of time, President Chavez and his spokespersons reported on public expenditure in Venezuela for USD 1.22 trillion, according to Cieca. In the meantime, income, according to the Central Bank of Venezuela (BCV), amounts to USD 505.57 billion. Interestingly, the government promised to spend somewhat more than USD 1.65 billion there and here, but has gotten USD 505 billion. Generosity exceeded the domestic availability. Everybody take Cieca sets 2005 as the year when President Chavez started to show his extravagant side by promising USD 19.77 billion to foreign countries. The following year, it was over USD 46 billion; in 2007, it climbed to USD 65 billion and in 2008, it went beyond USD 73 billion. In 2009, statistics made a quantum leap: USD 126.35 billion. But it is not what looks like. Or it is, but otherwise. Rojas explained that such a variation in the pace is because of the new scheme of partnerships to develop the Orinoco Oil Belt. That is, joint ventures with Russia, China, Japan, Italy and Belarus, where state-run oil holding Petróleos de Venezuela (Pdvsa) ought to have at least a 60-percent interest of the shareholders' equity. "Developing each bloc in the Belt requires between 15 and 20 billion dollars. Of course, if made, such outlays would start in the next years. At the end of the day, though, I think that Chinese are the ones really interested in developing that." The well is drying up No matter that many of such announcements are apparently made without planning and amidst presidential speeches. Rojas pointed to the status of the large supplier of foreign currency: Petróleos de Venezuela. "Despite the income over the past few years, Pdvsa failed to make the necessary investment in maintenance and output capacity. Pdvsa was taken its surplus to spend it in other things and today it is in a situation of negative cash flow." And there is no growth on the horizon. "A recent audit quoted by Rooters found that Pdvsa produces 2.8 million barrels per day, despite official numbers ending 2009 noted that output was at 3,012,000 barrels. Its production drops whereas debt surges. Companies get into debt to grow, to invest; but this is not the case, where one gets into debt to spend." That is, it seems that the revolution is drying up the well where dollars are taken. "And nobody knows what they do with the money. That money taken away from Pdvsa is supposed to go to the National Development Fund to invest in housing, infrastructure; but those works are not apparent either. USD 67 billion has entered Fonden in four years. What was done with that?" Anyhow, offerings have not slowed down. Until mid December, the Cieca counted public expenditure announced in Venezuela at USD 97.53 billion and another USD 92.89 billion for abroad. That is, USD 190.42 billion versus a tax income estimated at USD 98.08 billion. Where will those dollars come from? The situation of Pdvsa depicted by Rojas -and many other analysts- is like riding a bicycle with deflated tires. Nothing has been invested to produce more and yield more income. Worse still, a big slice has been compromised in advance. "There are 430,000 barrels per day that should be delivered to China as part of the arrangements for the so-called Chinese funds, plus some 300,000 for Cuba and Petrocaribe, in addition to the domestic market which consumes almost 500,000; that is, 1,230,000 barrels per day which do not yield income," he listed. The current status of the oil company accounts has a dual effect: on the very company, because it cannot reinvest in itself and on the tax income because of its decreasing input. "The government has been forced to increase indebtedness. In 1998, the country's debt amounted to USD 27.80 billion. Today, it exceeds USD 119 billion, including the effect of the Chinese fund." But the State needs more cash and will get it somehow. The ghost of a second devaluation in 2010 hunted most of the year. Finally, on December 30, it came true disguised itself as "unification." No more dual exchange rate at 2.60 and 4.30 bolivars per US dollar. January brought a single official exchange rate at 4.30 bolivars per US dollar. The alarms of inflation, particularly in drugs and food, were the New Year music. "The central government wants all the funds," the expert said. "And it established such a thing like the communes, which will be rather used to give money to the government. And taxes will also move up; but this will have not much effect on a recessive economy and where there will be no private investment out of the huge risk of investing here. Therefore, everything goes through public expenditure; everything goes through Pdvsa. But if a large portion goes away in commitments, possibilities of economic growth are low. As long as there is indebtedness capacity, Chavez will continue doing it." |
| Posted by:Fred |
| #7 The resolution to the money crunch will be the solution used by all Socialist/Dictatorships that ran out of money. Arm up and invade your neighbors. |
| Posted by: Lumpy Flinerong7967 2011-01-09 23:15 |
| #6 Given that I had the conversation with the cousin's in-laws some time ago, and in Spanish before I took the review class last semester, I wouldn't swear to all the details. But the gist of the conversation was that Chavez had a fund to subsidize utility costs and other things for Venezuelans everywhere. The relatives were enthusiastic about how Chavez "takes care of people". I suspect that they're a lot less enthusiastic now, but I have not had a chance to talk to them recently. |
| Posted by: mom 2011-01-09 16:30 |
| #5 Interesting, mom. What's to keep them from taking the money and Relatives back home being vulnerable to reprisals. |
| Posted by: Secret Asian Man 2011-01-09 14:55 |
| #4 "I think Chavez is sending small stipends to every emigre to keep them from saying bad things about him in their new countries." Interesting, mom. What's to keep them from taking the money and |
| Posted by: Barbara Skolaut 2011-01-09 14:29 |
| #3 Jim, Maybe he's talking about the economic well rather than the oil well. I gather that they aren't handling the assets properly. My cousin's Venezuelan in-laws, living in NYC, are getting a tiny bit of Chavez' largesse. I think Chavez is sending small stipends to every emigre to keep them from saying bad things about him in their new countries. I wonder who he's sending the really big goodies to. I bet a lot of people in Venezuela are asking the same questions. |
| Posted by: mom 2011-01-09 13:26 |
| #2 The well is drying up Bullshit, we (Earth) are awash with oil, only a few Very easy to tap areas are showing signs of LOWER flow, not "Drying up". |
| Posted by: Redneck Jim 2011-01-09 11:55 |
| #1 Venezuela = Zimbabwe |
| Posted by: Goodluck 2011-01-09 08:10 |