The Devil's Excrement

One striking aspect of Hugo Chavez’s leadership is the way his
criticisms of past practices reliably foreshadow his own plans. Between
1998 and 2003, Chavez rarely missed a chance to criticize the Venezuelan
State Oil company, PDVSA, for its lack of transparency, accountability
and auditability. In the 30 months since chavistas took full control of
PDVSA, however, the oil industry has reached levels of opacity,
unaccountability, and inauditability undreamed of in the pre-Chavez era.

Now, with the proposed reforms to Venezuela’s Central Bank Law, the lack
of transparency that has characterized PDVSA’s operations since 2003
will be officially extended to the oil industry’s
thick revenue stream. As explained by AIO in Daniel’s Blog
the new Central Bank law would enshrine in law a series of quasi legal
practices in place since last year that allow PDVSA to keep part of its
dollar revenues outside the country, to be spent – as dollars – however
the government wants.

Needless to say, in the current context, “the government” and “Chavez”
are synonyms.

There’s so much wrong with this proposal it’s hard to know where to even
start. From my point of view, though, what’s most dismaying about the
new law is that it officializes the Chavista Parallel Budgets doctrine.

Blithely discarding the long established principle of the “single treasury” –
la unidad del tesoro” – and the centuries’ old doctrine of the
parliamentary “power of the purse strings,” the new law allows PDVSA
(read: Chavez) to set aside billions of dollars each year to spend
without any constraints, controls, or oversight whatsoever. The
fundamental notion that the state can only spend money in accordance to
a budget approved by the elected legislature – a doctrine dating back to
Magna Carta and enshrined in every modern constitution around the world,
including Venezuela’s 1999 constitution – is quite simply ignored, as is
any measure that might obstruct Chavez’s total discretionary power over
the billions of dollars involved.

The parallel dollar budget will stand beyond the reach of any attempt at
independent auditing. This is not merely because the Contraloria General
de la Republica and the National Assembly’s leadership have been in
the hands of presidential cronies for years – though this is clearly a
major part of the problem – but more fundamentally because it will be
administered in dollars, from accounts sitting outside the country,
where Venezuelan state auditors have no jurisdiction. No longer will
lack of transparency hinge on the contraloria’s current political
docility: with the new central bank law, even a future, hypothetically
honest contralor would be unable to track the money. Until now,
transparency has been enshrined in law but ignored in practice – with
these reforms, the Chavez cronies’ disdain for transparency is
solidified into law.

Shielded from any oversight, any need for parliamentary authorization,
any auditing standards, any controls at all, there is just no telling
what will happen to the substantial sums of money involved. One thing I
can say for sure as a social scientist: lack of transparency breeds
corruption. Barring a “government of angels” – which no country on earth
has, and Venezuela less than most – extending such thorough,
sure-fire guarantee of zero-oversight virtually guarantees that
substantial sums will be stolen. What will happen to the rest is
anyone’s guess.

In light of the longstanding Chavista rhetoric against the lack of
transparency in the old PDVSA’s finances, this whole episode brims with
particularly bitter irony.

Francisco Toro

This entry was posted on June 26, 2005 at 7:46 pm and is filed under Uncategorized.