Let’s have a look at some of the corruption and deceit in the revolution, but tonight in a quantitative manner:
—-The Venezuelan Government buys Argentinean bonds from
that Government and sells them to local banks and financial institutions at an “implied”
exchange rate of Bs. 2350. The Bonds are sold and those dollars are sold in the
parallel swap market. Who gets the bonds? Those institutions friendly to the
Government who are willing to pay the intermediary for the Government part of
the gain. In order to please larger and more serious banks, about 20% is given
without any commission as long as those more “serious” banks sell the bonds to
a final client.
Thus, of the US$ 3.5 billion about 700 million were sold
without a commission, leaving US$ 2.8 billion. Since the average price of the
parallel market has been around Bs. 2675 since the Argentinean bonds have been
sold, the total “gain” by intermediaries and those that pay the commissions has
been Bs. 910 billion or US$ 423 million.
Hard to find a bigger rip off in Venezuela’s
history.
—Official Deposits, or deposits from official Government
institutions represent approximately 26% of all deposits in the Venezuelan
banking system. Total deposits in the banking system are of the order of US$ 18
billion. Thus, official deposits are approximately US$ 4.86 billion. Most of
these official deposits move around the banking system based on who pays a
commission to the “intermediary” Spread have come down, so it is no longer the
nice business it used to be as they get “only” a 3% commission. This comes out
to US$ 145 million if all deposits move based on corruption which is not the
case, but the bulk does, so we are talking about a US$ 100 million racket.
This used to be bigger than the first one, but as spreads came
down, they were not getting rich as fast, so they invented the first one. Reportedly,
the same people run both.
—-This one is “small” comparatively speaking, but is proof
of how pervasive corruption is in the revolution. At the National Housing
Council, they have been helping those that lose their homes by lending them the
money to buy another one. People are given between Bs. 40 million (US$ 18,604)
and Bs. 120 million (US$ 55,183) at preferential interest rates. Well,
unfortunately someone set up a
racket within the institute and as many as 1,000 families who had their
credit approved were ripped off, the check was issued and someone else cashed
it. If we assume the average check is for Bs. 80 million (39,208), then we are
talking about a clean US$ 39 million rip off in an institution that on top of
that has failed to do its job for eight years.
The people involved are truly screwed: They owe the money;
they have to pay the financing until the issue is resolved and they still have
no home.
—Last Wednesday our esteemed Minister of Finance
presented the 2007 national budget. His talk was an exercise in either deceit
or ignorance, depending on whether he believes what he said or was purposely
trying to lie. My bet is it was 80% ignorance.
Among other jewels, Merentes said that the era of
devaluations is over. He also stated that there is a “small” problem with
inflation but every state policy is aimed at attacking it. Well, the problem is
not small; in fact, they had to force interest rates to come down 18 percentage
points to drop inflation from 18% to 10% and now are back to 16% by the end of
the year. Unfortunately, they can’t drop rates 18% again because they are so
low now. Additionally, except for the Central Bank, that has been absorbing
liquidity, but has no more capacity to do so, not one policy has been
implemented to fight inflation.
In any case, the numeric part of his speech has to do with
the fact that Merentes proudly announced that the budget had a lot of latitude
in it because the budget was made assuming an average price for the Venezuelan
oil basket of US$ 29 per barrel.
Unfortunately, Venezuela has been producing
only 2.53 million barrels a day, while the budget assumes 3.5 million barrels a
day, 400 thousand barrels above what the Government says is total production.
So, let’s compare numbers. 29 dollars a barrel in the
budget with 3.5 million barrels a day is equivalent to US$ 101 million a day in
oil income.
In order to have US$ 101 million in oil income, with the production that
IEA says we have, the average price of the Venezuelan oil basket would have to
be above US$ 40.11 dollars per barrel.
However, Venezuela
just this week announced that it will take a production cut of 138 thousand
barrels a day, as part of the one million barrel a day cut by OPEC. This would lower
production to 2.392 barrels of oil per day, which requires producing US$ 101
million a day, an average price of US$ 42.43 per barrel.
Problem is that in the last three years, the final budget
has been, on the average 25% higher than the proposed budget. This would
require 25% more per barrel in order to maintain the budget or US$ 50.9 per
barrel.
Unfortunately, on Friday the barrel of oil for the Venezuelan oil basket closed at US$ 49.95, so that Merente’s words use of “ample room”, “comfortable cushion” and all those nice
words he used, only exist in his own imagination.
So, prepare yourself…
The Devil's Excrement 
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