The Superintendence of Banks issued a resolution today saying that three of the banks intervened will be reopened on Dec. 21st. I still don’t see how this will work, since I expect people will simply take their money out as soon as they can and the funds will flow to better banks or to foreign currency.
It may be that the Government is doing this knowing quite well that this will happen, but the strategy will be costly. In some sense all the Government is really doing is moving loans and deposits from these banks to Banfoandes and changing the name of the bank, something that it could have done on day one and created much less panic than it has.
First of all, the Government will have to replace the capital in each of the three banks which reportedly was lost with the creative operations done by the owners.
But more importantly, let’s look at the deposits in each of the three banks, looking at the total in each bank, as well as the size of “official” deposits (As of October 31st., we don’t know how much fled the week the first two were open):
——————————-Deposits (Bs) Off. Deposits (Bs)
Bolivar 4,038 mill. 858 million
Confederado 3,001 mill. 1,702 mill.
Central 4,003 mill. 835 mill.
As you can see, in Bolívar and Central official deposits were roughly 21% of all deposits. We don’t know how much of that left Bolívar in the week that it was intervened with open doors, but I assume quite a bit. Thus, the only way to insure these deposits will not leave is for the Government to add to the official deposits. The case of Central is likely to be worse as investors did not have a chance to take their money out, as it was shut down when intervened.
You can also see how ridiculous Banco Confederado was, with 57.1% of its deposits in official ones, something that makes no sense in any way you look at it.
It is clear why the Government decided to liquidate Banorte, the bank had 65.9% in official deposits, a number that should have raised the eyebrows of the Superintendence and shows there was help from the regulators in this whole crisis.
And then we come to Banco Canarias. The Government has said little about the losses in any bank, but Canarias’ profile in deposits was not too different than these banks, with 43.3% of its deposits in the form of official Government deposits. Clearly, the losses had to be huge to justify the different strategy of liquidating the bank. The question is whether people will ever be told what exactly happened there and what is the cost.
Thus, in the end the Government is doing what it should have done from day one, but making Banfoandes stronger, which is surprising, given the charges that this bank kept part of its deposits in many of the intervend banks. But the worst part is that people are likely to move their funds to the private commercial banks that are perceived to have no problems. This could easily have been avoided.
It also makes little sense for the Government to now have so many banks. Banfoandes will now surpass Banco de Venezuela (assuming all deposits stay, which will not happen) with 19% of all deposits, Venezuela will have a similar amount in fourth place. Industrial will be a distant 12th. with 2%.
This will all have an unknown financial cost, as the Government will have to replace capital and cover losses in thse banks. But more importantly, Government banks have been unable to keep up with even the Government’s requirements for loan quotas, so that lending will be hurt, which will be bad for economic growth at a time when things are not well.
The Devil's Excrement 
December 29, 2009 at 2:09 pm
Will they reopen Banco Banorte anybody have clue????????????
December 20, 2009 at 10:36 am
I want to alert ppl in Venezuela about whayt is happening in the poor Caribbean island of Dominica. Venezuela has just funded a massive landslide for his political crony Skerrit, the Dominican PM.
The reason they are interested in the East Caribbean and a range of island is control over the oil in the waters off the Caribbean which starts from bird Island – isle of aves all the way up to st kitts.
there is also alot of drug trafficking going on through these waters. earlier this year the dom ambassador to venezuela , who is a lawyer actually DEFENDED a group of venezuelans found with drugs and 1 million US in dominican waters. they were released and sent home on private plane with the money – NO CHARGES !
Elections on friday in dom featured massive bribery of a poor population – same red colour and also jetting in on private charters of hundreds of bribed voters living overseas. the opposition didnt have a chance.
Please miguel – do some thinking on the link with the Caribbean and Skerrit. He is the one spreading Venezuelans money to the other caribbean leaders in the eastern caribbean as well.
December 19, 2009 at 11:33 pm
Is there a connection to the post or just interesting info?
December 19, 2009 at 10:49 pm
FYI: http://www.claridadpuertorico.com/contentpdf.html?news=74F61F59304856266F41D59C05F39840
December 17, 2009 at 11:07 am
Miguel Octavio, thanks for your explanation above. What is your estimate on international reserves? and by international reserves I mean all the cash disposable in US$/Euros/Gold to the government to pay its international debt, I am also including here FONDEN, FEM, FOMIN, Central bank reserves. This is the key to know if Gov’t will or not will to default. I have heard ranges of international reseves from US$50-70 bn…which is more than enough to service Venny and PDVSA bonds and also to finance budget deficit for 2-3 years. But again I am not sure about this number. More clarity on reserves and fiscal deficit will give us the hint. Again I do not think they are in line to default Debt/GDP is 40% compared to developed countries of 80-100% ration, Venny gov’t can always refinance as the markets are eager for high yielding bonds from PDVSA.
December 17, 2009 at 7:11 am
Miguel,
Here ia an article from Reuters:
CARACAS, Dec 16 (Reuters) – Venezuela’s exports of crude oil and refined products slipped in November, according to data from the OPEC nation’s oil ministry.
Total exports of oil and products slipped by 0.8 percent to 2.398 million barrels per day (bpd) last month, down from 2.417 million bpd in October.
Exports of upgraded crude oil were 272,642 bpd for the month, according to the data, well below levels of more than 500,000 bpd seen earlier this year.
State oil firm PDVSA has said the units that upgrade extra heavy crude oil into lighter, exportable crude were hit with unplanned maintenance over recent months. The units were nationalized in 2007.
http://uk.reuters.com/article/idUKN1612416320091216
What struck me was the total collapse of upgraded oil deliveries which I assume they get the largest payment. Deliveries were down some 40%.
December 16, 2009 at 6:41 pm
This means no bonuses of Guayana workers
?
Is this a sector or am area?
December 16, 2009 at 5:20 pm
Thanks, that was a great explanation.
December 16, 2009 at 10:45 am
Ktaven,
I have written about that in 2 articles touching the Venezuela Mali links. There I also quoted some Malian sources. I mentioned the possibility of La Esmeralda, blablabla. Still: some of the things are far-fetched hypothesis and knowing the incredible record of US Americans about WMD and the like, I think we should be cautious before drawing .conclusions.
Soon after my second post, a person claiming to be a free lance journalist (but with a gmail account) and writing for a Swiss “think tank” (with US support, I saw some of the articles, she specializes in terrorism and Africa-Middle East) wrote to me asking for my opinion on several issues.
Those issues were:
– possible links of the Mali drug connection with Maghreb Al Qaeda
– possible plans of the Venezuelan government to get extra money from the cocaine trade in that area to compensate for the oil prices, etc
-possible consequences if the media discovered this or that
She asked me my opinion on a quote from another US “expert” who happens to be, again, the son of a US evangelical missionary in Africa (eye-rolling).
I am with Gweh on this: Iran wants to use Venezuela for importing machines, it wants to use it for circumventing financial isolation, perhaps somehting else.
Still, some of the other possible links are either far from proven or just don’t make sense.
Some may, but hold on your horses. The US has a very bad record on this. Remember the uranium link Nigeria-Saddam Hussein, which at the end was bogus stuff and when someone blew the whistle, Dick cheney’s workers gave away her identity
http://en.wikipedia.org/wiki/Niger_uranium_forgeries
There is one guy now in prison for that, even though the one behind him was Dick and he should be in prison right now.
I see the same bloody patterns as the preparations for other wars…or at least attempts by some hawkish groups in the US.
The same with a lot of issues on the Iraq war.
The same has been going on for over half of US involvements abroad in the last 200 years.
Just one of the many:
http://en.wikipedia.org/wiki/Gulf_of_Tonkin_Incident
One of these days I want to make a mind map of “think tank specialists” and analysists for several nations and their links to other groups.
In one of them you will have very strong links between
Lord of the Rings – christian conservative | Jewish ultra-right – military and the like.
Perhaps (probably) one day the wolf does come. Let’s be watchful but not too imaginative.
——————————
Back to topic:
Miguel, it would be interesting if you put your statement about Venezuela’s strength in context. Some months ago you were saying Venezuela needed $90 per barrel. How does this all compute? OK, Hugo is using more force than popularity now to stay in power, but still…
can you perhaps go into a general post one of these days about Venezuela’s general strength taking into account some oil scenarios?
December 16, 2009 at 9:49 am
Thanks GWEH… I will sleep better having your assurance it is all misinformation.
December 16, 2009 at 2:54 am
el articulo WSJ Tehran-Ccs is another rehash full of hearsay and innuendo but at least the questions are being intelligently asked. The only way nukes are going to enter the picture is Chavez acquiring warheads only from Iran. That is possible and Chavez certainly has set himself up for that with Iran. Everything else such as Iran processing Venezuelan uranium or Venezuela obtaining Iranian missiles is misinformation.
What Chavez is doing right now is helping Iran skirt international sanctions in order to obtain banned goods for its military programs. Being that Venezuela has good relations with just about every country on earth, this opens a new front for Western and allied investigators seeking to penetrate and unravel the secret purchasing networks.
December 15, 2009 at 10:56 pm
NicaCat reference above says—”
What do Fadi Kabboul, Aref Richany Jimenez, Radwan Sabbagh and Tarek Zaidan El Aissami Maddah have in common? The answer is that they are, respectively, executive director for planning of Venezuelan oil company PdVSA; the president of Venezuela’s military-industrial complex; the president of a major state-owned mining concern; and, finally, the minister of interior. Latin Americans of Middle Eastern descent have long played prominent roles in national politics and business. But these are all fingertip positions in what gives the Iranian-Venezuelan relationship its worrying grip.”
December 15, 2009 at 9:27 pm
Looks like hyperinflation will haunt our economy the first quarter of 2010.
So many off-topic comments Lol..
December 15, 2009 at 6:08 pm
OT here, but an interesting read in the WSJ today: “The Tehran-Caracas Nuclear Axis”
http://online.wsj.com/article/SB10001424052748704869304574595652815802722.html
December 15, 2009 at 1:16 pm
Miguel, how is Daniel doing today? Cómo amaneció?
December 15, 2009 at 12:36 pm
Nice link Mr. Danger.
Scary outlook for the future.
December 15, 2009 at 11:55 am
And on another unrelated note…
http://ftalphaville.ft.com/blog/2009/12/15/112756/the-worlds-riskiest-sovereign-borrower-2009/
December 15, 2009 at 10:24 am
This is off topic but describe Venezuela exactly–
The Ten Truths of Tyranny ( http://irabrodsky.com/index.php?/archives/86-The-Ten-Truths-of-Tyranny-revised-2009.html )
1. The larger government grows, the more corrupt it becomes.
2. The easier a law is to pass, the harder it is to rescind.
3. Any law that claims to protect rights that already exist will actually diminish those rights.
4. All new laws passed “for the common good” are actually for the empowerment and enrichment of politicians.
5. Laws enacted to help one group always harm everyone else.
6. All good things the government says happened thanks to regulation of commerce happened for other reasons.
7. Any development in science or industry that the government claims to have planned was going to happen anyway.
8. When politicians call industries or executives greedy, it means the politicians want a bigger piece of the action.
9. Citizens who oppose new legislation are always portrayed as villains.
10. Governments do not grant freedoms; they only take them away.
December 14, 2009 at 9:01 pm
Why do I have the feeling that the Tascon List will have an unofficial part in how depositors are treated?
And I suppose those in the know got their money out as the gov dallied around.
The big question is if the government has the money and or credit to get this under control without resorting to printing money which was done last time. At that time things were different. Most of the food other important things to survive were produced in Venezuela. Now most is imported and the price is global and if your credit is bad COD.
December 14, 2009 at 5:32 pm
Hi there,
On a totally unrelated mote, take a look on this article about The Devil Excrement:
http://www.businesspundit.com/white-collar-crimes-history-and-how-they-were-unravelled/