It is well known that Chavez gives away oil to many of his friendly countries (sometimes, if convenient to the unfriendly ones to) Most of these giveaways are done under the umbrella of programs approved by the Venezuelan National Assembly, many under terms that are really onerous to Venezuela, particularly a Venezuela that has so many problems and where money is short. In many cases, the receiving countries pay half within 90 days and the remainder in 15 years with ridiculously low interest rates.
Cuba gets away with not paying, by paying in kind with man hours of various services at wages and prices that Venezuelans wished they had.
And then there is Nicaragua. I had heard that Venezuela was using some convoluted way for giving away oil to Nicaragua, but until La Razon published the scheme on Sunday I had no idea of the magnitude of the rip-off on the Venezuelan people.
The document above is a proposal approved by President Chavez in April. It looks complicated. It is. Because it is designed to insure that Nicaragua ends up paying as little as possible in the end for our oil.
It works like this: PDVSA sells oil to Albanisa, a company owned 51% by Venezuela and 49% by Nicaragua. Albanisa agrees to pay for this within 90 days. Except that PDVSA transfers the debt to the Venezuelan Development Fund Fonden, which refinances the the debt, giving 50% of it a 14% discount and a year grace period for payment, and four years at 2% financing. But of course, of the 50% with the discount, Nicaragua ends up paying only 49% (if it does pay) because after all, Albanisa is 51% owned by Venezuela!
Thus, suppose it is US$ 100 million. The first 50%, is discounted 14%, so that the debt magically drops to US$43, but of course Nicaragua only has to pay 49% of that.
The other 50%, is refinanced to two companies, one called Caruna and the other Alba Caruna, also owned 51% by Venezuela and 49% by Nicaragua. Except these people get an even sweeter deal, as they get a two years grace period and are given 25 years to pay the remainder at the giveaway interest rate of 2% per year. Of course, half of that debt is owed by us Venezuelans.
This last part is almost like giving it away for free, not only are Caruna and Alba Caruna also owned by Venezuela with 51%, but if the Nicaraguans ever pay under the terms and world inflation stays at 2%, it would be like borrowing money free with huge discount to boot.
Most poor Venezuelans wish they could get such loans to, for example, fix their home, start a small business and why not, buy their family some food.
According to La Razon, this scheme is being used for Nicaragua to purchase some US$ 1.2 billion in oil a year, but in the end Nicaragua only pays for US$ 345 million a year.The whole thing then becomes a US$ 865 million a year give away to Chavez; buddies in Nicaragua.
The Devil's Excrement 
November 5, 2010 at 10:01 am
Where do oil transport costs enter into the accounting? Is Venezuela paying shipping costs also?
How much of a kick-back goes to Hugo Chavez Swiss bank accounts?
November 4, 2010 at 10:01 am
I can’t speak for the Nicaraguans but as a Honduran I can tell you that corruption was very evident for the short time we were a member of ALBA. In 2008 fuel cost $3.50 a gallon. After we entered ALBA in August 2008, fuel still cost $3.50 a gallon. However, the diesel we received from Venezuela was of inferior quality. Mileage was reduced in most diesel vehicles and the fuel was high in sulfur and a yellowish color rather than the customary clear hue. So our government was buying cheaper fuel yet charging the same price…obviously that difference was going somewhere and it was probably some slush fund belonging to Manuel Zelaya and his inner circle. I would bet Ortega and friends are probably enjoying similar graft with Hugo’s giveaways.
November 4, 2010 at 1:59 am
OK, if I were the opposition I would write a text describing what Miguel just wrote, with a little mind map thingie, arrows to Ortega, houses and cars.
I would translate all that into bolívares. Then I would print it in cheap paper in one of the many copying shops in the Avenida Bolivar of Valencia.
I would go to Libertador to the place where children are having classes under the skies for lack of school and I would distribute those flyers there. I would go to Big Low Center, the big bus terminal of Carabobo, with 20 other persons, and I would distribute those flyers specially next to the buses going to Maturín, to Puerto Cabello, to Calabozo, to Acarigua and to Tucupita.
Unlike PJ, who have distributed flyers a couple of times in slow actions with everybody having yellow shirts (hello, look at us!), people would be dressed in a very unremarkable way, they would all have cameras and watch each other and they would vanish from the place in less than 6 minutes.
I would keep doing that. Forget about distributing flyers to people in own cars or talking about this in Globovision (at least that should not be priority 1 to 20 in the media war).
November 3, 2010 at 8:44 pm
Bruni….Originally Ortega said Nicaragua would sell Venezuela beef and beans to pay for the oil. That’s lots of beans.
Ortega has two sons in San Jose, Costa Rica. They are “university students”. They drive extra fancy expensive sports cars. There was a dust up when the government of Costa Rica asked why Nicaragua had so many expensive cars with diplomatic plates. Nicaragua owns a house for the ambassador yet the ambassador said it did not meet his requirements. He lives in a big leased mansion.
November 3, 2010 at 8:37 pm
I wonder, maybe all these oil giveaways are in exchange for Hugo’s retirement plan. If he can’t remain dictator for life he will retire very well off in Cuba.
November 3, 2010 at 5:43 pm
Bruni:
We get caraota negra and the eternal thanks of Ortega and his cronies
November 3, 2010 at 5:02 pm
Miguel, this is in exchange of what? Usually the chavistas always invent something: arms, coffee, doctors, machines, expertise in urban development, houses…what is the great item Nicaragua has to offer Vzla?
November 3, 2010 at 5:00 pm
Yep, no one will call out the Martians (illegal alliens every one of them) for their twisted plotage and coniving trickery.
Any chance at all of letting US politics go? This isn’t the place for it.
November 3, 2010 at 2:45 pm
All I need to know about Slow Gibson is that he thinks there’s a difference between the Republican and Democratic parties in the US, and that Obama actually has the power to make decisions.
When watching a puppet show, it’s more enjoyable if one suspends disbelief and pretends the puppets are real characters, but only a fool believes the puppets decide what they will say and do.
November 3, 2010 at 1:11 pm
Speed Gibson,
Your description of Obama sound a litle racist to me…it does matter where his coming from? and do you have to offend also his wife. SHAME ON YOU!
In addition, Venezuelan problems should be solved by Venezuelans…and believe me most of the venezuelans prefer that…by the way i do not like Hugo either, but I do not want USA troop in my country or any country of the world getting any president out of power…just see in what mess Mister Bush got USA with his focus on IRAK democracy!
November 3, 2010 at 9:00 am
A picture forms, day by day, of what PDVSA is like, directly managed by the Venezuelan State, and with said State in the hands of a dictator. You have added another feature of it.
When it comes out completely, conclusions may be drawn safely. I hazard mine. The Oil industry and it’s profits should not be managed by the State in Venezuela. When this is over, it will only remain for us to decide HOW TO PRIVATIZE PDVSA.
November 3, 2010 at 5:34 am
this is how its done people…..read and learn….our prez from da hood wont be coming to help you all get rid of hugo anytime soon….he’s busy planning his move back to chicago and watching moocheles ass get bigger
http://www.drudgereport.com/
November 3, 2010 at 3:35 am
Doing business with a certified child molester (Ortega) is probably the most sickening thing.
November 2, 2010 at 10:33 pm
gas, diesel is among the most expensive in central america. the only people that get a price break are the taxi and bus drivers that support the fsln, daniel ortegas party. According to Ortega, nicaragua assumes zero debt, since its a solidarity gift from Chaves. The huge profits are divided between Ortegas family, inner circle and I m sure a huge slush fund for Hugo.
November 2, 2010 at 9:39 pm
Ummm, did you know that Daniel Ortega actually owns Albanisa (http://www.thecuttingedgenews.com/index.php?article=12477&pageid=13&pagename=Analysis)?
November 2, 2010 at 9:30 pm
In the sentence “That money plus money he literally borrowed without congressional approval came into DR and it was WOW.” by ‘he’ I mean Leonel Fernandez.
November 2, 2010 at 9:27 pm
Hello Everyone,
Longtime reader, first time poster. Excellent blog.
The Dominican Republic completed a similar deal just this year. DR sold 51% of the state refinery to Venezuela right before this year’s congressional elections. One of the terms stipulated is that oil will be supplied on credit terms of 25+ years.
Chavez was offered the refinery before, in 2009, which he then rejected. This was a negotiating tactic. That money plus money he literally borrowed without congressional approval came into DR and it was WOW. Leonel’s party won the upper chamber in a landslide. His party was expected to maintain power–but it became a slaughter.
What underlies all of this is a political agreement. DR will turn a blind eye to what is occurring in Venezuela (and what it is doing throughout Latin America & the World) and DR gets cheap oil. You give us stuff, we stay quite and give you legitimacy.
One hand washes the other.
November 2, 2010 at 8:41 pm
From what I can tell gas sells for about 2.75USD in Nicaragua and I doubt that there are any Bolivarian gas stations selling to the poor at half price. So the question is where does the excess profit from the cut rate crude go? Anybody know any Nicaraguans?
November 2, 2010 at 8:22 pm
If just a few of these were brought to light along with pictures of some of the mansions he has helped corrupt ex-officers buy I wonder how 2012 might play out.
November 2, 2010 at 8:10 pm
I am sure there are sluh funds all over the place, they have been seeding them since 2002.
November 2, 2010 at 8:08 pm
I just find it hard to believe that Hugo isn’t hiding some of it away for himself like Marcos.