The Fonden Papers Part VII: Some musings (a rant?) and observations!

September 10, 2011

I had a colleague, who will remain nameless, who left Venezuela almost three decades ago for a job in a multilateral organization. Years later, I found him again, working for a foundation. Miguel, he said, “I have the best job in the world, I read proposals from the best scientists in the world, I recommend to the Board the best ones, and they mostly go with my opinion.I basically decide how a few billion dollars are spent in the most exciting areas of of research in biology”

The story comes to mind, because according to the Fonden website, US$ 40 billion ( I have subtracted the missing US$ 29 billion or so) are decided by a “Directorio: (Board), composed of two people: Jorge Giordani and the Executive Secretary, someone named Claudia Garcia Guillen, whose CV is empty in the Fonden pages, and I have been unable to find much about her in

My friend would (or should) be envious!

Thus, mhewas wrong, there was a better job, imagine having the power or the ability to influence how million and billions of dollars are spent, even if you know little about the field, and steer Venezuela’s “development” with the money.

Except, that I am not sure about how these projects were approved. Was it Giordani who had the last word? Or was it Hugo himself? In the end, after reading all of the projects (I would take a test on my knowledge!) the whole thing makes little sense, when you look at the details of all the projects.

Let’s look at the biggest headache of Chavez Government in the last few years: The Electric problem. The root of all problems was Guri dam. The lack of maintenance forced the Government to stop almost half the turbines. This meant halting almost 50% of the main contributor to the country’s power generator. But, as you can see in row 113 of the spreadsheet, a scant US$ 64 milliom was assigned to this problem.

What gives?

There are 300-plus projects and this one does not even rate being in the top 80. They spent over 500 million dollars in at least 12 projects, US$ 100 million in at least 65 projects and Guri, barely got US$ 64 million.

But then, if you are distributing money right and left in the millions, why do you even bother to write down, consider or even give US$ 2,783 to overhauling the “Recrational Los Lagos El Encanto” Park (row 28). For God’s sake, give them US$ 3,000 out of petty cash and don’t even ask for receipts!

Remember, Fonden was supposed to be spent in foreign currency. All dollars. But you have things like liquidating INAM (row 134), the National Institute for Minors, which I am sure only required local currency.

But there are many like that. Take row 139, US$ 33 million to indemnify people who lost their homes in Lake Valencia, you certainly can’t justify paying them in foreign currency, no?

Or row 274, US$ 74 million to buy homes in the “secondary market” for those that lost their homes in the floods in Caracas. Did these people really get paid in US$ dollars. If not, how did Fonden exchange the money. Did they go to the central Bank and say: “Hey, remember the dollars you used to create Bolivars when PDVSA gave them to you and then you gave to me? Well, I want Bolivars for them now. Get it? If they did that, it would be giving someone Bolivars twice for the same dollars! Talk about being irresponsible!

How about row 230? 42 million dollars to build housing in the city of Caracas. Sounds good, no? Except the organization in charge of execution of the project is none other than the Ministry of Culture.

Hello! I know the Minister of Culture was an architect, but what does culture have to do with building housing?

I could go on and on, like 100 plus million on building ten new universities (Really, how crummy can they be?). Or the Metrocaribe Mariche, which received US$ 49 million (row 119), but can anyone near Mariche tell me if anything has been built? Or all the money invested in agriculture, what happened to it?

The point is that Fonden has been like a petty cash fund on steroids, used without planning, even random in topics and amounts. It is as if the revolution has no priorities, just throw money at stuff, hope something works.

But nothing seems to work.

And it all goes back to the same man, Jorge Giordani, the non-economist, obscure academic in charge of the economy for ten of the last twelve years. In charge of continued and soaring inflation. In charge of this boondoggle of a development fund, called Fonden, where money has been misspent, wasted, some US$ 29 billion somehow missing, and where the word “result”, “priority”, “evaluation” and the like seem to be absent from consideration.

And thus, I promise with this musing (or rant!) I will stop writing about Fonden unless new information becomes available. It should be a scandal, it should be a source of outrage. It is for me. We are talking US$ 25,000 for each person in Venezuela, spent without impact, without control and without accountability. To say nothing of how much of this money has been sent to Cuba.

Enough said!

23 Responses to “The Fonden Papers Part VII: Some musings (a rant?) and observations!”

  1. Derry Says:

    Crime has increased since Che1vez is in power. The muedrr rate went from 19 100 thousand in 1998 to over 35 100000 in 2002 and now it is much higher.Poverty is not all, no matter how many times you read Les MIserables, as Che1vez did.There is Bhuttan; there is Ghana, as I mentioned. There is Venezuela, where the average citizen has been better off for ages than either of those countries

  2. Tony Says:

    DIFFERENT ANGLE by Kenneth Rijock Financial Crime Consultant, for World-CheckMore about the AuthorVenezuelan PEPS reportedly Diverting Billions in Loan Proceeds Overseas28 June 2011Readers who follow China’s expanding involvement in Latin America know that the Peoples’ Republic has entered into a long-term trade agreement with the Government of Venezuela, one aspect of which is a $20bn loan, which is intended to finance nineteen development projects. The sale of Venezuelan oil to Chinese companies is understood to be the method through which funds for repayment of the loan are to be generated. This, in essence, guarantees China a sufficient quantity of oil to satisfy a major part of its growing needs. If you are wondering why this contract is of interest in a column that covers financial crime, read on.

    A witness who was present at a meeting of high-level Venezuelan PEPs, that can only be described as the largest illegal diversion of Venezuelan government funds since president Hugo Rafael Chávez Frías came to power in 1999, has related that one-half of those loaned funds, $20bn, is being boldly diverted from government accounts, and wired overseas. The remaining $10bn are to be held by the National Bank of Venezuela.

    In attendance at this meeting were reportedly senior Venezuelan bankers with close links to the government (making them PEPs, in the classic sense), all of whom have access to correspondent accounts overseas. Some of the bankers themselves own foreign financial institutions, which could facilitate the laundering of these funds, which rightly belong to the people of Venezuela. How will these intended 19 development projects ever be completed, when half the money is already in the foreign bank accounts of corrupt PEPs ?

    Whilst there is no information as to who will are the beneficial owners of these stolen billions, one important Venezuelan minister was recently seen flying in a business jet into an airport in the south of France, wearing a baseball cap, no less, in an obvious attempt at identity concealment. Can we then advance the theory that this PEP windfall will end up in European banks ? It is the logical conclusion, given where much of their money has gone in the past.

    Compliance officers at European banks, especially Swiss financial institutions, would be well advised to alert their staff accordingly, especially since the strict secrecy surrounding Mr. Chávez post-operative condition could be hiding a serious health condition, causing panic amongst the inner circle of Venezuelan PEPs, who will want to park their “flight capital” overseas quickly, should there be even the slighest possibility of regime change.

  3. Ira Says:

    Miguel, I know it’s a little bit of a way off, but can you do a mulit-part piece about the upcoming opposition candidates?

    And when I ask you for that, can you make it as unbiased as possible. despite your or other’s preferences?

    In other words, I get tiny tidbits of news about Capriles, but I really don’t give a shit about him playing basketball in some slum. I and others need more complete and comprehensive information about these guys that we’re simply not getting now. And we need to read it in one concise place. (Your blog.)

    For instance, why does Leopoldo seem to now be permanently considered persona non gratis? Just because Chavez said so?

    What the hell is going on?

    • I will at some point, I just think it’s too early, too many candidates, I will wait until the Lopez issue is resolved and some candidates have withdrawn. My feeling is there are only 3 candidates with chance: Pablo Perez, Henrique Capriles and Leopoldo, but my felling is Leopoldo will be blocked by the Government if the Court rules in his favor anyway. Some people disagree saying it would be a way for deflating Capriles. I think Capriles may be peaking too early. Of the three I tend towards Leopoldo in terms of electability. (Disclosure: He is the only candidate I have met with, at his request)

      • Farman Says:

        CharlesC, I’ve heard most of what you’re repeating here, but it’s a pile of sleiupatcon. These links are no different from the links between the FARC and the Republican Party that I . I was asking for evidence. I lived in Venezuela for years, where I knew Iranians and sought out Muslims. It seemed to me that the supposed ties between Chavez and the North African-Middle Eastern radicals was always more hype than reality.There may be some cocaine trafficking through Africa from Venezuela that could be linked to terrorism. And I’d be unsurprised if Venezuela’s financial system were being used to launder money for these groups, or anyone else with something to hide. But I think it’s a fantasy that any of the Islamic terror groups have, or are even seeking, operational capacity in Venezuela. Naturally I’m open to the evidence, but sleiupatcon at a Senate committee, evidence of links to the FARC, and the entirely feckless attempts by Islamists to bomb the US embassy in Caracas don’t add up to serious evidence. David seems to be trying to support your point but I have no idea what he is trying to say.Point is, to get back on topic, if billions of dollars have been stolen from Venezuela and most likely they have, with the Illarramendi case as one indication I think the money was pocketed by the thieves, and not funnelled to Islamists of any stripe.

    • CharlesC Says:

      “Just because Chavez said so?

      What the hell is going on?”
      The chavista press is not going to inform you-only redicule the opposition

      Ira- this may be minor compared to what may happen in the future.
      For example- look what happened to MCM on Independence Day=
      chavistas heckled her and threw objects at her and threatened her
      I like the fact that she said in the past “Venezuela said no to
      communism.” (but, Chavez ignored that fact)

  4. Evo Says:

    What happens next, all these billios “are” gone? I think nobody gives a sh!t anymore becuase everybody knows no matter how hard we cry nothing will happen to the “responsables” UNLESS somobody acts NOW. even if they are “linchados” in the main square, do we get those millions back? probably their families are and will be enjoying the mony somewhere in Miami, Las Vegas, or Cuba or Paris. All “del Pueblo” money GONE!!

    • CharlesC Says:

      “I think nobody gives a sh!t anymore becuase everybody knows no matter how hard we cry nothing will happen to the “responsables” UNLESS somobody acts NOW. even if they are “linchados” in the main square, do we get those millions back?”
      I have been screaming about this- stop the bleeding money now.
      And cancel those freakin contracts with CHina Russia, Iran,,Cuba, and every other big loser
      I honestly wonder if Chavez doesnt’ like being robbed and raped?
      Does CHavez hate math?

  5. Francisco Toro Says:

    Nah, c’mon, neither Claudia Guillen nor even Giordani have any power over this money. Fonden exists purely because Chávez got sick and tired of the situation he had in the early days when a Brilliant Idea ™ would pop into his head, he’d call a minister to say “Hey, I just had this great idea for Underwater Chicken-Coops” or “a natural gas pipeline to Saturn” or something like that, and he’d get the run-around because there wasn’t any money budgeted for that.

    Screw that!

    “Jorge, man, I dunno how but figure out a way that when I call and need money fast, there’s some pot you can take it out of without all that boring red tape.”

    That’s what this is about – letting Chávez bark out hundred-million-dollar-appropriations off the top of his head on Aló Presidente.

    Is it any wonder the accounting is FUBAR?

    • I dont know, I do think Chavez had a lot to do with it, but O also see Giordani’s hand. For example, Giordani has an ideological thing against hydroelectric, thus little money for Guri. I bet Giordani decided on a bug chunk of it, but of course, daddy warbucks Hugo did his part too.

    • CharlesC Says:

      You nailed it.
      “That’s what this is about – letting Chávez bark out hundred-million-dollar-appropriations off the top of his head on Aló Presidente.

      Is it any wonder the accounting is FUBAR?”

  6. Dr. Faustus Says:

    “Jorge Giordani and the Executive Secretary, someone named Claudia Garcia Guillen, whose CV is empty in the Fonden pages, and I have been unable to find much about her in”

    It is shocking beyond belief that someone (Claudia Guillen) has acquired unbelievable financial clout in a given country, in this case Venezuela, and no one knows anything about her. Really? Wow. Stunning.

  7. Ira Says:

    Can anyone imagine the impact that giving $25,000 to every VZ citizen would have had in a free economy (not Chavez’s economy)–as opposed to pissing all of that money to the wind?

    For Christ’s sake–picture yourself outside of the metropolitan areas of Caracas, Maracaibo and others, and we’re talking enough money to buy a hectare or so of land, and a modest HOUSE on it.

    And Miguel, if your $25,000 per Venezuelan calculation includes ALL Venezuelans regardless of age (children), then that family can afford 2 to 3 hectares.

    But I forgot:

    In Castro’s Venezuela–and let’s face it, that’s all it really is–people aren’t allowed to own anything unless you goosestep correctly and the state says it’s okay.

  8. deananash Says:

    Insane is the word. Miguel, I’m so glad you’re out of there. If there isn’t going to be a revolt, and after 11 years, apparently there isn’t, then fleeing is the next best option.

    Sad to say, but people (as a country) really do get the government they deserve.

    Chavez is Venezuela, and vice-versa.

    (I certainly mean no insult to nearly all of you. I understand that there are many, 20,30,40% of Venezuelans who abhor where the country is heading, but the majority are with Chavez, which is how things have come to be.)

  9. CharlesC Says:

    Thank you for the lovely polical cartoon.
    (I save them forever.)

  10. CharlesC Says:

    Except, that I am not sure about how these projects were approved. … the whole thing makes little sense,
    As with everything- for example Chavez is lying in bed in Cuba and gets on the phone and spend $4 billion on weapons from Russia-
    or Chavez visits Lukashenko in Belorussia and decides to ship oil to Belorussia- the little top quality oil that Venezuela has-?
    Are people robbing Chavez -or does Chavez spend money to feel good
    about himself? Are the people around Chavez brains turned off?
    I keep wondering why no Generals speak out -or defect?
    I know I am rambling- but- did you notice in the interview with Castro-
    Castro claimed “Hugo thought about” abdicating”-giving up power-
    and Castro clains he urged Chavez to “keep going”..hahahaha

    • CharlesC Says:

      Sorry for laugning-it’s is all seriously insane, really.

    • albionoldboy Says:

      why no Generals speak out -or defect? Simple, they would go to jail, they all have their hands in the cookie jar and Chavez remaining in power is all that keeps them from jail or extradited to the US.

      Mao Zedong did the same, all dictators need corrupt flunkies to stay in power. If they hand honest competent people they feel threatened

  11. JMA Says:

    It would be amusing if one day we could find out the true destiny of all that money: the foreign bank accounts of Chavez and his mafia. I am quite certain that they have hundreds of billions stashed away in fiscal heavens.

  12. Savi Vila Says:

    Your calculus is pretty accurate. At Fonden the total “missing” money is 1 time the actual total Venezuelan reserves [ ~ $29,000 Bn ]. Well. In my estimation, the total money “missing” in a similar way at the public expenses is near 29 times [ yes, 39 times] the total international reserves: $900,000 Bn. This huge number is obtained subtracting from the total oil income the total government expense [ in a real world this number is zero].


    Savi Vila, Ph.D.

  13. Ken Price Says:

    Venezuela is not a “Democracy”, it’s a Kleptocracy.

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