Fudging Venezuela’s Economic Numbers

July 7, 2012

One of the reasons Venezuela has to pay high interest rates to issue bonds is the lack of transparency in the country’s numbers. When so many of the numbers are iffy and manipulated, investors demand higher interest rates. This is costing Venezuela a lot of money, between Minister Giordani and Ramirez not talking to the markets and even deceiving them and gray numbers, Venezuela is likely paying between two and three percentage points unnecessarily. By now, the Chavez Government has been fudging, kneading and faking numbers so much, that it is hard to even guess what the real ones are.

This week we saw a couple of funny ones. The first one is the most significant on: the manipulation of Venezuela’s international reserves. This number is very important, because if reserves are drawn down, investors could become worried about Venezuela’s ability to pay its debt. Since Chavez has been transferring funds from reserves to the development fund Fonden, reserves have not increased as oil jumped up and as the number of Bolivars in circulation has increased dramatically.

But the Government cares little about this. Despite very high oil prices during the first few months of the year, international reserves dropped to worrisome levels, because actual “liquid” reserves were about US$ 1 billion a week ago. Total reserves during the year are shown here:

As you can see, despite record values for Venezuela’s oil basket the first few months of the year, reserves simply dropped from US$ 30 billion at the beginning of the year to between US$ 25-26 billion as oil prices began to drop. Clearly the Government was spending it all as it came in. And some more.

But then oil prices began to drop and liquid reserves were dangerously low and then magically, without explanation, they actually jumped up last week by a little over US$ 3 billion dollars in two days. That is a 12.5% jump. Crazy.

The Government has said nothing about it. Most likely, Fonden transferred the money to the Central Bank. The same Fund that most of the time we have had no clue as to how much money it has. No financials, no audits for Fonden most years. Thus, it helps investors in the country’s debt very little to have the money moved around like that, but Giordani and his combo seem to care very little about a few hundred million dollars in additional payments because of their manipulation of the international reserves and the like.

If reserves drop again, nobody knows if there is more money somewhere to prop up reserves, so it becomes a guessing game, which is completely unnecessary. It costs us Venezuelans a lot of money to manage things this way.

While less significant, there has always been strong evidence that the Government fudges inflation numbers too. What goes in the various groups is modified at will to try to lower inflation levels and few people beelive the official numbers. Despite this, Venezuela has had the highest inflation in the region for years and it has definitely been higher than what the Government says.

Last month, this document was leaked from the Government’s “Inflation” Committee in the middle of the month (Shouldn’t it be called the anti-inflation committee?)

View this document on Scribd

As you can see, half way through the month, the National Institute for Statistics and the Central Bank had projections for the month for various inflationary groups. While not all the groups are the standard ones used by the Central Bank, what is interesting is that in the final numbers published last week, they all came below the projections in the leaked document.

The most blatant case is Transportation. In the “projection” in mid-June, the estimate was that this group would go up 6.7%. This was due to the fact that the Government approved increases in parking fees,a s well as in public transport. But the funny thing is that these increases, which were projected at 6.7%, suddenly dropped to only 4% in the second half of the month. If the rates and the fees had been increased, how did they magically go down in the next two weeks?

Clearly, there is manipulation to boast that inflation is going down ahead of the election, but people feel inflation directly, no matter what the Government says. And once again, the Government claims inflation will be in single digits in a couple of years.

Sure, I recall Rodrigo Cabezas saying that in 2006 and he never managed to lower it below 20%.

But these guys are good, convincing people of their lies and manipulations. It is just a pity we have to pay for all of it.

10 Responses to “Fudging Venezuela’s Economic Numbers”

  1. What this shows is that Fonden is really just a secret sub-account of BCV reserves…which is another way of saying that BCV’s total reserve position is a secret.

  2. CharlesC Says:

    “The Party seeks power entirely for its own sake. We are not interested in the good of others… We are different from all the oligarchies of the past in that we know what we’re doing… Power is not a means, it is an end… The object of power is power… Always there will be the intoxication of power… We are the Priests of Power… The real power; the power we have to fight for night and day is not power over things but over men… Power is power over human beings, over the body; but above all over the mind… There will be no loyalty except loyalty toward the Party. There will be no love except the love of Big Brother.” George Orwell – 1984

    “power over human beings” – that is all Chavez wants…

  3. CharlesC Says:

    “Clearly the Government was spending it all as it came in. And some more.”
    (Devil discussing oil revenue..)
    Think about this-a huge, standing army “eats” large amounts of money.
    Chavez is not only buying lots of weapons- he is also selling weapons to rogue, terrrorist regimes throughout the world. I know it sounds far off topic-but for example- Rwanda- Tutsi and Hutu. -Hutu -with support of Uganda killed more than 500,000 (some say 700,000) Tutsi in 100 days. Most were hacked to death with machettes.( A large shipment of machettes was said to have originated from China)-I am not sure if Uganda paid for them-but they were distributed to the Hutu..Wikipedia claims that Rwanda “businessmen” bought 581,000 machettes from China.
    Also, some shipments of other military weapons,assault weapons, AK-47’s -30,000 arrived from where -paid for by who?
    Now, does anyone remember the connections with Cuba and Uganda?
    Now-for example Cuba:(from Fausta)
    “Cuban bank assets deposited in foreign financial institutions that belong to an international reporting system showed a stunning plunge of $1.55 billion, or 24 percent, in just the last three months of last year.”
    “The government may have shifted the money to financial institutions in countries like China and Venezuela, where the banks are not BIS members, the economist noted”
    Finally-“It did not go to help the Cuban people, and it certainly did not go to pay back the dozens of creditors the Castro regime has stiffed for decades and continues to owe billions to.”
    Point is – in Venezuela- billions are missing, too. And, this is all a part of
    an asymmetrical war- a real war. Weapons and narcotrafficking are part of a
    war against the Empire and the EU. China and Russia-via proxy-re.Venezuela and Cuba are propping up rogue regimes throughout the world on the one hand and going after the resources on the other hand(- doing the same thing
    critics accused the US of doing)Chavez is their handmaiden-their boy.
    No, he is more than that. He’s one of their big pimps.Groomed by one of the biggest-Castro.

    • CharlesC Says:

      Continued: “Think about this-a huge, standing army “eats” large amounts of money.” In Chavezlandia -the only jobs and the best jobs will be in the military. Welcome to Sparta. And, Chavez envisions poor countries with large armies(including Haiti) ready to be picked up with Venezuelan transport and Chavez supplying the weapons.
      Am I the only one that thinks Chavez should be impeached for opening and asmmetrical warfare school in Bolivia?

  4. Dr. Faustus Says:

    “The Government has said nothing about it. Most likely, Fonden transferred the money to the Central Bank. The same Fund that most of the time we have had no clue as to how much money it has. No financials, no audits for Fonden most years.”

    I find ‘this’ fact to be the most incredible of all. How is it that the Bolivarian Republic calls itself a democracy, yet just a handful of people know the real numbers contained in its most important economic fund, Fonden? It’s so bizarre. It’s actually quite stunning that there is no oversight from the Venezuelan legislature whatsoever. wow.

    Finally, where is Hugo Chavez? Isn’t he, like, supposed to be running for President or something? It’s like he’s running his campaign from a hidden bunker. How long will this lunacy last? ….Very strange.

    • island canuck Says:

      “It’s like he’s running his campaign from a hidden bunker. How long will this lunacy last? ….Very strange.”

      He recently said that HCR is a nothing candidate & would really like someone better to run against,

      The truth is he needs 3 days to rest after every appearance due to the cancer that he says he’s cured of.

      By the way the info on Twitter is that he’ll be leaving soon to Cuba again for more tests.

  5. NET Says:

    I don’t believe they are really convincing the relevant parties (international financial markets/et. al.). International Reserves are still overstated, since recently they priced gold , which is the vast majority of the Reserves total, at some 10% or so above the current market price. A few $billion liquid, if they really exist, cover only a month or two of food imports. Do we know for a fact that part of the “Reserves” aren’t Argentine/Bolivian/et. al.junk bonds valued at par? Inflation is calculated on prices, for example, of those of the Government “mercados de hortalizas”, soon-to-be FarmaPatrias, and maybe even Mercal. Minimum Wage/GDP/Debt to GDP are calculated at the artificially low Government controlled Bs./$ exchange rate. Debts: for Government employees for past prestaciones; PDVSA suppliers; international arbitration pending cases; and the Chinese agreements, to name a few, are huge black holes difficult to quantify. Who wants to pay up for Venezuelan debt other than as a short-term speculation. And if Chavez were to win the Presidency? And if in the not- too- distant future there is a world financial/economic collapse as some predict (Perhaps punctuated for Venezuela by a short-term Iran attack oil spike, which would only help cause the collapse)?

  6. Ken Price Says:

    Argentina has been doing the same thing (screwing with the “official” inflation rate) and now NOBODY believes the numbers. Result has been a run on the Peso, and now the government has restricted the sale of dollars to those with import permits or planning overseas trips. The obvious result is a thriving black market in dollars, at a significant increase over the official rate. Cane you blame them?

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