Chávez used his ‘enabling powers’ to reform the ‘organic law for the financial administration of the public sector’ to allow the government to borrow beyond the limit imposed by the ‘law of annual indebtedness’ without consulting either congress or the central bank. The official gazette explained that the reform would enable the government to respond to “unforeseen circumstances or circumstances that are difficult to foresee.” In theory, the reform only permits additional debt to be contracted in order to guarantee food sovereignty, the preservation of social investment and security or integral defence, and the restructuring of debt. In practice, this provides sufficient latitude to justify any additional spending the government wishes.
The MUD argues that the reform contravenes the government’s own (1999) constitution, article 312 of which specifically states that the government must obtain special approval to contract new debt, which must be “at a prudent level in relation to the size of the economy”. Last year, Chávez promulgated the ‘Special Complementary Indebtedness Law’, allowing the government to issue an additional BF45bn (US$10.4bn) in debt.
The biggest concern is that the latest reform does not require the government to account for the money that it chooses to borrow. The government’s reputation for the transparent use of funds precedes it: the national development fund (Fonden) is probably the largest of all of the Bolivarian Revolution’s opaque funds, where billions of dollars are shuffled to and from the state oil company Pdvsa, for instance, and also into other smaller funds ostensibly created for more specific social development projects.
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