Andean Group - September 2011 (ISSN 1741-4466)

The lengthy mystery over Venezuela’s executive controlled off-budget National Development Fund (Fonden) is gradually being solved by some tenacious opposition bloggers. Even taking into account the fact that these blogs are openly against the government led by President Hugo Chávez, the numbers as provided by the finance ministry don’t appear to lie. Yet the Fonden doesn’t seem to have much of an economic impact locally, suggesting poor management and, inevitably, official malfeasance.

It all began in April when Carlos Ramos, an opposition deputy in the unicameral national assembly, requested details of Fonden expenditure in 2010 from the AN president, Fernando Soto Rojas of the ruling Partido Unido Socialista de Venezuela (PSUV). Finance Minister Jorge Giordani duly provided a statement of accounts for the period 2006-2010 (the Fonden was created in 2005). Ramos passed the data onto a well-known economist and blogger, Miguel Octavio, who made it public.

According to the figures, the Fonden received some US$69bn in total between 2006 and 2010, mainly from the government’s cash cow, the state oil company Petróleos de Venezuela (Pdvsa), as well as from the petro dollar-flush central bank (BCV). Octavio was quick to spot that some US$29bn in Fonden funds appear to have gone missing since its creation in 2005 – immediately pointing up a US$29bn discrepancy between the reported amount assigned to projects and the reported figure for what has been disbursed (to 140 projects). That is the equivalent of the country’s total national reserves that are unaccounted for. There is some speculation that missing US$29bn is the cooperation aid Venezuela has delivered to its Caribbean and Central American allies under Petrocaribe and the Alianza Bolivariana para los Pueblos de Nuestra América (ALBA).

Octavio and a fellow blogger broke down the accounted-for US$40bn of expenditure by sector, with some intriguing discoveries. Curiously, the biggest share of Fonden assignations went to the Energy and Oil Ministry, which received nearly US$16bn of the $40bn. Of this, an estimated US$6bn was destined for the so-called Comisiones Mixtas Cuba-Venezuela, with the rest apparently heading back to its original source: Pdvsa. The transport and communications ministry received US$7.3bn. This ministry is responsible for the country's infrastructure, arguably the most logical use for windfall funds like the Fonden.

The defence ministry was assigned a whopping US$4.9bn. It’s worth remembering that this amount is on top of official annual budget defence expenditure, which according to London’s International Institute for Strategic Studies, totaled US$13.36bn over the period 2007-2010. Of the US$9.6bn spent through the Fonden in 2010 (which amounts to 13% of the 2010 budget of US$74bn), some US$3bn was given to the electricity ministry to deal with the power crisis.

GDP results
The economy expanded by 2.5% in the second quarter of 2011 compared with the same period last year, the central bank revealed, and by 3.6% in the first half. Venezuela’s GDP slowed, after having grown by 4.5% in the first quarter on the same period in 2010, off the back of an 18-month recession. Oddly, the construction sector declined by 2.3% year-on-year in the second quarter despite President Hugo Chávez setting ambitious targets for housing construction in 2011 and 2012. The most significant figure was for the oil industry, which grew by 0.8% during the second quarter, having contracted by 0.5% in the first quarter. The central bank said the oil sector’s recovery was due to a 4.4% increase in oil production and also higher oil prices. The second quarter saw a 56.3% increase year-on-year in exports from US$16.06bn to US$25.12bn, largely because of the increase in crude prices. Imports grew 25.3% over this period, from US$10.01bn to US$12.53bn.

• On your marks…

On 13 September the head of Venezuela’s national electoral council, Tibisay Lucena, set the scheduled 2012 presidential elections for Sunday 7 October, with the regional elections for state governors scheduled for December 2012 and the local elections (for mayors and municipal councillors) in April 2013.