* UPDATE at the bottom. Recently, reports coming out of Venezuela confirm that officials in the regime of Hugo Chávez act with complete irresponsibility, above the law for all practical purposes. It all started when Congressman Carlos Ramos revealed a $29 billion fiscal gap in the FONDEN, which is essentially an off-budget fund that Hugo Chávez uses at his absolute discretion to finance his favorite projects and the global revolution. In what is known as the undefined papers of the FONDEN, the blogger Miguel Octavio has delved deeper into the details of this questionable fund.
Meanwhile, we’ve received news about much smaller yet also scandalous expenses. For instance, a contract to provide the Chávez regime with undefined electronic identifications worth about $40 million, involving Gemalto, a French public company with ADRs traded in the U.S., which is somewhat like a subsidiary of UCI, the “technological university” of Cuba. In this regard, Congressman Ramos also picked up the story and decided to investigate a bit.
Next, there’s the sponsorship contract between PDVSA and the Williams F1 team. In this case, amounts are believed to range between £110.5 million and £154.7 million (over 5 years). Again, we find Congressman Ramos—seems to be the only elected official in Venezuela concerned about corruption—questioning the legality of this contract.
More recently, however, a copy of the contract between China and Venezuela was leaked, aimed at increasing the amount of a fund called the Chinese fund. As Miguel reports, if we are to take the documents at face value, Venezuela, or rather Hugo Chávez acting unilaterally and without Congressional approval, wants to borrow $116 billion from China with undefined terms. In Miguel’s own words:
The Republic borrows US$20.8 billion from the Chinese. PDVSA “pays” for this loan the sum of US$15.7 billion per year, clearly an excessive amount of money for the loan received. The Chinese collect interests and principal, and any “excess”—of which there’s a lot—returns to the Government, not to PDVSA, through parallel funds that bypass Venezuelan laws’ controls and approvals.
We’re talking about hundreds of millions here, billions there, mind-boggling figures. If these public funds had been used legally, Venezuelans, all 26 million, would definitely be laughing at any mention of crisis or capitalist failure. Because it must be noted: all these loans and unchecked spending, evading laws and Congress through dubious funds and payment mechanisms, occur against the backdrop of the highest windfall profits from oil revenues in Venezuela’s history.
Since Hugo Chávez took power in 1999, Venezuela’s debt has multiplied indefinitely:
The internal debt has gone from Bs 3.800 million to Bs 83.000 million ($31.900 million, figures from 2010).
The external debt has increased from $37.700 million to $54.500 million (figures from 2009).
This excludes commitments made with the aforementioned Chinese fund, in addition to the estimated GDP of nearly $2 trillion since 1999. Some estimates put the combined budget for Chávez’s period at around $1 trillion.
Venezuela has become so corrupt since Hugo Chávez’s rise to power that it now seems normal for Nigerian-style scams—where documents and officials’ signatures are forged—to appear in the most unexpected places.
What’s worrying, however, is that corruption doesn’t end with Venezuela. Authorities from China, Russia, Belarus, Iran, Cuba, Nicaragua, Bolivia, Ecuador, Colombia, Brazil, Argentina, and the U.S. are happy to look the other way, as long as they can make deals with the Venezuelan leader worth millions or billions. But European countries, like Spain, Italy, France, Germany, and the UK, are equally willing—perhaps even more so, considering Europe’s pathetic economic outlook—to look away, violating their own anti-corruption legislation and entering into contracts that can’t stand a minimum of scrutiny. This behavior is widespread in both the public and private sectors.
Venezuela is viewed as Libya once was. Chávez is perceived as Gaddafi used to be. Rabid dog and all, there’s enormous potential to rake in a few billion quickly. And Chávez, in his diminishing presence, is eager to mortgage Venezuela’s future. The sad truth for us is that those who are supposed to hold higher moral principles are as corrupt and corruptible as the Chavistas.