*UPDATE at bottom. Recently, reports from Venezuela confirm that officials from the Hugo Chavez regime are largely unaccountable, operating above the law. This began when Congressman Carlos Ramos disclosed a $29 billion budget deficit in FONDEN, an off-the-books fund that Hugo Chavez utilizes at his discretion for various projects and global initiatives. Blogger Miguel Octavio has extensively examined the so-called FONDEN papers, revealing intricate details about this questionable fund.
Meanwhile, smaller yet equally outrageous expenditures have come to light. For instance, a contract to provide electronic IDs to the Chavez regime, valued at around $40 million, has emerged. This involves Gemalto, a French public company with ADRs trading in the USA, and a little-known Cuban company named ALBET, allegedly linked to Cuba’s “University of Technology” UCI. Congressman Ramos has also taken an interest in this case and initiated an investigation.
Additionally, there’s the sponsorship agreement between PDVSA and the Williams F1 team. The estimated sums involved range from £110.5 million to £154.7 million over a five-year period. Again, we see Congressman Ramos—perhaps the only elected official in Venezuela concerned about corruption—raising questions about the legality of this contract.
More recently, a copy of a contract between China and Venezuela has surfaced, aiming to increase a fund aptly named the Chinese fund. As Miguel reports, if the documents are accurate, Venezuela—or more accurately, Hugo Chavez acting without Congressional approval—plans to borrow $116 billion from China. In Miguel’s words:
The Republic borrows US$ 20.8 billion from the Chinese. PDVSA “pays” for this loan at a staggering US$ 15.7 billion per year, which is clearly an excessive amount for the loan received. The Chinese receive interest and capital, and any “excess” goes back to the Government, not to PDVSA, through alternative funds that bypass the oversight and approval of Venezuelan laws.
These amounts are mind-boggling—hundreds of millions here, billions there. If these public funds had been used as intended, the 26 million Venezuelans would undoubtedly be laughing off any talk of crisis or capitalist failure. It’s essential to note that this borrowing and spending without oversight, evading laws and Congress through dubious funds and payment mechanisms, coincides with the highest ever oil income in Venezuela’s history.
Since Hugo Chavez took power in 1999, Venezuela’s debt has ballooned:
Internal debt has skyrocketed from 3.8 billion Bs to 83 billion Bs ($31.9 billion, 2010 figures).
External debt has escalated from $37.7 billion to $54.5 billion (2009 figures).
This excludes commitments made with the previously mentioned Chinese fund, on top of the estimated nearly $2,000 billion GDP since 1999. Some estimates suggest the combined budget during the Chavez era is about $1,000 billion.
Venezuela has become so entrenched in corruption since Hugo Chavez’s rise to power that it seems normal for Nigerian-style scams, involving forged documents and signatures, to emerge in the most unexpected places.
What is alarming, however, is that corruption extends beyond Venezuela. Chinese, Russian, Belorussian, Iranian, Cuban, Nicaraguan, Bolivian, Ecuadorian, Colombian, Brazilian, Argentinean, and American authorities are willing to overlook various issues as long as lucrative deals with the Venezuelan leader are available. Even European nations like Spain, Italy, France, Germany, and the UK are just as eager—possibly more so, given Europe’s dismal economic outlook—to ignore their own anti-corruption laws and enter into contracts that wouldn’t survive even the slightest examination. This behavior is rampant in both public and private sectors.
Venezuela is viewed in a manner similar to Libya in the past. Chavez is perceived like Gadaffi was. Chaotic and all, there’s a significant opportunity to make quick billions. And Chavez, in his waning days, is keen to mortgage Venezuela’s future. The unfortunate part for us is that those who are expected to have higher moral standards are just as corruptible as the chavistas.
*UPDATE: Miguel reports updated debt figures: Venezuela’s total debt has increased from $39.5 billion in 2000 to $104.5 billion in 2011.