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  HOME | Opinion (Click here for more)

VenEconomy: Liars & Bootlickers

From the Editors of VenEconomy

Last Tuesday, Nelson Merentes, Venezuela’s finance minister, submitted the preliminary draft for the Budgetary Law of 2014 before Congress.

In an organized economy with fiscal discipline, the nation’s budgets are a valuable tool for the analysis of the fulfillment of economic and social goals of the country as well as for planning the operations and investment of companies under determined macroeconomic policies.

Unfortunately, and as is customary for this government, the budget submitted by Merentes has less value than the paper it was written on. This is a document that is totally disconnected from the reality of the country, and the least we could say about this is that is an insult to the intelligence of analysts and all Venezuelans who the Government wants to take for fools.

The lies contained in this budget derive from a projected expenditure of Bs.551.63 billion ($87.56 million), an amount substantially lower than the fiscal expenditure of 2013, which is estimated at Bs.662.4 billion ($105.1 million) by the Government.

The budget is telling lies when it establishes the premises, which seem way too optimistic and unreal, so to speak:

For instance, the GDP is forecast to grow between 4-6%, which is impossible amid a scenario of intensification of controls without having an increase in productivity and greater dependency upon the external sector as announced by President Nicolás Maduro and his vice minister of the economy, Rafael Ramírez, with a longer-term massive plan of imports.

The inflation forecast between 26-28% is one of the least credible premises. There is no single independent analyst not forecasting, conservatively, that the history of 2013 will be repeated again next year as prices are likely to shoot 50% higher.

Another budgetary lie is to have set the official exchange rate at Bs.6.30 per dollar when everybody knows a new official devaluation(s) is looming so the Government can handle an ongoing cash crisis, which may lead to set a new official rate at Bs.12 per dollar with SICAD auctions hovering around Bs.20 per dollar and the opening of a parallel market with a much bigger exchange rate.

It is also unrealistic to forecast $60-per-barrel oil prices for 2014 with an absurd excuse of maintaining a “fiscal prudence,” when the market has projected prices to remain at an average of $100 per barrel just like this year.

This sick strategy has been repeated for years with the goal of understating “ordinary” revenues by a wide margin, so the Government can keep the 21% that goes to the nation’s budget state allocation for governorships and mayoral offices as low as possible. To that end, the State will set that difference of $40 per barrel as “windfall income” that will not be linked to the budget state allocation for its distribution throughout the regions and that will go straight to the Central Government’s coffers to be used discretionally and without any kind of accountability.

As one might expect, this budget draft will be passed by the “majoritarian” and “bootlicking” parliamentarian side backing the Government in Congress, all of them hands raised and no questions asked.

VenEconomy has been a leading provider of consultancy on financial, political and economic data in Venezuela since 1982.

Click here to read this in Spanish


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