Quico says: It's funny. Last year, when Bernie Madoff was caught fabricating reports designed to make it seem like he was still holding $50 billion worth of investors' money even though, in fact, the money had already been spent, he was called the biggest con artist in history. This year, when Venezuelan Finance Minister Alí Rodríguez fabricates stories designed to make it seem like Fonden, the Investment Fund his ministry oversees on behalf of the Venezuelan public, is still holding some $51 billion that have, in fact, already been spent, he's feted as an eminence grise of Socialist economic management.All this year, Alí has kept repeating a line about how Fonden has accumulated some $57 billion over five years, and he's consistently portrayed those savings as a key safeguard against the global financial crisis. How can we be sure that this claim is a wild misrepresentation, at best, and a flat out lie, at worst? Because the Finance Ministry's own reports say so!
Fonden itself still hasn't published its balance sheet for the second half of 2008, but MinFinanzas's own 2008 Memoria y Cuenta - its yearly comprehensive financial report - has a whole chapter devoted to the fund. It is, as far as I know, the most complete and up-to-date official report on the state of Fonden's finances, and it includes this startling gem on page 171.
As of December 31st, 2008, Fonden's Investment Portfolio reached a sum of US$6.07 billion alongside 280 million euros and 169 million bolivars.Which means that, unless the government has somehow scrounged up some $51 billion to put into the fund since January, Alí Rodríguez's repeated claim that the government has some $57 billion ferreted away in there is deception on a Madoffesque scale.
In fact, the government's $57 billion claim is based on a bit of book-keeping sleight of hand so clumsy, so crude, you really have to pinch yourself.
The 2008 Memoria y Cuenta shows, on page 170, that the accumulated inflows into Fonden, between 2005 and 2008, totaled some $45 billion. Throw in the $12 millarditos worth of BCV reserves the government dumped into Fonden this year, and the total inflows into Fonden, over its lifetime, have indeed totaled around $57 billion.
Trouble is, money flows out of Fonden as well as flowing in, and the same Memoria y Cuenta shows that out of the $45 billion that flowed into Fonden between 2005 and 2008, $33 billion had already been spent by the end of last year! And a further $6 billion had already been committed to various projects, which means they can't be considered "available" to face up to a new crisis.
What did Fonden's money pay for? In 2006 and 2007, it helped pay for social spending, as well as for those new Sukhoi fighter jets Chávez is into, and for the 100,000 Kalashnikovs he wanted, as well as that Chinese-made satellite. We don't know what the 2008 tranche went towards, exactly, because all the detail got taken out of this year's report.
The point, though, is that the money that bought those planes and those guns and all the other stuff Fonden's bought over the years, all that money keeps turning up in Alí's $57 billion boast, as though it hadn't already been spent!
And it's even worse than that, because part of the $57 billion he's double counting is the $12 billion transfer from BCV Reserves, which were themselves a clear instance of double-counting. So, in fact, some of the notional money in Alí's $57 billion figure has been triple counted! Strip away all the accounting gimmicks and, as best as I can tell, Fonden has maybe $6 billion in real savings - just over a month's worth of public spending.
What gets me is that Alí is not a stupid man. He's obviously aware of all this. If you look at his statements closely, he typically couches his claim in language about how "over five years, Fonden has accumulated some $57 billion." Which is clearly intended to leave you with the impression that that's how much money Fonden has on hand now, without him ever quite having to say so explicitly. And, of course, since he only talks to the grovelling parade of sycophants that pass for journalists on State-owned media, nobody ever presses him on it.
Bernie Madoff, you got nothin' on this guy.
[Hat tip: Miguel Octavio. Big thanks!]
