Venezuela: Where Is The Money? (¿Donde están los reales?)

May 7, 2014

As foreign analysts talk up the “pragmatism” of the current Venezuelan Government and Venezuela and PDVSA bonds soar, one has to wonder where the money is. After all, with shortages and inflation at an all time high, you would think this “pragmatic” Government would make a huge effort to reduce shortages by giving our foreign currency to importers to guarantee supply.

In my mind, the moment is now, not 2015. With the Government’s popularity at 21%, this is the time to adjust an really  be pragmatic. Instead, the only “pragmatism” has been that the Sicad 2 rate was higher than anyone expected. The rest, is so far wishful thinking, from currency unification, to any increase in the price of gas.

It is a case of “Show me the money”. So far, I have seen very little.

Thus, bonds go up on three acts of faith:

-The Government is “pragmatic”

-Oil will not go down in price.

-The parallel funds have the money the Government says

(And there is a corollary: The political cost of defaulting is too high. Ummm, I have heard that before: The political cost of firing 20,000 PDVSA workers is too high. The political cost of jailing Leopoldo Lopez is too high and so on and so forth, you get the idea)

Meanwhile, let’s look back at Cadivi approvals  for imports in 2012 (no data for 2013):

2012The important numbers here is that in 2012, the Government gave importers in twelve months US$ 18.18 billion  or US$ 77.7 million per day.

Well, today, Cencoex released the number for the first four months of the year, and this is the same data for imports:

CencoexWell, this 2.827 billion in four months for imports, which is equivalent to US$ 8.481 per year, substantially below the US$ 18.2 billion of 2012. And if you think Sicad 1 or 2 explains this, let me remind you Sitme was around in 2012 at daily average levels near or above Sicad 1 and Sicad 2 combined so far this year.

That is a factor of over two difference. So, if you have felt the shortages this year, the quantitative explanation is right there: A third of the money, a third of the goods.  And shortages, of course, create inflation, as there is too much money chasing too few goods.

So, if the Government has so much money in the parallel funds and if oil is high and you have become ¨pragmatic¨, why not use it? What are you waiting for?

For the Government to reach 10% in popularity? Really?

Which only leads to the question Luis Herrera used to ask: ¿Donde están los reales? (Where is the money?)

I have absolutely no idea, it may not even exist…

38 Responses to “Venezuela: Where Is The Money? (¿Donde están los reales?)”

  1. Kenneth Price Says:

    Does anyone really believe the government’s figures? Has any “independent audit” been done? Government figures aren’t worth the paper they’re written on!

  2. livefree Says:

    I’d have to assume that they are not total idiots and are keeping parallel funds for PDVSA/Electrical capex spending requirements. If you’re gov’t and faced with an urgent need to spend a few $B on refinery/electrical fixes which provide currency or diapers which don’t, where are you going to spend your remaining marbles?..question becomes how badly is PDVSA infrastructure neglected and what’s a bare minimum infrastructure spend required to keep any oil $ coming in? There’s just nothing to be gained by spending the parallel funds on consumer goods where smuggling will take a bunch of it.

    • moctavio Says:

      But you could do other things: Adjust, have a boost in inflation, then collapse in demand and lower inflation in time for 2015 elections. I still think there is no money around.

    • MasterBlog Says:

      You assume you are dealing with rational actors, which by now it’s been amply shown that this is definitely not the case.

      They have been giving money away for years through CADIVI, knowing full well the den of corruption that it was, what makes you think they would suddenly act rationally now?

      I say there is no money It’s gone. Spent, stolen , whatever. No Hay!!

    • Boludo Tejano Says:

      question becomes how badly is PDVSA infrastructure neglected

      Pretty badly, I suspect. Put it this way. Seven years ago CC had a posting on a burned up drilling rig in Anaco- unfortunately the comments have gone down the rabbit hole of software changes. I sent some links with pictures of the rig to a petroleum engineer I had dealt with years ago, to corroborate my opinion on the reasons for the blowout. He replied that in the years that he had been making inspection tours of Venezuela, he had observed a decided deterioration in the maintenance of PDVSA equipment since the 2002 Chavez takeover of PDVSA. That communication is now nearly seven years old. The deterioration can only have gotten worse in those seven years.

  3. Daveed Says:

    $756MM for “SALUD”? If this is for the cuban doctors, aren’t the cubans being paid in oil? Or are we paying for the cuban doctors in cash and receiving IOUs for the oil?

  4. Kepler Says:

    Miguel,
    Can you explain the things that could be done? You mean devalue on a massive scale, right?

    And what do you think of what Francisco Toro wrote the other day?
    http://caracaschronicles.com/2014/05/06/when-sustainable-is-a-four-letter-word/

    • moctavio Says:

      The weird thing is that the Government is talking in private about doing the things that are needed: Devalue to a single rate and raise the price of gas. Between the two, you save on the gas subsidy, eliminate smuggling to Colombia and demand would drop (and the exchange rate too). What I dont understand is that their target is to do that at the beginning of next year. Since the elections are over one and a half years from now, I would do all that now.

      I prefer not to comment on posts in other blogs in my blog. Not much new to me in that post.

      • Tom ODonnell Says:

        Miguel,

        Your figures above (their gist) are striking.

        The main question I have is whether, on the one hand–as a good friend in CCS who almost always is right about what the State is up to–is whether the whole Sicad II has been ‘theater’, a rather desperate theater to calm the protests spreading at the time it was inaugurated. This is an analysis pretty strongly supported by the figures you cite on how little money they have actually put in.

        Or, on the other hand, is it that they think things will calm down as SICAD I and Sicad II are combined and, little by little, the private sector will start selling dollars there … and so the State can save its own FX and not dump it all in now.

        (One other quibble/question: I recall one of the NY bank analist types saying that the government needs to put in about $20-30 million/day to cover the level of imports the country needs. Your figure for last year is $77.7 million/day — considerably above that number, no? How many dollars have to be offered there daily (by whomever) for imports to get to a reasonable level?)

        They are always ‘about to’ do something ‘pragmatic’. I am told there will be pragmatic ministerial changes in the next couple weeks, and they will start blaming the ‘incompetence’ of the former ministers as a cover for policy changes. So too, that PDVSA will have bid rounds on mature fields soon — which makes a lot of sense — but doesn’t prove it will happen. I find it interesting that you also say that the gov. is again talking in private about doing pragmatic things.

      • Charlie Says:

        I’ve said it before, the country should not give oil/gas away ….. and lost people I’ve talked to also agree. But another thing de agree with is that gas prices go up as long as we’re giving oil away to other countries un the form of lower prices, preferential financing, etc. I mean, why should Venezuelans pay more for gas when other countries are not paying a fair price for it. I know this is probably wrong, but that’s how I and many other people feel.

  5. Getashrink Says:

    “So, if the Government has so much money in the parallel funds and if oil is high and you have become ¨pragmatic¨, why not use it? What are you waiting for?

    For the Government to reach 10% in popularity? Really?”
    ————

    If popularity is their concern, they don’t need to use the money right now. Popularity is only important when there are elections close by. I’m afraid they are saving all the money they can save (even if they now have much less money than they used to have) in order to use it next year when we have parliamentary elections. They will go back to their big spending habits in about six months before the elections, in order to engineer another massive Daka-style victory. People will just forget the miserable 20 months or so that preceded that.

    So, even if the government has certainly less money now than they had a few years ago, make no mistake, they will win the next elections, and win big. Then we will go back to being miserable in 2016, until the next elections, and so on…

    • Dr. Faustus Says:

      Yes, and by the time there is a ‘next’ election, a large portion of the opposition will already have fled the country. That’s the “Mariel Boatlift” Cuban-inspired plan. “Food? You want food? Lemme check my Tascon List here to see if YOU qualify.” It’s coming to that,…and very soon.

  6. rafael silva Says:

    great post,
    great scam these guys have created over 15 yrs.
    breaking the laws of the market is like ignoring the law of gravity, hambre es lo q viene.

  7. Ira Says:

    Hey–forget the money for a minute:

    I just read they arrested all of the sit-in protesters.

    If the shit doesn’t hit the fan with protests right now, Maduro won and it’s all over.

  8. nacazo Says:

    My guess is that the money is in the swiss accounts of the boliburgueses.

  9. Antonio Says:

    Where is the Gold?

    • Ronaldo Says:

      My guess is that the Castros decided the gold would be safer with them. Then Chavez sent it all to Cuba in the last months before his death.

      I wish the opposition would demand that the government prove the location of the country’s gold reserves. Just let the press photograph it and count it. (Do not let the CNE count the gold)

  10. Kepler Says:

    OK, Miguel, I’ll try to think like a Chavista…
    Here it is: if you take the measures next year at the end of Q1 things will hit hard for six months or so but then the government will be able to pour in a lot of money just in the 3 months before the elections and nothing can get wrong
    (remember: I am thinking now like a Chavista
    If they do it this year, things might get bad for six months or so, then they will have money to give for three months or so at the start of 2015 but then they will run out of money and everything will be screwed up at election time.
    Their thought: no piñata can last for more than 3 months.

  11. xp Says:

    Get REAL.
    The current POOR FAITH
    [Aviation & Auto hard currency scarcity]
    by the regime points to
    SWINDLING.
    As in KITING.
    As in NON-EXISTING FUNDS.
    Those opening foreign currency accounts
    in local regime controlled banks,
    will eventually be repaid with their own bs.

    Re:-The parallel funds have the money the Government says it has …

    [Check kiting is a form of check fraud, involving taking advantage of the float to make use of non-existent funds in a checking or other bank account. In this way, instead of being used as a negotiable instrument, checks are misused as a form of unauthorized credit.
    Kiting is commonly defined as intentionally writing a check for a value greater than the account balance from an account in one bank, then writing a check from another account in another bank, also with non-sufficient funds, with the second check serving to cover the non-existent funds from the first account]

  12. Alex Says:

    My take is that shortages and cuts in dollar distributions are meant to allow cash to be saved up in order to honor debt payments. But again, if so, you’d see reserves growing when they’re really not.

    The story of the parallel funds I just don’t buy it. It smells of story telling.


  13. I don’t even waste 5 minutes on this: STOLEN, of course.


    • But that’s nothing new, just worse than ever, even worse than after the 70′s OPEC and those notorious thieves.. This is what’s new:

      Negotiating” or even talking and shaking hands with the Dictators may prove to have been a DEADLY mistake.

      The only way now, while the MUD lo embarra todo, pun intended, is further decay of the economy. More escasez, Please. More discontent, now. More desempleo, hopefully. More people pissed off, now…

      And the retarded MUD now is refusing US economic sanctions, while poor MCM is doing who knows what in Canada.. What a mess.

      BTW, look how far Cuba has gone, how prosperous after 50+ years of rebolucion, after their MUDs started to mess everything up, and after some Gringo economic sanctions. Brilliant!


      • And STIFF economic sanction by the US and others might help, but right NOW. Not decades later as in Cuba. Again, as Capriles and his retarded MUD messed everything up talking too much, instead of hitting the streets, the only way now to get rid of Chavismo is if people get even more pissed off.

        Of course Masburrismo will blame everything on such Yanki burguesia sanctions, but anyway, the worse the economic situation gets, the better on the long run. If it gets better, with the MUD.. say hello to Cuba # 2.

  14. m_astera Says:

    If you read the alternative news websites, you will find that the protestors arrested were all probably paid by the USA and the CIA. I don’t know if anyone who reads or posts on this site other than me goes far enough outside the box to know what I’m talking about, but I assure you they think Chavez was a god and Castro’s Cuba is the epitome of wise and caring government. What I can say is that Venezuela is on its own here. We will get no support from human rights organizations or anyone else. All have been corrupted by the Chavez movie and cannot admit they are wrong. Deal with it.

  15. Thomas Mohr Says:

    Dear Miguel,
    Venezuelan Officials use Secret Service Methods to observe demonstrations against Maduro in other countries and have people fired if possible for participating in such an event. Source here: http://diepresse.com/home/politik/aussenpolitik/3803781/Kinderbetreuerin-in-Wien-auf-Druck-Venezuelas-entlassen?_vl_backlink=/home/index.do ( in German). Please give this to your colleagues of the opposition.

    • Kepler Says:

      Wao! Thanks for passing that. I will sen that to a couple of people I know in Venezuela and the Venezuelans in Germany.

      I know they take pictures of us.
      A bunch of exile Chileans and FARC Colombians have beaten the hell out of at least one guy and a couple (thus man AND WOMAN) in Brussels in the last few years.
      The Belgian police knows them and now there is usually police protection.

  16. Kepler Says:

    OT but Venezuela-related: does anyone know of any good book about Cuba’s secrete service? To my amazement I haven’t been able to find anything just about that topic, just about the Cubans and the missile crisis and stuff like that.
    One of the most detailed pieces (just an article) I have found is this:
    http://www.urgente24.com/214538-el-g2-o-de-como-cuba-maneja-secretamente-a-venezuela

  17. Ira Says:

    Jesus fucking Christ. It’s time to give up:

    Venezuela is LOST, and the arrest of the sit-in protesters was the proof in the pudding.

    Zero reaction from Venezuelans, and no one in the rest of the world gives a shit. It’s OVER.

    Yeah, it’s a fun practice in political masturbation for us to read and post here, predicting how this policy of theirs is going to hurt that…how that is going to change this…but we’ve been wrong 100% of the time.

    Not 99% of the time–but 100%.

    The fat lady has sung,

    • Dr. Faustus Says:

      Calm down! First, find a dark room, shut the doors and place a CD of Handel’s Water Works in the player. OK, we’ll wait here. Next, close your eyes and follow the exquisite notes in your mind. After an hour or two of THAT, go find a copy of Dicken’s “A Tale of Two Cities,” find an easy chair and read it. Revolution! French style. They have the guns and the power and we have nothing but the desperate plotters in Monsieur Defarge’s musty old wine shop. That’s it. Think of the Marquis St. Evrémonde running over that child as Diosdado Cabello keeping the prison doors shut on all those protesters. Cruel. Despicable. OK? With me? So how come Louis XVI wound-up with his head in a basket on the Place du Revolution? Hmm? Revolution without the proper weapons is a very hard thing to overcome. The motley assemblage of students throughout Venezuela is unarmed, but motivated. Don’t give-up yet. We’re only on Chapter two…..

    • firepigette Says:

      The opposition has been shockingly wrong most of the time.The students are catching up, but like you say, not too many people care….there are even those who do nothing but criticize them…..shocking and sickening

    • Dean A Nash Says:

      I hate to say I told you so, but I did. Venezuela (and particularly, the opposition) has been a near replay of what happened in Cuba. For starters, Castro’s opposition – just like Hugo’s, couldn’t acknowledge that sometimes (rarely, but sometimes) Castro was correct. For example, on a Saturday, when Castro would say, “today is Saturday” and his opposition (displaced in Miami) would have a coronary arguing that it wasn’t. Stuff like that. Just for starters.

      Secondly, for far too long, for the opposition, it’s always been about regaining power. Not about helping the country (much less the poor), but about gaining power. Seven or more years ago, on this blog, I suggested that the oppo go out and get involved in EDUCATED the pueblo. This would have taken a lot of time-consuming, back-breaking work. Of course, they weren’t interested in that.

      Yes, VZ is lost, but it was lost a long, long time ago. Ditto for America. And mark my words – having spent 6 years in China – the world will rue the day when China becomes its taskmaster. For some countries, that will be sooner than later.

  18. Latulla Says:

    Last day!, extra, extra!

  19. Latulla Says:

    That´s very far, if comas ask me!

  20. VJ Says:

    Deuda comercial en cesación de pagos (Millones de US$)

    Aerolíneas extranjeras 3.700
    Sector alimentos 2.400
    Sector medicamentos 2.800
    Industria automotriz 4.500
    Industria química 678
    Industria de auto partes 150
    Comercializadoras de auto partes 60
    Comercializadoras de equipos médicos y laboratorios 60

    Total adeudado (Millones de US$) 14.348
    http://www.lapatilla.com/site/2014/05/13/jose-guerra-venezuela-en-cesacion-de-pagos/


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