THE revolution is bust. After five years of rapid growth, based on oil-fuelled public spending, Hugo Chávez’s Venezuela has run into the buffers. The president insists that the country is shielded by “21st-century socialism” from what is essentially a crisis of capitalism. But between the lines of the modest adjustment package he announced on March 21st can be glimpsed the true gravity of the situation.Venezuela’s original 2009 budget was based on oil at $60 a barrel. That has now been revised down to a more realistic $40, although independent analysts reckon the country is producing only about two-thirds of the 3m barrels a day the government claims. Budgeted spending is to be cut by 6.7%. But if compared with actual spending in 2008, the nominal cut is around 18%. When inflation is taken into account it is over a third.
The budget deficit will be narrowed by increasing VAT from 9% to 12%. But that still leaves a gap of over $10 billion to be filled by borrowing. Since foreign credit is virtually unobtainable, this will require a 180% rise in the government’s internal debt.
As the situation disintegrates Chavez will have two options, increase the pace of nationalizations at home and assault on enemies abroad, or back away from the "Bolivaran Revolution". Sadly my hopes for some rational thought from the tyrant are minimal to say the least. With that said who stole all of the money:
The finance minister, Alí Rodríguez, cites the $57 billion transferred in recent years into the government’s National Development Fund. However, according to his ministry’s figures, there was only $6 billion left in the fund at the end of December, shortly before the government raided the central bank’s reserves for $12 billion to top it up. What has happened to that money since remains unclear.
49 billion, gone?
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