"Venezuela’s 2010 Budget Maintains Social Spending Despite Global Economic Crisis"

[Peace Patriot]

This article contains some interesting stats. For one thing, the Chavez government has put forward a very conservative budget, based on a $40/barrel oil price for next year. (Oil will likely be higher.) Also, oil provides only 25% of the budget, while taxes provide a little more than half the budget (53%). That means that business must be doing quite well in Venezuela (if they expect half their budget--about $36 billion--from tax revenues).

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Venezuela’s 2010 Budget Maintains Social Spending Despite Global Economic Crisis

Published on October 21st 2009, by Kiraz Janicke - Venezuelanalysis.com

Caracas, October 20, 2009 (venezuelanalysis.com) – Venezuela’s Minister for Finances and the Economy, Alí Rodríguez Araque, presented the national budget proposal for the year 2010 on Tuesday with more than 45% of the total directed towards social spending.

The 2010 budget is based on an average oil price of $40 a barrel, estimated economic growth of 0.5 percent and inflation of 20 to 22 percent for the year.

(SNIP)

The total budget for 2010 is 159.41 billion Bolivars (US $73.9 billion). Of this, 45.73% would be directed towards social spending aimed at poverty reduction and improving the quality of life for Venezuelans, Rodriguez announced.

(SNIP)

Rodriguez said that tax revenues would finance 53% of the budget, oil revenues will account for 24.7%, while the incursion of foreign debt makes up the rest, “in order not to affect education and food items for our people.”

http://www.venezuelanalysis.com/news/4881

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I presume that "the incursion of foreign debt" means that the government, having saved $43 billion in international cash reserves over the boom years (economic growth of nearly 10%, 2003-2008, most of it in the private sector)--even while fully funding social programs--decided to finance part of next year's budget with that money. Having such a large international cash reserve gives them considerable flexibility in budgeting during this Bushwhack-instigated economic meltdown.

Another article, same topic. It contains the interesting news that demand for Venezuelan bonds is high.

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"Venezuela Will End the Year Without Budget Problems,” Says Chavez
Published on October 4th 2009, by Tamara Pearson - Venezuelanalysis.com
http://www.venezuelanalysis.com/news/4839

(SNIP)

(Chavez) also explained that the budget will use money obtained from selling government debt bonds, of which the government offered $3 billion worth earlier this year, but is considering raising that to $4 billion, given the high demand there has been for them.

"With this measure we are democratising government finances," Chavez said, and minister for finances, Ali Rodriguez, said the high demand for the bonds showed the trust investors had in "the capacity of the government to fulfil its obligations."

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Just a little more perspective on Venezuela, to add to my OP about Venezuela's success in its food and agricultural programs.
http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=405x25324

It's not all bad news in the 'Stalinist dictatorship' of 'tyrant' Hugo Chavez, folks--despite the crapola we are constantly fed by the corpo-fascist 'news' monopolies. In fact, Venezuela's doing quite well, which is illustrated not only by the Chavez government's 60% approval rating, but by the government programs and priorities that are the reason for that approval rating. We suckers here in the U.S., on the other hand, are saddled with trillions of dollars in debt unto the 7th generation, the biggest military budget on earth--to what good end no one can say--no jobs, a Great Depression, vulture profiteers in every sector, war, death and torture as our legacy, and the sinking feeling that, no matter what we do, our government will never be "of, by and for" most of us. How dare the bastards who have destroyed our country criticize Chavez?! How dare they? Have they no decency?

[Judi Lynn]

1. Great news. Looking forward to more. It's comical none of our corporate sources

have been able to find anything substantial to throw at the man, so they rush out daily, breathlessly to load us down with shocking news like Venezuela wants to conserve water right now (as if we haven't had to do it here endlessly) and Venezuela is having to struggle with electricity supplies (as if we haven't had innumerable blackouts for decades ourselves) and Hugo Chavez burped in public. Yadda yadda yadda. God forbid any of them break down and actually deal with real information which matters.

Thanks for this information.

[Braulio]

3. More from the Venezuela site used by Peace Patriot

I'm just quoting what they say

http://www.venezuelanalysis.com/news/4881

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"Despite slowing growth, unmet consumer demand combined with an over-valued currency – the Bolivar has been fixed at 2.15 to the US dollar since 2005 – has meant that inflationary pressures remain high.

Accumulated inflation from January to September was 18.5 % and the Central Bank expects it to rise above 26 percent by December. However, the budget predicts that inflation for 2010 will be between 20-22%.

Although the Bolivar is trading at more than double the official rate on the parallel black market, the minister ruled out a devaluation of the currency.

Since Venezuela is heavily reliant on imports, the country’s foreign exchange rate is intimately linked to inflation. In order to keep the Bolivar cost of goods bought abroad low, importers’ demand for dollars at the official exchange rate is high."

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This issue is like a fish bone stuck in the government's throat. They have failed to correct for the overvalued currency, and keep putting fingers in the dike, but it's ready to burst.

No country in the world, EVER, has survived unscathed a period of high currency overvaluation - the overvaluation sets the conditions for an economic crisis, it destroys exports, unbalances trade flows, and causes a bubble... and this is what's happening in Venezuela right now.

Did you check the item about "Venezuela is heavily reliant on imports"? This happens because Venezuelan industry is priced out of the market by the overvalued currency. Can't even compete growing simple foodstuffs with Colombia, never mind compete in anything else.

If you are interested in learning more about this problem, read about the crash of the currency in Argentina driven by the excesses of the austral years. Argentina has destroyed its economy over the years, using cycles of overvalued currency to poison its industrial and agricultural capacity. Nowadays, after so many years of ill-thought populism, it's a shade of its former self. By next year, they may even be importing meat.

[Peace Patriot]

4. Oh, right. The World Bank/IMF had nothing to do with Argentina's collapse and

"ill-thought populism" had nothing to do with its spectacular recovery. The "black holes" in your analysis make me laugh. It can make a person giddy gazing into an "event horizon" of such gravity that it emits no light.

As for current problems in Argentina--or in Venezuela, for that matter--the Bushwhack-induced, worldwide Great Depression has nothing at all to do with Venezuela having to finance debt, lowered oil production, Argentina's trade problems, etc.? It's all the leftists' fault?

I favor the word of the leftists who engineered Venezuela's sizzling economic growth the previous five years--the people who saved $43 billion while fully funding social programs--and the leftists who turned Argentina around, from a World Bank/IMF-created "basketcase" to a viable country--as opposed to someone who ignores such an overriding reality as the World Bank/IMF looting of Argentina.

As Lula da Silva has pointed out, the "blue-eyed wonders" of the World Bank/IMF and Wall Street were WRONG--and the South American left was RIGHT to resist them. Your analysis resembles that of the often-wrong--the looters and idiots who crashed one Latin American economy after another in the 1990s, and then crashed the U.S. economy!

Those who criticize Venezuela's and Argentina's "ill-thought populism" never explain what else Venezuela's oil profits should be spent on, instead of bootstrapping the poor and building a future with educated workers, infrastructure development, land reform, local manufacturing and regional cooperation, or how it was that Nestor Kirchner (after four presidents in as many months) stabilized the "basketcase" of the region, through restoring social programs and regional cooperation, especially with Venezuela, which helped Argentina pay off ruinous World Bank/IMF debt. Argentina would be in utter chaos now if it had not been for the national and regional leftist rescue of that country--something that the corpo/fascists there, and here, would like everybody to forget, or never know in the first place--because the corpo-fascists are looters, and now want to loot the leftist recovery!

The left's "New Deal" policies in South America are the best possible remedy to this "first world" crash. Everybody is hurting due to the "neoliberal" lunacy of the U.S. and its "first world" gang members, but at least the South American left has its priorities right, has their heads on straight (in the forward position) and are responding with policies "of, by and for the people" as opposed to the further looting and lunacy that is going on here. A healthy economy is made with workers and small businesses, NOT banksters and high-placed criminals of every kind including genocidal killers and war profiteers. Do you know that the biggest employer in the U.S. is small business?! Small business and workers are getting all kinds of help in Venezuela and other leftist countries, and zero, zip, zilch help here. We may all go down to perdition, but the South American countries with leftist leaders (the majority) have the best chance of not doing so, because...well...they are not stupid. They know that the advice of criminal multi-billionaires and global corporate predators are the crackpot ravings of Captain Qeeg as he heads the goodship Earth into a Hole So Dark we may never get out--because somebody ate his strawberries! Deep dark lunacy.

[Braulio]

5. Argentina May Import Beef First Time as Herds Die

Approximately 70 years ago, Argentina's economy ranked in the top ten in the world. Today, it ranks nowhere. What happened? Cycles of populism followed by military dictatorship. Argentina hasn't had a "spectacular recovery", it reneged its debt, and today it is so run down it may be importing meat soon. The following is from Bloomberg:

http://www.bloomberg.com/apps/news?pid=20601086&sid=aYOe6BO_JTb4

Aug. 18 (Bloomberg) -- Argentina, the biggest beef- consuming nation, may resort to imports for the first time within two years as a drought kills cattle and export controls prompt ranchers to quit the business.

The following is from Stratfor:

http://www.stratfor.com/

Wheat production in Argentina is down to 8.4 million tons this year, from 16.3 million tons in the 2007-2008 season. The corn crop has been hit less dramatically, but is still expected to fall from 20.9 million tons to 13.5 million tons. Total exports for wheat are expected to hover around 3.5 million tons, a 31-year low.

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Argentina is slated to receive its third shipment of liquefied natural gas (LNG) from Egypt on July 28, Bloomberg reported July 11. The shipment underlines a burgeoning economic crisis in Argentina as the country changes from a net exporter of natural gas to a net importer. For a country that has always relied on commodity exports for a comfortable cash cushion, this dramatic decline in self-sustainability spells serious trouble. The government cannot sustain the subsidization of domestic consumption forever, and it is quickly running out of cash. Coupled with the ongoing distress in the agricultural sector, Argentina could be facing an uphill struggle to feed its people and keep its lights on in the not too distant future.

... a host of populist policies that were implemented in response to the 1999-2002 economic crisis have begun to take a serious toll. Not only have price caps stifled investment and energy output, they have also boosted consumption habits. Natural gas consumption rose 34 percent from 2000 to 2007, reaching 122 million cubic meters per day. Rising consumption and a free-for-all attitude toward natural gas has led Argentina to rely on natural gas for 54 percent of its electricity generation.

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Why did the Fernandez-Kirchner team lose the last election? Because they're doing a poor job.

[Braulio]

2. Does the math add up?

Here's a statement regarding Venezuela's 2009 budget:

http://www.venezuelanalysis.com/news/3896

It says the 2009 Budget was planned at 168 billion bolivars.

The statement above says the total budget is 159 billion bolivars. Venezuelan inflation in 2009 is between 25 and 30 % (depends on the source, the Central Bank forecasts 26 %). Let's say it's 25 %. Correcting for inflation, the 2010 budget would be 127 billion bolivars.

Something doesn't add up in these figures...the drop is from 168 billion to 127 billion in real terms.

There's an additional issue: The latest production figures reported by OPEC for Venezuela are 2.1 million barrels per day. This is a lot lower than the official forecast for 2010. Therefore, the oil price forecast ($40 per barrel) is being used to offset the failure to meet production targets.

Finally, foreign currency reserves are exactly that, reserves. They're not useable in the sense that Venezuela can't practically "pull the money out of the bank". If they were to use foreign currency reserves, then the cost of Venezuelan bonds will drop - and this means the interest rates they pay when they borrow money would go up.

And they ARE borrowing money. They do so by borrowing from China (swapping Chinese cash for future oil deliveries), or via bond sales (in US dollar denominated bonds). The US dollar denominated bonds are used to prop up the bolivar black market, so if their price starts to drop, then the effective black market rate goes up. And this drives up inflation, which is already the second highest in the world.

The eventual solution, of course, is to devalue the currency and work to increase oil production, which has been declining. Or they can pray that oil goes up to $100 a barrel (which in the long term is going to kill their oil industry as customers shift to renewables under the dual pressure of too high prices and global warming).

[Peace Patriot]

6. "the oil price forecast ($40 per barrel) is being used to offset the failure to meet...

...production targets."

..production targets." How so? Nobody expects the price of oil to go down. $40/barrel is a very conservative estimate. It will more than likely be much higher. It is right now. And Venezuela is producing as much oil as it wants to produce. Production has to be geared to demand. The Bushwhacks hit demand with nukes. Venezuela's lowered production wasn't an inability to produce oil. It was a smart decision--based on many buyers' short-term inability to pay for it.

There is no discrepancy in Venezuela's budget. They said it is based on a projected inflation rate for 2010 of 20% to 22% inflation, not 25% (or higher). They intend to bring inflation down from 2009 levels.

I certainly share your concerns about an economy so largely based on oil, but I ask again: Given the oil-based economy that the Chavez government inherited, what better use could the oil profits have been put to, than bootstrapping the poor, supporting small business, land reform and so on? And what wiser course could a Venezuelan government have taken, as it created all these forward-looking social programs, than to re-negotiate the oil contracts with multinationals, to increase the Venezuelan peoples' share of the profits from their main resource?

It is difficult for me to imagine a better use of the oil profits, and better management of Venezuela's economy and resources, than their performance for 2003 to 2008 inclusive, before the Bushwhack crash. Now, like everyone else, they are having to tighten belts, but they are doing this, as well, in a way that keeps their development plans on track. I think the U.S. approach--giving away trillions of dollars to the least productive members of society, the very rich and the military--while utterly neglecting workers, small business and the poor--is insane.

And I can just imagine what would be happening in Venezuela--mass starvation, homelessness and hopelessness--and certainly no vision for the future--if the same insanity had reigned there, as is reigning here.

You criticize the Chavez government, or the Kirchner-Fernandez government. How about criticizing the fuckers who went before them, who, in Argentina's case, sold their country, lock, stock and barrel, to the World Bank/IMF (--and they DID pay off that debt, by the way; they did NOT renige on it, to everyone's amazement), and, in Venezuela's case, created the food insecurity and every other crises in Venezuela, that the people of Venezuela turned to Chavez to solve, and give him and his government such high marks for directly addressing and trying to solve.

[Braulio]

7. Venezuela isn't producing as much oil as it wants to produce

Sorry, but you got your facts wrong. If you look at PDVSA's "Siembra Petrolera" plan, you'll see Venezuela is behind its production targets.

Check this plan at

http://www.soberania.org/Archivos/Plan_Siembra_Petrolera_2006-2012.ppt

One of the key tenets in management is to make sure individuals and departments accomplish what they say they'll do. Unfortunately, this basic management principle is being violated by the Ministry and by PDVSA. There's too much talk, not enough action.

This in turn leads to a failure to meet production capacity targets, which are a key to obtaining a higher OPEC quota - the game isn't played just by booking reserves, production capacity has to be delivered.

The failure to deliver production capacity doesn't help, because it weakens OPEC, it doesn't allow it to manage prices at a good level. This in turn leads to price spikes such as last year's, which in turn cause economic disruption and hunger, and even worse, sets the market swinging towards alternative sources. And Venezuela does need to sell its oil to survive.

In the future, if Venezuela and the rest of OPEC don't get their act together, it'll become a has been in the oil leagues, Brazil will replace it by developing its new discoveries, and if prices do spike again, switching to battery powered cars will accelerate, eventually killing off the world oil market. I would be sniffing around Bolivian lithium mines just in case.