If Venezuela’s President Hugo Chávez fails to secure re-election in October 2012 it will not be for lack of spending. The day before his most likely rival in that contest, Henrique Capriles Radonski, officially launched his candidacy for the opposition Mesa de la Unidad Democrática (MUD), Chávez on 12 October gave him a sharp reminder of what he is up against. Chávez announced the issuance of US$3bn of bonds in the local market, bringing the total issuance this year between the government and the state oil company Pdvsa to a massive US$15.2bn. On top of this there are huge loans from the likes of China and Russia.
The latest bond will apparently finance projects for the agriculture sector - the Gran Misión Agro-Venezuela - and job creation through the Gran Misión Trabajo, which will be launched by November with the aim of creating 4m “productive” jobs over the next eight years. The central bank said that 40% of the US$3bn would go “exclusively” to the productive sector.
The Gran Misión Agro-Venezuela is sucking up money like a hoover with no concomitant increase in production or reduction in food imports, raising serious questions about efficiency and (inevitably given the opacity of Venezuela’s finances) corruption. The government last issued bonds on 26 July, to the tune of US$4.2bn, which was also supposed to target agricultural production, as well as housing construction.
Both the latest bonds were issued under the “complementary indebtedness law”, approved by the national assembly on 9 June, virtually doubling the government’s debt for 2011 to BF$99bn (more than US$20bn). Five days after this, on 14 June, the Chávez administration announced a bond issuance of US$2.33bn destined for Misión Agro-Venezuela.
Given that Venezuela has one of the highest borrowing costs of major emerging-market economies, the decision to tap credit markets yet again suggests a feverish determination to begin what the opposition claims is a massive increase in public spending to boost Chávez in the 2012 elections. It argues that by saddling the country with such enormous debts, and at a time when oil prices are as high as US$84 per barrel on average so far this year, Chávez is being palpably unpatriotic.
Chávez is certainly moving apace to announce new spending initiatives. In the space of two days this week he announced a new social “mission” to assist the elderly, and a new “Indo-Venezuela” mission for indigenous communities. He also promised the disbursement of Bs$880m (US$204m) for the Alma Mater mission dedicated to constructing socialist universities.
Chávez said the mission for the elderly would be launched at the end of the year. He said his government was also evaluating whether to increase pension payments for thousands of pensioners, as well as doing more for elderly Venezuelans who lack a pension and fall outside the social security net.
The “Indo-Venezuela” mission was launched to coincide with the Day of Indigenous Resistance on 12 October. Chávez ordered the “immediate occupation” of 25 estates in the western state of Zulia, including more than 15,808 hectares, to award to Yukpa Indians in the Sierra de Perijá bordering Colombia.
The mission is designed to verse the Yukpa better in 21st century socialism and to organise the hand over of land titles and demarcate the ancestral territory of the group. The indigenous peoples minister, Nilcia Maldonado, said the Yukpa would also be incorporated into the “Great Housing mission”: she announced the handing over of 40 houses to indigenous families in the state of Apure, as well as 110 heads of cattle.
Russia
In addition to the debt from bond issuances, Chávez agreed to a US$4bn loan from Russia last week to purchase military equipment in 2012 and 2013 after meeting the defence Tsar, Deputy Prime Minister Igor Sechin in Caracas. On top of this the finance minister, Jorge Giordani, is scheduled to fly to Moscow shortly to pursue a separate US$6.5bn loan to finance “infrastructure development”.
- Streamlined Opec
President Hugo Chávez has proposed a parallel Opec made up of the “giant” oil producers, of “no more than four or five members”, including Venezuela and Russia. He made the suggestion during a cabinet meeting broadcast on radio and television, in which Russia’s Deputy Prime Minister, Igor Sechin, and energy minister, Sergei Smatko, participated. Opec recently certified that Venezuela has the largest oil reserves on the planet (296,500m barrels) displacing Saudi Arabia from the top spot. Chávez failed to elaborate on the proposal, which rather conflicts with his criticism of elitist groups within larger organisations, such as the UN Security Council.
