Friday, July 28, 2006

Corruption tales

Visit Miguel to read about the creative ways chavismo manages to have money disappear. Or read the Veneconmy editorial reposted below:


People in Venezuela are no longer capable of feeling surprise at the succession of unbelievable antics that the government gets up to daily. Another of these inexplicable incidents came to light just a few days ago: the disappearance of a trifling $45 million from the Bank Deposit Guarantee Fund (Fogade), the whereabouts of which nothing has been known since –believe it or not- May 2006.

According to press reports, Humberto Ortega Díaz, the president of Fogade, apparently requested the Superintendency of Banks, the Government Accountability Office, and the Attorney General’s Office, to investigate the disappearance of these funds. The missing $45 million were seemingly deposited with the Banque Nationale de Paris (BNP) on December 14, 2001, to be invested in bonds, bills of exchange, and other instruments that would bring in revenues for Fogade. But, in May this year, when a paper for $2 million matured, neither the interest nor the capital appeared.

It is not known when or on whose instructions these dollars were transferred from the BNP to the “investment firm” CLBS Portfolio, whose only known representative, Arturo Ehrilch, was murdered -allegedly a contract killing- on April 9, 2006. The worst part is that all that is known about CLBS Portfolio is its headquarters in Caracas, which, to top it all, has remained closed since the death of Ehrlich. Now there is no one who can respond for these Fogade funds or, at least, explain what happened to them.

It could be that this is an isolated incident of corruption and negligence, but it does prompt one to reflect on how flexible (not to say slack) the norms governing the handling of accounts have become under the 5th Republic. The government has become quite an expert on not being accountable and refraining from giving transparent explanations regarding its handling of the public purse. It has changed all the rules to give itself greater freedom to manage the public finances, particularly on the international front. Now there are a number of funds and state-owned financial entities that make discretional use of huge amounts of money or open foreign currency accounts abroad under a cloak of opacity.

In the times of the 4th Republic, state-owned companies and government agencies would maintain dollar accounts as a matter of exception. Those that did exist had to go through several filters, including approval by the President of the Republic in Council of Ministers and the scrutiny of the board of directors of the Central Bank (then independent), which was the only entity in charge of handling these resources, the majority of them trust funds. The only exception to this rule was PDVSA, whose Rotary Fund was handled by the corporation itself.

Thanks to the slackening of these rules, it is almost a certainty that incidents such as the Fogade affair will become an everyday occurrence.

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