Missing the Point of Fonden

Elias Jaua cutting the ribbon on some Fonden project that nobody knows how much they spent on, nobody audited, and somebody undoubtedly got gobsmackingly rich out of…

Long time readers know I have a special fascination with Fonden – the Chávez-created National Development Fund – and, as a corollary, with the Venezuelan press’s utter failure to explain it.

It remains a subject of undying fascination for me: all these years later, even the newspaper reading elite – hell, the newspaper writing elite – doesn’t seem to have any clue what Fonden and its sister-funds are, or why there might be a problem with them.

Take this fairly representative piece by El Universal’s Mayela Armas: it describes a rumoured government’s plan to “unify” Fonden with all the other “parallel budget structures,” like the China-Venezuela Fund and other hierbas aromáticas del paraestadismo chavista.

What strikes me is how Armas fails to explain any of the reasons this story is interesting, or important, or might be worth knowing about. Instead, she leaves you with the vague sense that there’s some kind of boring bureaucratic reorganization in the government’s financing architecture that you probably don’t need to bother with.

Here are some of the things Armas – one of the top financial reporters at Venezuela’s oldest establishment paper – forgets to mention:

  1. That we don’t know how much money any of these funds have. She mentions we know $125 billion or so have gone into them and vaguely says the “details” of their activity hasn’t been reported. But what hasn’t been reported is not “the details”, it’s about the big, headline numbers: right now, the standing balance in Fonden is a state secret.
  2. That nobody audits any of these funds, nobody outside a tiny hyper-enchufado petit committee knows how much they spend on what when or why, that there’s no mechanism for anyone to force this basic information of evident public interest to be disclosed and that, strictly speaking, there is no verifiable guarantee that the funds even have any money funds in ’em in the first place.
  3. That this level of opacity, this orgy of spending that nobody’s ever put on the public record much less subjected to parliamentary approval, is clearly, plainly, deliriously, directly unconstitutional, Article 314 being one of those ones we’ve all decided doesn’t exist somehow.
  4. That the Chinese Fund is the product of an elaborate, long-running set of bilateral negotiations between the Venezuelan and Chinese governments and is therefore subject to special rules and oversight mechanisms through the Chinese embassy that don’t apply to the rest of the funds, rules that look surprisingly like – only far more invasive than – the type of conditionality that the IMF used to impose on  recipient countries, and that therefore you can’t just dump all of the Chinese Fund money into Fonden, or at least not without defaulting on a yards’ long catalogue of agreements with your key financial partner and fastest growing trade partner and key strategic diplomatic relationship (unless the idea is to somehow unify the funds by dumping the Fonden money into the Chinese fund and give China imperial rights over resources they didn’t even lend us in the first place, which seems crazy, but not any crazier than the other alternative.)

These are the bare-bones-basics of what remains one of the Big Three Chavez Era Corruption Cesspools (along with CADIVI and Military Drug-and-Subsidized-Product Smuggling.)

Fonden is more abstract and technical-seeming than the other ones, granted, and so the sprawling, 12-figure scandal (over ONE HUNDRED BILLION DOLLARS FERCHRISSAKE!!) barely gets talked about. People – not just Joe Blow in the por puesto, but educated people keenly interested in public affairs, have no idea that there’s a problem with it.

And how could they? When it does get written about, it’s in the sanitized terms of Armas’s nonsense little write-up.