A brand new report by Transparency International’s Venezuela chapter confirms our not-so hard-to-place suspicions: The public sector’s massive portfolio of enterprises is a financial black hole. The report is part of a much larger effort by Transparencia Venezuela to map and identify the large number of State companies in Venezuela, which will be public in the future.
According to official government data, the annual losses reported by an estimated 70% of all State companies totaled 1.29 trillion bolivars in 2016, which is greater than the public sector’s total expenditure on important areas like health, education, housing and social security (which added up to Bs 1.13 trillion) in the same period. Talk about priorities!
The remaining 30% of companies… well, we know nothing about. In violation of the Organic Laws of Financial Administration of the Public Sector, of the Public Administration, and the Law Against Corruption, they simply do not publish their budgets or financial statements. That means that the financial losses that the report cites for the overall portfolio of state-owned enterprises could actually be even larger.
Venezuela beats Argentina (52) and Brazil (130) handily in terms of total number of State-owned companies.
Transparencia Venezuela discovered the existence of at least 511 state-owned enterprises since the start of a related investigation in June of last year. These are just companies managed by the Executive Branch and do not include those controlled by State Governors or Mayors, so the number could be much higher.
Caracas Chronicles spoke with Christi Rangel, who was part of this report. She mentions that the report’s conclusions were based on three Official Gazettes, which included budgets and financial statements released by the National Budget Office (ONAPRE) in accordance with the Anti-Corruption Law. Then, it compared the totals with the annual expenses on the mentioned public areas in both the 2016 National Budget and related additional credits.
Rangel also considers that some of the budgets and financial statements released to the public domain are doubtful and cites a concrete example: The money-losing sugar refining complex known as CAAEZ. They show a profit for 2016, even though press reports from the same period show a very different picture. (As a matter of fact, the AN’s Oversight Committee recently released their own findings about CAAEZ – and they do not square up with the official story).
Rangel, who is the regional coordinator of Transparencia Venezuela in the Andes Region and an Economics Professor in Los Andes University (ULA), told CC that how most of these companies were created between 2006 and 2010. In contrast, Nicolas Maduro only created 77 companies since taking office in 2013. This total includes expropriated companies by the government, companies created by the government and those involving PDVSA.
Most of the state-owned enterprises belong to the manufacturing sector (23%), but companies in the financial and insurance services were allocated more budgetary resources (42%), even though they only make up 7% of all companies. In comparison with other nations in the region, Venezuela beats Argentina (52) and Brazil (130) handily in terms of total number of State-owned companies.
However, the money pit is expected to become deeper and dodgier this year as new funds are allocated to the State’s enterprises in what is perhaps the least transparent budget to date, that is, the 2017 National Budget.