Where has the money gone?

Venezuelan Vice-President Elías Jaua and Minister of Energy and Petroleum Rafael Ramírez are still expected to pay a visit to the National Assembly in order to explain how this credit rig works and render accounts on what they have invested its vast resource.

In November, after the public denunciations on the matter, Venezuelan President Hugo Chávez - after insulting the complainants - ordered the Vice-President, and the minister of Energy Petroleum and President of state-run oil company Petróleos de Venezuela (Pdvsa) to clear up the existing doubts over the deals with the Chinese comrades. But no public appearance on their part has been made and there is no date set. What does seem a fact, on the contrary, is the imminent trip that Venezuelan officers will be taking to materialize new contributions to the famous Chinese Fund.

President Chávez confirmed it on January 8: "We are after a new credit amounted to USD 4 billion and USD 2 billion we offer." He also spoke of another credit worth USD 4 billion that the Russian government will grant to buy weapons, from Russian companies of course. Earlier, on December 27, in one of his live telephone calls broadcasted on state-run TV channel VTV, he said that beginning 2012 , a new tranche of the Heavy Fund China-Venezuela and a loan amounting to USD 8 billion from the Industrial and Commercial Bank of China would be executed.

Opposition Deputy Miguel Ángel Rodriguez has led all kinds of strong warnings regarding these money handlings. And after receiving plenty of defamatory remarks and regarding the productivity situation of this oil-exporting country, the conditions of the national infrastructure, the electrical energy generation and the water service, the lack of housing units, in short: Venezuela's reality; he brings up an old question addressed to the government: "Where is the money?"

He highlights that this high level of investments does not feature largely in the country, and what worries the most is that these agreements are affecting Pdvsa's operations: "The company is so impoverished, to such an extent that in November when the Heavy Fund I was renewed, it sought a USD 6 billion loan additionally in order to finance its operations of the current year."

Rodríguez affirms that in this coming visit to China, the government mission intends to convey a clear message from President Chávez: the necessity to speed up new outlays. On this matter, he cites a confidential document - prepared with flowery and evocative language - with which the Venezuelan Head of State presented such proposal to his Chinese counterpart, comrade Hu Jinao. "President Chávez has asked the Chinese to speed up payments," he accuses: "We are facing an act of high treason; Venezuela's wealth is being given away to the Chinese empire."

As evidence of Venezuelan government's intention, opposition deputy Rodríguez produces a document. It is a summary of the first round of negotiations "for the long-term financing" made in Beijing between February 2 and 4, 2010. On the third page of the document, it is expressed that Asdrúbal Cávez - commissioned as Pdvsa's Vice-President - "brought forward the original proposal made by Chávez in order to initiate a Big Volume and Long-Term Funding amounting to USD 116 billion over 10 years, with a gradual payment of 35% in the first year; 25% for the second year; 20% for the third year and 20% of the payment for the fourth year."

In regards to that agreement reached by both countries, the first thing Chinese people were asked in 2010 was a sum of USD 40 billion in exchange for 250,000 oil barrels per day, for USD 70 each. But there was a piece missing: Venezuelans did not present the development projects which would be financed with such loan, but "a preliminary list" - without including projects in the energy, mining and agricultural sectors - with an investment estimated at USD 38 billion.

Shady deals

The Chinese altered the agreement. "Actually, what was agreed in 2010 was the amount of USD 4 billion for the Chinese Fund I and additional USD 4 billion for the Fund II," explains Rodríguez. "And regarding the fund labeled as Big Volume Fund, USD 20 billion; from which, USD 10 billion would be in US dollars and the remaining USD 10,000 in yuans; which are spent on Chinese products. That explains how Chávez became a giant salesman of household appliances brand Haier."

As a response to the official declarations, opposition deputy Rodríguez does some calculations. Since 2008, China must have received about 270,400,000 oil barrels for this peculiar exchange. "If, as stated by (Minister of Planning and Finance Jorge) Giordani, transactions were conducted at market price; that means revenues for more than USD 28 billion. Giordani also remarked that Venezuela already paid USD 6 billion to the Chinese. This leaves in evidence that there was a fund surplus of USD 22 billion which must have entered the Bandes Those from the government claim that such money has been invested in national development and infrastructure, but where are they? If they claimed - and if it was true- that highways are in perfect conditions, that the country is on track producing rice, sugar and coffee; and that we are exporting all those agricultural products, then it would be OK. Not at all. Where has the sum of USD 22 billion gone?"

Ask for anything, Pdvsa assumes the burden

The basic mechanism of the functioning of the fund is explained by Minister Ramírez, on the memorandum account 062-11, on April 15, 2011, made public by deputy Rodríguez. Pdvsa ships oil barrels to China National Oil Corporation (by then the agreement consisted of 430,000 barrels per day), which at the same time discharges through a "collection account" from the Bandes to Chinese Development Bank. The bank charges "the debt plus the quarterly interests" and the rest of the money - the fund surplus - plays in the other accounts of Bandes.

During the first two years, after deducting the sum from the creditor bank, Pdvsa used the "fund surplus" for "the royalty payment, extraction tax and to cover part of the production costs and oil refining process." But in January 2010, the Executive National ordered Pdvsa to assume "the entire financial burden for the payment of the debt in which the Bolivarian Republic of Venezuela incurred with People's Republic of China."

Ramírez just would like President Hugo Chávez to enable Pdvsa to charge again in its own right what belongs to it in this transaction. "The current volume represents a huge financial impact for Pdvsa," he wrote. He also put it into numbers: such financial impact amounts to USD 18.4 billion.

Murky business

For deputy Rodríguez, this stands for a different business. "This is basically money-laundering. Oil is exported, money enters Bandes and there Chávez grabs it. This is an operation against Pdvsa, which can only be figured out when you have it clear that it is just money laundering. What Ramírez tells Chávez, on the memorandum account is that he is making Pdvsa go bankrupt. And who controls the money that comes in and goes out Bandes? The answer is Chávez."

The money-laundering scheme enables President Chávez have at his disposal and make use of that large sum of money. Ramírez, in fact highlights graphically in his communication and explains in detail: "As it was set up as a fund, it is administrated as separate from the National Treasury. As a result, this allows the National Executive to provide financial resources for infrastructure projects and projects of social interest." And later, he cites: "The use of these funds for projects only requires the National Executive's approval." These can be reduced in a few words: "Chávez does whatever he wants with these Chinese funds."

From this affirmation, at least a good example is present: the memorandum account 119, on June 24, 2010, submitted to President Chávez by Minister Ricardo Menéndez, Minister of Science and Technology. In these papers, Menéndez shows the status of a good deal of businesses that should materialize under agreements reached with Argentina and Iran. And this situation is so pressing, to such an extent that he is forced to require funds for two years: additional USD 14.2 billion for building projects during 2010; and USD 10.6 billion for the following year (2010). Chávez's decision is -with these examples- more than obvious, in his own writing, he orders the delivery of the funds of 2010 "all this from the China-Venezuela Fund." That is to say, one agreement backs other deals with foreign partners.

Another evidence of the government's intention to speed up the payment and increase its rate appears in a memorandum from the legal adviser to the Minister of Foreign Affairs, dated November 14, 2011. There, the legal adviser comments a communication from the Bandes (3694, dated November 2) in which Venezuelan Ambassador in China Rocío Manerio is urged to seek the renewal of the "funding" -granted by the Chinese Development Bank to the Bandes- amounting to USD 4 billion, regarding the tranche B of the China-Venezuela Fund and entrusting her to include in the agreement the possibility of "renewing the funding up to three times." Another news is the creation of the National Development, Fund, Fonden, which plays a similar role to the one played by Bandes.

Rodriguez makes observations on the new actor: "Fonden was set up so that the government could have at its disposal around USD 50 billion of international reserves. And, at the same time, a similar sum of money from the oil sales has been injected, without having rendered accounts, so far, on its endeavors at the country's development."

While they wait for the (accountability) visit to the National Assembly, the Venezuelan Criminal Forum will go to the Supreme Tribunal of Justice in order to make an appeal to the Chinese Fund. For his part, deputy Rodríguez will ask the Comptroller's Committee to hold an inquest into the claims filed. "I want all of us to make calculations on every single dollar in which those USD 22 billion have been invested."

Translated by Adrián Valera Villani