Where does Fonden money go?

So now that we have those Fonden disclosure documents, it’s time to jump into the minutiae. Of course, we only have detailed 5-year disclosures for $40 billion out of the $69 billion Fonden has apparently assigned, but beggars can’t be choosers, so…

The first thing that jumps out at you is that by far the largest share of Fonden assignations are…to the Energy and Oil Ministry! Almost $16 billion out of the $40 went right back to the place where it came from: PDVSA.

Granted, that figure is inflated, though, by the Comisiones Mixtas Cuba-Venezuela – which, apparently, is bureaucratese for Sending Truckloads of Cash to Cuba. Turns out those commissions are run out of the Energy Ministry, and they’ve gotten over $6 billion assigned in the last five years!

Even after you leave out the cuban tajada, the Energy and Oil Ministry is still the largest recipient of Fonden funds. It’s hard to know what to make of that: it seems PDVSA could just as well spent those dollars directly out of its cash flow, without the need for the money to take a roundtrip through Fonden. There’s surely some reason why this happens, but hell if I know what it is.

The second biggest money-getter is Transport and Communications: railway construction, light rail and metro projects, bus buying, road and highway construction, that sort of thing. On the one hand, insofar as a mechanism like Fonden is justifiable (which isn’t very far at all), it’s this kind of project that can justify it. On the other hand, with “oversight” for each project limited to a single line on a spreadsheet, and $7.3 billion dollars at stake, you can be sure many, many hands have been greased out of this pot.

If you counted Cuba as a ministry, it would come in 3rd, with those Mixed Commissions getting over $6 bn. That’s a crazy scandal right there – Cuba’s gotten four times as much out of Fonden as housebuilding! – but not exactly a surprise.

The next two ministries are, to me, the real crux of the matter: Defense and Basic Industries (a.k.a. Guayana state-owned boondoggles.) Nearly $8 billion have been utterly wasted on these two assignations: buying advanced weapons systems we’ll never use, and pouring money into Guayanese money-pits the state has no business running in the first place. That’s $8 bn. of the Petrostate at its most mindlessly non-productive – pouring impossible sums into projects that create no value, no positive externalities, no development results…plain old waste.

The $3 bn. Alí Rodríguez got in a hurry last year to deal with the electric crisis looks comparatively easier to defend: that’s certainly a core state activity, though of course if they’d planned ahead a little they probably could’ve done a lot more with a lot less.

It’s further down the list, though, that you start to appreciate why the billions wasted on Cuba, on weapons and on doomed Guayana projects are so criminal: housing gets just $1.4 billion, and health gets lumped in with the rump “other” category. Just a drip. Education? Not there at all – understandable, perhaps, as Fonden spends only US dollars, but still.

For a fund that bills itself as National Development-centered, core social spending is a vanishingly small proportion of what Fonden does. Judging from Fonden’s priorities, subsidizing Caribbean dictatorships, buying Russian fighter jets and propping up loss-making steelmakers seems to be chavismo’s idea of National Development.

Sorry to get monotemático about it but, tomorrow: some choice line-items from the 140 project list!

40 thoughts on “Where does Fonden money go?

  1. On the other hand, with “oversight” for each project limited to a single line on a spreadsheet, and $7.3 billion dollars at stake, you can be sure many, many hands have been greased out of this pot.

    So, waht is our democratic representatives in the Asamblea National doing about this?
    Is there any denuncias bein drafted up to be sent to Contraloria/ Defensoria,
    Is there any political grass roots reaction to waht was already knowwn, but now has a onl liner reference on a spreadsheet?
    No?…. entonces que pasa?

    Pasa que la oposicion solo esta buscanto el quitate tu pa’ ponerme yo, otra vez. Eso pasa.


    • Sorry Luis, pero que LADILLA con esas opiniones cómodas. There’s a ton of people working HARD under extremely adverse circumstances to shed some light on this pero no, es quitate tu pa poneme yo…

      Kindly go fuck yourself…


    • LuisF

      You must first understand that even though we got a good number of deputies, we are not the majority so therefore:

      1) We do not decide who is in what committee, we have to negotiate that.
      2) We do not lead any major committees, so we have to negotiate what gets looked at and when.
      3) We are not the majority in any committee that matters either.
      4) We do not preside the Asamblea.

      Given all of the above, in order to effectively exercise the controlling functions correctly we will need to negotiate what we can control, and when.

      When the opposition candidate walks into Miraflores in February of 2013, he or she will still find a long hard slog ahead in terms of getting the house in order. In a way, the indefinite election modification might be a boon (in the sense that a good president gets more than one bite at the apple, although personally I would rather adopt the US way, two terms in a row and done for now)

      Now, getting Juan Bimba and Maria la Bollera to understand the “29 billion + raspada de olla” and translate in to votes, he alli el detalle, mi pana.


      • Exaclty, the need is to operate the “donde estan los reales?” moment! for Juan bimba et al. That is the crux of this, and also to dismantle the time bomb of socialismo!!!!, everything the new goverments tries, will be opposed by the socialista camp on ideological basis… We need to sell Capitalismo and market without complexes.

        I appreciate your educated reply. Keep up with the good work.

        Do not negotiate any golden bridges on my name though. Without justice there is no reconciliation. First charge them with all the crimes, then you may talk about amnesty.

        (Case in Point HCF, he was pardoned before the trial and charges were carried out, and you see where we are now!)



  2. Francisco,

    I suppose Defence also gets quite some money from the national – normal – budget.
    Still, I wonder if we will ever know the right figure for Fonden.

    I’ve read repeatedly Russian experts say Venezuela has spent about $7 billion plus in weapons in the last +-5 years in Russia alone (Lenta dixit).

    This article, from RIA, sent to me by Setty, mentions only “at least” 5billion plus, but even the journalist admits it is hard to know now what is being said about loans and more loans and purchases:

    In Kommersant -a rather respected newspaper- they mentioned repeatedly the initial payment end of 2010 or beginning of 2011 of 400 million dollars for a Russian-Venezuelan bank, Evrofinans Mosnarbank, for which Venezuela got 49% of the shares. That was at the end of last year or beginning of this. They say the main purpose of that bank is to facilitate the movement from Fonden (yeah, they mention the name) to the purchase of more weapons.

    I have whole posts about Venezuela buying this weapon or that from Russia and asking for loan for more weapons. At the end, it is excremely hard to know when they are mentioning when a previous purchase is being concluded and a new one is beginning.

    We are going to have a hard time finding out what has been really purchased already, delivered and ordered.


  3. Highly depressing graphs. None of that stuff – not oil, not defense, not the “industrias basicas”, certainly not the mystery transportation projects in a country where the infrastructure is, quite literally, the same as it was forty years ago – none of that stuff is going to get us out of poverty.

    By the way, the PR genius who deemed it necessary to name these loss-making boondogles “industrias basicas” should get a square named after him in Puerto Ordaz. Saying something is “basic” is the sure way to getting funding for it per secula seculorum…


    • Hm…”Sociedad Anónima de las Industrias Básicas para el Poder Popular de Importación de Whisky”…I think I have an idea. Thanks, Juan.


  4. One thing that comes to mind that even if we win we lose
    “1) We do not decide who is in what committee, we have to negotiate that.
    2) We do not lead any major committees, so we have to negotiate what gets looked at and when.
    3) We are not the majority in any committee that matters either.
    4) We do not preside the Asamblea.”

    These numbers would result in the immediate recall of the government in any sane country.

    The weak press here is one of the most disappointing things for me even after 25 years of knowing that nothing is as it seems. I understand that the oppos are on holidays like always in agosto although I see some of them popping up in the news.

    This whole boondoggle of FONDEN is bigger then RECADI & bigger then the suitcases.
    They should hammer away in the Asemblea on this one topic & never stop.


    • “These numbers would result in the immediate recall of the government in any sane country.”
      Announcement today- study finds estimated $31 billion missing- due to
      fraud in Iraq. (Well, there is/was a war going on…so what is the excuse
      for Chavez “missing 29 billion” -a “pretend war”?)And- supposedly this was over
      several years- and with Venezuela- 1 years!!


  5. Not withstanding the fact that they have often been very poorly run and have wasted lots of money I think this beating up of the basic industries is wrong.

    If you look at Venezuela right before Chavez came to power it exports consisted mainly of oil, but also about $6 billion dollars per year of non-oil products. And the non-oil stuff was precisely things made by the basic industries of the east – iron, steel and aluminum. Moreover, at that time many of those industries were owned by companies from Argentina and Japan who were making profits in spite of the huge head wind of a highly unfavorable exchange rate.

    So to say there are no positive externalities from the basic industries is really unfair and inaccurate – you got significant amounts of human and physical capital which actually were capable of earning their own keep which is more than anyone else outside of the oil industry does. If I had to guess which city’s workforce had a higher skill level, Puerto Ordaz or Barquisimeto I know I wouldn’t be guessing those of Bqto.

    Investing in education, health care, and basic social programs is certainly the top priority. But once you get past that I don’t see why having the government build houses should take priority over investing in new industries. Housing never has a return on investment for the country as a whole (as the US just found out) and is something the private sector can do perfectly well if only people in Venezuela had real jobs with decent incomes. So it would seem the government needs to prioritize building up industries that will create well paying and self-sustaining jobs which will then allow people to go out and purchase their own housing. The corruption and inefficiencies of the basic industries may make it a poor example of doing that but that doesn’t undermine the validity of the concept.

    I’ve never really understood what people opposed to that view as the alternative. Do they think these industries will come about on their own through private sector investments? Do they think Venezuela doesn’t need industry at all and can just jump to some sort of post-industrial service economy?


    • interesting thoughts. I think we need to keep an open mind and see what the state can do to trigger the start – just as it did in every single developed nation- but i am not sure how much of that aluminium was produced by the state pre-Chávez.

      I happen to know the main accountant for RUALCA. That company started to die under Chávez, he finally “exprópiese” and it vanished. It started by providing aluminium products to FORD in Valencia. Firstly it was wheels and then more complex forms. in the mid nineties they were already exporting 95% of their product and they had big plans.
      To my understanding they were a private company. How much help did they get initially from the state, if any? I don’t know.

      “Do they think Venezuela doesn’t need industry at all and can just jump to some sort of post-industrial service economy?”
      I don’t know, but: did Israel develop its basic industries ever? OK, Israel is a special case as it got massive amounts of USA aid over the last decades. Still, it has developed quite a lot of high-tech industries.


    • OW I think the main argument now is that these “basic” industries have evolved into a gigantic black hole of money once the government took them over and still do not produce in sufficient quantities to supply the national market even in the current recession.

      It doesn’t matter if we are talking aluminum, steel, cement, iron (cabillas), milk or whatever. These companies have not been successful under Chavez.

      We pick on housing because the government has made it such a huge political issue with Chavez saying that every family in Venezuela will have decent housing – a pie in the sky dream that will never see fruition.

      I heard a story today of a family that was being housed in a local hotel since December who were given a new, fully equipped house in Macanao & proceeded to immediately strip the house of all it’s contents & sell them.

      Giving people stuff for free will never have long lasting results.


    • I think OW, that your basic premise is correct, BUT, I would add that what was always missing from the “Industrias Basicas” thing was that they sort of gave up there and never took the next step.

      So we produced Aluminum Ingots, but not say, jalousie windows, for export. We produced steel profiles, not finished electrical motors for export.

      Value added items, downstream products, these represent a better and more solid economy than items that are one step up from raw material.

      Mind you, it wasn’t just in this area that historically Venezuelan Governments lacked vision. Just about any manufactured product got ZERO help from the public sector when it came time to export.


    • I don’t see why the private sector couldn’t have brought these industries about. Venezuela has the raw material, and with the right amount of policy mix, the private sector would have developed these industries, just like it developed the oil industry back in the 20s.

      I’m all in favor of industrial policy, but it has to be smart. The “industrias basicas,” with their decades worth of losses paid for bby Venezuelan taxpayers, with a paltry record of exports, has truly outlworn its welcome mat.


      • Speaking of industries….What ever happened with the miners’ strikes? Is Ruben Gonzalez 7-year sentence still going to stand even as Iris Varela plans to release 20.000? Are the miners getting paid now? I search the news, but I see nothing!


        • It looks like prisoners who were sentenced to less than 5 years will be released first. I see nothing relating to the policy for prisoners who are waiting for trial, often they’ve been waiting for many years? Often, they don’t have money to pay for the bus to the court. I see many articles about police complaining about no more sentencing criminals to prison. How does a country operate like this? How can you be talking about production in basic industries when there is no rule of law in the streets?


      • No, the private sector won’t do this. Yes, foreign private companies will show up to take oil or iron out of the ground – but that is simply extracting a commodity from the soil and is not what I am talking about.
        Private companies won’t set up companies in most established manufacturing industries because the barriers to entry, the requirement for huge and costly amounts of physical and human capital, are prohibitive for private companies. This is why even in developed countries like the US there are no NEW car, airplane, appliance or semi-conductor manufacturers. It is simply to costly to enter already established industries.
        If you look around the world essentially all new companies in those sorts of industries are state sponsored. The companies don’ necessarily have to be run by the government but the government at least has to give them the capital. And if Venezuela has $40 billion a year in oil profits putting at least 25% of that to investing in new industry sounds reasonable to me.


      • Just like it developed the oil industry in the 20s? Which country? do you know how PDVSA came to be? Do you know what foreign companies were leaving in Venezuela in the fifties and sixties?

        I know the word ‘comprador’ is often used by lefties, but I really can’t think of another word to describe the behaviour that seems to derive from this attitude: let’s sell oil, let’s them just set foot here and do it all for us, “else we would be Paraguay or Haiti” (that is almost like “es que somos así, no hay remedio”).

        What are the industries you would like the government to support? For every single government, every single government that has become developed did support heavily a series of industries – the States and Britain included – .
        It is here where PJ gets very very fuzzy.


  6. Quico, you make good pie! Sometimes it’s too easy to forget how difficult it is to come by the ingredients for this kind of pie. Thanks.


  7. I would like somebody (AN or whatever) to explain this in a way that everybody from Achaguas to Caracas could understand that the government has spent millions of dollars in trains that do not run, houses only few have, good will to cuba, weapons that do not defend them against the local choro, etc. while almost nothing (comparatively) in your local hospital so when your son is really sick he can get proper attention


  8. Island Canuck -you are so right.
    – these “basic” industries have evolved into a gigantic black hole of money once the government took them over -I suppose this is one way of describing “chavistation”


  9. Ojo: There are obvious positive externalities from investing in basic industries. But that’s not what’s happening here. What’s happening here is spending public resources to prop up the ailing balance sheets of loss-making basic industries. There are no positive externalities in that.


    • Externalities are the canard that keep on giving. As long as nobody measures them, they can justify anything! Why, there were even positive externalities from invading Iraq, if we got down to it.


      • This is not true. You absolutely know that there are such things as positive and negative externalities. The terms may be abused and used inappropriately at time but they are not a canard, any more than “supply” or “demand” are canards. And the positive externalities of having industry are well known (as well as a few negative ones like pollution). I would think members of PJ would have some interest in seeing the educated urban middle class grow which is precisely one of the things that having a developed manufacturing sector would make happen.


    • Absolutely true. Chavez buying up the privately run industries and now subsidizing them is a huge and unforgivable waste of money and you are correct that THAT has no positive externalities to that.
      The money should have been used to build, or support the building of, NEW industries.


  10. What I find particularly outrageous is the $7.3 billion spent on “transportation and communication” when there hasn’t been any new important highways made, and the current ones are falling apart. When the railroad along the Caracas-Valencia highway is starting to look semi-abandoned, with big chunks of rusted structures visible right beside the highway. When the Valencia subway is basically abandoned. No new airports. No new ports. How can they justify $7.3 billion?


  11. Exactly $520,000,000.00 for “PLANIFICATION Y FINANZAS”.
    Exactly $276,000,000.00 for “COMERCIOS”.
    And exactly $262,825,583.13 for “Otros”. Don’t forget the 13 cents.

    What’s wrong with this picture?


  12. it seems PDVSA could just as well spent those dollars directly out of its cash flow, without the need for the money to take a roundtrip through Fonden. There’s surely some reason why this happens, but hell if I know what it is.

    The roundtrip ticket of course. A very small item in a big pie. Share and share alike.


  13. I’m reminded of the anecdote about three coal mines in ussr, that each had produced one third of their quotas. They found out in what order the inspectors from Moscow were going to visit them, so they loaded the coal from the other two mines and sent them to the first by rail. When the inspector arrived, he saw a full quota having been met. They then kept sending the coal to the next mine before the arrival of the inspector. The inspector concluded that the nation had three full quotas of coal for what turned out a particularly harsh winter, leaving the nation short on coal halfway through.

    Maybe the money sharing between PDVSA and Fonden is some accounting analogy to the above.


  14. Quico, I would rather appreciate you stay on this monotema. This is the problem one scandal gets cover by the next. so the opposition, the apposition deputies, the press, you bloggers and we opinion publica get managed like clock work.

    Did we even noticed the ex magistrado Velazquez fun holiday trip in Colombia last. Week? like him there ia a Nobrega one in Madeira happyly spending his money.

    They will return when this opposition is done negotiating the puentes dorados, with chavismo to keep the peace and prevent a post chavez un govenrnable period. Same thing I say. mismo musiu con distinto cachimbo.

    I’m sorry if I step on some sensitivities. I know many great people are working very hard. My critique is that I am of the opinion they are working very hard at the wrong thing.

    Common!, the level of saqueo and of venom and hatered being carried out and it seems this group of venezuelians are playing dumb to what is going on. They keep striving for a new set of elecciones with the very same condiciones that before.

    I know you are a no-Fraude dogma guy. Sorry I am not.

    The go fuck your self part is really out of your ussual level. too bad.


    IMO the problem is venezuelian’s politics and society is a sociedad de complices hermano, and if you step on the interest base, well it wont go good for you.


  15. Hay quienes no quieren ver mas allá de sus narices ni entender lo que sucede, nuestra tierra se sacude las pulgas igual que los perros cuando le molestan, en éstos momentos sucede eso, pero hay que tener en claro el por que, estamos ante el ataque de entidades de la oscuridad, que hacen los últimos esfuerzos para atraparnos, mas no lo lograran, comente, cinco minutos ante de terminar el año ,les recuerdo¨Mision destrucción.hugo termínala rápido ya los plazos se te vencieron y no hay extensiones para ello, no me queda mas que desearle a todo el Pueblo de Venezuela , Colombia ,Perú y Paraguay, que nos preparemos para un trimestre de sacudidas sísmicas catastróficas, a mi pueblo de Venezuela aconsejarlo cuidado con los bancos del Gobierno, no será un año Feliz y prospero pero tendremos que luchar juntos a brazo partido para salir adelante. Unidos, con Fe y Esperanza. Organizados, contados con todos y cada uno de nosotros en lo que sabemos y podemos cada quien a lo suyo pero resulto podremos darles a nuestros hijos y nietos la paz, felicidad y prosperidad que esperamos de una Venezuela Nueva, Unida física, espiritual, religiosa Hem donde cabemos toda/ las clases sociales y razas, no decepcionemos nuestras próximas generaciones,, no quiero alarmarlos, tampoco estoy a autorizado para decirlo solo para darle las pistas, ya que el concertación y triunfo será de ustedes de todos y cada uno de los venezolanos, mi misión como les comente es destruir a Chávez y lo Hare pero solo con la fe, la ayuda y la organización de ustedes, solo no soy nadie, ustedes SI, he venido aquí a cumplir y así lo Hare, ustedes son quienes deciden, ellos quieren esclavizarlos para siempre, pero mi primera advertencia , para el rompimiento del hechizo invisible fue HONDURAS, y lo logramos lo demás ha venido sucediendo por operación DOMINO, fui traído única y exclusivamente para acabar con esto, que no se refiere solo a Venezuela, pero si es el punto neurálgico de toda la operación, nuestra energía es Luz, más no oscuridad, nuestro signo alumbra y vibra, nuestro símbolo es música celestial y pureza,claridad,verdor, agua, viento, tierra y fuego, lo dejaremos en las entrañas para siempre hasta el fin de sus días, lo de los nuestros y la eternidad, el tiempo se acaba para ellos y las distancias se ACERCAN PARA Nosotros, analicen y actúen sobre este punto vean en su cara, busquen su punto neurálgico por donde penetran sus vibraciones, se los estaré trasmitiendo al momento que estén leyendo, lo ven, es oscuro, borrascoso y anormal, si pueden grábenselo en sus mentes, esa es su energía, por allí entra y sale , hace y deshace, actúa y divide, Pienza ahora piénsenlo, tenemos nuestras lanzas y en ese punto en la mitad del medio, de los 2 puntos adversos y los 2 punto medio ni mas ni menos allí debe ir toda nuestra FE ENERGIA Y VIBRACION , el momento se acerca y debemos actuar con mucha FE Organización, Unidos, en Paz Amor Armonía y con toda nuestra energía hacia el ser superior en quien crean, La Fe mueve montañas, no le paren a los que se burlan las señales están dadas, recuerden estas palabra EN LA OSCURIDAD REINARA LA CONFUSION, LA SEÑAL VENDRA DEL CIELO. pero esa señal nosotros los de este lado la veremos como el sol, los oscuros son ellos, mas no nosotros ese momento sin que nadie te diga que hacer cada uno de ustedes sabrá donde, como y cuando hacerlo, no teman pues aunque habrá sacrificios, no tendremos miedo para actuar solo debemos mostrar miedo al creador mas no a sus malos Ángeles ni enviados humanizados, mantendremos las rejillas cerradas, quedan como el, en su laberinto por desobedecer el mandato que le fue dado, recuerden ya le quitamos el signo, ahora le quitaremos el símbolo y quedara solo en el preciso momento en que utilicen sus lanzas en su punto neurálgico con toda su energía y vibraciones, primero un advertencia de 3 y luego de 2 en el curso normal de nuestra vida através del tiempo en Venezuela cuatro alertas, área metropolitana Dito federal, Monagas, Carabobo y región nor. Oriental entre nueva Esparta y estado Sucre debemos estar preparados, nada de miedo ni rumores hay que orar, tenemos entidades aproximadamente 200 trabajando en ello para que sea lo menos impactante o no suceda. No es motivo de alarma, en estos días se han movido muy precipitadamente, le daremos un nuevo golpe esta vez en la isla. El sabe de vosotros, recuerden ubiquen en su rostro el punto receptor y actúen sobre este, no le paren a los comentarios, sigamos adelante, a los que crean y a los que no DIOS los bendiga, no olvidemos nuestros presos políticos y a los que han sido y seremos objetivos militares, nuevamente como hace 129 quedaras solo recuerda tu siniestra y tu diestra me pertenecen, nuevamente te inutilizare, todo mundo lo notar y puede hasta ser hoy la claridad de sus ojos te enmudecerán, la luz de sus cabellos te harán morder el polvo y con la señal acordada te enmudecerás


  16. The “go fuck your self” was piss-poor. Someone needs to relax and have a beer. I’m not a regular reader here, let alone a contributor (I came here following a link from the Devil’s Excrement). But Luis’ question was a serious one. It’s good there was an actual serious and educated response further down the page.

    Maybe (well… certainly, I’m in Vzla again for only 2 weeks after having been here for a year in 2010) I’m being naïve, but Luis’ question presupposed exactly the kind of actions I would expect in a parliamentary system. And if such actions and questions were not allowed, you can bet your collective opposition asses processes and petitions would be lodged in court. Maybe you’re just not firing on all cylinders guys…?

    Well, I’m not sure if I’ll come back here.. it was a kind of a turn off. Maybe if you’re recommended by el Diablo again.


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