Tuesday, July 26, 2005

Taking account of what the opposition did 

Today the Venezuelan State oil company, PDVSA, presented its audited financial statements for 2003. Why is this the topic for a post? A couple of reasons. First if you listen to the opposition very much (not recommended for people with a low tolerance for B.S.) you have certainly heard them complain that PDVSA hasn’t finished its financial statements and that therefore no one knows what is going on with the company’s finances. You will also have heard that this tardiness in reporting is an embarrassment to the country and it is Chavista mismanagement that is to blame.

This is complete nonsense. It is true that the 2003 financial report was over a year late. But what they fail to mention is that virtually the entire finance and accounting department of PDVSA went on strike in December 2002 and had to be fired. As a result almost all the people having first hand knowledge of PDVSA’s finances and how to prepare its financial statements are gone. So a significant delay in wrapping up all the accounting was to be expected.

To make matters worse most of the data processing for PDVSA’s finance and accounting departments had been outsourced to a private company, Intesa. That company also joined the strike depriving PDVSA of all its computerized accounting systems and data. Despite court orders Intesa never turned over the computers and data and when they got a final order from Venezuela’s Supreme Court insisting they turn everything over they claimed they couldn’t because they had discarded it. So the true culprits responsible for the tardiness of the financial reports are the former PDVSA managers and executives who sabotaged the company in 02/03.

Speaking of sabotage, that brings me to my second point. In the financial statements the outside auditors apparently quantify the damage to PDVSA from the strike at $13 billion!!! This is obviously a very large number – larger than I have previously heard. Further, this is only direct damages to the oil company through sabotage and lost sales. Given that the shut down of the oil company threw the economy into a severe depression it is safe to say that Venezuela as a whole suffered losses on the order of tens of billions of dollars!

These kinds of numbers would be large in any context. But remember this is a small, poor country we are talking about in which such sums are huge. Further, this money is irretrievably lost – those lost oil sales can never be regained. Those in the Venezuelan opposition who, in their desperation to be rid of a democratically elected president, participated in the “strike” bear complete responsibility for these immense losses. The reader may wish to keep this in mind the next time he/she hears someone in the opposition complaining about Chavez spending some money on TeleSur, his aiding Caribbean countries with their oil purchases, the money spent to hire Cuban doctors or any of the other things the opposition bitches about. When Chavez spends millions on legitimate expenditures the opposition is apoplectic. Yet when they do tens of billions of dollars of damage to the country in an attempt to overthrow the government somehow no one is supposed to be upset about that. And then they wonder why they are so widely despised!


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