Sunday, February 03, 2008

That is some piggy bank you have, Hugo. 

Today it was reported in Panorama newspaper that Venezuela's foreign reserves have topped a stunning $54 billion dollars. $33.2 billion are held by the Venezuelan Central Bank while another $20.88 billion are held by the national development fund, FONDEN.

In the article, a number of economists attributed this very high number to the exchange controlls implemented during the 02/03 oil strike. At the time, after the former PDVSA managers shut down the state oil company for two months reserves dropped to a little over $14 billion. Since then the reserves have grown by a stunning $40 billion!!!

The article also points out that from 1999 when Chavez first came to office to the controls were imposed in 2003 $34 billion left the country in capital flight for an average loss of $8.5 billion per year. All told, it is estimated that $125 billion is held abroad by Venezuelan nationals.

It should also be noted that when Chavez first came into office the reserves were approximately $14 billion dollars. That is, not only had previous administrations trashed the oil industry and had a currency probably even more overvalued than it is today but they almost left the cupboard bare, as this article from the time describes.

Thankfully, even in spite of the numerous mistakes he has made recently Chavez has improved the financial position of the country alot.


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