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Harvard's Hausmann & MIT's Rigobon speak out about Venezuela's electoral fraud

By Ricardo Hausmann & Roberto Rigobon*

Summary of the arguments The world may well feel that it should turn the page on the discussion about the claims of fraud with regards to the recall referendum in Venezuela on August 15. After all, the Carter Center has already spoken on the subject after conducting an extensive audit of the process. At the same time the opposition has failed to produce any convincing evidence to back up their claims.

In this report we try to put together the statistical pieces of the puzzle. We find evidence of fraud in the statistical register and we also explain why the Carter Center was not able to detect it.

Many hypotheses of fraud have been put on the table and showed to be wanting. This paper destroys many of them. However, it opens the door to other hypotheses of fraud that seems uncomfortably compatible with the facts of the situation.

First of all, the Carter audit, conducted on August 18, was based on a sample of about 1 percent of the ballot boxes. According to the Carter Center, the audit went flawlessly, except for the fact that the Head of the Electoral Council was not willing to use the random number generator suggested by the Carter Center but use instead its own program run on its own computer. At the time, this seemed odd, given that the objective of the audit was to dispel doubts.

The paper finds that the sample used for the audit was not randomly chosen. In that sample, the relationship between the votes obtained by the opposition on August 15 and the signatures gathered requesting the Referendum in November 2003 was 10 percent higher than in the rest of the boxes. We calculate the probability of this taking place by pure chance at less than 1 percent. In fact, they create 1000 samples of non-audited centers to prove this.

This result opens the possibility that the fraud was committed only in a subset of the 4580 automated centers, say 3000, and that the audit was successful because it directed the search to the 1580 unaltered centers. That is why it was so important not to use the Carter Center number generator. If this was the case, Carter could never have figured it out.

In addition, we develop a statistical technique to identify whether there are signs of fraud in the data. To do so, we depart from all previous work on the subject which was based on finding patterns in the voting numbers. Instead, we look for two independent variables that are imperfect correlates of the intention of voters. Fraud is nothing other than a deviation between the voters’ intention and the actual count. Since each variable used is correlated with the intention, but not with the fraud we can develop a test as to whether fraud is present. In other words, each of our two independent measures of the intention to vote predicts the actual number of votes imperfectly. If there is no fraud, the errors these two measures generate would not be correlated, as they each would make mistakes for different reasons. However, if there is fraud, the variables would make larger mistakes where the fraud was bigger and hence the errors would be positively correlated. The paper shows that these errors are highly correlated and that the probability that this is pure chance is again less than 1 percent.

The first variable we use is the number of registered voters in each precinct who signed the recall petition. This clearly shows intent to vote yes in a future election but it does so imperfectly. Our second measure is the exit poll conducted by Penn Schoen and Berland and complemented with an independent exit poll conducted by Primero Justicia. This also is an imperfect measure as it depends on potential biases in the sample, differences in the skill of the interviewer, etc. But this source of error should not be correlated at the precinct level with the one that affects the signatures. But it is very telling that in the precincts where the Penn, Schoen and Berland exit poll makes the biggest mistakes is also where the number of signators would have led you to believe that the Yes votes would be higher.

This evidence is troubling because it resonates with three facts about the conduct of the election. First of all, contrary to the agreed procedure, the voting machines were ordered to communicate with the election computer hub before printing the results. Secondly, contrary to what had been stated publicly, the technology utilized to connect the machines with the election center allowed two-way communication and this communication actually took place. This opens the possibility that the center could have informed the machines what numbers to print, instead of the other way around. Finally, after an arduous negotiation, the Electoral Council allowed the OAS and the Carter Center to observe all aspects of the election process except for the central computer hub, a place where they also prohibited the presence of any witnesses from the opposition. At the time, this appeared to be an insignificant detail. Now it looks much more meaningful.

The full report can be read here in Spanish [PDF format]

About the authors*

Ricardo Hausmann is Professor of the Practice of Economic Development at the Kennedy School of Government, Harvard University. He also serves as an independent member of the board of CANTV, Venezuela’s principal telecommunications company. Previously, he served as the first Chief Economist of the Inter-American Development Bank (1994-2000), where he created the Research Department. He has served as Minister of Planning of Venezuela (1992-1993) and member of the Board of the Central Bank of Venezuela. He also served as Chairman of the IMF - World Bank Development Committee. He was Professor of Economics at the Instituto de Estudios Superiores de Administración (IESA) (1985-1991) in Caracas where he founded the Center for Public Policy. He was also a visiting fellow at Oxford University (1998-1991). His recent work has focused on the sources of growth in developing countries, the sources of financial instability, the causes of macroeconomic volatility, the institutions to sustain fiscal discipline and the sources of inequality in Latin America. Besides his academic publications, his most recent books include Other peoples money: debt denomination and financial instability in emerging markets (with Barry Eichengreen), Global Finance from a Latin American Viewpoint (with U. Hiemenz), Wanted: World Financial Stability (with E. Fernandez-Arias), Democracy, decentralization and Deficits in Latin America, (edited with Kiichiro Fukasaku), Securing Stability and Growth in Latin America: Policy Issues and Prospects for Shock-Prone Economies, (edited with Helmut Reisen), and Banking Crises in Latin America, (edited with Liliana Rojas-Suarez, 1996). He recently directed a major study for FUSADES on a national development agenda for El Salvador. He is a past president of the Latin American chapter of the Econometric Society and a founding member of the board of the Latin American and Caribbean Economic Association. He has been a consultant for the International Monetary Fund, the World Bank, the Inter-American Development Bank and the Central American Bank for Economic Integration, among others. He holds a Ph.D. in Economics from Cornell University.

Link to Ricardo’s website:

http://ksghome.harvard.edu/~.rhausma.cid.ksg/publication.htm

Roberto Rigobon areas of research are international economics, monetary economics, and development economics. In international economics, Roberto focuses on the causes of balance-of-payments crises, financial crises and the propagation of them across countries - the phenomenon that has been identified in the literature as contagion. In monetary economics, he studies the behavior of financial markets and their interaction with monetary policy at high frequencies. In particular, his most important paper in the area studies how the Federal Reserve determines its interest rate policy when there are shocks to the stock market. In development economics, he has studied the behavior of the exchange rate when countries implement fiscal reforms, when central banks intervene in the foreign exchange rate market, as well as when there are financial imperfections and capital controls. Roberto is currently an associate professor with tenure at the Sloan School of Management, MIT, a faculty research fellow of the National Bureau of Economic Research, and a visiting professor at IESA, Venezuela. He joined the business school in 1997 and has won twice the "Teacher of the year" award and twice the "Excellence in Teaching" award at MIT. He got his Ph.D. in economics from MIT in 1997, an MBA from IESA (Venezuela) in 1991, and his BS in Electrical Engineer from Universidad Simon Bolivar (Venezuela) in 1984. He is married with three kids.

Link to Roberto’s website:

http://web.mit.edu/rigobon/www/



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