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Venezuela: The budget reaches the National Assembly

By Veneconomy

20.10.04 - Springing no last-minute surprises, the government submitted the 2005 Borrowing and Budget Bill to the National Assembly in the sum of Bs.69.3 trillion, an increase of 39.15% compared to the original budget for 2004 of Bs.49.8 trillion. However, that figure is not completely accurate, as, according to statements by Rodrigo Cabezas of the National Assembly, the budget for this year so far comes to Bs.57 trillion (including additional credits), 14% higher than the original amount.

The estimates for next year forecast a major increase in ordinary expenditure, which may ensure a growth in the economy in the short term, but could cause a collapse in the long term when oil prices drop.

One of the premises –fictitious it should be added- of the budget is that in 2005 the country will manage to export 2.9 million barrels a day of oil, which, calculated at $23 a barrel, would give revenues of just over $24.4 billion from oil sales abroad. But it would be more realistic to put exports at 2.2 million barrels a day at a price of $30, giving revenues of $24 billion, a figure very similar to the previous one.

However, forecasts based on the world outlook put prices much higher, which means that it is highly likely that the average for 2005 will even exceed $35/bbl, so giving the government a wide margin for coping with any eventuality. If that were not so, Finance Minister Tobías Nóbrega would have not left open the possibility of setting aside $4 billion to be deposited in the Macroeconomic Stabilization Fund. Today this fund has $707 million, but at one time it reached the sum of $6.22 billion, which were frittered away by the Chávez administration.

In just 10 years, Norway, a country with lower levels of production than Venezuela, has managed to save $130 billion, which indicates how much the government could have saved in these past five years so as to be able to meet its liabilities when oil prices fall, as inevitably they will.

In other words, the Chávez administration is committing the same mistakes as its predecessors of squandering the revenues from the oil booms without making the necessary provisions for the future.

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