Venezuela's 2010 Report to the U.S. Security Exchange Commision: A bag of lies and fiction.

 An appendix D to Form 18K presented by Venezuela to the Security Exchange Commission to describe the situation in the country as of December 31, 2009 belongs, mostly, in the realm of  fiction. Still, much of its contents cannot help but reveal the dismal situation of the country.

I have read it and have the following comments (in italics):

(1), The document starts listing some initiatives taken by the Chavez government:
· The strengthening of existing, and creation of new, national development and social funds to provide specific resources to major infrastructure projects and massive social programs;
In fact these funds have been created in order to allow Hugo Chavez to use oil income as he pleases, without any transparency or accountability.
· The introduction of diverse initiatives of co-management and self-management among workers, employers and supervisors, as options to reshape either state companies and/or abandoned manufacturing facilities, as a fast-track measure to activate these entities and to promote stable job generation;
Co-management and self-management of state companies have proven to be disastrous. In special the steel and aluminum companies located in the southern region of Venezuela are technically bankrupt.
· The creation of Government-owned entities to provide low-cost commercial services with a high level of social impact, such as airlines, telecommunications and food chain distribution;
Most of these “entities” such as CONVIASA, the state airline, and PDVAL, the food chain have become major disasters. CONVIASA has closed down for reorganization after having an accident with loss of life. This company owns 16 aircraft but only 5 were operational. The food chain has been worse. Some 180,000 tons of rotten food have been discovered in containers throughout the country, one of the largest frauds ever to take place in Venezuela.
· the purchase, at market prices, of all companies in the electric sector and Compañía Anónima Nacional Teléfonos de Venezuela, referred to as CANTV, Venezuela’s largest telephone carrier, to secure stability in service rates and minimize their impact on inflation;
The government takeover of these companies has, predictably, deteriorated the quality of the services. Now electrical blackouts take place continuously all over the country and telephone and internet users are intervened and or monitored by the government
· The purchase of all companies in the cement sector and Siderúrgica del Orinoco, C.A., referred to as SIDOR, Venezuela’s largest steelmaker, to help reduce prices in Venezuela;
These purchases have proven disastrous. In special SIDOR is near bankruptcy, with a decline of 50 percent of its steel production in the last two years and its management handed over to the workers. The previous owners of the cement companies have not been properly compensated and the production is now lower than before.
· Mercosur- to become a full member of Mercosur and establish a trade policy with Argentina, Brazil, Paraguay and Uruguay;
In fact, Venezuela has not been able to join Mercosur due to the opposition of some member countries, particularly Paraguay.
· Petroamerica- promoting the regional integration of state energy companies, divided into “Petrosur”, comprising the southern cone and Bolivia, and “PetroCaribe” comprising the Caribbean. The stated purpose of the regional arrangement is to strengthen Venezuela’s presence in the international markets by eliminating trade barriers, increasing its refining infrastructure and reducing costs;
These companies are mostly in the drawing board after several years. Petrocaribe is working, providing important volumes of subsidized oil to the countries in the area, at a great loss to Venezuela.
 Regional Economic Assistance- assisting governments in the region by purchasing financial instruments and supplying petroleum products under favorable trading conditions;
Some of the purchases of financial instruments such as the Argentinean and Ecuadorian bonds became highly corrupt transactions.
· Enhanced relations with Latin American and Caribbean countries- strengthening economic ties with Argentina, Cuba, Ecuador, Nicaragua and other nations and receiving additional support from those countries in connection with the development of the social agenda of the Chavez administration;
In other words, Chavez flooded these friendly regimes with Venezuelan money, in exchange for their political loyalties.
(2), In April 2007, President Chavez indicated the possibility that Venezuela would separate itself from the International Monetary Fund, or IMF, and the World Bank, stating that the country had paid back all of its obligations to both multilateral lenders and did not concur in the policy objectives the institutions were pursuing with respect to the poorest nations. It was later announced that any decision on this matter would be subject to appropriate evaluation and analysis. To date, Venezuela’s Government has not taken any formal steps to withdraw its membership in the IMF and the World Bank. In September 2009, Venezuela received a disbursement of approximately U.S.$3.5 billion equivalent of Special Drawing Rights, or SDRs, from the IMF, which provided an aggregate of approximately U.S.$33.0 billion to central banks worldwide in order to boost their reserves and increase liquidity in their financial systems.
Chavez’s rhetoric is not to be believed. Not only Chavez did not withdraw from these organizations but has borrowed further from them.
(3), Under the July 2005 amendment, Banco Central is required to determine the optimum level of international reserves and update the National Assembly on an annual basis. The optimum level of international reserves currently is stated to be U.S.$28.0 billion. All amounts of foreign exchange above this level are redirected to FONDEN every six months. The reform also required that Banco Central make a one-time special contribution to FONDEN of U.S.$6.0 billion from Venezuela’s foreign currency reserves. This deposit was completed on November 7, 2005, and since that date through December 31, 2007, approximately U.S.$17.0 billion was added by Banco Central and approximately U.S.$15.1 billion was contributed by PDVSA. In 2008, Banco Central contributed an additional U.S.$1.5 billion and PDVSA added an additional U.S.$6.0 billion to FONDEN, and in 2009, Banco Central contributed U.S.$12.3 billion and PDVSA added U.S.$570 million to FONDEN. At December 31, 2009, total FONDEN contributions amounted to U.S.$52.6 billion.
Chavez has systematically raided the Venezuelan Central Bank. All autonomy previously enjoyed by the bank, as a central bank must have, has disappeared.
(4), During 2007, Colombia was among Venezuela’s largest trading partners. On March 2, 2008, President Chavez announced a movement of troops towards Venezuela’s border with Colombia and on March 3, 2008 announced the suspension of diplomatic relations with Colombia as a result of the incursion by the Colombian military into Ecuador and the killing by Colombian military forces of certain members of the Revolutionary Armed Forces of Colombia, or FARC, including one of its leaders. On March 7, 2008, the governments of Venezuela, Colombia and Ecuador announced a resolution of their political disputes and restitution of normal diplomatic and trade relations as part of a diplomatic mission led by the Organization of American States. On July 28, 2009, President Chavez announced the suspension of diplomatic relations with Colombia, the withdrawal of Venezuela’s ambassador from Colombia and the review of all economic agreements between the nations, as a result of accusations made by Colombian president, Alfaro Uribe, of an alleged weapons delivery from the Venezuelan Army to the FARC. On August 8, 2009, President Chavez ordered the return of Venezuela’s top diplomat to Colombia, but expressed disagreement over President Uribe’s decision to permit U.S. military personnel to use Colombian military bases in Colombia. On August 28, 2009, the presidents from the twelve UNASUR countries met to discuss the agreement between Colombia and the United States and signed a joint declaration focused on expressing the need to respect the sovereignty of each nation in the region and to strengthen peace throughout the region.
On July 22, 2010, President Chávez announced the suspension of diplomatic relations with Colombia, after Venezuela was accused by President Uribe of harboring Colombian guerrillas on Venezuelan soil before the OAS.
Chavez has broken diplomatic and economic relations with Colombia three times in less than three years. The man is a complete clown.
(5), Venezuela had an estimated population of approximately 28.4 million as of December 31, 2009, of which approximately 64.7% were between the ages of 15 and 64. The estimated Venezuelan labor force was approximately 13.0 million at December 31, 2009.
And yet, there are 17,7 million Venezuelans registered to vote. Since the cut-off age is 18 years this means that about 100 percent of the Venezuelan population that could be registered to vote is registered. This is unique in the world. In fact, it cannot be believed. I think there are thousands of non-existent voters “registered” to vote…. for Chavez. No independent audits of the Electoral register are allowed.

(6). 2009                 Venezuela Arg. Brazil       Chile                Col

Adult literacy rate (%) 95.2       97.6  90.0       96.5 92.          89.6
Chavez bureaucrats keep insisting that Venezuela under the “revolution” has a zero percent illiteracy. But these, above, are their own figures as of December 2009. This literacy rate, by the way, is only 2 percent higher than what existed before Chavez came into power.

(7), In December 2009, the National Assembly approved the budget for 2010. The 2010 budget, as approved, projected total revenues of approximately U.S.$57.7 billion (14.5% of GDP), and total expenditures of approximately U.S.$74.1 billion (18.7% of GDP). The 2010 budget also contemplated a legal limit on borrowing by the Republic of U.S.$16.4 billion (4.1% of GDP). …The Government has focused on maintaining a positive correlation between the amount of debt and the country’s GDP, which has been lower than the average among Latin American countries and other developed economies.
This is bullshit. According to Barclay’s numbers the nation’s debts will represent 45 percent of the GDP by the end of 2010, more than twice as much as the figure for 2008.

(8), Employment (persons):

                                                                    2005                         2009
Community, Social and Personal Services 3,364,831 31.3 %       3,807,561 31.8%

This means that Venezuela has almost 4 million people employed in social “services”. You know what they are? Armed militias, or in the “misiones” pretending to learn something, or enrolled in some type of government program. What Chavez calls employment are largely handouts of several types. This is one way to disguise unemployment. Real unemployment in Venezuela must be around 20 percent.
(9), Pursuant to the strategic orientation, the 2010-2015 Oil Harvest plan principally contemplates the following objectives:
· Accelerating the development of the Orinoco Belt with a goal of producing 2.8 million bpd by 2030;
In Washington a few months ago Ramirez said that they would be producing 3 million barrels a day by 2018. So, who is wrong?  Ramirez in Washington or Ramirez in writing to the SEC?
· Developing offshore gas reservoirs to satisfy local demand and to export to strategic markets;
This is a cruel joke. The barge, Aban Pearl, brought in to drill for offshore gas production sank a few months back. Its contracting has probably been the object of a hugely corrupted transaction that I have denounced, so far without any action being taken.
· Seeking territorial balance and advancing socialist development
What does this means? No one knows.
(10), According to the business plan, PDVSA’s main objectives include increasing its production capacity to 4,460 million bpd by 2015, increasing its refining capacity to 3,200 million bpd by 2015, increasing its crude oil export volume to 3,900 million bpd by 2015 and increasing its natural gas production to 13,890 million cubic feet per day by 2015. The business plan also calls for the development of the Orinoco-Apure region to become a significant petrochemical provider for the Republic.
This is pure bullshit. As long as it is in the future these guys from PDVSA talk a big game. But if they had followed plans made by the managers who were there in the 90's  they would be producing 5,5 million barrels of oil per day instead of the meager 2,4 million barrels of oil per day they are producing today.
(11), In January 2007, CVG began the construction of the Social Production Company National Iron and Steel, or EPS Siderúrgica Nacional, with an initial investment of approximately U.S.$2.1 billion. EPS Siderúrgica Nacional is expected to produce 1.55 million tons of liquid steel per year. In July 2007, CVG began the construction of the Social Production Company Services of Lamination of Aluminum, C.A., or Servicios de Laminación y Fundición de Aluminio, referred to as EPS Serlaca, which has the capacity to laminate 114,000 tons of aluminum per year. The Republic invested U.S.$210.0 million into EPS Serlaca in order to process and increase the value of the primary aluminum produced by CVG Aluminio del Caroni S.A., or CVG Alcasa, and CVG Industria Venezolana de Aluminio C.A., or CVG Venalum. CVG anticipates a significant reduction in aluminum production in 2010 due to the closure of certain production lines at CVG Alcasa and electricity conservation efforts at CVG Venalum due to the National Energy Savings Plan implemented by the Government. The closure of two production lines at CVG Alcasa is expected to reduce the company’s output by approximately 40,000 metric tons per year, and CVG Venalum is expected to reduce its electricity consumption by approximately 38%, which are collectively expected to decrease output by 182,316 metric tons, or 42%.
The Guayana companies are in ruins. Production is down, management has disappeared, and chaos prevails. The above figures, although doctored by the government to improve on the real situation illustrates the collapse. All production is down from five years ago. I repeat: the Guayana companies are in irreversible chaos.



(11), The electric power sector in Venezuela is made up of state-owned companies. It serves approximately 25 million customers.
This is a curious statement. Venezuelan population is 28 million and there are 25 million costumers. This means that there are no families in Venezuela!!! Almost every Venezuelan is a customer of the electric companies. Unbelievable!

(12), In 2009, the Caracas Stock Exchange had a total trading volume of approximately U.S.$6.4 billion, including U.S.$6.1 billion in stocks, including ADRs, U.S.$31 million in commercial paper and U.S.$5,000 in Vebonos.
The Caracas Stock Exchange has practically disappeared, as of September 2010.