VICTOR SALMERON
EL UNIVERSAL

Last July, President Hugo Chávez cheered the organization of the National Development Fund (Fonden.) The board of the Venezuelan Central Bank (BCV) and oil state holding Petróleos de Venezuela (Pdvsa) disbursed petrodollars on an agency that theoretically would help to diversify the economy and fuel social programs.

Under the legal reform that made BCV to give USD 6 billion out of international reserves to Fonden, the money will be used "in foreign currency, to fund investment in real economy, education and health; improve the profile and balance of the foreign public debt, and deal with special, strategic conditions."

Pdvsa, the other pipeline, has provided USD 2 billion. In the aggregate, President Chávez' administration has used USD 8 billion in a fuzzy manner.

Based on a recent report from investment bank Credit Suisse, Fonden has used USD 1.1 billion to buy Argentinean bonds and USD 2 billion to procure restructured notes. Does it comply with the article on transfer of international reserves? According to analysts, the Ministry of Finance could argue that expense is not at issue, but the money was placed in Argentinean bonds and restructured notes to get immediate proceeds.

But there are increasing rumors in the financial market about the Government exchanging for bolivars the dollars deposited in Fonden through the sale of Argentinean bonds.

Finance Minister Nelson Merentes conceded that from November to January, USD 600 million in Argentinean bonds were sold to local banks chosen in a discretionary way. Banks pay the securities in bolivars. Therefore, the provision on Fonden expenses in foreign currency for the purposes of import of machinery and input has been set aside.

Argentinean bonds have become the goose with the golden egg for selected banks. The Ministry of Finance sells them the notes at the official exchange rate and banks resell them to businesses and surcharge 20-25 percent. Then, the businesses trade the bonds abroad and get US dollars regardless of exchange control.

Give me some more
Under the article regulating allocation of international reserves, transfer of funds from the Central Bank would be a single event. However, President Chávez has requested an additional amount of USD 4 billion.

"There in the Central Bank, there are additional USD 4 billion that should come to me," he pointed out recently.

Based on official estimates, at the end of this year, following the BCV new input and another outlay from Pdvsa, Fonden is expected to get USD 13 billion, or 75 percent of the Venezuelan Government total income in 1999.

Domingo Maza Zavala, a member of the BCV board, has warned about the need to prepare clear and well-defined rules on use of the Fund resources in order to prevent discretionary management.

El Universal has tried unsuccessfully to contact Minister Merentes to get his view about the use of petrodollars deposited in Fonden.

vsalmeron@eluniversal.com

Translation: Conchita Delgado