Now remember what they told you

Venezuela is mean and nasty and horrible and in an arms race to destabilize the whole region.

Colombia is nice and kind and soft and gentle, it's recent problems are now all gone and it's a perfectly safe and morally upstanding place to invest...for example, landgrabbing for goldmine territory in the middle of the jungle.

But wait! What's this? Why on earth is Colombia spending more on defence and security in its 2010 budget than it is on education? Click through and allow the always excellent 'Plan Colombia and Beyond' to fill you in on the details.

Loose Change We Can Believe In (great video)

It's not a LatAm thing, but this is the kind of show'n'tell that the interwebnetpipes does best. Anybody who takes obscure financial concepts and makes them intelligible gets my applause, and this clip is a great example. H/T to Sullivan's Daily Dish (where I found it).

Obama made that $100m spending cut sound pretty big and important, didn't he? I ask you to invest one minute and thirty-eight seconds of your time to put a little context in your life and see The Hawaiian can BS just as much as the last crew when he puts his mind to it.

Venezuela's 2009 budget, oil revenues, deficits and all that jazz

Of all the black box economics available to play around with in South America, perhaps the worst (should that be 'best'?) is the projected revenues that Venezuela expects in any given year from its state-run oil company, PDVSA. Not only are there a mountain of pricing variables, you have the neverending argument about actual production levels in the country, basically revolving around what actually constitutes a barrel of oil. Suffice to say that, if you so wish, you can "prove" that Venezuela is in great shape financially or about to go bankrupt next week just by choosing your own favourite dataset. Thus what is needed by people who don't live in partisanlandia is a fair estimate of how oil revenues are going and, eschewing as much politics as possible, a fair estimate about the state of play in the country's economy as a result.

All that preamble is to introduce this short but very informative report from Banca y Negocios (run by consulting firm Aristimuño Herrera & Asociados) that makes as good an estimate as any I've seen recently about the whole oil revenues caboodle. It's Spanish language, but there are plenty of numbers to help those who aren't so proficient (hey...there's always Google Translate). The whole thing is very much worth reading, but here are three points made:

• Oil revenues estimated at U$19.57Bn less than the original 20o9 budget and are now roughly equivalent to 2005 revenue levels

• However, government spending is up some U$32Bn from 2005 level (The shortfall is to be made up from tapping the Fonden fund, the extra revenue from the 3% rise in sales tax and by looking to Venezuela's private banks as a credit source)
  

• The adjusted budget barrel price of U$40 takes the pressure off PDVSA as the prime mover of revenue collection and will allow the company to get on with its job. It will also allow revenues to flow into FONDEN if the Venezuela basket price rises above $40/bbl.

There are plenty more in the link. The report sets out good ballpark estimates and doesn't try to thrust any ideology down your throat, thus it is recommended. It also gives me yet another reason to suppose that 1) Venezuela is not under any great fiscal pressure this year (this will come as a disappointment to many) and 2) a devaluation will happen in the second half of this year if oil prices don't pick up. As such, inflation will become a headline-grabber.

May you live in interesting times.

Venezuela's budget, currency devaluation and a chance for the prophets of doom to win money and kudos

Feeling lucky, punk? (redux)

This week Venezuela's Congress passed the 2009 budget, coming in a touch under U$78Bn and with an air of austerity (here's Reuters in Spanish). It's typical for Vzla budgets to be thrown in lowball then any extra gravy from better oil sales is used on discretionary projects, so the benchmark oil price of $60/bbl for 2009 (50% higher than today's price) means that unless oil climbs the country will have to nip and tuck at some point.

As usual there are plenty of expert analysts (the same people who would have cost you your life savings if you followed their advice over the last two years) calling for the country to devalue its currency, the Bolivar Fuerte (VEF); the same chorus has been calling this tune every year since...well, since Venezuela's economy started expanding rapidly (and that really disappointed them), but it looks like a devaluation might actually happen this time. If the country goes into recession it makes sense to deval while there is less inflationary pressure. On the other hand, if oil picks up it'll be business as usual and the VEF stays at 2.15 to the dollar. So the bottom line is that there is unlikely to be a deval in the first quarter of 2009 at the very least. Then after that point it depends on the state of the oil market, not on much else (certainly not politics).

The last round of BS about an imminent devaluation of the VEF was back on October 23rd. At that time I offered to bet $100 that there would be no deval in what was left of 2008. Unfortunately, the shills talk the talk but can't walk the walk and I failed to get anyone to wager with me.

But here comes the second chance, sportsfans! I again offer to bet U$100 that on 31st March 2009 the VEF has not been devalued and is still at the official peg of 2.15. The bet is offered at even money (your c-note covers my c-note) and we settle on April 1st 2009 via PayPal (or whatever you prefer).....we can even arrange for the money to cover a meal at Fallen Angel (or at least the round of cocktails). Any takers?

No austerity for Bolivia 2009

Last week, away from the public glare and hidden behind the financial horror stories coming from the North, Bolivia announced its 2009 budget (Presupuesto General de la Nación, or PGN). The news gives the USA and its allies just another reason to fear Bolivia, because unlike most countries it is in the position to significantly expand public spending in 2009 in order to combat the effects of the world slowdown.

This chart shows Bolivia's 2009 public spending budget compared to the other three years under Morales (click on any chart to enlarge)

Even the 2006 budget was far more than was previously spent by the country pre-Evo, but next year's budget (U$1871Bn) is 33% bigger than this year's record spend. As to how that money will be used, here's the breakdown:

As any economist worth their salt will tell you, spending on infrastructure is investing in the future of the country. They'll also tell you it's good because it's anticyclical (but don't worry too much, it's just a silly word they use that means "we've saved for a rainy day and now the rainy day is here so let's crack open the savings"). Bolivia is in the middle of a roads upgrading program that will only accelerate in 2009, with energy distribution, mining and agriculture all being alloted significant investments, too. In the word of Bolivia's FinMin Luis Arce:

"The National Government is banking on public investment as a central tool (against) the eventual effects of the (world financial) crisis that is not yet being felt in Bolivia although, obviously, it is not the only measure that will be applied next year to this effect."

As for where the money is destined, here's the regional breakdown:

It must be disappointing for the Evo haters to note how much of the national coffers will be spent in the half moon regions. La Paz is the most populated region so it gets the most. Santa Cruz is the second....hey, it gets the second largest amount. This is a concept known as "equity", and Evo is teaching the fascists all about it. There's nothing controversial you can say here.... man, that must piss them off no end.

Life would be so much easier for the USA regarding Bolivia if it could point to the mess Evo Morales were making of the economy, but the truth is that Evo is running the country very well indeed. By accelerating public spending at a time of world recession he is protecting Bolivia from the worst of the US-created financial mess that is currently being exported to the rest of the world. Maybe he could teach Hank&Benny a thing or two about prudent fiscal management. In fact, scrub the word "maybe", Evo's kicking their tushes bigtime.