PDV gets another bailout

For the second year in a row, PDVSA received billions of dollars from Fonden.

Venezuelan armed forces helicopter at Choroní at sunset, not carrying sacks of money for PDVSA.

Petroleos de Venezuela SA said in its annual financial report that it received a $2 billion payment from Fonden, an off-budget development fund run by the presidency, “to support the financing of non-oil activities realized by PDVSA during the year 2009.” (p. 214) The company then paid a $2 billion dividend to the government. (Give them credit for transparency — they mention the two payments under the same subhead for once.)

Fonden got almost all its funding last year from a $12 billion transfer of foreign reserves out of the Central Bank. At the time, the finance minister said Fonden would use all of the money “on investments with purely imported components” and thus wouldn’t be inflationary.

I’m sure they would argue that the money that went to PDVSA was indeed spent abroad on food and other goods for PDVSA social programs. That may be true, but if it hadn’t been for Fonden, the PDVSA dividend to the government probably would have been smaller. It looks like a finance trick to move Fonden money onto the government’s operating budget. Round and round it goes.

(Less importantly, but annoyingly, it also allows the government to double-count $2 billion of social spending. It counts money for Fonden as social spending, and also money spent by PDVSA. I’ve never seen a line for “eliminations” on the sums that Chavez holds up at his televised cabinet meetings.)

This is similar to what happened in 2008. According to that year’s financial report (link to the abridged English version for the benefit of our northern readers), Fonden gave PDVSA $5 billion in “additional support” (p. 81, Additional Contribution of Stockholder) and PDVSA paid a dividend of $2 billion to the government. The difference is that in 2008 it wasn’t about laundering reserves into the operating budget, it was just double-counting of cash: that year, PDVSA was the main cash cow for Fonden, giving the fund more than $12 billion in donations and fees.

Remember folks, you read it here first.

Updated to fix link to PDVSA English report.


4 thoughts on “PDV gets another bailout

  1. ow

    Are you sure it is page 81? Your link didn’t work with my browser but when I went to page 81 of the 2008 report in english on the PDVSA web site it was about Citgo.

    1. sapitosetty Post author

      Yeah man, thanks for catching the bad link and yes it’s p. 81. I think they changed the report on their website. The one I’m looking at is called 616.pdf. If you look at “document properties” in the PDF, the one I have here was made June 29 2009.

      Anyway, full text of what they wrote: Additional Contribution of Stockholder
      In December 2008, the Company received from FONDEN $5,000 million for financing non-oil activities performed by the Company during 2008 and 2007. Of this amount, $2,395 million was used to offset accounts receivable from related companies for loans granted by PDVSA to those companies for electricity and petrochemical projects. The remaining amount of $2,605 million was included in the consolidated Stockholder’s Equity as an Additional Contribution of the Stockholder and corresponds to repayment of disbursements made previously by PDVSA for the purchase of companies and development of activities under the food security plan of the Nation and reorganization of the electricity sector.

  2. aschachh

    The link in your post still works, but it seems that the 2009 report was removed from Pdvsa’s website earlier today. It’s been replaced with a poster.

    By the way, this is a great blog. Thanks.

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