Cablegate: Brv Releases National Development Fund Financials

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DE RUEHCV #2623/01 2422049
ZNR UUUUU ZZH
R 302049Z AUG 06
FM AMEMBASSY CARACAS
TO RUEHC/SECSTATE WASHDC 6078
INFO RUEHBO/AMEMBASSY BOGOTA 6960
RUEHBU/AMEMBASSY BUENOS AIRES 1439
RUEHLP/AMEMBASSY LA PAZ AUG LIMA 0563
RUEHQT/AMEMBASSY QUITO 2399
RUEHSG/AMEMBASSY SANTIAGO 3745
RUEHGL/AMCONSUL GUAYAQUIL 0635
RUEATRS/DEPT OF TREASURY
RHEHNSC/NSC WASHDC
RUMIAAA/HQ USSOUTHCOM MIAMI FL

UNCLAS CARACAS 002623

SIPDIS

SENSITIVE
SIPDIS

HQ SOUTHCOM ALSO FOR POLAD
TREASURY FOR KINGSMITH AND NGRANT

E.O. 12958: N/A
TAGS: EFIN ECON PGOV VE
SUBJECT: BRV RELEASES NATIONAL DEVELOPMENT FUND FINANCIALS

REF: A. CARACAS 0943

B. CARACAS 01336
C. CARACAS 0659

1. (U) SUMMARY: The BRV,s National Development Fund (FONDEN)
published a financial statement for the first time since its
inception 11 months ago. Coupled with a recent presentation
by Finance Minister Merentes, the documents show that Fonden
has received USD 14.9 billion in combined Central Bank and
PDVSA transfers during that period, and has disbursed 41
percent of the total for projects in the transportation,
energy, basic industries, health care, agriculture,
financial, defense and housing sectors as of July 7. END
SUMMARY.

2. (U) According to a July 7 presentation by Finance Minister
Merentes, since its inception in July 2005, Fonden has
received a total of USD 14.9 billion. This amount includes
USD 10.3 billion from the Central Bank (BCV) and USD 4.6
billion from PDVSA (see reftels A and B). According to the
presentation, Fonden had spent USD 6.1 billion, or 41 percent
of this amount.

3. (SBU) The presentation showed that Fonden to date had
disbursed USD 6.1 billion across 42 projects in the following
sectors: infrastructure (USD 796 million), energy and
petroleum (USD 423 million), basic industry and mining (USD
176 million), health (USD 447 million), agriculture and land
(USD 364 million), environment (USD 12 million), finance (USD
3.5 billion, of which the majority presumably went toward the
purchase of Argentinedebt), defense (USD 77 million) and
housing (USD 91 million). The total number of projects
envisoned to receive Fonden support is 85. Current
frecasts are for a total of USD 10.7 billion to be isbursed
from Fonden across all projects with th initial 42 having
already received Fonden disbursements. Details regarding
specific projects were not included in the presentation.

4. (SBU) Spending by Fonden has increased in fits and starts
with the largest increase occurring in the March and April,
2006 time frame with disbursements totaling USD 4.4 billion.
At the end of June 2006 spending was running at between USD
200 and 500 milion monthly. (NOTE: The BCV is holding
approximtely USD 34 billion in foreign reserves. Given tht
BRV officials have previously said that the accptable
reserve level is in the USD 25 ) 28 billin range, it seems
likely that they will raid theBCV again in the future. END
NOTE.)

5. (U) Th board of directors of Fonden published a statement
in the tabloid daily, Ultimas Noticias8 on August 23 which
contained asnapshot of Fonden,s balance sheet as of June
30 This was the first official publication from Fondn and
listed approximately USD 8.8 billion in curent assets,
allocated between projects in execuion (USD 5.4 billion) and
unallocated funds for rojects (USD 3.2 billion). The fund
had approxiately USD 200 million in reserves and equity.

6.(SBU) The USD 8.8 billion in total assets does not include
money already disbursed, apparently including the
approximately USD 3 billion spent on Argentine bonds. These
dollar-denominated assets were sold to banks and companies in
Venezuela (see reftel C) for local currency. However, it is
unclear what happened to the proceeds from their sale. At
the time of the transaction, the BRV defended the action as a
means to combat inflation (reftel C); however, if the
proceeds from their sale had re-entered the Venezuelan
economy as Bolivars, Fonden would be creating money. Such an
action would increase the money supply and drive inflationary
pressures.

7. (SBU) COMMENT: The publication of this information
demonstrates an interesting (if marginal) increase in
transparency on behalf of the BRV regarding Fonden and may
have been a response to criticism regarding Fonden's
transparency. The balance sheet cannot be found on either
Fonden or the Ministry of Finance websites and was not
reported by any media outlet. END COMMENT.
WHITAKER

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