Venezuelan spending slump reflects bad bookkeeping, incompetence.(Brief Article)(Statistical Data Included)

CARACAS -- Halfway through the year, government figures indicate that spending is a fraction of forecast levels.

Official figures show that only 3.9% of the money budgeted for infrastructure investment has been spent so far this year, and virtually none of the huge allocation for social spending has been expended.

While just $38 million of the $572 million infrastructure budget has been executed, the report claims that not a cent of the $1.75 billion budgeted for social spending budget has been spent so far. The revelations are likely to damage the government's standing among the country's poor.

If correct, the Central Budget Office (Ocepre) figures would be a stunning example of government incompetence. However, most analysts believe the truth is that the figures represent incompetent book keeping as much as anything else.

Many economists have suspected that the government was failing to execute its budget as planned. However, the draconian austerity measures Ocepre's figures imply would have sent the economy reeling back into recession, which has not happened. Instead, the Ocepre report suggests there is a widening gulf between the official figures produced in Caracas and reality of day-to-day governance in Venezuela.

Certainly, the Venezuelan bureaucracy has a long tradition of producing meaningless reports and inaccurate figures, a trend that has if anything gotten worse under the Chavez administration. Few members of the chavista ruling class have any governing experience. Combined with the excessive centralism and a pervasive culture of secrecy, the result is that information, as well as decisions and disbursement orders, flow slowly. Much of the problem seems to be that government agencies simply don't report their spending to Ocepre. Government sources say that it is impossible to know how much of the problem is attributable to such information bottlenecks, and how much of is the result of a government that is not organized enough to spend its budget.

The implausibility of Ocepre's mid-year report is a sign of the government's inability or unwillingness to publish timely and accurate information about its own performance.

The other big concern is that corruption traditionally has been a huge problem in Venezuela. Many analysts worry that with such an obvious breakdown in accountability, theft could be a significant problem once the final figures are tallied.

Because government spending is a huge part of the Venezuelan economy and a fundamental input for the models economists rely on to project economic growth, the lack of candor obscures effort to monitor growth and to make predictions about future conditions. Without a clear notion of how much the government has actually been spending and how much it is likely to spend in the future, any estimate of future economic growth becomes little more than a guess. Readers will do well to keep this in mind when reading international risk assessments and credit agency projections for Venezuela in 2002 and beyond.

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