Take physic, pomp

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.

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