Finance Ministry pushes four new funds

As I wrote in this New York Times piece in 2007, Venezuela’s government funds became quite opaque under Hugo Chavez. Here’s a piece from the Daily Journal in 2005 noting the creation of four new funds and criticism that “such funds have a history of administrative problems, which usually cause them to run out of money.”

Photo by M. B. M. on Unsplash

Finance Ministry pushes four new funds

By Jens Erik Gould

Daily Journal Staff

May 16, 2005

The Finance Ministry proposed Monday the creation of four new funds and also confirmed last week’s purchase of Argentine bonds.

Deputy Finance Minister Edgard Hernandez Behrens announced that the ministry was waiting for President Hugo Chavez to approve the creation of a Risk Fund, a National Guarantee Fund, an International Guarantee Fund, and a Research, Development and Innovation Fund, reported the state’s Bolivarian News Agency (ABN) on Monday.

The proposed funds will serve a similar function as the Venezuelan Investment Fund created by the government of former President Carlos Andres Perez, said David Moran, an economics professor at the Univerisdad Metropolitana in Caracas. The Perez government created that fund to develop a national industrial park and to help promote Venezuelan companies in the international market, among other functions, he said.

Moran said the Finance Ministry changed the names of funds that already existed. “It must be to give the sensation that it is something new,” he said. He added that such funds have a history of administrative problems, which usually cause them to run out of money.

ABN reported that the Risk Fund, which will receive $25 million, will help finance start-up businesses that lack access to banking.

“I think what they’re trying to do with this fund is inspire people to launch new projects,” said Moran. He doubted that the Risk fund would have a big impact in the short term, citing the example of the Industrial Bank of Venezuela (BIV), which also credits new businesses,

The Research, Development and Innovation Fund will allocate financial support to businesses that upgrade production technology. The fund aims to improve industrial processes, develop new services, and increase production.

The National Guarantee Fund, similar to the former Reciprocal Guarantee Fund, will have $50 million to back financial guarantees issued by the public banking sector to businesses in risk.

The International Guarantee Fund will have $200 million at its disposal to finance the Venezuelan exports, ABN said.

ABN also reported that last week’s purchase of $100 million worth of Argentine bonds was an effort to conduct financial transactions with other South American countries.

“This was a political option,” said Moran about the purchase. He added that the purchase was risky, since Argentina just denied to pay nearly 60 percent of its external debt.

He added that although Venezuela is rich in oil, it had many needs, such as more housing. “I think that $100 million is better spent on housing than on bonds,” he said.