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News > Latin America

Venezuelan Private Sector Siphoned Off $259B in Public Funds

  • The illegal abuse of the exchange rate is seen as partly responsible for the shortages seen on shelves and exorbitant prices.

    The illegal abuse of the exchange rate is seen as partly responsible for the shortages seen on shelves and exorbitant prices. | Photo: Archive

Published 19 June 2016

The private sector is accused of abusing preferential exchange rates meant to keep food affordable, helping cause food shortages.

Critics of the Venezuelan government have repeatedly accused it of failing to take measures to deal with shortages, but an investigation by teleSUR reveals that the private sector may have siphoned off up to US$259 billion from state coffers by taking advantage of different exchange rates and failing to produce the goods they claimed they would. 

Behind the Food Lines in Venezuela

The economy of Venezuela, which holds the world's largest oil reserves, is intimately tied to oil production. 

As is common with states that have economies built around a single commodity, the availability of dollars means it was often cheaper to import goods instead of producing them domestically. 

Despite its fertile agricultural lands, this meant food was also imported from its neighbors.

In order to keep prices for essential goods at an affordable level, the government implemented an exchange rate system that effectively subsidized the provision of dollars for imports of key goods. 

A private business would request cheap dollars from the Venezuelan Central Bank with the stated aim of using them to import food or raw material for food production. The Central Bank would provide the dollars at the preferential rate reserved for essential goods of 6.3 Bolivars to one U.S. dollar.

These private business would then lie about what was imported or produced in order to allegedly stash dollars away in offshore accounts or sell the goods at the illegal black-market rate of approximately 500 bolivars to one U.S. dollar.

The Venezuelan government claims that in some cases, business that were given dollars never imported anything at all, hoarding the cash instead.

Is There Hunger in Venezuela?

This kind of illegal behavior repeated thousands of times by the private sector is in many ways responsible for the shortages seen on shelves and the exorbitant prices.

In 2013, the then head of the Venezuelan Central Bank, Edmee Betancourt, said that the country had lost between $15 and $20 billion the previous year through such fraudulent import deals. 

In total, government supporters estimate that US$259 billion were lost or siphoned away between 2003 and 2013.

The Central Bank's own figures show that between 2003 and 2013, the Venezuelan private sector increased its holdings in foreign bank accounts by over US$122 billion, or almost 230 percent. It is likely that many of the 750 offshore companies linked to Venezuela in the database released from the Panama Papers have been used to recycle this money.

Venezuela's largest food manufacturer, Polar, whose owner is opposes the government, has interrupted production several times in recent weeks because, it says, the government hasn't given it the dollars it needs to import its raw materials. 

However, over the years Polar has been one of the very biggest recipients of preferential dollars for imports.

Indeed, one of the challenges facing the government is that Venezuela's traditional elite still own most of the companies that do the importing, giving them ammunition in its economic war against the government.

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