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Cablegate: Brv Submits 2009 Budget, for What It's Worth

VZCZCXYZ0016
PP RUEHWEB

DE RUEHCV #1455 2902028
ZNR UUUUU ZZH
P 162028Z OCT 08
FM AMEMBASSY CARACAS
TO RUEHC/SECSTATE WASHDC PRIORITY 1989
INFO RUEHBO/AMEMBASSY BOGOTA 7887
RUEHLP/AMEMBASSY LA PAZ OCT LIMA 1103
RUEHQT/AMEMBASSY QUITO 2917
RHEHNSC/NSC WASHDC
RUMIAAA/HQ USSOUTHCOM MIAMI FL
RUCPDOC/DEPT OF COMMERCE
RUEATRS/DEPT OF TREASURY

UNCLAS CARACAS 001455

SENSITIVE
SIPDIS

HQ SOUTHCOM ALSO FOR POLAD
TREASURY FOR MMALLOY
NSC FOR JSHRIER
COMMERCE FOR 4431/MAC/WH/MCAMERON

E.O. 12958: N/A
TAGS: ECON EFIN VE
SUBJECT: BRV SUBMITS 2009 BUDGET, FOR WHAT IT'S WORTH

REF: 2007 CARACAS 2040

1. (U) Press reports indicate that the Bolivarian Republic
of Venezuela (BRV) has submitted the 2009 budget to the
National Assembly (AN), though it has not yet been formally
presented by the Minister of Finance as is the custom.
According to these reports, which cite AN deputy and
president of the Finance Commission Ricardo Sanguino,
projected central government spending for 2009 is 169 billion
bolivars (Bs), or USD 78 billion at the official exchange
rate. This amount represents an increase of 23 percent over
the initial 2008 budget. Per the press reports, key
assumptions for 2009 include an average price of USD 60 per
barrel for Venezuelan oil exports, annual inflation of 15
percent, a real growth rate of 6 percent, and an exchange
rate of 2.15 Bs/USD, the same as it has been since 2005.

-------
Comment
-------

2. (SBU) BRV budgets are not reliable guides to spending or
to the indicators mentioned above. Central government
spending is generally increased significantly throughout the
course of the year through additional credits approved by the
National Assembly. To date in 2008, these credits total Bs
38 billion, adding 27 percent to the initial 2008 budget.
More importantly, a significant part of fiscal spending -
perhaps on the order of 30 percent - takes place off-budget,
through an array of discretionary funds. The inflation
estimate is laughably low, as it was in the 2008 budget
(where it was estimated at 11 percent (reftel), but will
likely end the year at 30 percent).

3. (SBU) The most surprising feature of the 2009 budget,
given what has been leaked to the press to date, is the
estimated oil price of USD 60 per barrel. The BRV regularly
lowballs the estimated oil price, partly to be conservative,
partly to compensate for inflated export numbers, and partly
to increase discretion in its use of oil revenue (septel).
Given the recent decline in oil prices, USD 60 per barrel
seems far more realistic than the estimate of USD 35 per
barrel in the 2008 budget seemed at the time. A likely
explanation is that the BRV had been expecting oil prices to
remain above USD 100 per barrel and was taken by surprise by
the rapid drop in the past several weeks. End comment.
CAULFIELD

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