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Chávez and Bernie Madoff

I’m going to take a risk and make public a prediction I originally made whilst slightly intoxicated: Before the end of this year, there will be an enormous financial scandal that will bring the Chávez administration to its knees.

Although I guess, given the facts, this maybe isn’t the riskiest prediction anyone’s ever made. Oil’s down around $40 a barrel, even though Venezuela’s (conservative) 2009 budget assumed $60 a barrel. (Oil makes up over 90% of exports, up from 68% in 1998.) Starting last year, the state oil company got way behind in its payments to contractors, a trend that’s continuing this year, to the tune of $7.6 billion.

The late payment is both a symptom of Venezuela’s worsening public finances and a cause of the same, as contractors suspend work and oil output falls further (Venezuelan oil output is down by about  1 million barrels a day since Chávez took over, according to OPEC).

How will Venezuela keep up its massive spending programs? By dipping into billions in reserves the government supposedly saved during the boom time.

And there’s the problem.

There have been no checks or balances in Venezuela for a long time, with Chávez loyalists dominating every part of government. There is no way to confirm that it actually has billions of dollars lying around. In fact, The Economist reports that Chávez has already skimmed $12 billion from $42 billion from the Central Bank’s reserves, which are supposed to be backing up the worthless bolívar, not spent on social programs.

So here’s how it’s gonna go down: At some point, the real direness of the situation is going to hit home, someone’s going to open the government’s vault, and they will find that vault empty, or anyway a lot emptier than it’s supposed to be.

That discovery will be followed by the suspension of the Venezuelan government’s credit card and shortages in the public grocery stores, and the government will start handing out coupons rather than cash to welfare recipients. Payments to public employees will be suspended as well, and the state oil company won’t be able to save anyone because it will have its own crisis with angry contractors, striking workers, and free-falling output. The bolívar will hyperinflate and Venezuelan bonds will explode, and when the bank accounts in Switzerland are finally unearthed, various cars and buildings will be set on fire by very large groups of angry (and more importantly, unpaid) ex-Chavistas.

Exit Chávez, stage left.

In retrospect, these events will seem practically foreordained. Every single person in Venezuela has several stories about government people stealing money or handing out suspicious contracts, and little videos like this one…

… are numerous.

Pedro Carreño, Justice Minister: The only path to justice is socialism. It’s not capitalism.

Inconvenient journalist: Isn’t it contradictory to trash-talk capitalism when you’re wearing a Louis Vuitton tie?

In the end, the Venezuelan government is like a huge Bernie Madoff scam. With boom-times over, they will not be able to hide the stealing, and Chávez and his minions will have to flee to their new homes in Havana.

You watch. Just remember you read it here first.

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