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President Hugo Chavez “beautiful revolution” has reached with full energy the state run “fund for the warranty of deposits” (FOGADE). The new Director of the institute, Jesús Caldera Infante, declared before the Finance Commission of the National Assembly that the state institution in charge safeguarding the savings of millions of citizens will also finance the revolutionary process: 30% of the profits by his institution will be allocated to “The Fund for the Endogenous Social Development”. “...it will be invested on health, education, and housing.”

The portfolio for investment of Fogade amounts to US $700 million, and the portfolio in local currency amount to 600 billion Bs. The annual benefits for each are 12% and 20 % respectively, a total of 142 million dollars. If 30% of these resources were allocated, the “The Fund for the Endogenous Social development” would receive US$ 42.6 million.

At the National assembly, Caldera exposed clearly, with a form of speech which reminds that of President Chávez himself, the purpose of creating a Fund, whose main functions have been so far:

- Safeguarding the deposits made by the public in banks, savings and loan institutions, and other financial institutions that are subjected to the “Decree-Law for the Reform of the General Banking and Finance Law”

- Conducting the Liquidation process of all banking and financial institutions subjected to this Law as well as of all firms related to the financial group.

Fogade is an autonomous institution with legal status and a patrimony of its own, independent of the National Public Treasury, and under the trusteeship of the Finance Ministry.

It had its highest relevance during the national financial crisis of 1994-1995, when the vulnerable banking system fell like a set of dominoes, following the collapse of Banco Latino, leaving behind a hole gap of 8 billion dollars in the GNP. Today, Fogade seems to gain new public relevance, not due to a banking crisis but to a political one.

Caldera stated firmly that the social plans and Missions sponsored by the government, which is apparently under the rush caused by the proximity of a referendum for presidential revocation to be held on August 15, would not suffer any lack of resources, apart from those granted by Petróleos de Venezuela (PDVSA) that derived from the current high oil prices.

Dividends for the Revolution

As one of his first measures, Caldera handed over scores of properties-which had been under the possession of Fogade since the bank crisis- to the “Vuelvan Caras” Mission, a governmental program for the creation of multiple small productive units seeking to incorporate the excluded sectors of the population to a new national productive framework.

Over 365 assets, including real estate and land, will be transferred to new hands. According to his critics, these properties were handed over without a bidding process, with no profit for FOGADE, and thus none for the state. It seems that the times of the bidding and auction processes held under previous governments -not less criticized and blemished by accusations for their lack of transparency- are long gone.

Before the Parliamentary Finance Commission, Caldera Infante explained that such donations did not cause FOGADE any patrimonial damage, since all these assets are registered as losses in the institution’s balance sheets. He declared: “I’ve come to these hearings before the National Assembly in order to explain how to achieve, from the institution under my authority, the social endogenous development of the country”

With this purpose, he proposed that between 30 and 40% of the national and international investment return be allocated, among other sectors, to goals of the state, such as health, housing, promotion of social and productive work; a popular alternative economy, and culture.

Raise of Contributions and Guarantees

Although the financial system is in a reasonably good situation, Mr. Caldera also proposed before the National Assembly- currently discussing a reform of the Banking Law- that the contributions made by the banks to FOGADE, as well as the guaranteed amount of deposits, be raised. In this sense, the safeguarded amount for the account holder would be raised from 10 to 25 million Bs, and the contribution by the banks from 0.5 to a top 2%.

The purpose -he said- is that “we can have insurance over the deposits and thus become a solvent institution, that protects the accountholders’ savings and that has a large patrimony”.

Caldera asserted that with his proposals, which should be included in the Banking Law upon approval, he seeks to stipulate that Fogade, besides its other functions, contribute to the social development of the country. He explained that with his proposals, he intends to offer more security to the more than 15 million depositors, out of a population of nearly 24 million in the country. “It is an act of justice to see to it that there are guarantees for the accountholders”, he said.

Caldera claimed that the proposals of raising the contributions and the amount guaranteed do not necessarily affect either the solvency of the banking system or the interest rates, arguing that there is a high differential between the lending and the savings interest rates; in some cases it even reaches 20 points. “An increase in the percentage of the contributions made by the private and public banks on the deposits from the public is necessary, fair, and can not be postponed (...). We hope that our proposals are accepted” he said to the parliamentarian.

Caldera explained that a 2% contribution to Fogade by the banks would be a top limit and that he is in favor of a percentage that is fixed as a result of consensus between the government and the financial system authorities

The proposal includes the calculation of the contribution rate at the close of each month, instead of the current biannual calculation, and also suggests that the mechanism for the calculation be determined by Fogade.

He stated that some banks calculate the contribution percentage “as they please” and that six institutions have had debts with Fogade of over 8 billion Bs. in contributions for two years.

Farewell if You are not With the Revolution

As if his revolutionary proposals were not enough, Caldera also justified before the legislators the wave of dismissals from the Fogade payroll: “We have removed 80% of the previous structure” We have reached, in a legal way, the core of the previous managerial staff, of which several members had been occupying their posts for 19 years, and dragging along a managerial culture that is incompatible with the project conceived in the Constitution for the socioeconomic development of our nation, and with the social and economic development plan for the period 2001-2007”. Although he did not specify the number of dismissals -“it is confidential” he said- he assured that they are specially from the management part of the payroll.