For crisis-hardened Venezuelans, the bland government announcement last month was a sure sign that something unpleasant was about to happen. ``At the moment, the government is not examining the nationalization of these institutions,'' declared Deputy Finance Minister Luis Xavier Grisanti, referring to three troubled banks that the authorities were trying to nurse back to health. Sure enough, two weeks ago, the banks--Banco Italo-Venezolano, Banco Profesional and Banco Principal--were declared insolvent, and the government took them over, assuming $330 million in bad debt.
The bank failures came seven weeks after the government seizure of another institution, Banco Progreso, with losses initially estimated at $635 million. After auditors took a close look at the books, the red ink nearly doubled; it may wind up totaling more than $2 billion.
The disasters surprised no one in Venezuela, where banking collapses have become periodic rituals, the economy has fallen into ruin and public cynicism is pervasive. Over the past 15 months, 16 private banks have failed and been nationalized. The government has picked up the tab for $7 billion in losses, equivalent to 16% of last year's GDP. Charges of financial irresponsibility, corruption and outright theft are flying. Arrest warrants have been issued for more than 100 people in connection with the collapses, and dozens of financiers are believed to have fled the country. President Rafael Caldera has charged that the banking system has been systematically looted by ``a den of thieves.'' The debacle makes a strong bid to be, in the words of Francisco Faraco, a respected financial analyst in Caracas, ``the world's biggest financial crisis of the 20th century. ''
The impact on the country, which is the second largest exporter of oil to the U.S., has been nothing short of catastrophic. To accommodate the bad-debt burden it has assumed, the Caldera government sped up the money-printing presses; this in turn has driven the annual inflation rate above 70%, the highest in South America. Price controls and currency restrictions, imposed to check inflation and save foreign reserves, have virtually paralyzed business. Public services have been curtailed, and unemployment has climbed. Constitutional provisions protecting civil liberties and property rights have been in suspension since last July, ostensibly to aid investigators probing the scandal.
The government insists it is trying to get to the bottom of the issue, but its efforts are widely viewed as slow and inept--a perception that has grown since the first and biggest bank closed its doors. That institution was Banco Latino, Venezuela's second largest, which at its peak claimed $1.4 billion in deposits. By the time the national banking superintendency took it over in January 1994, Latino's deposits had been reduced $1 billion. In going over the books, government inspectors uncovered false entries, fraudulent accounting and insider lending.