Fundacion Siglo 21, an economic think-tank, asks today in its commentary in the Listin Diario if anyone is doing the math or requesting calculations from others before making decisions in government. Economist Isidoro Santana writes that the lack of governmental calculations is evident once again regarding the renationalization of Edenorte and Edesur, but explains that these oversights are hardly new and attributes the current macroeconomic imbalance to this tendency as well.
Santana said the government did not do its math when it chose to finance an ambitious public works program by taking on foreign debt, saying the repayment was instead left up to the Virgen de la Altagracia. The present administration, he says, went to the extreme when it presented the low levels of indebtedness to the country upon entering into office in 2000 as a negative factor. He writes that the new levels of debt incurred by the Mejia government, however, have only served to spur an impressive capital flight and further corruption.
He asks where were the numbers people when the government first came to Baninter’s assistance, to discover shortly thereafter that this was not a matter of the bank’s momentary lack of liquidity, but a major fraud, and regardless they opened the vaults of the Central Bank to issue pesos wholesale, without hard currency support. When the monetary authorities finally understood what they had gotten into, their first reaction was that it didn’t matter because by law the Central Bank cannot lose money, and the government is obliged to finance any commitments it takes on. But the million-dollar question was – Where would the money come from?
Santana comments further on how, as a result, the DR went from being the model example of a healthy Latin American economy to a country where people have had to withdraw their funds and a country with rampant inflation and a spiraling devaluation of the peso that the government has tried to control by artificial measures. Once again, Santana says, the calculations failed.
And then the government chose to subsidize the cost of power, but no one assessed where the money would come from for the government to pick up the bill. At that point in any case the IMF had been called in, an organization that is expert at performing calculations.
Nonetheless, the authorities continue to make decisions as if nothing has happened, such as the buyback of Edenorte and Edesur. In conclusion, Santana leaves us with two unanswered questions. Where will the money come from for this deal? And is there anyone in the government doing its numbers?