The head economist at the PUCMM sponsored Cenantillas think-tank, Pedro Silverio, takes on the government and the Report on Electricity in El Caribe’s editorial page today. According to Silverio, the government’s “irrefutable” arguments were not credible enough for the IMF’s high-level team, sent recently to the DR to study the impact of the purchase of the electric distributors (Edenorte and Edesur) – and with good reason. The basic suppositions used by the government on which they based their calculations were wrong, says Silverio. One example cited is the presumption that the government was responsible for 50% of the debt carried by the “Edes”. As a shareholder, the government had a responsibility that was represented by the 50% of the shares, but shareholding was the limit of the government’s responsibility. If a bankruptcy occurred, the government ran the risk of losing its investment. Even if the government had been responsible for 50% of the debt, it would not have been part of the public debt, although leaning in that direction. The amounts owed only became public debt when the state decided to take over all of the electric distribution. The economist says that another important issue was that efficiency in the power distribution would improve in government hands, a highly questionable supposition given the Mejia administration’s prior record for managing public affairs. All this, says the economist, goes to show that the idea was not to find a basis in reality, but rather to justify a public stance that, in addition to doing damage to the economy, would bring about a break in the talks with the IMF. According to the high-level commission of the IMF, “The purchase by the government of the electricity distribution businesses Edenorte and Edesur, has an additional impact on the amount of gross public debt of the Dominican Republic in the amount of US$488.45 million.” Silverio calls this figure “respectable”, as it almost equals – but under far worse conditions than – the first US$500-million issuance of sovereign bonds. Silverio adds that in the case of the debt taken on by the purchase of the Edes, “It was necessary to assume that it would have no impact on the external debt in order to avoid the constitutional requirement of taking the purchase to Congress for approval. On the other hand, once the IMF accord was signed, the exchange rate began to fall. Nevertheless, when the purchase of the Edes was announced, speculation gathered on further devaluation. True to form, since the re-purchase of the Edes, the peso has devaluated by 34%, although not all of it can be blamed on the repurchase.” In his final message, the noted economist says that the deal fostered the break with the IMF and this, in turn, created an atmosphere that fuelled the subsequent devaluation. Today, however, the government chooses to lay blame on the business community for the failure to reach an agreement with the IMF. The responsibility for this is exclusively the government’s own, since if they had not broken the first agreement, things would be a lot different today.