Can accounting really be allowed to base itself on known fictions?

Sir it is with amazement I read Barney Jopson, Benedict Mander and Miles Johnson reporting on how “Venezuela devaluation dents big companies”, February 12.

I understand the locals are prohibited from even thinking in terms of a different foreign exchange rate than what the current oilygarchs in power allows them to, though even so, most of them do, at least in the shadows.

But that grown-up foreign companies hang on to a rate that drives only a part of the economy, and have not created reserves to cover for this and other adjustments of the fx fiction to come, is astonishing. It sort of falls in the same category of naiveté as bank regulators believing that an AAA to AA rating has so little implicit risk so that they can allow banks to leverage over 60 times to 1 on such exposures.

Honestly, something is terribly wrong if auditors can ok balance sheets based on a known Bs. fiction.

When democracy dies in the cradle

Sir, Arvind Subramanian is absolutely correct arguing that democratic forces stand no chance against the economic rents of a State, “Arab spring will not see an economic bloom”, February 22.

As an oil-cursed citizen (Venezuela) and therefore an expert on the issue let me assure you that societies where citizens are not paying directly for most of their government expenses, and are mostly positioned as receivers of government favors, there is absolutely no chance to develop a functional democracy. The most one can do is to hope for an illuminated oil-dictator, in the sad certainty that sooner or later one will have to suffer a truly dysfunctional one.

If for instance in Iraq oil revenues were shared out directly in cash to citizens the political dynamics there would have been different, and real democracy could have had a chance to be empowered. As is they are just waiting for the next petro-autocrat, and who could then perhaps even count on an oil production that doubles the highest under Sadam Hussein´s regime.

By the way even taxes can produce a tax-curse, if these are not transparent enough. Currently the UK taxman perceives through taxes on petrol consumption more per barrel of oil than those who give up that non-renewable for ever… and few UK motorists are really aware of how much they pay in these taxes.

EITI, unwittingly, is an obstacle to other cursed-citizen's requests.

Sir I refer to your Oily transparency April 15. In the debate on what to do with an oil curse the Extractive Industries Transparency Initiatives occupies so much space it does not leave much room for others who like me want the oil revenues distributed directly to the citizens.

In fact EITI is more of an obstacle since it states as its 2nd Principle“We affirm that management of natural resource wealth for the benefit of a country’s citizens is in the domain of sovereign governments to be exercised in the interests of their national development.”

When seeing how much oil-richness has been wasted in the hands of oiligarchs, petrocrats or plain thugs it is truly amazing such a principle should exist. I guess it is because it is always more fun to talk to an oil blessed politician or technocrat than with a poor oil cursed citizens.

http://theoilcurse.blogspot.com/