VENEZUELA/USA/cuba: Oil remains a precious resource for Venezuela, and Presidential candidates present different plans to use it

Record ID: 343735

  • Title: VENEZUELA/USA/cuba: Oil remains a precious resource for Venezuela, and Presidential candidates present different plans to use it
  • Date: 28th November 2006
  • Summary: MARACAIBO, VENEZUELA (FILE) (REUTERS) VARIOUS OF PETROLEUM EXTRACTION
  • Embargoed: 13th December 2006 12:00
  • Keywords:
  • Topics: Domestic Politics,Energy
  • Reuters ID: LVACSUOO3CJ7ZOWD37Z9WYM5BHPM
  • Story Text: Day by day, hour by hour, Venezuela's oil pumps are meticulously working, bringing the country's most valuable resource to the surface.
    Known as "black gold", oil is the lifeblood of Venezuela, giving the country a bargaining chip in the global economy and in many ways, helping President Hugo Chavez survive numerous challenges to his government. But as the presidential election nears and Venezuela's reliance on oil grows ever stronger, many wonder what will happen when the bubble bursts.
    Venezuela is the world's No. 5 oil exporter and relies on crude oil for about half of all state revenues. Official figures put oil production at 3.3 million barrels per day and the government is striving to meet a production target of 5.8 million barrels per day by 2012.
    Owing to high global oil prices Venezuela has raked in the profits from the state oil company, Petroleos de Venezuela, or PDVSA. The government has also changed the hydrocarbons law in 2001 which has increased the royalties that the state receives from foreign oil companies. And petrodollars have filled the pockets of Chavez's government - funding the president's populism by going on a spending spree at home and abroad.
    Chavez has been armed with petrodollars throughout his presidency thanks to the high global oil prices. He has poured billions from oil revenues into projects for the poor as part of his self-proclaimed socialist revolution, but critics say that he has not done enough to diversify Venezuela's economy, which could be in deep trouble if oil prices fall.
    Nevertheless, Chavez insists that he is 'sowing the seeds' from the oil revenues to promote socio-economic development and avoid being adversely impacted by the boom and bust nature of the oil market.
    "It is our option to build a developed, modern, productive and diversified economic model to develop the country. As we have been doing, as we have been achieving," he said at a retirement ceremony for state employees earlier this year.
    The achievements Chavez talks of are his social missions, the myriad of new infrastructure projects that have been built or are planned and his attempts to encourage Venezuelans to start up their own businesses using government loans.
    The money for these projects is plentiful, with PDVSA committed to funnel ten percent of its revenues into social initiatives as opposed to oil-related activities such as exploration.
    "(Talking of PDVSA) They are prepared to add ten percent of the investment plan to all of our budgets relating to social development, to social (initiatives) not to oil (related initiatives). That is to say that in the case of the 'Sowing the seeds of the oil plan' (a plan dedicated to economic diversification) which is worth 60 billion U.S. dollars, 6 million are destined for social development (programmes)," Rafael Ramirez, Venezuela's Energy Minister and the President of PDVSA, declared earlier this year.
    Aside from the infrastructure projects, the projects funded from the oil coffers are largely small scale farming schemes, factories and workshops. Although this helps to meet targets for Venezuela to substitute imports, more serious efforts will have to be made to address this issue and thereby make life more affordable for Venezuelans.
    Many praise the attempts being made by Chavez to use the oil revenues for positive ends, but others are fierce critics of the way in which PDVSA is being managed to meet them. Jose Toro Hardy, the Ex-President of PDVSA spoke to Reuters about how this could damage the industry.
    "PDVSA has directly assumed state functions. PDVSA is directly fulfilling a large quantity of functions that do not befit an oil company. As a result of these conditions PDVSA is suffering a lot. If companies like Exxon Mobil, BP or Shell were obliged to do what PDVSA is doing nowadays, they would rapidly fall apart. What happens is that PDVSA, being a state company, doesn't fall apart (because it is supported by the state)," he said.
    Still, Larry Birns of the Washington-based Council on Hemispheric affairs believes that the end goal of diversification is an important one.
    "They are doing a lot of investments all over the world right now to try to diversity income streams. And Venezuela has always been a country that has taken advantage of OPEC politics. Venezuela will continue to squeeze as much revenue as it can out of the oil business, yet at the same time work to diversify," he said.
    Chavez is not alone in using oil wealth to influence. This is exactly the resource that the main opposition candidate, Manuel Rosales seeks to tap into to realize his social programmes and at this stage to sway the electorate his way. His proposed 'Mi Negra' debit card will be funded by the use of twenty percent of the oil revenue. The debit card is aimed at supplementing the income of two million poor families so that they can buy food or save to invest in small businesses and Rosales has been campaigning hard to win over the poor with this scheme.
    "It doesn't matter which party they support. It doesn't matter where they live. What is important is that they are middle class, working class or the poor. It doesn't matter who they would have voted for or in which colour they choose to dress (talking of political allegiance). "Mi Negra' is a debit card that represents social justice and hope for the people. I am going to give it to all of the people of Venezuela that belong to the middle classes, working classes and the poor," he told supporters at a recent rally in his home city of Maracaibo, the state where most of the oil extraction has taken place to date.
    Oil clout gives Chavez a strong position from which to attack his number 1 enemy, President George W Bush, who for Chavez not the head of the free world, but the man at the helm of an imperialist power which promotes 'savage capitalism' responsible for making the poor countries poor. Chavez is in a unique position to make his frequent outspoken attacks since he know that the United States is reliant on its oil and militarily overstretched, so would be unlikely to take any action. This has won Chavez support from U.S. opponents worldwide.
    Venezuela is the fourth-largest supplier of oil to the United States, supplying around 12% of its oil. However Chavez has forged strong ties with China and South American in order to reduce dependence on Washington amid a war of words with the Bush government. Eager to antagonize Bush, Venezuela is also supplying discount fuel to heat the homes of the poor in a direct deal with the economies in the Bronx and this year made oil deals with El Salvador and Nicaragua to give a boost to the election campaigns of the leftists in both states.
    Chavez is also supplying cheap oil to the Caribbean states so that Venezuela too gains influence in the region. Cuba benefits through this deal too and donates services in return, such as sending health professionals into Caracas slums and teachers to deliver literacy programmes.
    As long as Venezuela's pumps continue to draw oil from the land, the precious resource will remain the stalwart of the Venezuelan economy and likely continue to wield influence throughout the world no matter who wins the election.
  • Copyright Holder: FILE REUTERS (CAN SELL)
  • Copyright Notice: (c) Copyright Thomson Reuters 2011. Open For Restrictions - http://about.reuters.com/fulllegal.asp
  • Usage Terms/Restrictions: None
Register