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Chavez's unique skill

Wednesday, 13th February 2008

If you want a lesson in how not to help a country's poor, and how not to take advantage of a country's natural resources, take a leaf out of Hugo Chavez's book:

Venezuelan President Hugo Chavez's policies have cut the South American country's oil output by 1.2 million barrels a day, enough to supply 80 percent of U.S. East Coast demand, according to Cambridge Energy Research Associates.
Production from Venezuelan fields has plunged by more than one-third since Chavez assumed the presidency in 1999 because of a lack of investment by the country's state oil company, Rene Ortiz, a Cambridge Energy Research Associates senior associate, said today in an interview in Houston. Another factor was the replacement of engineers with military personnel ill-equipped to manage oil fields, he said.

Agh! Who cares! We're getting it cheap. And who cares if it's the poor who'll get screwed. As Oliver Kamm explains:

Chavez uses oil as a means of coercive diplomacy (or buying friendship in international forums). It hurts other nations (Trinidad & Tobago, e.g., is a hydrocarbons producer which loses business because it isn't in a position to sell below market price) and subsidises rich-world consumers at the expense of poor Venezuelans. It's particularly disturbing that the deal is in the form a barter rather than a market transaction, because there's no way of properly comparing the services that Venezuelans will receive.
The strong suspicion is that Chavez is using the country's oil wealth, which ought to be stored against future fluctuations in the oil price, for securing services of value to him but that are not transparent. The poor financial nature of the deal doesn't affect him, but it's a way of obtaining services that are quite plainly going to be used against his political opponents (see article in Times business section on this).

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Umbongo

February 13th, 2008 1:54pm

I don't know whether this deal is actually operational but, as a Londoner, I have to thank Chavez and the poor of his country for providing our buses with cheap fuel. Characteristically, our mayor also delights in seeing the poor of another Latin American country (ie as well as Cuba) well and truly screwed.

PJD

February 14th, 2008 1:56pm

But this doesn't really matter when you have double digit percent ecomonic growth on the back of high oil prices. High oil prices caused by the instability caused by Bush in Iraq and threats to Iran.