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Venezuela – Oil Economy on Slippery Ground

Rusty oildrums, by Gabe/flickr

Oildrums, courtesy of Gabe/flickr

Will Venezuela be next to stumble into a debt crisis – ironically, a country well endowed with the world’s most sought after resource? In its most recent issue, The Economist raises this question, as rumors swirl that the Bolivarian Republic might not be able to repay its international obligations between 2012 and 2015. The possible default of one of the world’s foremost oil producers should give the international community pause although any crisis is unlikely to materialize immediately. However, as soon as oil prices fall considerably below $100 per barrel, the Venezuelan economy will be deprived of its main foreign income, and a debt crisis might not be far behind – possibly threatening  President Hugo Chavez’ long rule.

L’état, c’est Hugo

Despite high oil prices, Venezuelan GDP has been contracting for the last three years and inflation has been over 20 percent since 2007. Exports have been falling steadily and because power and water infrastructure falls short of much needed investment, Venezuelans are often forced to take cold showers. Even productivity in the state-owned oil company PDVSA has decreased by a third since Chavez took power in 1999. Chavez is infamous for his erratic behavior and his dislike of the private sector. During his 12-year rule, he has nationalized hundreds of domestic and foreign companies, closely regulated the economy and eliminated market mechanisms. In this way Chavez has paved the way for widespread corruption and inefficiency. Moreover, he has been governing by decree since December 2010, which grants him almost unlimited power to push through policies without parliamentary control. In Venezuela l’état, c’est Hugo. In this atmosphere of impunity many Venezuelan entrepreneurs have given up their businesses, and foreigners are increasingly reluctant to invest. In a recent country risk assessment Venezuela ranked 93 out of 100 – with civil-war plagued neighbor Colombia ranking a much higher 51.

The Achilles heel

As the government has successfully dismantled the private economy, Venezuela’s dependence on revenues from oil exports has increased, and imports have risen as many goods are no longer produced in Venezuela. Oil production makes up about a third of GDP and generates the lion’s share of the government’s revenue. Fluctuating oil prices are thus the Achilles heel of the whole economy. As soon as oil prices fall, Chavez might find it difficult to keep up public spending and to repay international obligations (net public debt was 29 percent of GDP in 2010). This might not only lead to a debt crisis and hamper economic growth but also to a decline in Chavez’ popularity. With plans to run again for president in 2012, he is in dire need of oil money to subsidize basic goods such as food. Otherwise the poorest will be hit even harder by rising food and living costs, with their incomes eaten up by staggering inflation – perhaps just like Chavez’ personal political future.

* For more information, please see our extensive resources on Venezuelan Energy, Economics, Politics and Security.

Mr. Chavez and the Jews

In Venezuela, respect for minorities is all but hot air, photo: a•Andres/flickr

Merely a decade ago, close to 20,000 Jews called Venezuela their home. Yet in these past ten years, during President Hugo Chavez extended tenure, their number has dropped to less than 9,000. This exodus intensified between 2008-2010, with over 5,000 leaving the country, mostly heading to Miami in the US.

If someone were to rank the most embattled Jewish communities in the world today, the Jewish community of Venezuela would certainly be high on the list. Yet this has not always been the case. Venezuela’s Jewish community is among the oldest in South America, dating back to the middle of the 17th century, when groups of Marranos (Spanish and Portuguese descendants of baptized Jews, which secretly continued to adhere to Judaism) lived in Caracas and Maracaibo.

In the middle of the 19th century, the Jewish community in Venezuela became fully established, with a majority of the Jewish population descending from a continuous influx of European and North African immigrants. Most settled in and around the capital city of Caracas, comprising a tightly knit community converging around the Club Hebraica, a large complex in the eastern part of the city. » More

Venezuela’s Election: Operation Complete!

Hugo Chávez

Hugo Chávez, courtesy of Bernardo Londoy/flickr (cc-nc-sa)

As a great revolutionary commander, Hugo Chávez knows how to motivate his troops. His military career clearly inspires him in his current job as a populist leader.

It’s been deliciously entertaining to follow last Sunday’s election on Chávez’s blog and twitter stream. I thought I’d (roughly) translate a few selected pieces of his rhetoric for the benefit of  all the English-speakers out there. Here’s how the Venezuelan president rallied his troops on the eve of the election:

21:50, Saturday 25 September – Chávez’s blog

“These have been difficult times. Full of pain. But the People are taking it into their stride. Fight. And always vanquish! The time has come, so let’s go! Charge!!

We pray God and give our love to those who suffer most. And despite the pain and the exhausting effort, we leave early for the battle.

Everybody on the offensive at reveille! We will demonstrate again that the revolution is here to stay! No one remains without voting!

The bugle call must resound in every corner of the Nation announcing what will be a great Popular Victory!!

Come on, all candangueros and candangueras, tweet reports from the Operation Willian Lara!”

» More

Partially Recognized Territories: All About the Money?

Abkhazia Parliament Building, courtesy of john/flickr

Many countries are not fully recognized by international organizations and other countries. Kosovo, Somaliland and Taiwan are good examples of states that are not recognized internationally. But these states have either de facto autonomy and can sustain themselves or are recognized by a comfortable number of “powerful” countries that allow them to survive on the international stage.

Some other countries, however, are recognized but are also heavily dependent on one country to survive. This is the case with Northern Cyprus, only recognized by Turkey, but also Abkhazia, supported by Russia and only recognized by a handful of states.

Abkhazia is located in the territory of Georgia and, together with South-Ossetia, declared their independence in the 1990s. The territory became the center of international attention during the South-Ossetian war in the summer of 2008. Currently only recognized by Nauru, Nicaragua, Venezuela and, of course, Russia, Abkhazia is also recognized by non-recognized territories such as South-Ossetia and Transnistria. Furthermore, Abkhazia is also part of a group called the UNPO (Unrepresented Nations and Peoples Organization.)

If we look deeper into the motivations for recognition of Abkhazia, however, we can see beyond the standard political arguments (about the right to self-determination, for example) and into a world where money matters more than political ideals.

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Bolivar’s Exhumation: Chavez’s Orwellian Cult of (His Own) Personality

President Hugo Chavez speaks in front of a portrait of Simon Bolivar, photo: Sheila Steele/flickr

Hugo Chavez’s latest bout of political theater reeks of George Orwell. In his dystopian novel, 1984, Orwell shrewdly points out that “those who control the present, control the past, and those who control the past, control the future,” an assertion Chavez seems to have taken to heart. The Venezuelan president’s recent decision to exhume the body of legendary hero and national founder, Simon Bolivar, has sparked an onslaught of international criticism about the president’s persistent eccentricities and obsession with the national figure. According to Chavez, a self-professed admirer, follower and disciple of Bolivar, the exhumation seeks to allow forensic scientists to discover the real cause of Bolivar’s death; Chavez believes Bolivar was possibly poisoned by Colombian traitors. The aberrant decision has reinforced perceptions that Chavez is a mad man who is losing his grip of reality; but how crazy is he really?

The search for possible reasons behind the exhumation has yielded a plethora of theories.  Some say Chavez wishes to divert attention from domestic problems such as the economy’s unrelenting recession or a recent scandal over imported food left rotting in the country’s ports. Others claim that, if he can prove that Bolivar was indeed poisoned by Colombian traitors, Chavez would use such evidence to support his contentious relationship with the current Colombian government. Yet others believe that Chavez seeks to use Bolivar’s body as a political gimmick to rile up support for his Bolivarian movement ahead of crucial parliamentary votes in September. Regardless of which theory turns out to be right, one thing is clear: Chavez wants to use Bolivar’s symbolic power to pursue his own ends, whatever they may turn out to be. » More

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