Chavez Ambitions in Venezuela May Fade With Oil Price

[KC]

Chavez Ambitions in Venezuela May Fade With Oil Price
By Matthew Walter and Steven Bodzin

Oct. 27 (Bloomberg) -- The same tumbling oil prices that led OPEC to slash output last week threaten to send Venezuela's economy into a tailspin, and put an end to President Hugo Chavez (http://search.bloomberg.com/search?q=Hugo%0AChavez&site=wnews&client=wnews&proxystylesheet=wnews&output=xml_no_dtd&ie=UTF-8&oe=UTF-8&filter=p&getfields=wnnis&sort=date:D:S:d1)'s ambitions to expand his socialist revolution at home and abroad.

To cope with plummeting oil revenue, the source of half the government's spending, Chavez may have to cut domestic handouts and foreign aid. The first items likely to go will be arms purchases from Russia, oil subsidies for Cuba, and job-creating local projects such as bridges and subways, economists say.

``You have a country with an oil boom, that doesn't know how to save, doesn't know how to set up productive industries that generate jobs, and goes into debt,'' said Elsa Cardozo, a professor of political science and international relations at the Universidad Central de Venezuela. ``Then oil prices fall and the party ends.''

Venezuela may be poised to repeat the economic collapse it suffered in the 1980s at the end of its last oil boom. Former President Carlos Andres Perez (http://search.bloomberg.com/search?q=Carlos+Andres+Perez&site=wnews&client=wnews&proxystylesheet=wnews&output=xml_no_dtd&ie=UTF-8&oe=UTF-8&filter=p&getfields=wnnis&sort=date:D:S:d1), employing policies similar to Chavez's, lavished petrodollars on public works projects, foreign aid and nationalizations in the late 1970s, setting the stage for a 1983 currency devaluation and spending cuts that sent millions of Venezuelans into poverty.

'Most Vulnerable'

``Venezuela is now more dependent than ever on oil,'' said Jose Toro Hardy (http://search.bloomberg.com/search?q=Jose+Toro+Hardy&site=wnews&client=wnews&proxystylesheet=wnews&output=xml_no_dtd&ie=UTF-8&oe=UTF-8&filter=p&getfields=wnnis&sort=date:D:S:d1), a former board member of state oil company Petroleos de Venezuela SA. ``Venezuela is the most vulnerable country in all of Latin America to a falling oil price.''

Chavez is already spending beyond his means, posting a $7 billion budget deficit in the first half of 2008, a period of unprecedented oil prices, on a $63.9 billion budget for the year.

Economists' estimates of the minimum oil price Chavez needs to sustain his economic policies range from $120 a barrel to $65. Oil fell 93 cents, or 1.4 percent, to a 17-month low of $63.22 a barrel today on the New York Mercantile Exchange.


Below $80 a barrel, it's likely that Chavez will devalue the bolivar for the first time since 2005, sparking a surge of inflation (http://www.bloomberg.com/apps/quote?ticker=VNVPIYOY%3AIND) and a drop in real wages because of Venezuela's reliance on imports, said Gustavo Garcia (http://search.bloomberg.com/search?q=Gustavo+Garcia&site=wnews&client=wnews&proxystylesheet=wnews&output=xml_no_dtd&ie=UTF-8&oe=UTF-8&filter=p&getfields=wnnis&sort=date:D:S:d1), an economics and public finance professor at the Instituto de Estudios Superiores de Administracion, a Caracas business school.


FULL STORY (http://www.bloomberg.com/apps/news?pid=20601109&sid=akTFBDZHqr34&refer=exclusive)

[KC]

This was predicted years ahead of time. How long do you think it will take before this "socialist revolution" degenerates completely?

EDIT: Just saw this:


Venezuela spent $4.4 billion on 12 contracts for Russian weapons, the Kremlin said.

4.4 billion on 12 contracts? While people are starving? Seriously?

[Q]

Yeah, the CWI predicted this would happen quite a while ago: with the falling of our prices, Chavez will face huge difficulties continueing his reform program (which was mainly paid by oil revenues) and will be forced to make cuts as the recession continues. This will create social upheavals and quite possibly the regaining of ground by the rightwing reactionaries...

I'm interested in what IMT'ers, the apologists of Chavez, have to say on this.

[Charles Xavier]

Chavez was not that long ago saying 50$ a barrel was a fair price for oil. I doubt this will be a huge problem, as the huge rise just a godsend.

[cyu]

Well, you would expect Bloomberg to say that wouldn't you? Capitalist news source predicting the demise of its enemies? Hardly shocking.

Why doesn't the article say anything about Saudi ambitions fading with oil prices, or any number of other oil regimes more friendly to American capitalists?

On an economically tactical side though, Chavez shouldn't be relying just on oil anyway. Personally, I would suggest that they use their current oil wealth to develop their other industries. Diversification is good - not just in a capitalist's investment portfolio.

[KC]

Well, you would expect Bloomberg to say that wouldn't you? Capitalist news source predicting the demise of its enemies? Hardly shocking.

Why doesn't the article say anything about Saudi ambitions fading with oil prices, or any number of other oil regimes more friendly to American capitalists?

Because Saudi Arabia doesn't have a "socialist revolution".

It is also blindingly obvious that the entire reason that Chavez's administration can offer all of these social programs is because they have the money to do so. Oil prices drop and they won't be able to do so anymore. Then what happens?

[Yehuda Stern]

Now he's going to make a socialist revolution for sure. Just you wait!

[cyu]

Because Saudi Arabia doesn't have a "socialist revolution".

You're right, they don't. But the Saudis must have other ambitions right - or do you believe the Saudi regime is without ambition? Why doesn't Bloomberg talk about the ambitions of the Saudis and how that will be affected by oil prices?



It is also blindingly obvious that the entire reason that Chavez's administration can offer all of these social programs is because they have the money to do so. Oil prices drop and they won't be able to do so anymore. Then what happens?


That's why Venezuela should use their oil wealth to develop their other economic sectors. Damn comparative advantage - no nation should allow itself to become a banana republic - it is a simple matter of economic security.

[KC]

You're right, they don't. But the Saudis must have other ambitions right - or do you believe the Saudi regime is without ambition? Why doesn't Bloomberg talk about the ambitions of the Saudis and how that will be affected by oil prices?

Because it's not politically relevant to "them".

[BobKKKindle$]

Why doesn't Bloomberg talk about the ambitions of the Saudis and how that will be affected by oil prices?

Saudi oil revenue is used mainly to support the extravagant spending and decadence of the royal elite, and so a fall in oil prices may impose limits on future consumption spending for this tiny group (although this is unlikely, as they also derive wealth from other sources such as investment returns, and even with a fall in price, oil revenues will still be substantial) but it will not have severe social impacts because the majority don't benefit from the country's oil wealth anyway, whereas in Venezuela the provision of social programs has relied on oil prices remaining high, such that a fall will have broader implications and may damage the legitimacy of the Chavez government.

[chebol]

The CWI (and Bloomberg "oh-shit-wadya-mean-we're-conspiring-against-the-Venezuelan-government news) can go predict until they're up to their untouchables in low quality Venezuelan crude still being sold for a mint, while Venezuela maintains growth rate, financial reserves, social gains, revolutionary-thumbing-the-nose-at-detractor-ness:

http://www.borev.net/2008/10/world_oil_price_collapse_threa.html

Of course, the whole thing could be mightily fucked, After all CWIers/ Bloomsberg smarmies/ random snipers know SOOOOOOOOO much about revolutions, having made so many....

[naturally I assume you are all well-versed in internet sarcasm - perhaps having a achieved a black belt, or something - and realise I'm not having a serious go at anyone here... or not]

[brandnewworld]

I find it really ridiculous that so many so-called "socialists" are already predicting the downfall of Venezuela's revolution. According to them, the drop in oil prices is just one more indicator of this inevitability.

Perhaps some people forget that what is going on in Venezuela is an unfinished struggle, and the outcome of the struggle will be decided on the balance of forces - that is the relative weakness/strengths of the revolutionary forces against the forces of imperialism.

So far, we can see that the revolution has come as far as it can under the sole leadership of Chavez, and that the leadership needs to broaden, and the gap between the grassroots community councils and the corrupt bureacracy needs to be crushed..we can also see there are still alot of contradictions. We can see that the vestiges of the old captalist Venezuelan state needs to be taken down and completely replaced by people's organs of power, and we can see that private capital still exists in Venezuela which creates constant antagonism. We can see the relative weakness of US imperialism, its total lack of credibility in Latin America, its failed coup attempt in 2002 and its inability to militarily intervene to crush the revolution.

But does the fact that there are contradictions, and unresolved aspects of this struggle, mean that Venezuela's revolution will fail? No way! It may, it may not, and we will see whether it does over the next few years. Hopefully Chavez can broaden the leadership and participation of the revolutionary forces, and can diversify the economy to decrease its reliance on oil. But he can't make these changes at a pace that goes beyond the consciousness of the Venezuelan people.

Anyone who says they KNOW whether the revolution is doomed to fail clearly doesn't understand the dynamics of class struggle.

[JohnnyC]

I don't know whether "revolution" in Venezuela will fail or not, but I certainly think that Chavez is acting like a dictator.Some things he say and the power he has are not good at all for revolution, in my opinion.How can you call it a socialism if only one man has the unlimited power.Socialism is about equal distribution of economic and political power, not about one man trying to lead us all in the name of socialism.I think his only job should be to protect the revolution from capitalists.People of Venezuela will know best what should be done if they have the power to do it.

[nikolaou]

i would not even bother reading anything reported in bloomberg.

venezuela is not in that much trouble at the moment. when they create the following years budget, they always concider the possibility of an oil price collapse.

for 2009 budget, the average price of 50ish dollars was used, and most economists will tell you they expect it to be much higher then 50 by the end of the year.


and Hugo was smart and anticipated such an event, as a socialist, he knows very well about capitalisms boom and bust, and how that will effect demands for his countries oil. therefore, during the boom years they stockpiled quite alot in order to guarantee they would not have to cut back on social spending in a time like this, and he has already promised that if cuts have to be made, social spending will be the last on the chopping block. especially concidering this is a very crucial time in the revolution.


VIVA HUGO, VIVA FIDEL, VIVA LA REVOLUCION, VIVA LIBRE VENEZUELA, VIVA LIBRE CUBA

[brandnewworld]

Here's a socialist perspective on the mall expropriation.

“Socialism, not commercialism”: Chavez’ Christmas message

By Jim McIlroy and Coral Wynter

CARACAS – “Say what they like, the new Sambil is not going ahead,” Venezuelan President Hugo Chavez said on December 23. He was responding to the reaction to his decision, announced on his national television program Alo Presidente on December 21 that the almost completed giant Sambil company shopping mall, in the inner suburb of La Candelaria, would be expropriated from its private owners.

“The Venezuelan leader said it would be out of line with his government’s socialist vision to allow the new Sambil mall to take up precious urban real estate – and that unbridled commercialism isn’t his idea of progress either,” Ian James reported for Associated Press on December 21.

“We’re going to expropriate that and turn it into a hospital… a school, a university,” Chavez told the Alo Presidente audience, in the outer Caracas neighbourhood of El Valle, where he was opening a new People’s Clinic. “How are we going to create socialism, turning over vital public spaces to Sambil?” Chavez added.

In a pre-Christmas statement on Alo Presidente, Chavez also explained that, “The message of Christ, who said that the Kingdom of Heaven is that of the poor, has very often been manipulated. In this way they have manipulated the poor of the world for centuries, to make them quietly accept exploitation,” according to Venezuelana de Television on December 21.

“Christ was born to call on us to create, here on earth, the Kingdom of Love,” which has no other name but socialism, Chavez said.

In a Christmas Day message, Chavez added that, “Today on Navidad (Christmas Day) is the appropriate moment to make the call to fight for peace and social justice. Remember that Jesus Christ fought for this 2000 years ago, in order to leave behind a light of peace in the world.

“The path of peace is justice. Only a just world will be a world in peace,” Chavez added, according to the December 26 newspaper Ultimas Noticias.

On December 23, at the doorways of the Sambil building in La Candelaria – which was scheduled to house 273 shops – two groups of residents gathered, one supporting the expropriation decision and the other opposing it. Supporters of the move, dressed in red T-shirts, wrote graffiti explaining that, “This [building] should be a space for life, not for the construction of more commercial centres. Here there should be a university or a hospital,” the Ultimas Noticias reported.

Members of an ecological group demonstrated against the fact that the construction of the mall had destroyed a number of trees. They wanted a park established on the site instead.

Local resident Elizabeth Navarro commented, “The property ought not to be used against collective rights. An investment of this magnitude must be made to the benefit of the collective, and not just for a small group of capitalists,” the newspaper reported.

Rafael Yepez, another resident, added: “If the Sambil goes ahead or not, it should be subjected to a popular consultation, which should decide… if they want a university or a hospital , or simply that nothing is built there,” the Ultimas Noticias noted.

Jorge Rodriguez, newly elected mayor of the largest Caracas municipality of Libertador, running for the United Socialist Party of Venezuela (PSUV), said that during his period in office, no more commercial malls would be constructed in his municipality (western Caracas). The mayor will open up spaces for discussion with the residents, the community, the communal councils and small business operators on the future of the mall, the newspaper reported.

The mayor will also authorise an investigation into the conditions under which construction permits were given to Sambil in the first place. Some reports indicate that the original permits were issued, not under the stewardship of previous mayor Freddie Bernal, but the earlier right-wing opposition mayor before 2000.

[Guerrilla22]

That is one of the downsides of being too dependent on one sector of your economy. For the longest time oil prices were soaring and it will beinteresting to see how Chavez handles a period of sustained low oil prices, if the current trend continues.

[brandnewworld]

Just for anyone who was wondering, here is the FULL QUOTE from Chavez that is shown truncated and misleadingly as KC's signature:

“This message is for the Venezuelan bourgeois class. We respect you as Venezuelans, you should respect Venezuela, you should respect the homeland, you should respect our constitution, you should respect our laws. If you don’t do this … we will make you obey the Venezuelan laws!”

“If the Venezuelan bourgeoisie continues to desperately attack us, utilising the refuges it has left, then the Venezuelan bourgeoisie will continue to lose these refuges one by one!”

Some of the rest of this speech can be read here (I can't post full URLs yet)

www . greenleft . org . au/2007/713/37009

[nikolaou]

Just for anyone who was wondering, here is the FULL QUOTE from Chavez that is shown truncated and misleadingly as KC's signature:

“This message is for the Venezuelan bourgeois class. We respect you as Venezuelans, you should respect Venezuela, you should respect the homeland, you should respect our constitution, you should respect our laws. If you don’t do this … we will make you obey the Venezuelan laws!”

“If the Venezuelan bourgeoisie continues to desperately attack us, utilising the refuges it has left, then the Venezuelan bourgeoisie will continue to lose these refuges one by one!”

Some of the rest of this speech can be read here (I can't post full URLs yet)

www . greenleft . org . au/2007/713/37009


yeah man, wtf is he doing purposefully taking the quote out of context?