Hugo Chavez El Presidente for Life?
Oil, the primary driver of the Venezuelan economy (93% of export revenue derives from crude), trades around $40 a barrel well off from its highs of $140. The current Venezuelan budget assumes that oil will average $60 a barrel this year, something unlikely to happen as the global recession endures. Instead of saving its oil surplus, Chavez blew it by spending on internal subsidies and expanding government, creating a current shortfall. This mismanagement has created rampant 30.9% inflation in 2008, which will probably go higher as the need to devaluate the Venezuelan Bolivar to pay off foreign debts and increase export revenue becomes irresistable. Venezuelas also endured intermittent food shortages last year, but yet had to face 50% rising food prices.
Because Chavez purged the state oil company, PDVSA, with loyal cronies, PDVSA’s efficiency is not what it once was. The government’s goal of exporting 3mm barrels of crude per day, which is reflected in its budget, may be untenable further straining the budget.
Venezuela’s crime rate has blown through the roof under Chavez. There were 15,000 murders in 2008, and drug dealing has overrun many neighborhoods. The police has lost control of the country.
The socialist state monster Chavez has created cannot sustain itself under these pressures. Whether Chavez can sustain himself under them will remain to be seen, but let us all hope not.
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