Following the death of the late President Hugo Chávez, Venezuela is caught between the big dream that was promised and a reality that risks turning into a nightmare ahead of the presidential elections.
Venezuela’s leading position in the global oil industry is not so much owed to current production levels, but to the fact that it holds the biggest oil reserves in the world, according to OPEC.
Its 297.6 billion barrels of crude oil, apart from outstripping Saudi Arabia’s production (265.4 barrels), represents 24.8 per cent of OPEC’s total reserves and 20 per cent of global oil reserves.
The country’s cooperation policy with its closest allies has generated a massive debt burden of almost 200 billion US dollars.
Under this initiative promoted by Chávez, it has been supplying oil and fuel on preferential terms to member countries of the Bolivarian Alliance for the Peoples of Our Americas (ALBA), such as Cuba, Nicaragua, Bolivia and, to a lesser extent, Ecuador.
The most outstanding example is Cuba, which currently receives around 96,000 barrels of oil a day (two-thirds of its national consumption), paid for in part by the services of 35,000 Cubans, working in Venezuela as teachers, medical, scientific and military staff, etc
The death of Chávez comes at a time when the Venezuelan economy is weak.
Its economic imbalances include a budget deficit equal to 16 per cent of GDP, inflation that rose to 20.1 per cent last year – the second highest in the region – hefty public debt and a rentier model dependent on oil revenues.
These factors, added to the scarcity of certain basic foodstuffs and the repercussions of the recent devaluation of the Bolivar by 32 per cent (the exchange rate against the US dollar went from 4.3 to 6.3 bolivars), threaten to undermine the "21st century socialism" applied by the Bolivarian leader.
Venezuela’s business leaders say that this year will see the end of the economic bonanza, which was an illusion created by massive public spending.
Reality and lean times are now on their way.
It should, nonetheless, be pointed out that unemployment fell from 16.1 per cent to 5.9 per cent between 1999 and the last quarter of 2012, a downward trend that was only momentarily disrupted by the destabilising efforts of the opposition, which culminated with the oil strike and the failed coup in the year 2002.
The oil lockout in January 2003, the impact of which is fully reflected on the unemployment curve, was part of the same opposition strategy: to hit oil distribution directly at the source.
Informal employment fell from 51.1 per cent in 1999 to 42 per cent in 2012.
During the 14 years of "Chávista" government, Venezuela’s gross domestic product (GDP) grew by over 350 per cent, reaching 320 billion US dollars in 2012, thanks to the production and export of oil, the main market for which was, paradoxically, the country Chávez criticised most – the United States.
Another major flaw in the Venezuelan economy is its dependence on oil, which pre-dates Chávismo. Ever since the 1970s, governments have failed to create the broader economic base needed to create employment and reduce poverty.
Under the Bolivarian leader, the country’s oil dependence was heightened. The state oil company PDVSA currently generates 96 per cent of the dollars earned by Venezuela. In 1998, the same figure was 69 per cent.
Now, the time to awaken is nearing and the forecasts are far from promising, although anything could happen.
