Consortiums led by Repsol of Spain and Chevron of the USA have just been awarded the right to develop, in partnership with the state-owned oil company, PDVSA, two oil fields in the Orinoco Belt, which have the potential to augment significantly the country’s proven oil reserves. The government is hoping that these agreements, the first since Mr Chávez was elected president in 1999, will lead to a much-needed increase in production, following problems besetting the industry due to a mix of nationalisation, falling oil prices, lack of investment, inefficiency and the diversion of PDVSA’s resources and attention to underwriting Mr Chávez’s social programmes and foreign policy.
However, there does not appear to be any quick fix for Venezuela’s immediate problems.
In the richest of ironies, Venezuela, with its huge oil wealth and abundant hydroelectric power, is facing acute energy shortages, as blackouts have been affecting most of the country since December. Then, with the country suffering from a drought blamed on El Niño, the government imposed electricity and water rationing to prevent a collapse of the electricity grid as water levels behind the Guri Dam, which supplies most of Venezuela’s power, fell alarmingly. Rolling blackouts were imposed across the country and were only halted in Caracas in January by the President himself after massive street protests opened his eyes to the high political cost of the move.
But on Monday, Mr Chávez announced that he had signed a decree declaring an energy emergency in Venezuela, with electricity consumption being directly linked to a system of discounts and swingeing penalties in order to encourage more efficient usage.
Critics are claiming that the government has failed to invest in the infrastructure necessary to boost the country’s power supply to meet growing demand and, more generally, has squandered the country’s oil windfall during its 10 years in office.
Then last month, the government blocked RCTV, the country’s oldest privately owned television station, from being transmitted on cable because it had failed to broadcast one of the President’s orations in breach of a law that requires presidential speeches to be carried live, even though the speech in question was unscheduled. Four other channels were also shut down.
RCTV, it will be recalled, had been taken off the airwaves three years ago because of its openly anti-government position. As he did in 2007, Mr Chávez is ignoring international condemnation of this denial of free speech.
It is difficult not to see the move to muzzle the media as a clumsy attempt to put a lid on rising public discontent and the dissemination of unflattering information regarding the economic crisis, the energy crisis, growing levels of insecurity, deteriorating public services and rampant corruption. For Mr Chávez’s opponents in Venezuela, this is additional proof of his “totalitarian vocation” and much has been made of the unintended irony of RCTV being banned on January 23, the anniversary of the replacement of the military dictatorship of General Marcos Pérez Jiménez with democratic rule in 1958.
In addition, the highest rate of inflation in Latin America has been exacerbated by the devaluation of the national currency, the bolívar, by 50%, on January 8, the fourth since Mr Chávez came to power in 1999. It appears that the government hopes that this measure will help it to tackle its chronic balance of payments problem and problems of liquidity at PDVSA.
Local economists have however warned that the devaluation will be counterproductive and will only result in higher prices, more severe shortages, a reduction in real consumption, a continuation of the recession and critically, an increase in poverty. And, in what is being viewed as an attack on private property and the free market, Mr Chávez has closed down stores for “speculation” and even seized a French-controlled supermarket chain in the wake of the devaluation. Such moves, on top of media repression, can only make a bad situation worse.
Mr Chávez, nonetheless, seems to be undeterred by declining approval ratings and defections from the government. In an address to the Congress last month, he defiantly announced that he was now a Marxist. But as his “21st century socialism” continues to gather political steam, it appears to be woefully lacking in economic traction.
As much as one is tempted to hope that the deals with Repsol and Chevron herald the dawn of a more commonsensical economic approach across the board, if there is not a more sensible approach to the treatment of private property and the right to make a reasonable profit on investments, then Mr Chávez will be pursuing an unsustainable economic model.
And if Mr Chávez continues to deny Venezuelans the basic right to express themselves freely via independent media, then he is denying them one of the fundamental principles of a democratic society. Mr Chávez still appears to have a goodly amount of economic capital to play with. Perhaps he should ask himself if he has the political capital to pursue his radical policies without allowing all Venezuelans to have their say.
