By Matthew Walter
Oct. 6 (Bloomberg) -- President Hugo Chavez has figured out how to use Venezuela's vast oil reserves to increase his regional influence while diminishing U.S. clout: He all but gives it away.
The self-proclaimed socialist revolutionary is allowing impoverished U.S. allies such as Honduras and the Dominican Republic to buy discounted oil with low-interest loans. Then he rebates the revenue back to those countries in the form of aid - - attached to strings he controls.
Venezuela's oil wealth gives it ``much more capacity for an aggressive foreign policy,'' says Jose Manuel Puente, a professor at the Center for Public Policy at the Instituto de Estudios Superiores de Administracion in Caracas. ``You can cultivate and multiply your revolution, and you can create more friction with the U.S.''
Record oil prices have allowed Chavez, 54, to boost spending on such agreements this year. Crude exports from Venezuela, the Western Hemisphere's biggest oil exporter, exploded since 2007.
Crude prices have soared 52 percent since the beginning of last year. In July, they touched a record $147.27 a barrel before retreating to $92.70 on Oct. 3. Revenue at state-owned Petroleos de Venezuela SA rose 69 percent in the first half of the year to $72.4 billion, according to the company's earnings statement.
Chavez's oil-subsidy program is aimed at the 18 Central American and Caribbean countries in Petrocaribe, an alliance he created in 2005.
Favorable Terms
Member nations, many of which have been buffeted by inflation in prices for fuel, food and other necessities, get 1 percent financing for their purchases and may be required to pay as little as 30 percent of the market price for the oil within 90 days, then get 25 years to pay the rest, Chavez explained at a July Petrocaribe summit in Maracaibo, Venezuela.
Through the program, Venezuela supplies more than 200,000 barrels a day to those countries, most of which rely entirely on imports for fuel. Some countries are receiving financing to cover more than half their oil imports.
Meanwhile, a portion of the loan repayments go neither to Venezuela's treasury nor the state oil company; instead, they are deposited into an aid fund for Petrocaribe countries that Venezuela jointly controls.
Costa Rican President Oscar Arias said in a Sept. 26 interview that he plans to join Petrocaribe and begin receiving 20,000 barrels of oil products a day.
Small Country, Big Help
``This will be a big help for a small country with such a high oil bill like ours,'' he said. ``This will provide a huge relief for our balance of payments.''
While Arias insisted that Chavez's ``tangible assistance'' won't effect his government's policies, the impact of the Venezuelan leader's efforts, political as well as economic, is visible throughout the region.
In Honduras, which began taking advantage of Chavez's largesse in January, a long history of friendly relations with the U.S. -- it took economic advice from the American-led World Bank in the 1990s and has allowed the U.S. to use its military bases -- has given way to a sharper tone.
In August, Honduran President Manuel Zelaya denounced U.S. ``imperialism,'' and praised Chavez's economic model.
``If the system that governed Honduras for 40 years had resolved the poverty, the indigence, the exclusion of more than 4 million Hondurans, we wouldn't be looking to the south, toward socialism,'' Zelaya said on Aug. 25 in Tegucigalpa as he signed up for new Venezuelan credit lines for agriculture initiatives and for oil-funded subsidies.
Off-Budget
Petrocaribe's funds are largely off-budget, in recipient nations as well as at home. Opposition parties in Argentina, Nicaragua and elsewhere have complained that their governments' Venezuelan aid programs lack transparency, both in terms of how much money they generate and how it is used.
Nicaragua's National Assembly held a special hearing Sept. 18 to investigate how much aid Venezuela has sent the country. While President Daniel Ortega says the total is $521 million since 2007, the central bank says it can only account for an estimated $185 million.
``The money is for the people of Nicaragua, not for Ortega,'' Victor Tinoco, a congressman with the opposition Sandinista Renovation Movement, said at the hearing.
Ortega has said he used the funds for his ``Zero Hunger'' program and for loans to farmers and to poor families to start small businesses.
`Extremely Murky'
``All of these funds are extremely murky,'' says Patrick Esteruelas, an analyst at the Eurasia Group in New York.
Chavez claims Petrocaribe was born out of concern for the impact rising oil prices were having on the poor in a region where, according to the World Bank, 17.9 percent of the population lives on less than $2 a day.
``We became alarmed when oil shot up to $120, $130, $140,'' Chavez said in a July 16 speech. ``Immediately, we activated Petrocaribe to protect our brothers, the smallest ones, the weakest ones.''
As oil prices rise, the amount each country borrows from Venezuela also increases. As of June, the Dominican Republic owed Venezuela $800 million, Dominican Finance Minister Vicente Bengoa told reporters at a conference in Cancun, Mexico.
Leaders associated with Chavez increasingly are imitating his class-warfare, anti-American rhetoric. After Chavez and his ally, Bolivian President Evo Morales, both kicked out their nation's U.S. envoys, Honduras delayed the acceptance of its U.S. ambassador's credentials in a show of solidarity.
Fuel Subsidies
The World Bank last year ranked Honduras as the fifth- poorest nation in Latin America and the Caribbean, with a per capita income of $1,600. The Central American nation has spent more than $140 million on fuel subsidies as of August, up from $55 million for all of last year, Finance Minister Rebeca Santos Rivera said in an interview.
Honduras's initial agreement with Chavez authorized it to import $800 million worth of Venezuelan oil products in 2007 and 2008. The Honduran government immediately resells the shipments to private importers, putting the profit into a fund administered by the central bank for state-sponsored investment projects, she says.
Venezuela's oil-related subsidies compete with aid to Latin America and the Caribbean from the U.S. Agency for International Development, which is projected to total $859.7 million this year, up 8.4 percent from last year and down from $1 billion provided in 2005.
Struggling U.S.
``The U.S. is struggling to come up with adequate alternatives to encourage or co-opt supporters within Latin America and rival Chavez's oil largesse,'' says the Eurasia Group's Esteruelas.
In some cases, Chavez has said he would accept goods and services as payment. In August, he suggested that the Dominican Republic could reduce its debt with tourism packages for Venezuelans.
``Already, the flexibility from Petrocaribe is greater than what we're receiving from the Inter-American Development Bank and the World Bank, in terms of financial conditions and time,'' says Santos, the Honduran finance minister.
President George W. Bush, tied up with a war in Iraq, hasn't given the region the attention he promised during his 2000 election campaign and this year couldn't get the Democratic-controlled U.S. House of Representatives to even vote on a free-trade agreement with Colombia, the U.S.'s strongest ally in South America.
Creating an Opening
That failure raises questions in the region about the U.S.'s reliability and creates an opening for Chavez, says Peter Hakim, president of the Washington-based Inter-American Dialogue, a policy analysis center focusing on Western Hemisphere affairs.
As small nations line up behind Chavez and his growing affinity for Iran and Russia, the U.S. risks fading cooperation on trade, energy projects and drug trafficking.
``We've seen how President Chavez's influence, with his rhetoric and his resources, has had an impact on our internal politics,'' says Felipe Salaberry, a Chilean lawmaker who helps run the Union of Latin American Parties, an alliance of ``center and center-right'' political groups.
``Using an anti-Yankee discourse among a population that's in a great state of need is always going to be attractive,'' he adds.
To contact the reporter on this story: Matthew Walter in New York at mwalter4@bloomberg.net
Posts
No comments:
Post a Comment