Chávez using oil money to buy influence abroad
By Juan Forero The New York Times
WEDNESDAY, APRIL 5, 2006
CARACAS President Hugo Chávez is spending billions of dollars of his country's oil windfall on pet projects abroad, aimed at setting up his leftist government as a political counterpoint to the Bush administration in the region.
With Venezuela's oil revenues rising 32 percent last year, Chávez has been subsidizing diverse items like samba parades in Brazil, eye surgery for poor Mexicans and even heating fuel for poor American families from Maine to Philadelphia. By some estimates, the spending now surpasses the nearly $2 billion that Washington allocates annually for development programs and the drug war in western South America.
The new spending has given more power to a leader who has been provocatively building a bulwark against what he has called American imperialistic aims in Latin America. Chávez frequently derides President George W. Bush and his top aides. In March, he called Bush a "donkey," a "drunkard" and a "coward," daring him to invade the country.
But with the biggest oil reserves outside the Middle East, Chávez is more than an irritant. He is fast rising as the next Fidel Castro, a hero to the masses who is intent on opposing every move the United States makes, but with an important advantage.
"He's managed to do what Fidel Castro never could," said Stephen Johnson, a scholar at the conservative Heritage Foundation in Washington. "Castro never had an independent source of income the way Chávez does.
It remains unclear exactly how much the government has spent, because the state oil giant, Petróleos de Venezuela, has not made detailed financial records public, and its balance sheets have been shielded from independent audits. Megaprojects, like Chávez's utopian plan to build a gas pipeline through the Amazon to Argentina, are unlikely to materialize.
But Johnson estimates that Venezuela pledged $3 billion in aid last year to its neighbors, including generous bond purchases that made the government a lender of last resort across the continent.
The Center of Economic Investigations, an economic consulting firm in Caracas, estimated recently that Chávez had spent more than $25 billion abroad since taking office in 1999, about $3.6 billion a year. First Justice, a leading opposition party, put the figure at $16 billion, based on Chávez's own declarations.
What is clear is that more than 30 countries as far away as Indonesia have received some form of aid or preferential deals.
His government has purchased $2.5 billion in Argentine debt, the Venezuelan finance minister, Nelson Merentes, recently said, and was selling oil at cut-rate prices to 13 Caribbean countries and buying a big stake in Uruguayan gas stations. Some projects are as ambitious as the planned $3 billion purchase of 36 Brazilian oil tankers. Others are as modest as the $3.8 million in aid to four African countries.
Critics see the spending as a reckless exercise in populist decadence intended to burnish Chávez's image while embarrassing the Bush administration, his principal obsession since American officials gave tacit support to a failed coup against him in 2002.
Chávez is "spending considerable sums involving himself in the political and economic life of other countries in Latin America and elsewhere, this despite the very real economic development and social needs of his own country," said John Negroponte, the American director of national intelligence, in February at a congressional hearing in Washington.
Antonio Ledezma, an opposition leader and one of the president's more determined foes, said the policy's aim was to build "a political platform with an international reach."
"He wants to spread his ideas beyond Venezuela to Colombia, Peru, Ecuador, Bolivia," Ledezma said in an interview. "The instrument he uses is petroleum."
Chávez celebrates the spending as revolutionary largess, designed to further his dream of unifying Latin America in a way Simón Bolívar could only dream of.
In mid-March, in a ceremony unveiling the latest example of Venezuelan munificence - a program to sell oil on preferential terms to a group of leftist mayors in El Salvador - Chávez said that Venezuela was compelled to help.
"They are a revolutionary movement," he called the mayors. "We have an obligation with their people."
With the price of Venezuelan crude rising fivefold since Chávez was first elected in 1998, the spending has not hurt international reserves or Venezuela's credit worthiness. Oil analysts say the sustainability of that situation depends on the flow of revenues, the price of oil and the amount of crude Venezuela's oil industry is able to produce. Still, with Venezuela's expenditures opaque, there was increased speculation about how long the huge outlays would continue.
"From a fiscal perspective," said Michelle Billig, director of political risk at the Pira Energy Group, a New York consulting firm, "there's a lot of concern over the lack of savings and what an expansionary fiscal policy could do to their macroeconomic outlook should there be a downturn in prices or supply."
Critics who have questioned Venezuela's spending are roundly denounced by the government, which says its focus remains on providing for Venezuela's poor. Indeed, Venezuela plans this year to deposit $10 billion into a fund for social programs, Chávez said in February, up from $8 billion in 2005.
The programs, government officials contend, have helped reduce poverty to below 30 percent of the population. Social scientists in Venezuela dispute the claim, saying that poverty still hovers at well over 50 percent, and that half of Venezuelans work in the underground economy, selling trinkets or offering services and barely making ends meet.
There is little doubt, however, that the spending has won Chávez stature and support abroad. For Argentina, the debt purchases helped President Néstor Kirchner, Venezuela's left-leaning ally, to pay off that country's $9.8 billion debt to the International Monetary Fund, ending Argentina's stormy relationship with the lending agency.
In Cuba, Venezuela has supplied nearly 100,000 barrels of cut-rate oil a day - a deal Cuba repays with doctors and other services - making Chávez a benefactor on a par with the Soviet Union, which once bankrolled Castro's economy.
