Hugo Chavez’s Economy


It is difficult not to be fond of Hugo Chavez’s politics. There is little question that as president, Chavez is attempting to create a radical social-democracy in Venezuela. In many cases his efforts have already been successful. Chavez is seeking to empower the lowest strata of society. He is attempting to implement participatory democracy in the areas of health-care through his Mission Barrio Adentro (Inside the Neighborhood) program. However, regardless of how much we may like Chavez’s politics and his efforts to redistribute wealth in Venezuela, one has to wonder if an economy based mostly on oil is sustainable in the long run.

When Chavez was elected into office he inherited a host of problems. One of which, and perhaps the largest has been greatly ignored by the independent and left leaning media outlets–and that’s the environmental consequences of Venezuela’s reliance on oil as a source of sustenance for its economic well-being.

The lifeblood of the Venezuelan economy of is indeed its robust energy industry. Oil production accounts for almost half of the total government revenues and about one third of gross domestic product. According to the BCC News, Venezuela produces approximately three million barrels of crude oil per day, and exports almost 75% of that total production. Of the country’s $3 to $4 billion in annual foreign investment, almost all of it is channeled into the oil industry. Venezuela is currently the fifth largest oil exporter in the world and supplies about 13% of daily oil imports to the United States.

This is where Chavez can truly flex his muscle and challenge US supremacy, and in particular the Bush administration. The removal of Venezuela from the oil supply side would most definitely result in higher oil prices in the US and elsewhere. Secure oil supply is especially important at the present time, given the ongoing uncertainty surrounding energy supply from the Middle East.

Nonetheless, all this is putting enormous stress on Venezuela’s natural environment and it is causing insurmountable problems for Venezuelans in the process. In fact, it is even argued by some environmentalists in the country that pressure on Venezuela’s environment is increasing under Chavez.

“[A huge problem] is the continued issuing of gas and oil concessions, especially in the eastern part of the country, such as in the Orinoco Delta and the Gulf of Paria, which is a very important fish breeding area,” Venezuelan environmental activists Alicia Garcia and Maria Eugenia Bustamante told Jeroen Kuiper of Venezuelanalysis.com.

“The ecosystem of lake Maracaibo has suffered a lot already from the oil industry. Another oil and gas-threat comes from the plans to construct pipelines towards Colombia, Panama, Brazil, and the United States,” say Eugenia Bustamante and Kuiper. “The main problem is the difference between what is being said and what is being done. How can you say that you are in favor of sustainable development, when at the same time you allow an increase of the extraction of gold, diamonds and wood? How can you support the Kyoto Protocol, lash out at the USA for not signing the Protocol, and at the same time announce increases in oil and gas production?”

According to the Energy Information Administration (EIA), air pollution levels in Venezuela are high compared to the country’s neighbors, owing mainly to Venezuela’s oil industry. Deforestation, like many other South American counties, is also a huge problem in the country. As the EIA reports, “The United Nations Food and Agriculture Organization estimates that Venezuela lost forest cover at a rate twice as high as the average rate for tropical South America in the early and mid-1990s, and this hasn’t slowed much under Chavez.”

Venezuela is also becoming industrialized in an unsustainable fashion. The country’s “total energy consumption in 2002 was 2.9 quadrillion Btu’s (quads), accounting for 0.7% of the world’s total,” reports the EIA. “Still, Venezuela’s energy consumption that year was behind only that of Brazil (8.6 quads) and of Mexico (6.6 quads) in all of Latin America. The country’s relatively high level of energy consumption, which has increased by a hefty 83% since 1980, is due in part to government subsidies on gasoline, natural gas, and electricity that effectively encourage consumption.”

Chavez’s efforts to resolve this dilemma have been minimal at best. His government, like his predecessors, has put little resources into researching and developing non-hydro renewable energy sources: such as biomass, geothermal, or wind and solar energies. Overall, Venezuela is the third-largest CO2 emitter in Latin America, trailing only Mexico and Brazil. Venezuela’s carbon dioxide emissions over the past five years have easily surpassed those of Argentina and Colombia, the next two largest CO2 emitters in Latin America. All of this has poisoned water supplies and polluted Venezuela’s air.

So as lefties and others in the US embrace Chavez’s efforts to alleviate poverty and provide health care to all citizens of Venezuela–they must also be aware and cautious as to the sustainability of the Venezuelan economy, not to mention the country’s natural environment. All this must raise questions as to the Chavez government’s long-term health and vitality.

JOSHUA FRANK is the author of the forthcoming book, Left Out! How Liberals Helped Reelect George W. Bush, to be published by Common Courage Press. You can pre-order a copy at discounted rate at www.BrickBurner.org. Josh can be reached at: Joshua@BrickBurner.org.


JOSHUA FRANK is managing editor of CounterPunch. His latest book, edited with Jeffrey St. Clair is  Hopeless: Barack Obama and the Politics of Illusion. He can be reached at brickburner@gmail.com. You can follow him on Twitter @brickburner

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