Venezuela’s Economic Woes
Stratfor had a good article a few days back regarding Chavez’s latest nationalization push. While certain to shrink the already unbalanced Venezuelan economy, this move indicates how dropping oil prices (combined with stagnent Venezuelan production) drives the state’s need to find new revenue sources. In a key summary: “Venezuela’s economic situation is decidedly less than sound. With more than half of the government’s budget heavily dependent on oil, Venezuela is extremely sensitive to even relatively minor shifts in crude prices… With crude prices dropping, increased competition from the Saudis and Chavez’s mismanagement and underdevelopment in the oil sector, Venezuela is in a difficult spot.”
The mismanagement and underdevelopment of Venezuelan oil infrastructure must be emphasized. The state cannot even meet its OPEC quota and, due to Chavez’s international spending sprees, the cash from the past few years of booming prices has already been squandered without necessary infrastructure investments.
