Venezuela heading in wrong direction on Guyana’s oil discovery

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By The Piper

The PiperVenezuelan President Nicolas Maduro’s May 27, 2015 presidential decree (No. 1787) not only reaffirms that country’s claim to the Essequibo, but extends the claim to Guyana’s territorial waters, a move that is at once provocative and dangerous.

Maduro is adamant that Exxon Mobil Corp should cease what he characterizes as a further extension of American economic imperialism. Since the pronouncement of the presidential decree, Venezuelans have been mobilized around the issue through speeches saturated with nationalistic sentiments. Maduro is playing a dangerous game, both at the domestic and international levels.

To date the newly elected APNU+AFC administration has responded in measured and thoughtful ways as evidenced in Raphael Trotman’s statement in parliament and Guyana’s diplomatic moves especially through CARICOM. The government of Guyana should stay this course and avoid statements of bravado which can come easily when national sovereignty is threatened.

Maduro’s gambit is directly related to the economic desperation and political instability within Venezuela. Contrary to popular belief, however, Venezuela’s economic problems actually predate the Bolivarian Revolution. Since the late 1950s the two main political parties, Acción Democratica (AD) and the Christian Democrats (COPEI) formed a power-sharing deal through the Punto Fijo Pact.

Essentially this partnership colluded in massive ‘squandamania’ of the country’s oil wealth, and this especially after the formation of OPEC in 1973. The honeymoon did not last. By 1998 world oil prices were flattened and the hegemony of the oil oligarchy was in the throes. In the meantime urban poverty skyrocketed and as author Michael Reid has shown, by 1989 more than half of the Venezuelan population was living in poverty. These conditions led to the Bolivarian Revolution.

Hugo Chávez Bolivarian Revolution was a direct attack not only on the puntofijismo, but also against the general tenets of liberal democracy. In contradistinction to standard party politics, Chávismo was (and is still so under Maduro) a broad-based movement built on aggressive economic populism. Some of the old socialist strategies of controlling the commanding heights of the economy were instituted but more than that, the Revolution had a genuine popular element. Unlike the concertación of Chile, or the more moderate populism in Brazil under PT, the Venezuelans went wild with economic policies that were not fiscally sustainable.

The interested reader may want to compare Mercados de Alimentos and almost free gasoline in Venezuela with Bolsa Familia (cash payments to the poor) in Brazil. Nothing demonstrates better the insanity of Chavismo economics than the free home heating oil given to poor 400,000 Americans by Citgo – a subsidiary of Venezuela’s state-owned oil company.

The Bolivarian Revolution received a death blow with the collapse of world oil prices in the wake of new hydrocarbon inventories associated with fracking. The current economic situation is desperate. Forbes recently reported that inflation is running 100%, among the highest in the world. Imports have been cut, and a burgeoning informal economy has deepened the fiscal crisis due to tax leakages.

With 95% of foreign exchange coming from oil, and with only marginal upward movement in oil prices, the problem is likely to worsen. Shortages of everyday consumer items are widespread and there is de facto rationing of basic goods. Violent crime has skyrocketed.

On the political scene, the new leader of a united opposition front (MUD), Jesus Torrealba, is effective and well liked. He has built good working relationships with former presidential candidate Henrique Capriles, and also with the popular Leopoldo Lopez. Most threatening to President Nicolas Maduro is the fact that Torrealba has genuine grassroots connections to the poor.

With parliamentary elections coming later this year, President Maduro perhaps feels cornered. Who would have thought that an American oil company might provide a platform for the Chivasmos? The fact that Exxon has found the oil, combined with an old territorial dispute with Guyana – a militarily weak, English-speaking country, is the perfect foil for a charismatic leader. The real danger for President Maduro is that Venezuelans are tired of attacks against foreign countries. They know these attacks do not yield food or jobs. President Maduro may soon realize this, and might get the itch to demonstrate resolve through military brinksmanship in the Stabroek Patch. That is not such a good idea.

2 COMMENTS

  1. Yes you are correct in your assessment. But lets not forget that the US also wanted the PPP out of power to take control of the oil. They could not dictate to the PPP how to run the affairs of this country so a deal was made with the coaltion to get them in power and the oil in return as payment for their assistance to put them in power.

  2. Venezuela is indeed playing a dangerous game that can well produce the opposite result. Americans are well known to jump in to protect their citizens and more importantly their interest. Case in point Iraq. That invasion was all about oil. It is a known fact that Saddam Hussain or his people had nothing to do with September 11th or Weapons of Mass Destruction(WMD) that invasion was all about oil plain and simple. In fact the hijackers on the planes that were flown into the WTC were from Saudi Arabia. What does this have to do with Guyana, Venezuela and oil? Everything. The company with the exploitation licence is American the American public is forever hungry for oil Guyana does not have the money or no how to efficiently exploit this find which leaves it exclusively in American hands. They will not allow Venezuela to deny them this ready source. Military intervention is probably not an option as the public here is war weary. What is likely is massive political and economic pressure on Venezuela. This should be our Government’s approach turn the Americans loose on them. However there is a price to pay American hegemony and control of our resource. Question to be answered. ” Is it worth it”

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