The end of the oil chequebook

Coming amid campaigning for the Nov.23 mayoral and provincial elections, the global financial crisis drops in at the wrong time for Venezuelan president Hugo Chavez.

In a recent meeting, Chavez sought to reassure voters: "Many expect the fall in oil prices to make us tumble, but Venezuela is not going to collapse that easily,” he said, adding that the country could rely on “a consolidated system".

Roy Daza, president of the National Assembly's Commission on Foreign Affairs, ran a similar line. "We are sitting on the base of a global system that needs oil to exist and we are a producer country,” he explained.

Nevertheless, the recent collapse in oil prices has alarmed economists, for the most part allied to the opposition.

The decrease in consumption and production of goods and services in the United States is expected to dampen demand for oil and gas in Venezuela’s main customer.

According to the worst forecasts, the price of crude is therefore expected to continue its downward slide.

For most experts, the drop in oil revenue will negatively affect the government’s social programmes. Some, including agricultural and social housing projects, are entirely financed by income from the public oil company PDVSA.

For their part, many Venezuelans are used to regular shortages of basic foodstuffs. Thus, they are getting ready for the worst. Already, in some of the biggest supermarkets of the capital, such as Centro Plaza in the posh neighbourhood of Chacao, neither sugar nor milk can be found.

In the mean time, entrepreneurs are putting their savings in foreign banks or buying bonds in dollars and euros, amid persistent rumours of a devaluation of the Bolivar – expected early in December, between the elections and the Christmas break.

While its economy has so far remained largely immune to the global financial crisis – a success Chavez attributes to his alternative model – Venezuela nonetheless appears to be heading for a period of doubt.

In order to anticipate a possible future recession, the budget for 2008 is said to have been calculated on the basis of an oil barrel at 30 dollars. Meanwhile, the Venezuelan government claims to have made provisions to ensure food security in the country.