Published by Minyanville
A Russian delegation is currently touring Venezuela, having met President Hugo Chávez earlier this week. Today the group is taking in the oil-rich Orinoco Belt along with with Oil Minister and head of state oil company Petróleos de Venezuela, Rafael Ramírez. The South American nation holds the world’s largest oil reserves, even greater than those of Saudi Arabia. It's these reserves that allow Chávez to cling onto power, lubricating his Bolivarian revolution.
The liquid gold—or devil’s excrement as former Venezuelan politician Juan Pablo Perez Alfonzo once described oil—makes up Chávez’s arsenal against the United States and the western world, while also serving as his gift to friendly nations such as Cuba, which receives 92,000 barrels of oil daily.
The Russians were preceded by a delegation from Belarus earlier this week. Chávez met with Victor Sheiman, a special envoy sent by the country’s president Alexander Lukashenko. Venezuela has awarded five oil blocks to Belarusian state oil firm Belarusneft, one of which is in the Orinoco region.
Next year’s budget is to be based upon a cost of $50 for a barrel of Venezuelan crude oil, roughly half the average price during the last week of September, which was $98.79, according to Bloomberg. The country’s oil basket has averaged $99.60 a barrel so far this year, up from $71.97 in 2010 and $57.01 in 2009. According to the Wall Street Journal, analysts expect that Venezuela will be able to keep up with debt obligations and fulfill spending plans as long as oil prices stay above $85 a barrel.
Yet, Venezuelan gas stations are still struggling to provide enough fuel for the domestic market. The Economist this week described the country’s infrastructure as “falling apart.” State-owned airline Aeropostal saw a DC-9 lose two engines on landing last week in Puerto Ordaz. This follows 33 aviation “incidents” last month, a rate up about 10% this year so far compared to last year. Roads are full of potholes and the capital’s Metro is overcrowded and plagued with breakdowns. This, on top of electricity shortages will be a major headache for Chávez as he looks to begin campaigning for next October’s presidential elections.
Los Roques Takeover
After last week’s rumors of Chávez’s impending death and the following theatrics during which he played baseball in front of bemused reporters outside the presidential palace, the maverick leader has returned to form announcing a planned takeover of an idyllic Caribbean archipelago. The scores of islands of Los Roques are the crème de la crème of Caribbean beach resorts, an untouched paradise which attracts high-end visitors from both Latin America and the rest of the world, often with their own yachts.
However, Chávez would like to take those yachts and use them to transport tourists, while taking over the islands and using them for state tourism. This is in a country that has done very little to attract visitors thanks to insecurity, strict foreign exchange controls, and a lack of travel infrastructure.
“I've always said we should nationalize Los Roques,” Chávez said on state television. “There are some houses that were illegally built. We're going to take them over... There are some supposed owners. They privatized it, so to speak, the high bourgeoisie, including the international set.”
While the expropriations may seem harmless, they follow hundreds of similar moves often against foreign companies. ExxonMobil (XOM) is currently in battle with the Venezuelan government as it fights for the $7 billion it believes it is owed after a 2007 expropriation. Chávez’s government has offered the company just $1 billion. More than 400 companies have been expropriated in Venezuela this year alone.
There is some good news for the government. Inflation slowed in September, up just 1.6% compared to August which saw a 2.2% rise. Still, it remains the highest figure in the Americas. The newly released numbers take annual inflation for the 12 months to September to 26.5%. Inflation this year is at 20.5%.
Venezuelan Gold Reserves
And finally, after Chávez’s shock announcement in August that he was to pull in all of the country’s foreign gold reserves, Venezuelans can expect the first shipment to arrive in October, according to a senior official speaking to Dow Jones Newswires. Air shipments are the preferred method and will cost “no more than $7m,” including insurance, according to the source. However, analysts are still baffled by the move, both in its reasoning—the country holds 99 tons of gold in the Bank of England, in some of the world’s safest vaults—and in its logistics.