Hugo Chávez/Sandbox

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Venezuela is a major producer of oil products, which remain the keystone of the Venezuelan economy. Chávez has gained a reputation as a price hawk in OPEC, pushing for stringent enforcement of production quotas and higher target oil prices. At a June 2006 meeting, Venezuela was the only OPEC country calling for lowered production to drive oil prices higher. Industry analysts say Venezuela wants lower quotas because, under Chávez's administration, PDVSA's output has been reduced by 25% and Venezuela can't meet its current quota. [1] However Forbes argues that some oil production numbers are politically motivated done to discredit the Venezuelan industry. [2] Nonetheless, Chávez has attempted to broaden Venezuela's customer base, striking joint exploration deals with other developing countries, including Argentina, Brazil, China and India. Record oil prices have meant more funding for social programs, but have left the economy increasingly dependent on both the Chávez government and the oil sector; the private sector's role has correspondingly diminished.

Chávez has redirected the focus of Petróleos de Venezuela S.A. (PDVSA), Venezuela's state-owned oil company, by bringing it more closely under the direction of the Energy Ministry. He has also attempted to repatriate more oil funds to Venezuela by raising royalty percentages on joint extraction contracts that are payable to Venezuela. Chávez has also explored the liquidation of some or all of the assets belonging to PDVSA's U.S.-based subsidiary, Citgo. The oil ministry has been successful in restructuring Citgo's profit structure,[3] resulting in large increases in dividends and income taxes from PDVSA. In 2005, Citgo announced the largest dividend payment to PDVSA in over a decade, $400 million. Yet despite massive efforts to increase production, daily oil production is still well short of the levels attained under the previous administration.

During Chávez's presidency, from 1999 to 2004, per-capita GDP dropped 1–2 %, but with the help of rising oil prices, the end of the oil strike, and strong consumption growth, recent economic activity under Chávez has been robust,[4] particularly in the non-petroleum sectors. Most of that growth was directed to the poorest sectors of society, with real income growth of 55% reported between 2003 and 2005,[5] although some economists argue that the subsidized growth in this sector could stop if oil prices decline.[6] Overall, since the start of his presidency, government statistics indicate a 6.4% drop in official unemployment [7][8] and a 6% drop in the rate of poverty.[9]

Critics state that unemployment levels have not dropped enough, considering the massive oil windfall, and that the job creation may not be permanent. Some social scientists mistrust the government's reported poverty figures, based on contradictory statistics and definitions, and some economists report insufficient economic growth and continued repression of the economy.


Proposed Version

Economic policy under Chavez is evolving and difficult to categorize. Neither following the statist path of Cuba nor the neo-liberal path of Mexico or Chile, it seeks to strike a middle ground.[10] It borrows from other international experience, with Keynsian fiscal and monetary policy.[citation needed] Enterprenuership is promoted but is of a social co-operative and co-management variety [11] Government direct investment follows neither import substitution nor a globalization path, seeking instead to meet internal, regional, and lastly global south demand.[citation needed] Private investment is encouraged, but not at the expense of other priorities such as oil control and land redistribution.[citation needed] Most of the initiatives are at the mercy of high budget costs, forcing the government to expand its two pillars of traditional income (what are the two pillars?). Tax collection has been revamped, leading to better compliance.[citation needed] Oil policy was rerouted from production centric goals, to profit centric ones.[citation needed]

Venezuela is a major producer of oil products, which remain the keystone of the Venezuelan economy. Chávez has gained a reputation as a price hawk in OPEC, pushing for stringent enforcement of production quotas and higher target oil prices. As a result, Venezuelan production is lower than during the Caldera administration.[citation needed] (As a result? No, there are other factors.) Chávez has redirected the focus of Petróleos de Venezuela S.A. (PDVSA), Venezuela's state-owned oil company, by bringing it more closely under the direction of the Energy Ministry. He has also attempted to repatriate more oil funds to Venezuela by raising royalty percentages on joint extraction contracts that are payable to Venezuela, and changing operating contracts to mixed companies with majority stake. Chávez has also explored the liquidation of some or all of the assets belonging to PDVSA's U.S.-based subsidiary, Citgo. The oil ministry has been successful in restructuring Citgo's profit structure,[12] resulting in large increases in dividends and income taxes from PDVSA.

Results reflect Venezuela's internal political conflict. (no, much more as well - they also reflect poor fiscal management, corruption, etc.). From 1999 to 2004 per-capita GDP dropped 1–2 %, coinciding with the deepening political crisis, other indicators such as poverty and unemployment reflected negatively. Afterwards with the help of rising oil prices, the end of the oil strike, political stability (?????), and strong consumption growth, recent economic activity under Chávez has been robust,[13] particularly in the non-petroleum sectors. Most of that growth was directed to the poorest stratus of society, with real income growth of 55% reported between 2004 and 2006,[14] although some economists argue that the subsidized growth in this sector could stop if oil prices decline.[6] Overall, since the start of his presidency, government statistics indicate a 6.4% drop in official unemployment [15][16] and a 6% drop in the rate of poverty.[9] The World Bank echoed a drop in poverty as well.[17]

Critics state that unemployment levels have not dropped enough, considering the massive oil windfall, and that the job creation may not be permanent. Some social scientists mistrust the government's reported poverty figures, based on contradictory statistics and definitions, and some economists report insufficient economic growth and continued repression of the economy.

[edit] Notes

  1. ^ The Economist, (June 8, 2006), "Venezuela's foreign policy: Bruised but unbowed," The Economist, Accessed 20 June 2006.
  2. ^ Oxford Analytica. (Forbes 16 Jun 2006). Venezuela's Oil Policy Has Risk Premium Retrieved 27 Jun 2006
  3. ^ Ramirez, Rafael. (Minister of Energy and Petroleum, 25 May 2005). A National, Popular, and Revolutionary Oil Policy for Venezuela. Retrieved 31 Oct 2005.
  4. ^ Bloomberg. (Bloomberg, May 16 2006) Venezuelan 1st-Qtr GDP Grows 9.4 Percent on Oil Surge (Update1). Retrieved 13 Jun 2006 .
  5. ^ Datos, (2006). Perspectivas del Mercado y del Consumidor Perspectivas Venamcham 2006, p.8. Retrieved 21 Jun 2006. (Spanish)
  6. ^ a b Bronstein, H. (June 14, 2006), "Colombians in Venezuela thank Chavez for new life", Washington Post, Accessed 22 June 2006.
  7. ^ Instituto Nacional de Estadistica.(INE, Jan 1999) Globales de Fuerza de Trabajo. Retrieved 13 Jun 2006.
  8. ^ Instituto Nacional de Estadistica.(INE, April 2006) Globales de Fuerza de Trabajo. Retrieved 13 Jun 2006.
  9. ^ a b Weisbrot, M., Sandoval, L., and Rosnick, D. (2006), "Poverty Rates In Venezuela: Getting The Numbers Right", Center for Economic and Policy Research, Accessed May 31, 2006.
  10. ^ Hari, Johann. (The Independant 14 May 2006). Hugo Chávez - An Exclusive Interview Retrieved 24 July 2006
  11. ^ Pearson, Natalie Obiko. (Associated Press 16 July 2006). Venezuela tries '21st-century socialism' Retrieved 16 July 2006
  12. ^ Ramirez, Rafael. (Minister of Energy and Petroleum, 25 May 2005). A National, Popular, and Revolutionary Oil Policy for Venezuela. Retrieved 31 Oct 2005.
  13. ^ Bloomberg. (Bloomberg, May 16 2006) Venezuelan 1st-Qtr GDP Grows 9.4 Percent on Oil Surge (Update1). Retrieved 13 Jun 2006 .
  14. ^ Datos, (2006). Perspectivas del Mercado y del Consumidor Perspectivas Venamcham 2006, p.8. Retrieved 21 Jun 2006. (Spanish)
  15. ^ Instituto Nacional de Estadistica.(INE, Jan 1999) Globales de Fuerza de Trabajo. Retrieved 13 Jun 2006.
  16. ^ Instituto Nacional de Estadistica.(INE, April 2006) Globales de Fuerza de Trabajo. Retrieved 13 Jun 2006.
  17. ^ Urdaneta, Jainelly. (Panorama Digital 03 Jun 2006). World Bank: Venezuela decreased poverty Retrieved 1 July 2006
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