Venezuela's unsustainable growth (I)

We have seen time after time how inacurate -when not utterly wrong- everybody, starting from the International Energy Agency, has been on predicting oil price evolution. Still and even if there is current prices have a lot to do with temporal crisis and speculation, you can count on prices remaining high for the next couple of years. Demand won't be lower than now, even if China were to slow down its growth in a year or so.

In a previous post you saw a chart showing Venezuela's GDP growth for one year next to the (OPEC/Venezuelan) oil price increase for the year before. Oil price multiplicating effect in the economy does not show up right away, so I decided to plot the oil effect one year after its happening, even if this is just an approximation. 

What comes clear out of this is that the military regime is making Venezuela more addicted to oil than ever. This means the country requires increasingly higher oil price hikes to keep up growth. 

Venezuela has had for over 10 years higher oil prices than in the decade before this government got elected (1, 2 for some historical references in Spanish). The oil dependency is so great that when prices went down in 2009, Venezuela was kept in recession, even if prices were still over 300% higher than in the nineties.  In fact, Venezuela was already in a recession the year before as the government had been throwing out money like there were no tomorrow and oil prices did climb then but not fast enough.

Last year oil prices were about >21% higher than in 2009. That would have meant a growth nearing 10% this year if the economy behaved like in 2004 or 2006 and each petrodollar were as effective as back then That won't be the case. Some economists have predicted <1.5% GDP growth and the Chávez regime also something a bit above that figure. The GDP should actually be higher than 5% -what I put in the chart- if the government acted on a responsible manner. Of course, it is not just about oil prices: people have to extract oil and that requires equipment and expertise PDVSA does not have and security the military caudillo is not willing to give. We will have to pay dearly, very dearly, for any help. Even so, I can see the military regime will have enough money to finance a lot of programmes, specially short-term, to try to win the 2012 elections.

The alternative forces face a great challenge, specially as they are cash-strapped and the slightest suspicion of international financing will lead to political prosecution (never mind the Venezuelan military are keeping Cuba's dictatorship by financing it with hundreds of millions in oil).

Luis Borges, from Primero de Justicia, has kept giving interviews in Caracas about how the government is just giving the crumbles to the poor while pilfering billions. What he says is all right and dandy. Still, the people that can listen to that are just part of the 30% of Venezuelans with Internet or cable TV access or those living in Caracas. Only a fraction of them will understand the implications of what Borges is saying, specially in the way he tells the story. His party, as other parties, are failing to spread responsability for spreading the message through a whole team and making that team travel through the country.

If the alternative forces want to have a chance to win the 2012 elections, their only hope is to talk to the people from now on in key areas outside the 3-4 main urban hubs of Venezuela were they have focused their efforts. Most people we need to reach are no longer in Petare or even in Southern Valencia. They are in Acarigua and Guanare, in Maturín and even closer in Los Guayos. The potential in areas that are already voting for the alternative forces is minimal. The potential in other areas is much higher. But that potential can only be used if the alternative forces go there with 1) a thorough understanding of regional pecularities, historical backgrounds for those regions and local concerns and 2) a plan for sustainable development that includes those regions and is explained in very simple talk. Alternative forces would be well advised to try something extra as well: to talk to the people about the truths no politician has wanted to talk about until now, to talk about real land reform, to talk about real accountability and real production.

Now: oil prices cannot keep going up forever. Chávez will have enough tinder until the elections. In a future post I will talk about what comes ahead.