Venezuela: Oil, Politics and Foreign Policy

October 22, 2008     The Center for Hemispheric Policy of the University of Miami hosted a dynamic conference that featured keynote speaker, Anibal Romero, Professor of Political Theory, Universidad Metropolitana. The conference commenced as Susan Purcell, the Director of the Center for Hemispheric Policy gave her opening remarks.       The first panel discussed the economic forecasts and the political risk scenarios of Venezuela. The primary issue on the table was the effect that the plummeting price of oil would have on the economic outlook of the nation.  Benjamin Ramsey, Vice President of Andean Region Economics and Strategy at JPMorgan, declared that although Venezuela is highly leveraged to oil prices, a sharp drop in prices would not have an immediate negative impact because of the nation’s current account surplus, hence substantial degrees of freedom. This however would not be sustainable and there would eventually be a negative economic effect on the Venezuelan economy.     The second panel dealt with the petro-politics of Venezuela. The panelists discussed what different alternatives Hugo Chavez could take in order to cope with the current oil prices.  The first alternative mentioned was to reduce oil subsidies domestically. Currently in Venezuela, a barrel of oil goes for US$5. Since the cost to produce a barrel of oil is US$25, the nation has a US$6 billion operating loss annually.  The second option would be for Venezuela to reduce its oil donations to other nations for political reasons. He currently supplies oil to Nicaragua, Bolivia and Peru among other nations at highly discounted prices in order to gain some political clout. The final option discussed would be for Venezuela to reduce its fiscal spending to prevent inflation. This would probably be Chavez’s last option. His main goal is to stay in power it is highly unlikely that he would take measures to curb his social agenda.  Evanan Romero, CEO of Grupo Asesor Petrolero Venezolano, LLC., outlined Chavez’s dreams and nightmares when it comes to political and economic catalysts of the near future.     Featured speaker, Anibal Romero, gave an astute speech on what the future of Venezuela would look like. Following Professor Romero was Former Ambassador Otto Reich, who gave a provocative presentation of the alternatives that United States could take to squeeze the Chavez government in a time of economic weakness. He suggested that the US cut off all oil imports from Venezuela, which would potentially force Chavez out of government. Amb. Reich’s suggestion was the most controversial of the conference and it met criticisms in the following Q & A. None-the-less, all options are on the table and both viewpoints can be argued. On that note, the conference concluded and the guests enjoyed a closing cocktail reception.

 

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