Chávez's ambitions fall with declining oil prices

CARACAS, Venezuela — High oil prices allowed Venezuelan President Hugo Chávez to spend freely to spread his socialist gospel and challenge the U.S. role as the dominant player in Latin America and the Caribbean.

The sharp drop in oil prices is imperiling those ambitions, analysts said Tuesday, a day after the Venezuelan government announced that it is suspending free heating oil to poor people in the U.S. Oil accounts for 93 percent of the government's export income and about 50 percent of its overall income.

"Hemispheric politics are suddenly becoming too expensive for Chávez," said Carlos Alberto Lopez, an energy consultant in Bolivia. "He will have to allocate his dwindling resources to sustaining his political position in Venezuela."

Chávez is facing a crucial political test in the near term. He's asking Venezuelan voters to lift term limits so that he can seek re-election once again, in 2012. The national referendum could be held as soon as Feb. 15.

Polls show that Chávez trails by 20 or so points and can't risk reversing his enormous expansion of government spending aimed at the poor, his core group of supporters.

That puts oil subsidies and other foreign-assistance programs throughout Latin American and the Caribbean on the chopping block.

Recent news reports have put in doubt whether Petroleos de Venezuela, the state oil company better known as PDVSA, can finance planned oil refineries in Ecuador and Nicaragua, two Chávez allies.

"We know that PDVSA doesn't have the cash," said Jorge Pinon, an energy fellow at the University of Miami's Center for Hemispheric Policy. "We also know that the financial markets don't have any money to loan. Those projects are not going to be carried out."

Another potential target: the Petrocaribe program under which Venezuela sells 56,000 barrels a day of oil and diesel to nearly 20 Caribbean and Central American countries under generous terms. The countries have to pay for only about half of the oil, with the rest to be paid over a 25-year period.

The program paid dividends in 2006 when the 15-nation Caribbean Community backed Venezuela's bid for one of the 10 rotating seats on the U.N. Security Council, although the effort ultimately was unsuccessful.

"We are quite confident that Petrocaribe will continue," Ralph Gonsalves, the prime minister of the island nation St. Vincent and the Grenadines, told McClatchy Newspapers in an interview. "I specifically raised this issue with Venezuelan authorities recently. I don't see a problem."

Venezuela also sells 15,000 barrels a day of subsidized oil to Central American nations and an unknown amount of subsidized diesel to Bolivia.

The Chávez government also provides nearly 100,000 barrels a day of oil and oil products to Cuba, a close ally. The price to Cuba is unknown but is likely free.

Bolivia gets millions of dollars a year from Venezuela for President Evo Morales to hand out to his nation's mayors for new schools, sewer systems and health clinics. Venezuelan money also underwrites Cuban doctors in Bolivia who perform free eye surgeries, as well as helicopters that ferry Morales throughout the country.

In all, the oil subsidies and foreign-assistance programs are believed to have cost Chávez billions in 2008, although no one has exact figures because the spending is off-budget.

Chávez could finance all of the programs abroad — and the vast antipoverty programs at home — with oil at high prices in recent years and climbing. At roughly $50 a barrel, however, global oil prices are far below their July record of $147.

"Chávez's meddling will certainly be a lot less effective in 2009," said Jorge Quiroga, a former president of Bolivia.

Quiroga added that the oil-price dive would scuttle PDVSA's plans to spend hundreds of millions of dollars to find natural gas in Bolivia, a priority for Morales' government.

No longer providing 100 gallons of heating oil to the poor in the U.S. will save the Chávez government about $100 million.

The government has saved another $2.5 billion by announcing that it will limit Venezuelans to spending no more than $2,500 abroad a year with inexpensive dollars provided by the government.