venezuela: the development of an oil-dependent country after the crisis ilona Švihlíková
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Venezuela: the development of an oil-dependent country after the
crisis Ilona Švihlíková
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Oil
• Discovered in 20´s – Venezuela the biggest world oil exporter
• Thanks to oil – economic and social structure differs from other Latin American countries
• 50-50 rule
• The founder of OPEC
• Hawk in OPEC
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Top ten oil reserves (BP statistical review)
Country Share of total Country Share of total
Saudi Arabia 19,1% United Arab Emirates
7,1%
Venezuela 15,3% Russia 5,6%
Iran 9,9% Libya 3,4%
Iraq 8,3% Kazakhstan 2,9%
Kuwait 7,3% Nigeria 2,7%
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Impacts
• Importance of state and oil company PDVSA
• Geopolitical risks
• Position in OPEC
• Dutch disease (exchange rate, inflation, impacts on trade flows)– Necessity to diversify the economy
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The start of Bolivarian Revolution
• Hugo Chávez Frías (1998 – 56%)• Financing of social programmes: OIL • 1) reviving OPEC – oil diplomacy (not
using dollars!)• 2) getting control of PDVSA (a state within
a state)– Organized a coup d´etat against Chávez– Chávez returned within 48 hours– Gained control of PDVSA
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Ten years of Chávez´ reforms (Socialism of the 21st century)
• Oil as a geopolitical tool: ALBA, Petrosur• State involvement in the economy• Social reforms (missions) • Workers self-management• Land reforms (food sovereignty)• Direct democracy (community councils)• Internationalism (integration) against US
imperialism
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Venezuela: Real GDP development
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Achievements and failures
• Growth of manufacturing sector (98,1%)• Declines in poverty and inequality• Social missions: Barrio adentro, Robinson,
Ribas missions – increase in HDI and Latinobarometro (positive evaluation)
• Budget surplus, decline in foreign debt (and helping Argentina)
• High inflation (30%) – low absorption and thus overvaluation of exchange rate
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And then came the crisis
• Channel to Venezuela:not financial sector, but oil price - dramatic decline (the burst of the oil bubble)
• OPEC – severe cuts in quotas • GDP (2009) – 3,3% • Economic adjustment package: VAT
increase, cuts • Exchange rate devaluation, high inflation,
electricity black-outs (drought)
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High oil price volatility
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Impacts of the crisis
• The recession was longer and deeper than in other Latin American countries
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Economic data (Eurostat 2011)
2007 2008 2009 2010
Real GDP growth
8,2% 4,8% - 3,3% -1,9%
Inflation rate
18,7% 30,4% 27,1% 28,2%
Current account balance (% GDP)
8,8% 12,0% 2,6% 4,9%
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Current top oil producers (JODI – September 2011)
Country Mb/d Country Mb/d
Russia 10,3 Kuwait 2,9
Saudi Arabia 9,4 Venezuela 2,8
USA 5,8 Iraq 2,7
China 4,0 United Arab Emirates
2,5
Iran 3,6 Mexico 2,5
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Where does Venezuelan oil go?
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Despite diversification efforts…
• 80-90% of export revenues, 50% of government income, 30% of GDP = OIL
• PDVSA, third biggest oil company (Saudi Aramco, Exxon Mobile)
• 10% of PDVSA´s investment budget goes for social programmes
• Intensive cooperation with China • Petrocaribe initiative • Disputes in OPEC
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International dimension of Bolivarian revolution
• Opposition towards US imperialism – Venezuela as a model for rest of Latin America?
• ALBA • UNASUR • Bank of South • Petrosur, Petrocaribe…• But: „the enemy of my enemy is my friend“
approach in foreign policy
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Grassroot dimension
• Support by the liberation theology• Decentralisation of economic and political
power • Communal councils (30 000 until now) • Cooperatives (100 000) , workers
participation (Alcasa factory) • Community media network• Enormous political activity + indigenous
population rights.
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Criticism
• From the right: authoritarian style (top – bottom), strong influence of the military.
• From the left: populism, emerging personality cult (With Chávez everything, without Chávez nothing), bureaucracy, Venezuela still a capitalist country (private sector 70%)
• High crime, patronage and clientelism, housing and electricity shortages remain serious problems
• Much of the process depends on Chávez: his illness?
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Thank you for your attention