Goods dwindle as oil drops in Venezuela

A version of this article also appeared in the Arizona Republic

By Chris Hawley, USA TODAY
12 February 2009

If you want beans, pasta or milk, you’re out of luck at the El Barquero Supermarket in Caracas, Venezuela.

“Lentils, grains — you almost can’t get them,” purchaser Jose Rodriguez said by telephone. “We’re always having shortages of one thing or another … and you can’t import them because the government controls it all.”

Such is life in President Hugo Chávez’s Venezuela, where the country’s fortunes have largely traced the price of oil — from a relative bonanza as recently as last year, when crude went for more than $140 a barrel, to the current reality of rising poverty, crime and food shortages as the oil price plummeted to about $40.

The trends are linked because Venezuela, the No. 4 supplier of oil to the United States, relies on crude revenue for about half of government spending. That could spell an uncertain future for the free health clinics, new public universities and foreign aid programs (including free heating oil for some Americans) that Chávez has created while trying to forge an anti-U.S. bloc of socialist countries in Latin America.

The tumbling oil price is a major factor in a nationwide referendum Sunday to determine whether Chavez, 54, stays in power for four more years — or is allowed to continue as president for a decade, or more.

“I think the times and the economic crisis are going to affect Chávez, and in a big way,” said Alfredo Ramos Jiménez, director of the Center for Comparative Politics at the University of the Andes. Chávez has approval ratings of about 60%, but Ramos Jiménez said falling oil revenue could leave Chávez unable to fulfill his promises. “Now there’s just not enough money to meet them,” he said.

Inflation runs above 30%. Chávez has implemented price controls, but many producers have reacted by choosing not to sell their goods below what they consider fair cost — resulting in shortages of staple foods. The government has put strict controls on the buying and selling of dollars in an effort to prop up its currency, the Bolivar.

Crime is rising. The country’s murder rate soared from 25 per 100,000 people in 1999 to 48 in 2007, according to the Venezuelan Program for Education and Action in Human Rights.

Kidnappings during the first nine months of 2008 doubled from the year before, from 182 to 366, the group reported.

Chávez’s opponents have been chipping away at his power base. In November’s state and municipal elections, they won control of the capital and the country’s three most populous states.

The referendum Sunday will determine whether term limits are abolished for Chávez and other officials. Confident he will win, Chávez has taken a more conciliatory tone with opponents in recent days and even called the leader of an opposition group to wish him luck before a march.

“We are the guarantee of peace, we are in the final week and I ask the people, state institutions, everybody to campaign in peace,” he said at a rally.

A poll of 1,300 Venezuelans by the Datanalisis company in mid-January showed 51.5% supported Chávez in the referendum vs. 48.1% against. The poll’s margin of error was +/—2.7 percentage points.

“His proposal enjoys some popularity, but quite a bit less than he himself does,” said Andrés Stambouli, director of the Center for Government Studies at the Metropolitan University in Caracas. “That shows that even among his own supporters, there is a group that doesn’t like the idea of this reform” to allow Chávez to stay in power.

In such a tight race, the outcome will probably hinge on which side has the most enthusiastic supporters, said John Walsh, a senior associate at the Washington Office on Latin America, a think tank.

Chávez has showed no signs of reining in social programs. The government’s 2009 budget, passed in December, optimistically counts on $60-per-barrel oil prices.

The government says it has $42 billion in savings — enough to tide it through another year without any budget cuts, said Larry Birns, director of the Council on Hemispheric Affairs, a Washington think tank.

If the government eventually has to tighten its belt, Chávez’s popularity will probably plummet, Birns said.

“He doesn’t get a free pass with his own people,” Birns said. “He’s got to keep on supplying them with the favored treatment that they are growing used to.”

Hawley, the Latin America correspondent for USA TODAY and The Arizona Republic, reported from Mexico City. Contributing: Sergio Solache and wire reports