Freedom Folks

Monday, January 29, 2007

Venezuela: Oh Yeah This Is Going To End Well!

Source: The rather confused Wall Street Journal (why confused? Well, they lambast socialism abroad yet think nothing of importing mass numbers of socialists to our shores.)
Venezuela might have the hardest time pursuing the assertive foreign policy of President Hugo Chávez, a populist and former army officer, if oil prices were to drop much more. Over the past few years, Mr. Chávez has used oil money to try to counter what he sees as harmful U.S. influence in Latin America. Caracas has helped finance some neighbors' debt, and it has handed out cut-rate oil to dozens of countries, including Fidel Castro's Cuba — and even some U.S. communities through the state oil company's Citgo subsidiary.

Unlike Russia, and to a lesser extent Iran, Venezuela has been much more reckless in spending its oil windfall. Last year alone, public spending grew 43%, widening the gap between total government income and outlays to about 1.5% of the total economy, according to estimates by Morgan Stanley.

So far, falling oil prices haven't dented Mr. Chávez's spending habits. Just last week, he announced a program to send 100,000 poor Venezuelans each year to vacation in Cuba. He also recently offered the army's services to build a road in Nicaragua at a projected cost of $350 million.

While economists agree that Mr. Chávez's free-spending policies may eventually shipwreck the Venezuelan economy, they say that won't happen — if it happens at all — for at least another year. The main reason: Venezuela has accumulated more than $36 billion of reserves.

But there are signs Mr. Chávez could be headed for trouble, even without a much bigger drop in oil prices. He recently ordered an increase in gasoline prices — which the government has long subsidized — to raise federal revenue. And some economists view his recent nationalization of Venezuela's biggest telephone and electric companies as a sign his administration is eager to raise more money to keep up its spending.

A further drop in oil prices, then, might leave Mr. Chávez with some tough choices about where to trim the fat. High on the list would be his foreign aid. By far the chief beneficiary of Mr. Chávez's largess is Cuba, which receives 103,000 barrels a day of refined petroleum products in exchange for the services of Cuban doctors and other specialists. Analysts believe aid to Cuba totals about $3 billion a year.
Bread and circuses folks, but have no fear, when their economy tanks we'll take all the "willing workers" they have to offer. You know, the mental giants who voted this clown into office!



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