The NYT Sunday Magazine has a terrific piece on Chavez's oil-financed Bolivarism, highlighting all of the classic elements of the natural resource curse. What is most striking, as my excerpts below highlight, is how predictable it all is...
The Cash Spigot: "...Pdvsa is no longer an oil company...It now exists to finance Chávez’s transformation of Venezuela. The integration is illustrated by the fact that Rafael Ramírez, the minister of energy and petroleum, is also president of Pdvsa. “The Pdvsa that neglected the people and indifferently watched the misery and poverty in the communities surrounding the company premises is over,” Ramírez has said. “Now the oil industry takes concrete actions to deepen the revolutionary distributions of the revenues among the people.” If the Pdvsa of the 1990s thought it was Exxon, today’s Pdvsa amounts to the president’s $35 billion petty-cash drawer."
The Dutch Disease: "Oil caused the bolívar to be overvalued. Farms and factories are in trouble. They can’t export and must compete at home with products imported at the official exchange rate, which is now about a third of the market rate. And so the country is awash in artificially cheap imported products, from basic foodstuffs, like Brazilian cooking oil, to fancy cars."
Rent Seeking: "The disparity between the official exchange rate (2,150 bolívars to the dollar) and the black-market rate (6,200 bolívars at press time) has created a new class known as the Boliburgesía. Bankers, traders, anyone who works in finance or commerce, can get very rich manipulating the exchange rates. Buy all the imported whiskey and Hummers you want, is the message. Live a life of wild excess. Just don’t try to produce anything."The Pattern: "This is classic oil curse, and Venezuela has seen it before. In 1973, and in 1981, Venezuela spent oil money wildly, without controls. Each time a boom ended, it left Venezuela worse off than before it began — per capita income in 1999 was the same as in 1960.
The Question: Are the gains sustainable this time around? And what happens if and when the spigot runs dry?