Oil Wars

As we've seen before, Chavez is totally out of his mind, save for when what he does makes perfect sense, which does seem to be the case an abnormally high percentage of the time.

But there are things that really do make you realize the guy has lost his marbles. For example, I've never really written about it but the guy has always been talking about building a natural gas pipeline from Venezuela south to Brazil and Argentina. I've never written about it because it would be hugely expensive, environmentaly iffy, and, like, why the fuck would the rest of South American need Venezuelan natural gas anyways.

Well, after picking up this mornings newspaper I realized maybe I need to do some re-thinking of this. From the New York Times:

Energy Crunch Threatens South American Nations

SANTIAGO, Chile — For Chile and Argentina, it was the frostiest of winters, and not just the reading on the thermometer.

During one of the coldest South American winters here in decades, neighboring Argentina cut at least 90 percent of the natural gas it sends to Chile 79 times along pipelines that connect the two countries.

Power plants and factories in this smoggy capital were forced to switch to diesel and fuel oil, which belch more air pollution and have nearly quadrupled the cost of producing electricity. Santiago reported its highest number of dangerous smog days in the past seven years.

Argentina’s actions have chilled relations between the two countries. But the impact of South America’s energy crisis is far broader. Across the region, concerns about energy are roiling national politics, generating tensions between neighbors and emerging as one of the biggest brakes to growth and integration.

Energy is the Achilles’ heel of the governments in Brazil, Argentina and Chile, which are struggling to maintain sufficient natural gas supplies after several years of strong economic growth.

“Bottlenecks in energy supply will be a critical policy concern in Latin America over the next two to five years,” said Christopher Garman, the Latin America director at Eurasia Group, a New York-based consulting firm.

Energy concerns are at the top of the agenda for the region’s incumbent leaders, most of whom have high popularity ratings, thanks mostly to buoyant economies riding a wave of higher commodity prices.

But the steady economic growth has only increased energy demand, while governments have failed for a decade to invest enough in natural gas exploration and new power plants to expand their energy supplies.

Fortunately, they never brought up Chavez nor his silly pipeline proposal in the article. The last thing anyone should be doing at this point is make the guy look like he has good ideas.
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The National Assembly finally included the modification, meaning if it passes the referendum it would be unconstitutional any form of discrimination based on sexual orientation. I was surprised the government decided to do add it at the last moment meaning there would be nothing stopping gay marriges. I do not believe any other nation has their rights protected at the constitutional level, not even mentioning republican efforts to do the opposite.

EDIT: link

UPDATE from OW

Unfortunately while some good rights got added to the proposed constitutional reforms, as Flanker reported above, there were big steps backwards in the realm of democracy.

For years Venezuelans have justifiably bragged about the rights citizens have to have consultative referundums on any topic that 10% of the population wants to have it on and to be able to recall office holders once they reach the half way point of their term. Unfortunately both of these rights will be harder to exercise if the proposed reforms pass.

Previously for there to be a consultative referendum you had to gather the signatures of 10% of the electorate on petitions. The new proposed changes to the constitution would double that to 20%.

Further, to convoke a recall election against an office holder now you will need signatures from 30% of the population rather than 20% as is currently required. What is more, for the recall election to be valid 40% of the electorate will have to vote in it rather than the 25% now required.

Clearly from now on invoking one of the more democratic aspects of the Venezuelan political system, consultative and recall referendums, will be a lot harder.

I wonder why. Aren't they supposed to be aiming for more democracy, not less?
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Of late debate has been raging in the comment section on whether Venezuela is handling its economy properly of late, and more specifically is it investing to ensure future growth on less dependence on oil, or has it simply engaged in a massive consumption boom fueled by windfall oil revenues.

Over the last few days Chavez sure seems to have given some hints:

First he gives teachers a 40% salary increase. Of course, teachers the world over tend to be underpaid so maybe this is justified.

Second, yesterday he gave doctors a 60% increase. Remember, these are the same doctors who fought Mission Barrio Adentro every step of the way.

Finally, to top it all off yesterday he decided to give the most highly paid workforce in Venezuela, the oil workers, up to 130 million bolivares ($60,000) in loans to purchase new homes (as if they couldn't afford to buy homes on their own given their salaries).

This last measure is particularly ironic after Chavez fought to get PDVSA out of its country club culture now maybe he has decided it isn't such a bad thing to put them back in it?!?!?!?! Why oil workers who makes many multiples of what most other Venezuelans earn can't go to a bank and get their own loans for their houses is completely beyond me.

In any event, the direction of all this is very clear - spend, spend, and spend some more - tomorrow be damned. The link to the doctor's increase is particularly illustrative of this mentality. Chavez apparently realized that the price of oil has gone up $4 more per barrel, he did a back of the envelope calculation, and he decided he could afford to give the doctors a big raise. Of course, that this money had potential alternative uses such as maybe building some industry or paying down debt seems to have been overlooked and was not considered a good use for the money.

People often argue that there is something "inevitable" to inflated currencies, spending binges, and inflation during oil booms. That is simply not true. No one forced Chavez to spend the money like this - he DECIDED to do it. He could alternatively have put the money in the macro-economic stability fund to save for some day when oil revenues are not so plentiful, but he CHOSE not to.

And lets note, these are huge salary increases. The doctors will get 60% more bolivares every month. Yes, but inflation is 15 or 20% you say so they won't really get the fully 60% increase you say. Yeah, that is partly true. But they can get damn close to the full 60% as long as they don't do anything stupid, like buy something actually made in Venezuela. As long as they buy things coming from the good old U.S.A. they get the full 60% increase because every single dollar still buys 2,150 bolivares and that hasn't changed - there is no inflation with respect to dollars and hence no inflation on imports.

Yes,in Venezuela, there is a consumption boom. Yes, inflation is high. Yes, the bolivar is overvalued. Yes, imports are crowing out Venezuelan production. But none of that has to be, none of that is inevitable. It all results from conscious decisions like the ones listed above.

You want different results? Make different decisions. It really is that simple.
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