Saturday, February 18, 2006

Hugo Chavez - the half trillion dollar man 

The oil policy of Venezuela changed radically with President Chavez coming to power in 1999. Whereas previously Venezuela has been a OPEC quota buster that worked to keep prices down upon Chavez’s coming to power Venezuela became a price hawk insisting on production cutbacks to boost prices. This price hawkishness has been evident recently as evidenced by this article in yesterdays Financial Times:

Venezuela puts pressure on OPEC to cut its output

By Kevin Morrison in London

Venezuela said yesterday the Organization of the Petroleum Exporting Countries should cut its output by up to 1m barrels a day – firing the first salvo well in advance of the next meeting of oil ministers from the cartel in two weeks’ time.

The call from Opec’s fourth biggest producer comes days after the cartel trimmed the demand outlook for this year, and follows a sharp fall in prices this week. The drop was triggered by swelling oil and petroleum product inventories in the US, the world’s biggest consumer.

Rafael Ramirez, Venezuelan energy minister, said that for the level of demand there was overproduction of about 1m barrels a day.

“I think we should cut between 500,000 and 1m,” said Mr. Ramirez, who is one of the most hawkish ministers in Opec.

So in a response to a dip in prices Venezuela takes a aggresively pro-active stance of wanting OPEC to cut back production. That is certainly a very prudent stance and hopefully will allow prices to be kept from falling.

Contrast this to previous Venezuelan governments which were more concerned with doing what the oil consumers, like the United States, wanted than doing what was in the best interest of their own country. In 1990 Iraq invaded Kuwait and due to a US embargoe the oil from both those countries was kept off the market and prices spiked. How did Venezuelan government of Carlos Andres Perez respond? Lets see from a Wall Street Journal articles published on August 20, 1990:

Perez Hints Venezuela, Others Will Lift Oil Output

By Jose De Cordoba

Caracas, Venezuela – President Carlos Andres Perez strongly suggested that Venezuela and other OPEC countries will soon increase production to make up for embargoed Iraqi and Kuwaiti oil.

“OPEC has the obligation to maintain production at the 22.5 million barrels a day level agreed to at the last OPEC conference,” said Mr. Perez during an interview at his ornate office in the presidential palace here.

But Mr. Perez said Venezuela, like Saudi Arabia, wanted if possible to reach agreement with the other members of OPEC, or the Organization of Petroleum Exporting Countries, to “provisionally” increase their production quotas. The higher production would make up a large part of the roughly four million barrels a day of Kuwaiti and Iraqi oil removed from the world market by the United Nations sanctions following Iraq’s invasion of Kuwait.

Mr. Perez said a steep price rise resulting from a failure to replace the lost production would be “disastrous” for the world economy, and especially for the economies of developing countries.

Venezuela, along with Saudi Arabia, has issued a call for an OPEC meeting to consider a production increase.

Mr. Perez, who has been accused at home and in the U.S. of waffling on the issue of raising Venezuelan production, denied that he has been pressured by the U.S. to do so. “The U.S. attitude towards Venezuela’s position has been one of frank gratitude,” Mr. Perez said. Mr. Armas, the energy minister, said that at the beginning of the Gulf Crisis, Venezuela had briefly raised production over its OPEC quota “out of nervousness”.

Clearly, the Carlos Andres Perez administration cared more about helping out the U.S. with low prices than reaping the benefits of high prices for Venezuela. The difference with the Chavez government couldn’t be more stark. And this goes a long ways towards explaining why Chavez is so beloved by Venezuela, he does everything he can to increase the resources available for them, and so detested by the U.S. government, he has cost them a lot of money.

Exactly how much money has the increased in oil prices that started with Chavez’s ascension to power cost the U.S.? This is not difficult to figure out. The U.S. Department of Energy publishes a Monthly Energy Review. Looking at the January 2006 report in Table 1.5 we see the Merchandise Trade Value which gives how much the dollar value of U.S. net oil imports are. In 1998, before Chavez came to power it was $43.7 billion dollars. That is, it cost the spent 43.7 billion dollars to import oil. Lets look at what that number has been in the years since Chavez came to power:

1999 $60 billion

2000 $109 billion

2001 $93 billion

2002 $94 billion

2003 $122 billion

2004 $166 billion

2005 $210 billion

As can be seen the U.S. has been spending ALOT more money to import oil since Chavez came to power. In 2005 it spent five times as much money on oil imports as it did in 1998!!! And what is the cumulative cost – i.e. the cumulative years amounts above the $43 billion amount from 1998 in all the successive years? Doing the calculations in a spreadsheet the number I cam to was a stunning $556 billion dollars. Yes that is right – the U.S. has had to spend more than half a trillion additional dollars to import oil since Chavez came to power. That is a staggering amount. And it will still be a staggering amount even if you don’t attribute all of it to Chavez’s oil policies.

Looking at this it is a little easier to see why the U.S. would very much like to be rid of the Chavez government


Off to a good start 

Much has been made of the Venezuelan government not having built a sufficient number of new housing units. Although what they do build has been of very high quality they have not met their goals of 100,000 units.

So far this year they are getting off to a much better start. According to Ultimas Noticias to date in 2006 9,600 new houses have been built. If this pace is accelerated just a bit they should meet their goals.

The Ultimas Noticias article also mentioned another key fact that is often overlooked in the discussion of housing. The Venezuelan government often buys houses in the private market to then give to low income families. Last year it bought and distributed 7,000 such houses which are not counted in the numbers of new government housing. So far in 2006 500 such homes have been distributed.

Additionally, the government has a large program of grants to people to subsidize their housing purchases. The grants are $8,000 per family and so far this year 3,500 such grants have been giving out. Clearly the governments efforts to help people solve their housing prolems have gotten off to a quick start.


Friday, February 17, 2006

The opposition can lie on the internet but they can’t fool the courts 

The opposition to president Chavez has for some time now accused his government of various political crimes and crimes against humanity. Some of them (with the support of pretend laywer Alek Boyd) even went so far as to file a case against the Venezuelan government in the International Criminal Court.

Earlier this month the court threw everything out. Essentially, the prosecutor found the evidence to be sorely lacking. The whole report can be found here but lets just look at some key excerpts:

The Office reviewed the communications, including supplementary information submitted by senders of communications, and examined the relevant documentation and video-recorded information. In addition, we conducted an exhaustive search of all readily-available open source information, including media reports and reports of non-governmental organizations and international organizations.


Communications put forward allegations that crimes against humanity had been committed against the political opponents of the Venezuelan government. The allegations in the communications that fell within the temporal jurisdiction of the Court included 45 victims of murder, 39 to 44 of imprisonment, 42 of torture and larger numbers of victims of persecution.

Many of the allegations of persecution did not appear to satisfy the elements for the crime of persecution.

A considerable challenge in analysing the information received was the lack of precision as well as internal and external inconsistencies in the information. There were numerous instances in which the lack of even approximate data rendered information unreliable for purposes of analysis. Some allegations were missing vital data such as the date of incident, the location of incident and the name of the alleged victim. In other instances, the same individuals appeared on different lists of allegations in different communications; the same individuals were allegedly victimized on different dates for the same crimes; individuals’ names were repeated twice on lists of alleged victims of murder [someone was murdered twice? That does sound fishy – ow]; and there were frequent inconsistencies in victims’ names, ages and location of alleged incidents. These difficulties did not disqualify the information but rendered more complex the evaluation of allegations and the crime analysis. The Office also drew upon on other reliable sources, including the reports of the Inter-American Human Rights Commission, which had helpful information.

The Office consolidated the information and examined the overall patterns arising from the information in communications and open sources. In order to constitute a crime against humanity, Article 7(1) of the Rome Statute provides that particular acts must have been committed as part of a widespread or systematic attack directed against any civilian population. This test creates a stringent threshold. Even on a generous evaluation of the information provided, the available information did not provide a reasonable basis to believe that the requirement of a widespread or systematic attack against any civilian population had been satisfied.

So the heart of the matter seems to be that the information about who had been presumably repressed by the government was all wrong. Most likely the reason for that was it was just made up. Given what the opposition are like I can believe that. But you would at least think they wouldn’t put the same person down as having been murdered more than once and could get basic things like dates, names, and locations to be consistent. I don’t think even Alek Boyd could have screwed something up this badly all by himself – he must have had technical assistance from SUMATE.

In any event, this is a further instance of a long standing pattern here. The opposition likes to make all sorts of allegations against the Chavez government – the elections are fraudulent, there are political prisoners and persecution, the oil industry is going down the tubes, and on and on. Yet, without exception, every time these allegations are examined by an expert outside source they are found to be without any basis. In other words, they are just fabricated.

So when you sit and read some opposition allegations and notice it sounds so off the wall that it must be just made up there is a reason for that. And that is it really is the case that some idiot just sat in front of their computer and made it all up. Such is the state of information provided by the Venezuelan opposition.


Thursday, February 16, 2006

Its official 

For a while now the 9.4% growth GDP growth number for Venezuela has been thrown around. But that was always an estimate, the real numbers had yet to be released. Today the Venezuelan Central Bank released the real numbers and the estimate turned out to be darn close - the real number is 9.3% growth. And while that may seem to be a little less than what was estimated it actually masks what is very good news - that Venezuela's economy was growing 10.4% in the fourth quarter. That is it accelerated as the year drew to a close. Hopefully momentum will carry over into this year.

Rather than go through all the numbers, which have been analyzed before, let me just give them as Bloomberg summarized them:

Feb. 16 (Bloomberg) -- Venezuela's economy grew for a ninth quarter in the October-through-December period as increased government spending fueled consumer demand, the central bank said.

Gross domestic product, the broadest measure of a country's production of goods and services, expanded 10.2 percent in the fourth quarter from the year-earlier period, the central bank said in a statement. The economy grew 9.3 percent last year, less than the bank's initial estimate in December of 9.4 percent.

``All the factors are in place for many years of real growth,'' Armando Leon, one of seven central bank directors, told reporters in Caracas yesterday. ``We expect the economy to grow 5 or 6 percent this year.''

Government spending rose 38 percent during the first 10 months as President Hugo Chavez drew on record oil income to fund health, food and education programs. The economy grew 18 percent in 2004 after contracting 7.7 percent in 2003 and 8.9 percent in 2002.

The oil industry grew 2.7 percent in the fourth quarter while non-oil GDP grew 11 percent, the bank said.

Construction expanded 28.5 percent and manufacturing jumped 8.9 percent during the fourth quarter, the bank said.

The surplus of the current account, the broadest measure of a country's trade in goods and services, grew to $6.4 billion in the fourth quarter from $3.6 billion in the year-ago period, the bank said. The current account surplus for 2005 rose 84 percent to a record $25.4 billion

The capital account, which measures investment flows, had a deficit of $6.2 billion in the fourth quarter, the highest level since the bank began reporting quarterly balance of payment figures in 1997. The capital account deficit for 2005 was $16.2 billion, also a record.

If there is a negative in there I sure can't find it. And judging by this neither can most Venezuelans.


Wednesday, February 15, 2006

How do you spell asshole in the House of Representatives? J-O-E B-A-R-T-O-N 

The U.S. political leadership certainly has no shortage of people who are complete jerks - Bush, Cheney, DeLay, Frist just to name a few. Today I learned of one who I hadn't previously heard of - Joe Barton. This congressperson from Texas is the Chairman of the Committee on Energy and Commerce.

Apparently he is all worked up in a lather right now. About what you ask? About Venezuelan owned Citgo doing for American citizens what this clown and his collegues should be doing but don't - help people of limited means pay some bills. No joke, this asshole wants Citgo investigated for giving out low cost heating oil:

WASHINGTON – U.S. Reps. Joe Barton, R-Texas, and Ed Whitfield, R-Ky., today sent a letter to Felix Rodriguez, president and CEO of CITGO Petroleum Corp., asking him for details of the company’s programs to provide discounted heating oil primarily to organizations in the Northeast. Barton, chairman of the House Energy and Commerce Committee, and Whitfield, chairman of the Subcommittee for Oversight and Investigations, have raised concerns that the company, a subsidiary of Venezuela’s state-owned oil company, is using this program as part of an unfriendly government’s increasingly belligerent and hostile foreign policy toward the United States.

Those who want to bore themselves reading his entire letter can read it but let me just quote the last two paragraphs:

Given President Chavez’s clear anti-American sentiments, his current efforts must be viewed with concern that he is attempting to politicize the debate over U.S. energy policy. Indeed, CITGO’s Chief Operating Officer, Jerry Thompson, recently acknowledged as much in an interview with USA Today (January 12, 2006, page A1): “Being owned by a political entity [PDVSA] ultimately means, from time to time, you have to do things with a political bent to them. Heating oil as an example of that.”

The Committee would like to get a better understanding of Venezuela’s program offering discounted heating oil to select low-income communities in the United States (the Program). Accordingly, pursuant to Rules X and XI of the United States House of Representatives, please respond to the following questions. (1) How and when was this Program first conceived? (2) How and why were the particular beneficiaries of this Program selected? (3) How is the Program being implemented? (4) What is the status of the Program in each of the proposed communities? (5) Does this Program run afoul of any antitrust laws? In addition, please provide all records in CITGO’s possession, custody, or control relating to the Program. All responses and documents should be provided on or before February 23, 2006.

Thank you for your cooperation.


Joe Barton

Ed Whitfield

cc: The Honorable John D. Dingell, Ranking Member
Subcommittee on Oversight and Investigations

The Honorable Bart Stupak, Ranking Member
Subcommittee on Oversight and Investigations


So lets make sure we are getting this straight. A foriegn owned company is generous enough to help Americans in need and instead of being thanked... they get investigated for violating anti-trust laws?!?!?! Excuse me, but aren't antri-trust laws meant to prevent companies colluding to raise prices? Not stop companies from giving to charities or lowering prices? Quite frankly this absurd request deserves a simple one line reply - "fuck off". But that would obviously provoke legal action and fines. So Citgo will have to spend countless hours putting together documentation for this clown. As the saying goes, no good deed goes unpunished. Hopefully, some people in New York, Boston, Delaware, Maine, Vermont and elsewhere will write to give Joe a piece of their mind.

And all this is not to mention you would think this guy would have other things to focus on, like the government letting Big Oil walk away with billions of dollars in unpaid royalties. As if they weren't already making enough money. Of course, if the government bothered to collect these royalties and use them to provide discounted heating oil they wouldn't have to worry about what Citgo was offering to people - there wouldn't be any unmet needs for them to fill. But of course that won't happen because the Joe Bartons of the world don't give a hoot about the well being of average Americans.


Updated links 

At long last I have updated my links section to include some excellent sites such as:

Latin American News Review

The Digital Revolution

News of the Restless

These are excellent sites which I would recommend as daily reads.

One additional site dear to my heart is Barquisimeto.com which focuses on one of Venezuela's most pleasant city. And one big virtue of it is it is chock full of information on the new construction and infrastructure projects taking place in that city - you know, the sort of activity the opposition claims just doesn't exist.


Tuesday, February 14, 2006

Economic terrorism 

At first glance reading todays New York Times article about what the U.S. and Israel are trying to do to the Palistinians didn't seem to have anything to do with Venezuela. Then I thought about it for two seconds and realized it had everything to do with Venezuela. In fact, it became quite apparent that in terms of what the U.S. and Israel want to do to the Palistinians Venezuela has been there and done that.

What is it they are planning to do? Here are some key points from the article:

The United States and Israel are discussing ways to destabilize the Palestinian government so that newly elected Hamas officials will fail and elections will be called again, according to Israeli officials and Western diplomats.

The intention is to starve the Palestinian Authority of money and international connections to the point where, some months from now, its president, Mahmoud Abbas, is compelled to call a new election. The hope is that Palestinians will be so unhappy with life under Hamas that they will return to office a reformed and chastened Fatah movement.


The officials said the destabilization plan centers largely on money. The Palestinian Authority has a monthly cash deficit of some $60 million to $70 million after it receives between $50 million and $55 million a month from Israel in taxes and customs duties collected by Israeli officials at the borders but owed to the Palestinians.

Israel says it will cut off those payments once Hamas takes power, and put the money in escrow. On top of that, some of the aid that the Palestinians currently receive will be stopped or reduced by the United States and European Union governments, which will be constrained by law or politics from providing money to an authority run by Hamas. The group is listed by Washington and the European Union as a terrorist organization.

Israel has other levers on the Palestinian Authority: controlling entrance and exit from the West Bank and the Gaza Strip for people and goods, the number of workers who are allowed into Israel every day, and even the currency used in the Palestinian territories, which is the Israeli shekel.

Israeli military officials have discussed cutting Gaza off completely from the West Bank and making the Israeli-Gaza border an international one. They also say they will not allow Hamas members of the Palestinian parliament, some of whom are wanted by Israeli security forces, to travel freely between Gaza and the West Bank.


If a Hamas government is unable to pay workers, import goods, transfer money and receive significant amounts of outside aid, Mr. Abbas, the president, would have the authority to dissolve parliament and call new elections, the officials say, even though that power is not explicit in the Palestinian basic law.

The potential for an economic crisis is real. The Palestinian stock market has already fallen about 20 percent since the election on Jan. 25, and the Authority has exhausted its borrowing capacity with local banks.

Hamas gets up to $100,000 a month in cash from abroad, Israel and Western officials say. "But it's hard to move millions of dollars in suitcases," a Western official said.

The United States and the European Union in particular want any failure of Hamas in leadership to be judged as Hamas's failure, not one caused by Israel and the West.

I'm not going to go in depth analyzing the Palistinian situation nor how outrageous this is (Israel gets to just keep other peoples tax money? Can I stop paying taxes to the U.S. government until it stops its illegal wars? Some how I doubt it.)

But there is a striking parrallel here between what is happening to the newly elected Palistinian government and what happened to the Venezuelan government a few years ago. In December 2002 the Venezuelan opposition, quite possibly with the U.S. advising it, launched a strike to shut down the Venezuelan oil industry and deprive the government of money it needed to run the country. None other than the former PDVSA president Roberto Guisti said the government wouldn't survive a week without oil exports. This was full scale economic warfare, or better yet, terrorism. Hundreds of thousands of people lost their jobs. People couldn't drive their cars so, for example, taxi drivers lost all their income. There were huge shotages of propane for stoves. People I know were forced to chop up old furniture and burn it in order to cook.

And what were the aims? To overthrow the government. Faily that, it was hoped to at least "make the economy scream" so that Venezuelans would turn on Chavez and vote him out at the first oppertunity. You just can't get any more cynical and undemocratic than that - except of course for the U.S. and Israel who are now doing the exact same thing. In any event, it didn't work. Most Venezuelans kept working and the country recovered. The electoral strategy of pissing people off at Chavez backfired as when the economy revered people realized that all the hardship wasn't Chavez's fault but rather the fault of a extremely cynical and selfish opposition. So the first chance they go Venezuelan's punished the opposition giving it a huge defeat and making it clear they will now give it a huge defeat in any vote.

Hopefully, the same will happen in this situation. The Palistinians will realize who is causing their suffering. And causing this suffering simply because they excercised their fundamental rights. Hopefully, this will make them even more determined to fight for a just resolution to their plight. And Venezuela, having been there and done that, should stand shoulder to shoulder with them the whole way. I trust they will.


Monday, February 13, 2006

Economic notes 

On the political front things have been quiet in Venezuela. Chavez is immensley popular, the Assembly is full of like minded people thanks to the opposition's brilliant strategy of boycotting the election, and the opposition is in disarray with its main political party, Primero Justicia, unable to do something as simple as organizing primaries to choose its leadership.

Of course, there is a very simple reason for the quiet that reigns in Venezuela - its booming economy. The basics of that are at this point well known. But in the past few days yet more statistics have come out that I thought I'd pass along.

First, the unemployment rate continues to drop and jobs created. The unemployment rate in the second half of 2003 was 16.8%. By the second half of 2005 it had dropped to 11.9%. Certainly a very significant improvement. Unemployment is dropping because jobs are being created by the hundreds of thousands. In the second half of 2005 222,501 new private sector jobs were created while 71,155 public sector jobs were created. 86,925 of those new jobs were in construction while 45,724 were in manufacturing.

Secondly, the international financial community is taking notice of the Venezuelan boom with Venezuela's credit rating increasing from B+ to BB. This may be a rather arcane item but it does mean Venezuela pays less interest on its debt so it does have a real benefit for the country.

Lastly, in 2005 Venezuela had a record year for auto sales at well over 200,000 being sold. So 2006 has no where to go but down, right? Wrong. In January 2006 90% more cars were sold than in January 2005. Unreal. Where the hell are they going to put all those things. And now the mystery of why no-one shows up to opposition political rallies is solved - they're all out car shopping.


Pipeline or Pipedream 

The huge natural gas pipeline that president's Chavez, DeSilva, and Kirchner have proposed for South America is more and more in the news. Recently Brazilian environmentalists have come out strongly against it. Brazil has also insisted that Venezuela pay at least half of the estimated $20 billion dollar cost of the pipeline. Many have also questioned the economic feasability of contstructing such a large pipeline. All these concerns lead to questions about whether or not this pipeline will ever be built. This blogger certainly thinks not. However, if it does get off the ground it will certainly be one of the great civil engineering works of all times. So it is someting that merits following in detail, especially when all encompassing articles on it come out. From today's Washington Post:

A Latin American Pipeline Dream
Regional Leaders Put Weight Behind Gas Plan

By Monte Reel
Washington Post Foreign Service
Sunday, February 12, 2006; A24

BUENOS AIRES -- South American leaders from Venezuela to Argentina are proposing to build the world's largest fuel pipeline across Latin America, and they hope it will deliver much more than natural gas: They portray the plan as the first blueprint for a new era of regional cooperation, greater independence from international markets and a more prominent voice on the world stage.

President Hugo Chavez of Venezuela has labeled the proposal a 5,000-mile symbol of diminishing U.S. influence in Latin America. Enthusiastic support for the project from regional heavyweights, including Brazil and Argentina, has prompted others to describe the project as the first true joint venture of a political coalition determined to forge a new South American identity.

"This is the end of the Washington consensus," Chavez told reporters in Caracas last month, using the term for the market-driven economic policies that many Latin American countries adopted in the 1990s with U.S. encouragement. "It's the beginning of a South American consensus."

But the pipeline is a long way from being built, and many potential obstacles -- finding the estimated $20 billion to pay for it, resolving the environmental concerns of burrowing through the Amazon rainforest, dealing with competing interests of individual nations -- have caused some analysts to wonder whether the public pledges of unity can withstand a concrete test.

Instead of illustrating the ideological solidarity of the region, some analysts say that the pipeline proposal could expose the political fault lines that divide participating countries.

"This is a region that is moving toward more disintegration and political fragmentation -- not the other way around," said Michael Shifter, vice president for policy at the Inter-American Dialogue, a Washington-based group concerned with Latin American issues.

According to preliminary proposals, the pipeline would begin in Puerto Ordaz, southeast of Caracas, stretch south the length of Brazil and end in Argentina, with possible branches serving Uruguay and Bolivia. In the past four years, the five countries have elected presidents who seek to promote more regional teamwork and less dependence on international financial markets.

Energy-related issues have been instrumental in determining the outcomes of several of those elections, in some cases serving as a lightning rod for public discontent. Energy is increasingly seen as a tool to achieve greater economic independence in the region.

Chavez, thanks to record profits in Venezuela's the oil and gas industries, has become the continent's most prominent voice and most active alliance-builder, using fuel to barter trade deals with Latin American neighbors and to secure goodwill. In Bolivia, disputes over how to manage natural gas reserves toppled two presidents in the past two years and helped propel the rise of Evo Morales, a socialist who has vowed to increase state control of the sector, to the presidency.

The countries with the region's largest economies, Brazil and Argentina, are struggling to keep up with rising domestic demand for natural gas and are eager to make deals with ideological allies to preserve flows.

The three principal authors of the pipeline plan -- Chavez, and presidents Luiz Inacio Lula da Silva of Brazil and Nestor Kirchner of Argentina -- promise more details next month, when they meet for discussions in Argentina. Each has good reasons for wanting the project to progress quickly.

Venezuela would benefit from greatly expanded markets for its natural gas. Argentina, a longtime gas producer, recently has had to reduce exports to meet rapidly increasing domestic demand. Brazil already depends on gas imports, largely from Bolivia, and is predicted to triple its consumption by the end of the decade.

"The energy sector has been growing in prominence for the Brazilian government over the past year, and it has been looking for ways to get more control of its supply," said Sophie Aldebert, an associate director in Rio de Janeiro of Cambridge Energy Research Associates, a consulting firm. "Gas from Venezuela could be of great interest for a country trying to diversify its sources of energy."

Energy experts said designing and building the pipeline would be an enormously challenging task, but could be done within seven years with adequate financing. After meeting with Lula and Kirchner in Brazil last month, Chavez told reporters there would be more than enough money, with billions contributed by each government and possible investment from unspecified Asian partners.

Some experts suggested that private financing would help insulate the long-term project from political and financial turmoil in a region historically marked by instability.

But even if the project makes economic sense, others said the greatest challenge would be environmental.

To cross Brazil, the pipeline would have to traverse the Amazon, a vast river system and forest that is home to 25 percent of the world's plant species and numerous indigenous communities. Development projects in the region often become mired in disputes over their environmental impact; experts have been assessing the effects of paving the cross-Amazon highway for almost five years, and environmental activists said they expect approval for a pipeline to be at least as complicated.

"This pipeline project caught everyone in the environmental community by surprise. There was absolutely no discussion about this before the presidents sat down together and announced it," Paulo Adario, Amazon program coordinator for the environmental group Greenpeace, said in Manaus, Brazil. "It would have enormous consequences not only to the environment, but to the many indigenous groups."

Because presidential elections are slated for Brazil, Venezuela and Argentina before the end of next year, some critics have questioned whether the current presidents really believe the pipeline has a future beyond the planning of summits and staging photo opportunities.

"The realities of this project -- for example, whether it's even feasible -- have not yet come into play, because right now this is just a political tool," said Luis Pacheco, a former chief of planning for Venezuela's state oil company who opposes Chavez's administration.

Russia's state-controlled energy company, Gazprom, cut off gas supplies to Ukraine on Jan. 1 in a fight over pricing that also had political overtones. Reductions in gas entering a pipeline network were felt across Europe before the dispute was settled three days later. The incident illustrated how political tensions can turn a pipeline into a source of pressure.

Nowhere in South America is the potential for such tensions greater than in Bolivia, which has the continent's second-largest gas reserves after Venezuela. Bolivia, which borders Brazil and Argentina, could become the most convenient source of gas for both, although the proposed pipeline would carry Venezuelan gas into direct competition with Bolivia, South America's poorest nation.

But Morales calls Chavez a friend and political hero, and Chavez has said that Morales's election in December sealed the pipeline deal, which some analysts said a president without strong ties to Chavez would likely oppose.

"Why would Bolivia be happy in any possible way to give up a big share of its natural markets?" said Carlos Alberto Lopez, a former vice minister of energy for Bolivia. The issue is being viewed from "an ideological perspective and not an economic or commercially based one," he said.

Recent events in other parts of Latin America suggest that the current atmosphere of unity could dissolve into a conflict over national interests. Argentina's Kirchner and President Tabare Vazquez of Uruguay have been feuding over Uruguay's plan to build two paper mills near the Argentine border. Tensions between Argentina and Chile flared last year when Argentina reduced natural gas exports to its neighbor to address greater domestic demand.

"Economically, you do see some room for pragmatic deals," Shifter said. "But there are lots of splits, divisions and jealousies in the region now." Chavez is the motor driving the pipeline, he said, "and clearly he has some constituency in Latin America, but I don't think a lot of people in other countries are looking to copy his style."


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