Venezuela's Socialist Reforms Float on a Sea of Oil
With his outspoken criticism of the US and self-proclaimed Bolivarian Revolution – the current catchphrase now being “Fatherland, Socialism, or Death!” – Venezuelan President Hugo Chávez has catapulted his oil-rich country into the forefront of 21st-century geopolitics.
Among many profound reforms to private and public life, Chávez has implemented an ambitious series of social programs, known as Misiones, that offer free health care, education, and subsidized food to the country’s poor, who account for around 80 percent of the national population.
Since coming to power in 1998, Chávez has taken advantage of huge hikes in oil prices to fund such public works programs. A combination of these and other factors has sent his popularity skywards, resulting in landslide victories in every referendum and general election that has been held during his two terms in office.
There is much debate surrounding Chávez’s presidency and the fundamental efficacy of the social, economic, and legislative reforms he has implemented in the last nine years. But there is one question that is very rarely raised in the heated debates between pro- and anti-Chavistas: Given that climate change is now a pressing global problem, what are the ethical implications of funding a socialist revolution on crude oil sales?
A Booming Economy
Chávez is by no means the first Venezuelan president to fund social programs on oil revenue. Since the large-scale exploration and commercialization of its massive reserves at the start of the 20th century, Venezuela has remained highly dependent on oil as a cheap and abundant export resource. Juan Vicente Gómez, three-time military dictator of Venezuela from 1908 until his death in 1935, used newly discovered oil reserves under Maracaibo Lake to finance a grand public works program, receiving generous kickbacks in the process. Marcos Pérez Jiménez, another dictator who held office from 1952 to 1958, transformed Venezuela into Latin America’s most modernized country through profound economic reform and massive oil-funded investments in infrastructure.
Today, oil sales account for roughly 90 percent of export earnings, more than 50 percent of the federal budget revenues, and around 30 percent of GDP. As a result, the country’s economy has always been highly susceptible to fluctuations in market prices, and with oil now at a $76 per barrel, Venezuela is booming.
Venezuela currently produces between 2.3 and 3.3 million barrels of crude a day, most of which is exported to the US, China, and India. According to government figures, 474,000 barrels remain within the national borders every day for internal consumption as gasoline or other derivatives, representing a per capita consumption of just under half that of the US.
Juan Carlos Sánchez is a consultant to the Ministry of the Environment and a university lecturer on environmental studies. He was part of the Venezuelan UN delegation that signed the Climate Convention in 1992 and ratified the Kyoto Protocol in 2005. He explained that climate change represents a double challenge for Venezuela.
Climate change and global petroleum dependence are a Catch-22 for Venezuela. The country could suffer environmentally, economically – or both.
“Yes, it will cause a little destruction, but not too much.”
“On the one hand, should the climate change drastically, ecosystems would be affected and agricultural productivity would suffer,” Sánchez says. “And considering that 70 percent of the country’s electricity demand is met by hydroelectric projects, power generation could significantly fall as a result of droughts. On the other hand, if global measures are taken to avert climate change, the oil industry could be severely affected. A reduction in greenhouse emissions in industrialized nations implies a net reduction in demand for hydrocarbon resources, which the Venezuelan economy depends heavily on.”
So it’s something of a Catch-22: Venezuela looks set to suffer either environmentally or economically, or both.
But as things stand, Venezuela is profiting considerably from the refusal of the US to ratify the Kyoto Protocol, something for which Chávez has (somewhat ironically) criticized George W. Bush on several occasions. Politics aside, the current oil bonanza that Venezuela is enjoying could be put to good use, Sánchez believes. “We have been relatively lucky until now that the principal client for Venezuela’s crude oil is the United States. Now is the moment for this country to invest both in measures to reduce the internal generation of emissions, and to prepare for a possible reduction in the global demand for oil.”
Do as I Say, Not as I Do
The last national inventory, carried out in 1998, identified that Venezuela’s CO2 emissions amount to 114 million tons annually. With nearly 27 million inhabitants, this equates to one of Latin America’s highest per capita rates, at roughly 60 or 70 percent that of developed nations.
Sánchez rates Venezuela’s consumption of hydrocarbons as “very inefficient,” citing deforestation, a lack of public awareness of the need to conserve resources (exacerbated by heavily subsidized gas prices), a polluting oil industry, and a transport system geared around car use as the major factors.
Metro and tram systems have been flagship projects of the Chávez government and have recently come online in major cities across the country, although Sánchez describes surface transport in Venezuela as “disastrous.” Furthermore, he criticizes the ease of obtaining credit to purchase a car, the installation of car production lines in Venezuela, and the low fuel efficiency of many models on sale there.
Another major contribution to Venezuelan greenhouse emissions is the release of methane during the oil extraction process. Venezuela’s heavy crude reserves are mixed with gas, and one cannot be removed from the ground without the other. Venezuela does not capture or commercialize any of its gas reserves and has never done so, due to the costs involved when gas is mixed with oil and located underwater, as is the case in Maracaibo Lake. “At the moment the most economically viable option for the oil industry is to simply release this methane, which is one of the principal greenhouse gases, straight into the atmosphere,” Sánchez explains, adding that “although the economic return may not be great, capturing and selling this gas would go some way towards reducing Venezuela’s greenhouse emissions.”
An Emphasis on Profit
We spoke to a consultant on the Magna Reserva exploration project in the Orinoco, the world’s largest known heavy crude reserve, which is believed to contain enough oil to keep Venezuela a petroleum exporter for another 200300 years at current demand rates. The consultant, who wished to remain unnamed, described the government’s extraction plan in the Orinoco belt as “woefully aggressive, poorly supported and hopelessly rushed,” describing the resulting environmental devastation as “unprecedented” in Venezuela.
“It’s pretty bad, especially now because large-scale exploration projects are taking place in ecologically fragile areas.” On top of that, the consultant claims that the Ministry of the Environment is failing to carry out follow-ups to even analyze, let alone alleviate, the impact of the oil companies’ activities in the field. “Conservation measures are being overlooked because there’s simply not enough time to carry them out.” (Both Environment Minister Yuvirí Ortega Lovera, and the ministry’s Director of Environmental Impact Assessment Vladimir Valera, declined to comment.)
But there is no lack of environmental legislation, according to this source. “Venezuela has been a pioneer in this field in Latin America. The legislation exists within an excellent legal framework. The problem lies in the government’s effectiveness to apply it.” The same goes for environmental studies, many of which are carried out “but never followed up,” the consultant stated.
Sánchez agrees. “Even among state-run companies, the emphasis appears to be on profit rather than on complying with environmental laws. You would think that the government’s own companies would want to set the example, but this appears not to be the case.”
Another unnamed source who worked on a state-funded eco-efficiency project said that sound environmental proposals are often commissioned and submitted, but then abandoned before they are fully put into effect.
The source worked on a paper containing proposals for environmental reforms in a popular tourist destination west of Caracas. By addressing problems such as refuse mismanagement, wasteful water usage, and energy inefficiency, the proposal was designed to reduce the negative impacts of tourism on the area.
The source claimed that in June 2006, the proposal was presented on President Chavez’s weekly touring TV program “Aló Presidente” as “already being fully and successfully implemented,” but that this was “not the case at all.”
Furthermore, the source said that on subsequent visits to the region, “a great deal of disappointment” was evident among the local population due to the lack of official interest in the proposals since being presented on national television.
However, Eugenio Mora, an economist, TV presenter, government supporter, and personal friend of Chávez, believes the government’s environmental policy is working to good effect.
“It’s a good policy, especially in regards to oil spills. Let’s not forget the spill at Maracaibo Lake [in 2005], which the government is currently in the process of cleaning up, along with the surrounding areas.”
Mora also maintains that this government is taking action where previous administrations did not. “Let me give you an example. There were mining companies destroying the jungle in the Gran Sabana (an extensive national park in southern Venezuela). The Chávez government had them removed, which was a very controversial decision, because they represented a lot of powerful business interests. But the government did it in order to protect the environment.”
The Great Gas Pipeline of the South
Meanwhile, Chávez has been busy pushing for a 5,600-mile pipeline through the Amazon to supply southern markets such as Brazil, Argentina, and Chile with liquefied natural gas (LNG). According to environmental groups, the construction of the pipeline, known as the Gran Gasoducto del Sur (Great Gas Pipeline of the South), would involve deforesting huge areas of virgin Amazonian rainforest, as well as disrupting delicate Atlantic and Caribbean coastal ecosystems. The scale of environmental catastrophe that this project entails is such that even directors from participating companies such as Brazil’s Petrobras are getting cold feet.
Mora played down the environmental consequences of the pipeline.
“It’s not such a big thing. Yes, it will cause a little destruction, but not too much. It’s not a whole industry we’re creating there, it’s just a pipeline. But it’s crucial we build it for Latin American integration. Argentina is undergoing an energy crisis, and Venezuela has the energy to help. This would also help reduce Latin American dependence on the United States. If these environmentalists believe in social justice, this is the way we are going to achieve it.”
The project would help set the Venezuelan government on its way to achieving what energy analyst Carlos Malamud identifies as its aim to “set Latin America’s energy agenda and, with its own criteria, lead a process of regional integration based on energy.”
On July 27, Chávez announced that despite his efforts, discussion on the Gas Pipeline project had come to a standstill. “I can’t force this pipeline onto the South,” the Venezuelan leader lamented in a live televised broadcast.
He did not comment on the reasons for the halt in progress, leaving analysts to conjecture that a combination of environmental, economic, and political concerns were the cause for international disagreement over the pipeline. Chávez’s comments, however, reveal a strong conviction to push ahead with the pipeline should an agreement be reached with members of South American trade bloc Mercosur. For now, it appears that environmental concerns represent an inconvenient snag to Chávez’s vision of a unified Latin America.
‘We Live for Oil’
So does Venezuela have any responsibility not to sell its crude to the world?
“Responsibility lies primarily with consumer nations,” Sánchez says. “But Venezuela, as a major exporter of hydrocarbons, has a moral duty to invest in eco-projects in order to project an image of environmental responsibility to the world.” He describes the government’s overall approach to climate change as “short-sighted,” referring to the administration’s apparent belief that “climate change doesn’t affect us, and we have so many resources that there is no need to worry about these things yet. The world wants us to produce more and more oil and is paying us ever greater sums to do so.”
“I sincerely hope that this changes very soon,” he concluded.
Mora says that curtailing petroleum exports is not an option.
“In Venezuela, we live for oil. We have no other way to generate an income. [Not selling oil] would have a horrible effect on our economy. We are taking steps in diversifying our economy, specifically in the aluminium, steel, and agricultural sectors. But it’s a long process, which will take at least 40 years. So for now we need oil. Venezuela starts and ends with (state oil company) PDVSA.”
The Magna Reserva consultant was less circumspect. “It’s a complete joke. The only thing propping this government up is the influx of dollars coming in every day from crude oil sales. They can’t afford to hold back on a single barrel. If oil prices were to drop, this government would collapse instantly.”
Luckily for Chávez, oil prices remain sky high, and with industrialized nations apparently unable to meet even the most lenient targets for emissions reductions, demand is set to continue climbing. Only a concerted and sustained effort to curb consumption and turn to renewable fuels could change that. But with the flurry of trade deals that Venezuela signed last year with China – principally on energy issues – demand for Venezuelan crude looks unlikely to drop any time soon.
Until then, it’s “Fatherland, Socialism, or Death!” all the way to the bank – just don’t mention the environment.
Sebastian Kennedy is a freelance journalist based in Caracas. He worked for a year as correspondent for Venezuela’s English newspaper, The Daily Journal. Martin Markovits is a freelance journalist who spent the past 18 months as one of the main political journalists for The Daily Journal. He covered the 2006 Mexican elections from Mexico City.