Dispatch from the Banana Republic addicted to oil

One good reason to pray for the emergence of alternative energy or a radical drop in oil prices. In Venezuela they never seem to learn and Little Castro is proof of that.

Dependence on one export has strapped the country’s financial fortunes to a roller coaster. When oil prices are high, many Venezuelans enjoy an enviable quality of life, particularly for a developing nation. The state doles out subsidies to domestic businesses, adds thousands of state jobs, and keeps the domestic currency artificially strong, which makes imports cheap. This state-dispensed bounty has helped create a carefree, let-the-chips-fall-where-they-may mentality in Venezuelans and fostered a concomitant sense of entitlement. After all, with money seeping out of the ground, what incentive is there to work? Of course, government can only apportion handouts when the cash box is full. When oil prices fall, government revenue plummets, and the state is forced to curtail the spoils.

The prudent approach would be to leverage the country’s petroleum wealth to fortify other sectors of the economy. But Venezuelans gravitate to leaders who swear oil reserves can keep the party going indefinitely. Chávez is the latest in a long line of irresponsible, populist presidents, and if he has his way, his successor won’t emerge for many years. Chávez is demanding—and is expected to receive— authority to run for unlimited reelection. Still, even as he concentrates power, broader trends could determine how long his unlimited term in office lasts. Chávez’s standing—like so many things in this country—may depend more on the price of oil than he would like to believe.