Chavez Uses Oil Profits to Build Political Power

By
JIM SCIUTTO
May 25, 2006, 8:11 PM ET
2 min read

CARACAS, Venezuela, May 25, 2006 — -- On nearly every corner of the capital Caracas, today's Venezuela overflows with energy and pride.

Travel hundreds of miles west to Maracaibo, and you'll find the secret of this country's remarkable rise, the richest oil reserves in the Western Hemisphere and the source of 11 percent of U.S. oil imports.

One advantage of these fields is the shallow oil deposits, just about 60 feet below the surface. The oil literally comes right out of the ground. And that means cheap production costs averaging just a few dollars a barrel.

With $1 billion a month in state oil profits, Venezuela's President Hugo Chavez has converted cash into political clout.

The self-appointed champion of anti-Americanism has publicly labeled President Bush an imperialist, an assassin and a donkey.

It is more than rhetoric.

Chavez has given significant financial support to like-minded Latin American leaders, and he has signed arms deals with Russia.

"In the past, we simply exchanged oil wealth for imported cars from the U.S., fancy fabrics from France … superficial things with no value," said Rafael Quiroz, the former director of the state oil company.

Profits Fuel Social Programs

Venezuela's oil wealth has largely missed the vast majority of its population. In Caracas, 3 million of the city's 5 million residents live in deep poverty.

Today Chavez has used oil money to win over the poor. Thousands of new state-funded cooperatives offer free health care and discounted groceries.

But drivers may enjoy it most. Gas sells for just 11 cents a gallon here, the world's cheapest. Still, many Venezuelans we spoke with, especially the wealthier ones, criticize Chavez for extending state control over the economy and wasting oil money simply to boost his profile.

The future may lie under the Orinoco River in southern Venezuela.

If these fields can be exploited efficiently, they'd give Venezuela the world's largest reserves and the United States a powerful rival to the south for many years to come.