STATE-OWNED Petróleos de Venezuela (PDVSA) is developing an initiative that has raised no small amount of debate in Central America. The idea is apparently simple and well intentioned, since it involves enabling the isthmus nations - which do not have major economic resources - to buy crude oil under advantageous conditions.
PDVSA is offering financing at low-interest rates to help these countries buy the crude. But the proposal is not as simple as it seems. The Venezuelan oil company will not sell its products on the open market. Instead, it will sell exclusively to municipalities. These, in turn, will have to form joint ventures with PDVSA that will deal with distribution and other phases of the marketing of the hydrocarbons, thus becoming permanent partners of PDVSA.
THIS VENEZUELAN state company has already signed hundreds of agreements with municipalities in El Salvador and Nicaragua and now intends to expand its operations into Honduras and Guatemala. However, an issue has come up with the first two countries that leads many to suspect that this is not a simple business deal, but a brazen political maneuver by Hugo Chavez.
PDVSA has entered into contracts only with the municipalities that are currently controlled by the leftist opposition: the FSLN [Sandinista Front for National Liberation] in Nicaragua and the FMLN [Farabundo Martí National Liberation Front] in El Salvador. These contracts not only discriminate politically, but also create a bond of dependence on the cities buying the oil. This kind of political advantage could be very useful for Chávez's followers, enabling them - when the time comes - to find useful allies who are already attuned to their politics.
Many in Central America have become enthused over the possibility of obtaining discounted oil at a time when the price of fuel has skyrocketed. But other, more cautious observers, including some in Guatemala, point out that the oil proposal is just a way to build a support base and create the political conditions necessary for Chávez to widen his circle of allies. This distrust, which might seem exaggerated to some, is fully justified if placed in the general context of the Chávez administration's foreign policy.
THAT'S BECAUSE because Hugo Chávez's Venezuela, for some time now, has been sowing unease and discomfort throughout Latin America. After achieving an almost total consolidation of his power inside the country, this populist caudillo has embarked on an adventure of continental expansionism that includes his open intervention in Bolivian affairs, his attempts to influence the elections in Peru and Mexico, his country's withdrawal from the Andean Pact, and the bitter criticism he has directed at the two nations that recently signed free-trade accords with the United States - Peru and Colombia.
The axis initially formed by Chávez and Fidel Castro has expanded this year, with the incorporation of Bolivian President Evo Morales. At present, there are hundreds of Venezuelan and Cuban advisers in Bolivia providing advice for the new president about a Constituent Assembly that will be set up in the near future.
The advisers are manipulating the electoral patterns the same way they did in Venezuela to ensure their caudillo's perpetual rule. The assembly can be expected to have a majority of members who support the new president and will change the rules of the democratic game to allow Morales' re-election and consolidate the state's full power over the country's economy.
Meanwhile, in recent days, Chávez has launched a frontal attack against Alan García (...).
MORE STEALTHILY, the Chavistas are trying to promote the candidacies of Andrés Manuel López Obrador in Mexico and Daniel Ortega in Nicaragua, while helping to organize radical groups in various places in Latin America and fueling their demonstrations.
Because of all this, the general picture has become complicated and exceedingly worrisome. Governments like those in Brazil and Chile do not look kindly upon Venezuela’s expansionism, one that seems unstoppable because of the economic power crude oil has brought that country.
Chávez has engaged in a dangerous interventionism but, perhaps for that very reason, it is likely that he'll soon discover that a tacit alliance has been formed against him in a region that has not the slightest intention of recognizing him as a continental leader.
Carlos Sabino is an adjunct fellow with The Independent Institute, a fellow of the Francisco Marroquín Foundation in Guatemala, a director at CEDICE, a public policy institute in Venezuela, and the author of many books on development. This column was republished with permission from The Independent Institute.
Originally published June 26, 2006