Monday, October 13, 2008

As profits dip, oil countries' aid programs may take hit

As profits dip, oil countries' aid programs may take hit
Updated 17h 39m ago

Venezuelan President Hugo Chavez has used his country's oil profits to
fund aid programs to win new allies throughout Latin America.
By Chris Hawley, USA TODAY

MEXICO CITY — Fernando Garcia was going blind in his left eye. After
years on a waiting list for an operation at a Mexican hospital,
Venezuelan President Hugo Chávez came to the rescue.

The Venezuelan government paid for Garcia's flight to Caracas and free
cataract surgery that restored his sight.

"There's not enough money in the world to repay Venezuela for what they
did for me," Garcia says.

And that may be exactly the problem.

Helping people such as Garcia is part of Chávez's strategy of converting
high oil prices into billions of dollars spent on aid programs to win
new allies throughout Latin America — and to diminish the power of his
avowed archenemy, the Bush administration.

Venezuela, the world's No. 7 exporter of crude, even extends its largess
to the USA, where Venezuelan-owned Citgo has given 105 million gallons
of heating oil to Indian reservations, homeless shelters and needy
families since 2005.

Now, oil prices are down more than 40% from their July peak, and
analysts are wondering how long Venezuela and regimes in other
oil-exporting countries, such as Iran and Russia, can keep up the

Venezuelan Finance Minister Alí Rodríguez warned last week there would
be "significant restrictions" next year.

"Clearly, it's going to affect how much extra money they have on hand,"
says Rodrigo Salazar, a professor at the Latin America Faculty of Social
Sciences in Mexico City. In Venezuela, "the first thing to be sacrificed
would be these programs abroad," he says.

Lower oil prices could definitely erode the stature of oil-exporting
nations, says David Victor, an energy specialist at the Council on
Foreign Relations.

"The overall effect of this will be to amplify fundamental weaknesses in
countries that depend on oil," he says. "That will affect some of our
allies, and it will affect some of our adversaries."

The oil windfall allowed Venezuela's economy to grow between 8% and 18%
annually since 2003, even as the Chávez government took steps that would
normally scare away investors.

Chávez declared Venezuela a socialist state, seized control of private
oil projects and nationalized businesses ranging from the CANTV phone
company to an H.J. Heinz tomato-processing plant.

Of all U.S. foes, Chávez is the most dependent on oil for his political
power, Victor says. Chávez uses the oil bonanza to fund everything from
medical clinics to subsidized food stores, community orchestras to
low-cost housing.

Venezuela, a member of the Organization of Petroleum Exporting Countries
and the world's 10th-largest producer, also sells oil at below-market
prices to left-leaning allies in South America and the Caribbean.

And the nation of more than 26 million people is a major lender to
Argentina and helps prop up communist Cuba with about $2 billion
annually in aid.

Programs such as the "Miracle Mission" surgery trips sow goodwill.
Mexican taxi driver Ernesto Gualito was unable to work for two years
because a cataract turned the vision in his left eye into a cloud of white.

Last year, he was one of 80 patients from the Tlalpan borough of Mexico
City to receive free surgery in Caracas.

The hospital greeted them with a sign saying "Welcome, Mexicans!" The
Venezuela government supplied them with clothes, pajamas, toothbrushes
and even sunglasses to protect their eyes on the trip home.

"I wish our own presidents cared as much as (Chávez)," says Gualito, who
now drives a cab again.

Other countries are flush with petro-dollars in recent years. In
Ecuador, another OPEC state, leftist President Rafael Correa counts on
oil revenues to fund his programs for the poor. He recently threatened
to expel foreign oil companies if they don't increase production.

In Iran, President Mahmoud Ahmadinejad more than tripled food subsidies
to $5.85 billion in 2007, from $1.67 billion in 2004, according to the
International Monetary Fund.

Iran also sends money to Hezbollah in Lebanon and Hamas in the
Palestinian territories — two groups the United States regards as

Russia, meanwhile, used oil profits to pay most debts from its 1998
financial crisis, plus save a nest egg of $580 billion. Russia also
increased its foreign aid to $215 million in 2007, from $50 million in
2004, foreign ministry official Mikhail Savostiyanov said in March.

Lower oil prices might make some countries less receptive to Chávez's
anti-American rhetoric, says Adalberto Santana, a Latin American studies
professor at the National Autonomous University of Mexico. Low prices
could also mean serious budget cuts.

"The fall in the price of petroleum obviously affects the resources
available for (social) programs," he says. "But it's difficult to hurt a
Hugo Chávez, because there is still a great need for those fuels."

Hawley is Latin America correspondent for USA TODAY and The Arizona

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