Venezuela

** Background ** (from Economist)**:** From 1958 until the mid-1990s two parties, Acción Democrática (AD) and the Comité de Organización Política Electoral Independiente (COPEI), alternated in power in Venezuela. Frequent economic crises and endemic corruption eventually led to a collapse in their support, culminating in the 1998 election of a former lieutenant-colonel and leader of a failed coup in 1992, Hugo Chavez, with a mandate for radical political reform. Mr. Chavez’s policy program has exacerbated political polarization, but he has survived several attempts to remove him from power, and was comfortably re-elected to a third term in December 2006. However, in December 2007 Mr. Chavez lost a referendum on constitutional reform, bolstering a newly emerging opposition movement centered around students and disenchanted chavistas. ** Policy issues ** (from Economist)**:** Political radicalization has been reflected in increasingly heterodox economic policymaking in recent years, including the imposition of exchange and price controls in 2003 in an attempt to arrest capital flight and control7 inflationary pressures. Both have been maintained since then, but distortions in the economy (aggravated by the expansionary fiscal stance) are becoming increasingly evident. The public finances remain over-reliant on oil revenue, which entrenches cycles of economic boom and bust. High oil prices have increased the disincentives to undertake structural reforms, and facilitated the government’s policy goal of expanding the state-led development model. ** Hugo Chavez ** (from Economist)**:** Venezuela is defined by Hugo Chávez, its president since 1999, and his brand of “21st-century socialism”—which looks more like old-fashioned autocracy. Although his “Bolivarian revolution” has brought social benefits, his unusual handling of Venezuela's oil-dependent economy has led to the rise of a new oligarchy. Meanwhile, his strong desire to revolutionise regional politics has concerned and infuriated Venezuela's neighbors. For a long time, a weak political opposition and restrictions on dissenting media meant Mr. Chávez faced few obstacles. Though forced from office in 2002, he was quickly reinstated and overcame a recall referendum the next year. In late 2006, Mr. Chávez was re-elected. However, his subsequent attempt to make sweeping changes to the constitution was defeated in a referendum. This domestic resistance, along with his reversal of his stance towards Colombia's internal strife, indicate Mr. Chávez could be losing his touch. Chavez hates Bush and is anti-United Sates; said in UN meeting regarding Bush that “The devil came here yesterday. And it smells of sulfur still today.” Oil accounts for 90% if Venezuela’s exports (ac. to __Economist__ ); more than 50% of their exports go to the US (also ac. to __Economist__). Price is falling-could be a concern; it recently came down to $90 a barrel; if it hits $75 a barrel, experts say imports would be unsustainable at the current level. US is the only major country that Venezuela trades with that really pays for oil, as Venezuela supplies cheap or essentially free oil to its allies, so its threats to cut off our oil supply are empty. “For each $10 drop in the oil price, the government gets $5 billion (1.4% of GDP) less in revenue, according to LatinSource, a consultancy. Mr Chávez said this month [October 08] that an oil price no lower than $80 was “sufficient”. But the economy is already deteriorating.” ** Recent Developments: ** Venezuela and Russia have joined forces, and are to perform joint navy exercises in the Caribbean later this year. On September 11, Venezuela expelled America’s ambassador, saying that it was “in solidarity with Bolivia”, which had just expelled the ambassador there, and Chávez threatened to cut off oil supplies if there was any “aggression” toward his country-unrealistic (US main trading partner, economy suffering, see oil section for details) The government is becoming unpopular in the country, though Chávez remains relatively popular. Internationally, numerous scandals (corruption and connections with Columbian terrorists and drug traffickers in high levels of the government) have left the government tainted.
 * Venezuela **  Aubrey Faust
 * Oil: **