Analysis of this month's failed rebellion in Venezuela should include an important piece of information that too frequently is overlooked.
All analysts will correctly note the deteriorating conditions of the country's plentiful poor. Standards of living of the 80% of Venezuelans living below the poverty line indeed have sunk during most of the past 2 decades.
And most analysts will correctly note the large share of top income-earners employed by the state oil company, Petroleos de Venezuela SA, or otherwise connected with the oil industry. In a country for which oil accounts for one third of gross domestic product, 80% of export earnings, and more than half of government operating revenue, this is no surprise.
Too many analysts, however, will deduce from these observations, as they have done before, that Venezuela's petroleum wealth in no way benefits the country's poor.
To the contrary, poor Venezuelans benefit enormously from their country's petroleum. They just do so through a destructive and unsustainable mechanism: heavy subsidization of petroleum products.
Retail prices of Venezuelan gasoline are among the world's lowest.
Consequences include world-class urban congestion and pollution, especially in Caracas, and a society chronically dependent on cheap transportation.
Also, the need to sell below cost in an artificially stimulated domestic market drains Pdvsa's resources and saps its ability to regenerate wealth.
The subsidy mechanism is long past broken.
Venezuela isn't the only oil-rich country to have hitched politically popular subsidies to resource development. Like others, it has tried to reverse course since the collapse of crude oil prices in 1986.
But the task is difficult. Venezuela's first effort to raise gasoline prices, part of a 1989 austerity program, led to riots in which more than 200 people were killed.
Now the price of gasoline in Venezuela is about 35¢/gal. Under current political conditions, that's not likely to change.
Resource development should never occur just to enrich a lucky few. As Venezuela's experience shows, however, dirt-cheap gasoline is the wrong way to share the bounty.
(Online Apr. 19, 2002; author's e-mail: [email protected])