Girish Gupta

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Venezuelans smuggle petrol as blackouts spread
Jun. 15, 2011

Published by Financial Times

In the Venezuelan border town of San Antonio, motorists fill their tanks for $1 then drive a few hundred yards into Colombia, syphon out the contents and sell them to middlemen for $40. Meanwhile, as electricity blackouts spread this week from Caracas to Maracaibo, Venezuela’s second city, president Hugo Chávez is putting the blame on unidentified saboteurs.

Heavy subsidies on petrol and electricity clearly aren’t working. But looming elections next year mean the Chávez administration probably can’t do much about it.

The government has been urging people to cut use of both fuel and electricty as public coffers struggle to keep up with demand – even though high international oil prices have been pouring money into one of the world’s biggest producers.

Chávez and Rafael Ramírez, oil minister, called for a cut in fuel use earlier this year – analysts suggest the subsidies cost the public sector about $21bn a year when lost profits are taken into account.

And this week, in response to the power cuts, Elias Juaa, vice president, announced tough penalties to curb use, with businesses and residential customers having to cut down by 10 per cent or face hefty fines of up to double the value of their bill if usage increases by more than 10 per cent.

But Chávez knows he must be cautious as the presidential elections approach. When the government of Carlos Andrés Pérez attempted to cut fuel subsidies in 1989, hundreds were killed in the ensuing Caracazo riots.

Chávez is too skilled in public relations to make the same mistake and will be hoping that high oil prices will lubricate his election campaign – for which state oil company PDVSA will be the cash cow – before he has to make any serious cuts.

The spread of power outages and any talk of reducing use of petrol – which Venezuelans regard as a birthright – will add to the impression that Chávez’s socialist revolution isn’t really working. The president will need to quash this quickly, as the country’s unorganised political opposition begins to find some common ground.




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© Girish Gupta