WITH PROVEN RESERVES OF 77 BILLION BARRELS, VENEZUELA REMAINS ONE OF THE TOP SUPPLIERS OF U.S. OIL IMPORTS AS WELL AS ONE OF THE TOP TEN CRUDE OIL PRODUCERS IN THE WORLD. HOWEVER, AS THIS FIRST PART OF A SPECIAL REPORT ON THE COUNTRY REVEALS, PRESIDENT CHÁVEZ HAS ALREADY STARTED DIVERSIFYING THE COUNTRY'S OIL-DEPENDENT ECONOMY INTO AGRICULTURE, TOURISM AND INDUSTRY

Man of the people. Hugo Rafael Chávez Frias, President of the Bolivarian Republic of Venezuela.

Hugo Chávez has been President of Venezuela since receiving his first absolute majority in 1998, a majority confirmed in his re-election last year. His Fifth Republic has instituted fundamental statutory reforms to forge a new government framework he claims is nothing short of a “revolution.” His detractors say he is centralizing power. His supporters say he is re-building the country for the Venezuelan people. Rarely has a leader generated such strong and conflicting opinion in such a short time. President Chávez himself puts the division into a philosophical context. “If you don’t understand and you are an ethical person, then you will make an effort to understand before you give your opinion.”

The truth is that the entire world has an interest in the process of change going on in Venezuela. Nature has favored the country with a wealth of resources. Venezuela is one of the top ten crude oil producers in the world and oil dominates the economy. Buoyant oil prices have enabled the president, largely through a 35% rise in government expenditure, to turn a deep economic recession in 1999 into GDP growth of 3.2% in 2000 and 3.5% for the first quarter of 2001. Encouragingly, non-oil GDP also rose 3.6% for the first quarter of 2001 due to positive growth in the manufacturing, construction and telecommunications sectors rising 4.6%, 9.1% and 16.2% respectively. Inflation currently stands at 12.6% and is continuing to fall and unemployment is at 14%. “For the first time in twenty years salaries are rising faster than inflation,” says President Chávez.

JOSÉ A. ROJAS RAMIREZ Minister of Finance

In view of this, the democratic electorate, unafraid to speak out, are not much inclined to comment. In short, all potential investors with an interest in globalization have their eye on the president and Venezuela. “We are two years into the birth of the New Republic and are continuing to pass many new laws so that we can achieve a policy of fiscal balance through a diversified economy that is not dependent on the oil industry,” he explains.
Since 1999, the administration has passed a law for the promotion and protection of investment, another concerning telecommunications, a third for hydrocarbon gases and the administration is currently working on an electricity sector law. “We have introduced new laws to encourage a greater flow of foreign investment,” explains Jose Rojas, Venezuela’s Minister of Finance, “For example, the law of concessionary grants
allows development and construction of new infrastructure projects.”

Ironically, in order to push through these laws, the administration has increasingly been viewed from abroad as one that is centralizing power and this has reduced private investor confidence in sectors crucial to the realization of the country’s macro-economic plan. However, the president remains firm, “God grants victory to those who persevere,” he quotes from Bolívar, “We want to promote private investment in agriculture, tourism, aluminum and natural gas and diversify in the energy industry. This is our clear message to the world.”
President Chávez does not want his government’s policies to be seen as interventionist. He continues to support the opening up of the oil and energy industry, and recently declared that his government had no interest in the $1.7 billion buy-out, by American-owned AES, of Venezuela’s largest privately owned power company Electricidad de Caracas. “In the next few years,” according to Finance Minister Rojas, “we are going to have to finance many projects: chiefly in the electricity, mines, aluminum, and oil and gas sectors. Much of the intensive capital and technological investment must be financed externally.”

“Ours is a country open to investment and with an infinite amount of opportunity,” says President Chávez. “We want people to come and invest.” Delegates from all G7 countries have already visited Venezuela. President Bush has openly stated that he is keen to forge closer relations with Latin America. “We have very positive relations with the United States,” notes President Chávez.