Venezuela’s new socialist leader hopes to continue the ambitious construction programs initiated by the late President Hugo Chávez, and the nation’s vast oil and mineral reserves will likely enable much—but perhaps not all—of the work to go on, said sources familiar with the political and economic conditiions in Venezuela.
“The construction programs of the Venezuelan government are largely sustainable” under Chávez’s successor, said George Ciccariello-Maher, assistant professor of history and politics at Drexel University, an expert on Venezuela and author of a new book, "We Created Chávez: A People's History of the Venezuelan Revolution.”
“However, the historic challenge for Venezuela and other resource-rich nations is to develop the capacity to engage in this construction through their own means, rather than being overly reliant on costly imported parts and supplies,” Ciccariello-Maher said.
Venezuela faces other challenges as well. Chávez for years borrowed heavily against the current and future value of Venezuela’s natural resources; as a consequence, the nation suffers from a high inflation rate and, after Chávez’s nationalization of several industries, a poor investment climate.
In a report issued before Chávez’s re-election last October, Morgan Stanley analyst Daniel Vorberg said the government’s financial mismanagement “may be taking Venezuela toward a crisis and potentially even a debt event"—that is, a default on some loans—“that could come as early as the second half of 2013.”
Volberg said Venezuela’s deficit, as a percentage of gross domestic product, is the largest in Latin American, and its international reserves have fallen sharply in recent years. The output of Petroleos de Venezuela, the state-owned oil company, is down as well.
Now, Venezuela’s new leader, Vice President Nicolás Maduro, must quickly prepare for a April 14 election. His likely opponent, Henrique Capriles Radonski, has questioned the country’s close ties with China, the leading source of money to support Venezuela’s building boom.
China’s financial support has been critical for Chávez’s capital-intensive construction initiatives, said Kevin Gallagher, a professor of international relations at Boston University who has tracked China’s growing interest nations—Venezuela and other Latin America countries, among them—that have the natural resources it needs.
“If the current regime maintains power, I don’t think Venezuela’s relationship with China changes much,” he said. However, an election win by Capriles Radonski could lead to at least a reworking of Venezuela-China ties.
Much of the financing for the building boom has come from China Development Bank in the form of loans and lines of credit tied to Venezuela’s emerging role as a leading oil supplier to China. Venezuela currently exports about 500,000 barrels of oil per day to China, making it China’s fourth-largest oil supplier. The Venezuelan government has indicated it plans to double those exports by 2015.