Using oil to spread revolution

Venezuela and Latin America

Jul 28th 2005 CARACAS
From The Economist print edition

Hugo Chávez is spending some of his country's oil windfall on buying support abroad. How much of a return is he getting?

WITH a swipe at American “imperialism” and reports on social problems in Latin America, a new regional television channel began pilot transmissions on July 24th. Telesur, backed by the governments of Argentina, Cuba, Uruguay and Venezuela, bills itself as a home-grown answer to CNN that will let Latin Americans see themselves “through their own eyes”. But 70% of the channel's $10m start-up cost comes from Venezuela's government. To many, Telesur looks like propaganda for Hugo Chávez, Venezuela's president, and his “Bolivarian” revolution, named for South America's independence hero but of increasingly socialist bent.

Predictably enough, at the urging of Connie Mack, a Florida Republican, the United States' House of Representatives greeted Telesur by approving an amendment to the Foreign Appropriations Act calling for rival propaganda broadcasts. That allowed Mr Chávez to gloat that by getting his channel on air he had “scored the first goal” against George Bush.

Telesur comes on the heels of other initiatives in which Mr Chávez is using some of his country's windfall oil revenues to procure friends and influence abroad, especially in Latin America. Thus, Venezuela has bought $538m of Argentine debt. It is talking about doing the same for Ecuador's new populist government. Venezuela has also promised to build houses in Cuba and to finance co-operatives in Argentina.

Most of the schemes involve oil. They began with a pact to expand subsidised shipments to Fidel Castro's Cuba, in return for the services of 17,000 Cuban doctors. In May, under the label of Petrosur, energy ministers from Argentina, Brazil and Venezuela agreed to develop a field in Venezuela's heavy-oil belt in the Orinoco, a refinery in Brazil's north-east, and an oil and gas venture in Argentina. In June, Venezuela set up Petrocaribe, under which it is offering 12 Caribbean countries cheap credit for oil imports. On July 22nd, at a meeting of Andean presidents, Mr Chávez proposed Petroandina, under which these oil-producing countries would co-operate on pipelines and refining.

Some of these initiatives, such as Petrocaribe, expand on the polices of previous Venezuelan governments. But now their aim is to cement an anti-American block. This goal has also led Venezuela to seek close ties with countries such as Iran and China. With Mr Castro, Mr Chávez claims to be building an alternative (called ALBA) to the Free Trade Area of the Americas, a moribund plan backed by the United States. More immediately, oil brings Venezuela influence over a block of (mainly Caribbean) votes in international bodies.

In parallel, Mr Chávez seeks support among Latin Americans by posing as the leader of a continental revolution. At its cheekiest, this has led him to take advantage of the difficulties of Brazil's President Lula da Silva, a more moderate left-winger, to sponsor a samba school, whose theme will be Viva la Revolución, at next year's Rio carnival.

For now, Mr Chávez's diplomacy chimes with an anti-American mood in many Latin American countries. Governments are happy to pocket Venezuelan subsidies. His willingness to meddle in their internal affairs “may cause some discomfort,” says a Latin American diplomat. “But if you break publicly with Chávez you're playing Bush's game”. So South American governments have ignored American pleas to shun Mr Chávez.

In its ill-tempered diplomatic battle with the United States, Venezuela has seemed to have the upper hand in other ways too. Its alliance with Cuba has subverted the American trade embargo against Mr Castro. Its refusal to collaborate with Colombia's government in its war against leftist guerrillas causes difficulties for the Americans' chief ally in the region.

Fears that Venezuela would profit from its rejection was one reason why the Bush administration lobbied so hard for the Central American Free Trade Agreement (CAFTA), narrowly passed by the House of Representatives on July 27th. Donald Rumsfeld, the defence secretary, had called this “a national-security vote”.

All the same, Mr Chávez's successes are fragile ones. For one thing, it is hard to see what tangible benefits Venezuelans derive from this diplomacy. Mr Chávez has alienated both of his country's main trading partners, the United States and Colombia. Oil revenues are increasingly being spent without democratic scrutiny. A once-professional diplomatic service has been turned into a branch of the revolution, its dissidents either purged or neutralised. And although the alliance with Cuba has brought new social programmes, their cost and long-term benefits are hard to determine. Despite the oil boom, unemployment officially stands at 11%.

There are also limits to the region's tolerance of chavista expansionism. Only Cuba has signed up for ALBA. The richer Caribbean countries are unenthusiastic about Petrocaribe. Petrosur and Petroandina feature much rhetoric and little action. Cuba apart, no other country shares Mr Chávez's distaste for representative democracy, or his disdain for regional bodies such as the Inter-American Commission on Human Rights.

In a setback for Mr Chávez, on July 27th the Inter-American Development Bank, the region's largest official lender, chose as its new president Luis Alberto Moreno, Colombia's ambassador to Washington who was discreetly backed by Mr Bush. Mr Moreno easily defeated candidates from Brazil and Venezuela.

Argentine officials have welcomed imports of fuel from Venezuela, and its help in making contacts with China, but they are cooling towards Mr Chávez. Were evidence to emerge of his hand in Bolivia's turmoil, South America would become even warier. Should Lula's troubles deny him a second term, Brazil is likely to move to the centre-right, shifting the regional balance. The death of Mr Castro, who is 78 and frail, would be a body blow to Mr Chávez. So, of course, would a fall in oil prices.

A Summit of the Americas, involving 34 countries (all except Cuba), in Argentina in November should be a pointer to the prevailing diplomatic winds. The United States wants to stop the meeting becoming a platform for Mr Chávez. But if Mr Bush turns up empty-handed (CAFTA apart), Latin Americans will continue to pay court to that generous neighbour in Caracas.

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