Even $100 dollar oil is not enough for voracious Hugo Chavez

March 14, 2011

As oil prices hit U$100 per barrel, many thought this would be enough to satisfy Chavez’ voracious appetite for sometime.

No such luck.

Yesterday, Chavez said that more money is needed and that he had sent some people to China to negotiate a new loan. Chavez said that he “did some adding” and he realized that he needs more money. “I checked the Housing Mission, we need thousands of millions”

And then the man that has wasted over half a trillion dollars in twelve years dared say: “One has to administer resources with good criteria. We have to save (??). One has to add up the numbers of the country…We have to administer with prudence…we need money for agriculture,roads, schools, hospitals, culture, the armed forces, railroads…”

Chavez sent the Minister of Commerce Edmee Betancourt with representatives from Finance and PDVSA to make a formal request to the Chinese, later he mentioned “one of the largest banks of that country”

It was unclear what happened to the US$ 16 billion left, never disbursed, of the US$ 20 billion loan with China. This is the so called “miracle loan” as Minister of Finance Giordani says these loans can not be considered as debt, in a new and novel interpretation of “debt” under the revolution.

Let’s see. Even if we don’t believe PDVSA’s export numbers and believe ours, Venezuela exports about 1.6 million barrels of oil a day. At US$ 100 per barrels, the Venezuelan basket for the year would be around US$ 92 per barrel, some $25 dollars above last years average, or  an additional US$ 40 million more per day, or an extra US$ 14.6 billion more. But this is not enough for Hugo.

The sad part is most of this money will be used for current spending, not investment, mortgaging the future of all Venezuelans so that Hugo may create a feeling of bonanza and get reelected in 2012. That is all that matters to him.

How irresponsible can you get?

42 Responses to “Even $100 dollar oil is not enough for voracious Hugo Chavez”

  1. Kepler Says:


    Russia already did. I wrote about it. A large part of the lands in Zulia (the confiscated ones) are going to a big Russian company: 20 thousand hectares

  2. Roy Says:


    Sorry for putting words in your mouth. I misunderstood your previous position on the issue.

  3. A_Antonio Says:

    MO I agree with you, but the porpuse from China with the loans is avoiding the bidding processes, or get in those with a better position than others countries.

  4. moctavio Says:

    I dont oppose it, I would only do it for Government to Government deals, not for debt deals or those that went through a bidding process. On the contrary, I favor it.

  5. A_Antonio Says:

    China has outstanding diplomacy to get always an advantage position in oil exploitation in Venezuela. It has plenty of money to make loans, is buying a position in the Venezuelan Industry in the future, with or without Chavez; in conditions that will be in a way to negotiate with advantage. We have China forever (or until the last drop of oil).

  6. Roy Says:


    Re: Disavowal of Chavez regime deals

    Thanks for supporting me. This idea has been discussed before and I support it at some level. Miguel is completely opposed, and he has good reasons to back his position. The main problem, is that such a statement says that the Opposition does not recognize the government under Chavez as legitimate, and thus, would represent a prima facie declaration of civil war. To do this, might give Chavez an excuse to not recognize the political legitimacy of the MUD and open the door to denial of civil rights to the Opposition, at a time when they are not prepared to enter into that phase of political conflict.

    So, this is a very delicate topic. However, I think that there is a middle ground, which is to announce the MUD’s “concerns” about the future ability of Venezuela to service the debts that the Chavez regime is incurring, and asking potential investors to ask the Chavez regime for full public disclosure of its current financial status and to carefully consider the risks involved.

  7. moctavio Says:

    Venezuela can always renegotiate terms until it makes the whole thi ng unprofitable, it can also change laws, void contracts. Chavez has done it all, it may not be the signal you want to send the world, but ask yourself, what the hell does Vietnam’s oil company know about heavy crudes?

  8. Ira Says:

    Still don’t agree. The Chinese won’t bet on a dying horse, and VZ under Chavez is a dying horse.

    The money is going to tighten up with so much now going to Japan.

  9. jsb Says:

    China’s buying land in Venezuela to grow food and getting Venezuelan oil and preferential pricing through these debt agreements… Can we call it neocolonialism yet?

  10. bobthebuilder Says:

    The more Chavez slides the nation in to China’s pocket, the less control any Venezuelan will have over the country’s future. If the Chinese become so dependent on Venezuela’s oil, would they ever permit anyone not in their interests to come to power? Perhaps this is what Chavez really wants.

  11. Kepler Says:

    I was thinking about it, but I am not sure. I was telling Miguel I have the impression China, in spite of all its “non intervention” paradigm, is playing more than a money lender the role of a business angel (or devil) for Hugo.
    That means they will do anything to keep the conditions. To do that they do not really need to send troops or the like. They are much smarter than that. They have their intelligence services, they will pour hundreds of thousands of Chinese gadgets before the elections into Venezuela at little cost for them, they already provide the communications (and surveillance) systems for the government.

    I’m not sure. You have been there. What do you think? It is not like we will have fair elections. You don’t need to do a Lukashenko to win in Venezuela.

  12. deananash Says:

    I’m surprised that no one has commented on Roy’s (outstanding) idea. The opposition – ALL of the opposition – should hold a press conference and announce that any deals signed by Chavez going forward are going to held to the HIGHEST scrutiny and will be declared null and void if they are found to unfairly take advantage of the country. And yes, this would include the way that the monies were actually dispersed in Venezuela.

    This needs to be crystal clear. Simply paying Chavez a fair price isn’t enough.

    The point of the exercise would be to cause doubt to potential investors…to make them fully aware that they risk losing everything if they get in bed with Chavez.

  13. Khyber Says:

    Problem is Venezuela will be hard pressed to renag on any debts they may have with China as far as I can see it. He was elected, as corrupt as the election was, and how do you justify not paying that debt. I wish Venezuela doesn’t pay it back, but I think it would cost Venezuela more then that satisfaction is worth.

    Shame to see the country go more into debt even more, I worry about a post Chavez Venezuela when all this corruption will come back to haunt it. With so many uneducated, people like Chavez will simply use the oppertunity to push it back into the hands of some kind of silly dictator like him.

  14. mick Says:

    For once I see some truth from Pygmalion. Chavez is trying to get his hands on every penny he can now, because he couldn’t care less about Venezuela’s future. He needs to build his personal rainy day fund just in case the people wise up. I’m sure Gaddafi gave him some tips on hiding billions in state funds.

  15. Carlo: I know, that less than 1.6 million get paid, but I did not want to get into that, it is damn if you do damn if you don’t for the Government. If you use their numebrs is absurd to borrow more…

  16. CarlosElio Says:

    Lat’s bring this to a manageable level. Imagine you are with a bunch of pals talking about a new business idea: you would get a loan to finance a project of social interest, say low-income housing. You just joined the company investing your social capital with the buddy leading the project, your brother-in-law. You know close to nothing regarding civil engineer. Where would you put your energy? Securing the loan or the long term viability of the project?

    In a culture that lives in narrow windows of time, the “here and now,” the “get what you can when you can,” $100/barrel, $200/barrel, $1,000/barrel won’ be enough as greed is a function unbounded from above. Perez proved it and chavez ratified it.

  17. Pygmalion Says:

    Miguel – I agree. Inflation is around 30% and this destoys our buying power. But I still maintian that the mess will have to be cleared up by the next government since more money will be borrowed and wasted.

  18. A_Antonio Says:

    Any countries that lend money to Venezuela today are looking for positioning itself to extract and exploit oil in advance conditions, in the future, before or after Chavez.

    Notice, (Pigmalion) Venezuela is already broken, It can not pay the lend money in the future with anything except only by given future its sovereignty to the future oil extraction.

    Venezuelan government is so incompetent to extract and exploit the Venezuelan oil today , that in decades, Venezuela will be one of the last countries to have large amount of oil bellow ground. So the only way to pay the loans will be give the oil to countries that borrow the money so they can extract and exploit provably in very unfortunate conditions for Venezuela.

    Chavez only is selling the sovereignty of our natural resources at will.

  19. Carlo Says:

    Even if we don’t believe PDVSA’s export numbers and believe ours, Venezuela exports about 1.6 million barrels of oil a day. At US$ 100 per barrels, the Venezuelan basket for the year would be around US$ 92 per barrel, some $25 dollars above last years average, or an additional US$ 40 million more per day, or an extra US$ 14.6 billion more.
    Migue, this is not correct.
    LESS THAN 1 MILLION BARRELS ARE ACTUALLY PAID, not 1.6. The paid barrels are the ones shipped to the US, ie CITGO, former LYONDELL, a couple of CONOCO refineries and so on..as far as I understand we are talking about 900K barrels, most of them low and sour quality, priced 15% less that WTI marker. Assuming 80 bucks, or 20 more than 2010 pricing, this is an extra of 18 Millons US$/day, 6.5 billions per year, not 14.6
    For what concerns the outstanding produced 600K barrels per day, you have some already prepaid for China, others for Cuba that nobody will ever collect, other for Pacto San Jose, Petrocaribe, Argentina, that maybe some day will be paid to our grandsons.

  20. And another useless and empty comment that has nothing to do with the post. The mess is not going away, you are paying for it with 30% inflation.

  21. Pygmalion Says:

    Whatever Chavez does he will not be reelected in 2012 since the opposition is 52% majority. So he can do what he likes for now by borrowing more money as the next government will have to sort out the irresponsible mess.

  22. Kepler Says:

    Tu nena te encontró la cámara que quieres en Europa? Mándale los dólares rápido. Tú puedes. El 90% de los venezolanos no.

  23. Your ability to make comments that have no content and have nothing to do with the posts never cease to amaze me.

  24. Pygmalion Says:

    I guess that the tenet of this interesting post is that Venezuela is going broke. Any idea of when this will happen so that I can plan ahead?

  25. Kepler Says:


    Chávez will do anything as long as he has support from the Chinese or anyone.

  26. SemperAugustus Says:

    Another possibility is that the Chinese will soon have a lesson in sovereign risk, when Venezuela renegades on all of its loans.

  27. An Interested Observer Says:

    Chavez: “One has to administer resources with good criteria…We have to administer with prudence”

    Who says he hasn’t done this? His prudence is making sure spending adheres to his good criteria, which are two: keeping himself in power, and pressing down those who would take some. Frankly, this is a very honest speech from him.

  28. Kepler Says:

    I agree with Deananash. The guys know very well what they have and what they need to have to keep the oil and other resources rolling.

    I remind you also: the Venezuelan “intelligence” service is using Chinese technology to follow us.

    The Chinese can be incredibly discreet about the way they protect their investments in a land.

    I am not completely sure of this, but consider for a moment what happened in Belgrade:
    (Observer/Politiken investigation)


  29. deananash Says:

    Ira, no risk, no glory. The Chinese don’t want investments risk-free investments, they need ENERGY, of which VZ has much and Japan, nada. They’re going to keep lending to Chavez until they own the whole country. They aren’t stupid, on the contrary, they are very astute.

  30. Kepler Says:

    Es una lástima que nada de esto salga en la prensa venezolana.
    Chávez va a vender la primera noche de venezolanas aun por nacer y los riñones de niños que aun están en la barriga de las madres y la gente ni se da cuenta en Venezuela. Y tanta paja que hablan del imperialismo.

  31. HalfEmpty Says:

    TechJetSet that’s because he doesn’t have a Monopoly yet, look closely, 1 purple and 1 yellow have not been purchased.


  32. TechJetSet Says:

    My favorite part of the image of the “Monopoly” Board is that there no houses built on any property. Was that planned or just coincidence?

  33. JFE Says:

    I think the reason is that most oil contract are negotiated for several months in the future for covering price spikes, so they will not see the proceeds until next year. But of course, they need the money NOW, so the loaning spree start.

  34. Roy Says:


    And, I will still reiterate that I think the MUD should pre-position their future government by warning the world against giving credit to Venezuela under these conditions and announcing that any further loans or credits to this Government may be subject to “renegotiation”. Caveat emptor!

  35. Ira Says:

    Roy, you took the words out right out of my mouth.

    Lending to Japan poses zero risk to the Chinese, as opposed to lending to VZ.

  36. Roy Says:

    This comes at an interesting moment. The disasters in Japan are going to be creating a huge demand for credit in the near future. He may be able to negotiate more credit, but it is going to be more expensive than he can imagine.

  37. Charly Says:

    How irresponsible can you get?

    Don’t blame it on Thugo, blame it on your pals i.e typical Venezuelans. If all that matters to him is to get re-elected, all that matters to them is la bolsa de arepa, so they will re-elect him.

  38. Speed Gibson Says:

    the chinese are laughing their asses off at this buffoon….they so own Venz…and they are not forgiving

  39. torres Says:

    Miguel Octavio, this is the most frightening post of yours that I can remember.

  40. geronl Says:

    lol. Figures. I think leftist politicians the world over are exactly the same when it comes to spending more than is economically feasible. If they have no restraints or balances on their actions this is how they will end up.

  41. CarlosElio Says:

    When the first oil embargo back in the early 1970’s petroleum prices quadrupled overnight. Then president Perez went also in a world tour asking for loans to finance grandiose development plans conceived around a pitcher of beer and some arepas by the buffoons of his time: Naricual gold mines, modulos de apure, elevator operators in every elevator that existed in the nation, cattle program seeded with vaquillas de Costa Rica, and scores of other ridiculous programs. When critics asked him if getting the country in so much debt despite the windfall of oil prices wasn’t crazy, he responded saying that the crazy thing would be not to secure those loans to fund national development. He said that the loan would be paid with the wealth that his investments would generate. Well, none of Perez projects worked out in the end.

    This is not to exonerate the new clown in town, but to point out that something very weird happens in the minds of people with too much power and money, that end up costing a lot of suffering to millions of people.

    The cure for this social pathology is strong democratic institutions.

  42. Gringo Says:

    How irresponsible can you get?

    Don’t worry, Thugo can get even more irresponsible. 🙂

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