Note to Rory Carroll Re Venezuela

RE: Oil giants squeeze Chávez as Venezuela struggles; Dec 9, 2010
Dear Rory Carroll (and editors): 
You wrote
“Venezuela's tottering economy is forcing Hugo Chávez to make deals with foreign corporations to save his socialist revolution from going broke.”
You say cables released by Wikileaks reveal a “severe financial crunch in his government.”
The cables you cite actually say nothing at all about Venezuela’s government going broke – understandably enough, since such a claim would be outlandish.
As of September of 2010, the Center for Economic and Policy Research (CEPR) reported that Venezuela’s debt to GDP ratio was a very low 18% – far lower than most European country’s (Britain’s is 70% of GDP).[1] Venezuela’s foreign public debt is only 10.8% of GDP. It also has foreign exchange reserves of $28 Billion USD and, as of last year, acurrent account surplus of $19.8 billion USD.
Given all this data, how do you justify your opening sentence?
Your article strongly suggests that foreign investors now have Venezuela’s government by the throat when you stated
“Luigi Maccotta, told his US counterpart that Italian oil company ENI squeezed PDVSA over an Orinoco belt deal in January this year knowing it had no one else to turn to.”
Oddly, you also wrote that “foreign oil companies still in Venezuela stay largely silent lest they anger the government and find themselves locked out of the western hemisphere's biggest energy reserves.”
Why do foreign investors care if the Chavez government gets angry if they have it by the throat?
Moreover, you didn’t mention that even US officials were not completely sold on Luigi Maccotta’s version of events. The cable you cited says
It is unclear what bonus Eni really paid PDVSA, but it is interesting that regardless of the figure, PDVSA likely will not see any cash flow in the immediate future due to its $1 billion debt to the Italian company.”[2]
You jump from US officials engaging in dubious speculation about PDVSA’s cash flow situation to the Chavez government being the mercy of foreign businessmen who are now keeping the government afloat.
You should have informed your readers of the abysmal track record western officials have in forecasting economic developments in Venezuela. CPER noted
“…the IMF underestimated Venezuela’s growth for the four consecutive years 2004, 2005, 2006, and 2007, by 10.6, 6.8, 5.4, and 4.7 percentage points, respectively”
Finally, given the fiasco US and EU economists and business people have made of their own economies, you should clearly receive their assertions, even the ones made in private, far less credulously.
Joe Emersberger
[1] For stats on Venezuela see
CEPR; Update on the Venezuelan Economy, Mark Weisbrot and Rebecca Ray, September 2010
For stats on EU debt levels see
[2] Wikileaks ref# 10CARACAS163

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