beyondbrics

How short people’s memories are – especially when there’s so much to remember. With the intense political drama unfurling in Venezuela at the moment, the (incredibly dramatic) explosion of the Amuay refinery six months ago seems to have been largely forgotten.

Not by everyone though. On Monday, for example, one outraged newspaper attempted to jolt Venezuelans out of their fixation on the present to remind them how disastrous the whole Amuay affair has been, with the oil-rich country’s gasoline imports from the US apparently having quadrupled since the tragic accident.

That would be okay – up to a point – if it wasn’t for the fact that Venezuela’s government subsidises local petrol consumption so much that it might as well be free.

It’s one thing to give away your own oil – with the largest oil reserves in the world, there’s no denying Venezuela has quite a lot of the stuff – and simply forgo what you might gain from exporting it. But it’s rather a different thing to import refined products at market prices and then more or less give them away.

Juan Nagel, a Venezuelan economist who blogs at Caracas Chronicles, speculates that the amount that the government has had to shell out on importing refined products could even have put enough pressure on its already strained finances to be a significant factor when it came to devaluing the currency earlier this month.

With Venezuela now supposedly importing more than 100,000 barrels a day in gasoline and components, a back-of-the-envelope calculation suggests that the government has probably spent about $2bn on imports in the last six months, and very probably more.

That’s not exactly peanuts, but it’s not the be-all-and-end-all either, as Nagel admits. He has another intriguing theory about the devaluation, which is that the real crunch factor may have been the fact that the Chinese (the main underwriters of last year’s enormous fiscal deficit) appear to be increasingly reluctant to continue lending to Venezuela’s notoriously spendthrift government.

Still, who knows what drives the sometimes peculiar economic decisions of Hugo Chavez’s government. Not that most Venezuelans are probably paying that much attention anyway. They’re far too focused on whether or not their president is even alive to preoccupy themselves with such abstractions.

Related reading:
Confusion reigns over Chávez’s condition, FT
Venezuela: Up in smoke, FT Analysis