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A couple of weeks ago, financial analysts voiced fears that Venezuela might no be able to resists contagion from a possible Argentine debt default. Also, concern over Venezuela has deepened in earlier weeks as the Organization of Petroleum Exporting Countries announced its third successive output cut this year, aimed at shoring up crude oil prices. As OPEC's third-largest oil exporter and the fourth-biggest economy in Latin America, Venezuela depends on oil for 75 per cent of its export income and half of its fiscal revenue.
Export revenue collapses in the past have led Venezuelan governments to switch rapidly from spending bonanzas to painful fiscal adjustments. Such a scenario could be looming again, some observers feared, given populist President Hugo Chavez's penchant for announcing social spending plans.
Argentina has not defaulted on its debt — not yet, at least — and oil exports proved not to be such an important factor. This year Venezuela's budget was based on its heavy mix of crude averaging $20 a barrel. After averaging $26 last year, this year it has averaged $22, a level that still provides a degree of comfort.
Nevertheless, without any perceivable contagion from Argentina nor suffering yet from meeting OPEC's cut in exports, homegrown factors are pushing down the bolivar, the country's currency, and increasing domestic demand for dollars.
Venezuelans are buying dollars because interest rates on bolivars are not high enough to beat inflation, forecast at 10 to 12 percent this year. Concerned at the hemorrhaging of dollars, which some analysts calculate at roughly $1 billion per month, last week Venezuela's central bank said it was reducing from 15 to 12 per cent the ceiling on banks' foreign currency holdings as a percentage of net capital. It also reduced, by the same amount, the maximum permissible daily variation in foreign currency holdings and banned sales of foreign currency to companies based outside Venezuela.
But fear of inflation is not the whole story. Political instability plays an important role as well. Rumors of possible coups are rampant, although nobody can come up with a believable scenario of how they would come about. Ironically, is was the Chavez government itself who gave credibility to these rumors when some officials publicly charged former president Carlos Andres Perez with plotting its downfall-setting up a back-to-the-past scenario that is fascinating Venezuelans.
A coup — which would have to be headed by military-is the talk of common Venezuelans concerned with their personal security. Even though Chavez is supposed to run a strong-arm government, crime under his rule has grown exponentially. Since he has been in power, mugginess and kidnappings have escalated and murders almost doubled.
Increasingly, Venezuelans are yearning for a government that will deal with this problem, while Chavez, meanwhile, is busy polishing his public image on both the left and the right side of Latin America's political spectrum.
Last week he killed two birds with one stone when both Cuba's dictator Fidel Castro and Brazil's president Fernando Henrique Cardoso joined Chavez deep in the Venezuelan rain forest for the inauguration of a multimillion-dollar power project that will provide electricity to Brazil.
At Santa Elena de Uairen, a tiny town on the edge of the jungle, Chavez had been drinking champagne with Castro, who was celebrating his 75th birthday and was supposed to return to Cuba after that, but he chose to go into the jungle with Chavez where Brazil's Cardoso would join the Venezuelan president for the plant's inauguration.
This week Chavez is again on the road-he has been away from Venezuela much more than any other president in living memeory-at the meeting in Santiago, Chile, of the so-called Rio Group of Latin American countries. Meanwhile, members of his cabinet are traing to deal with the two issues that are undemining Chavez's rule, inflation and crime.
Commerce minister Luisa Romero announced that Venezuela would cut imports by about 20 percent in an effort to strike a better balance of trade and boost its currency against the dollar. And defense minister Jose Vicente Rangel said last week "that everything that is happening of a delinquent nature is being given particular attention," adding that "the theme of security has ceased to be simply a word to assume the importance of a state problem."
But this doesn't make up for the lack of presidential attention to both problems perceived by Venezuelans, an issue that Venezuela's press, usually guarded in its criticism of Chavez, has been increasingly featuring in its editorials.
Claudio Campuzano (claudio-campuzano@hotmail.com) is U.S, correspondent for the Latin American newsweekly Tiempos del Mundo and editorial page editor of the New York daily Noticias del Mundo. He writes weekly for World Tribune.com