Chávez’s cheque book diplomacy

Hugo Chávez, Venezuela’s president and media phenomenon, is well known for his antics at home. For those out of touch with his singular leadership style, check out YouTube for his Sunday show Aló Presidente.

Now attention is being drawn to his activities outside Venezuela’s borders. Chávez likes to cast himself as the modern day Simón Bolívar, the great liberator who freed South America from Spanish rule.

Bolívar dreamt of uniting the independent republics of the continent in a common federation. Chávez has taken up that call, terming it the “Bolivarian Alternative” for South America. There’s work on a regional development bank, stronger trade relations and closer political ties. 

But such “cooperation” comes at a cost. Precisely $220bn over since 2005, if a new report is to be believed. Venezuela has become well known for offering subsidies, oil exchange programmes and other forms of financial support under President Chávez. But until now, no-one has tried to quantify exactly how much.

According to Centro de Investigaciones Economicas, a Caribbean think-tank, the money is primarily earmarked for fourteen allied countries. Most are from South America. Bolivia and Cuba are perhaps the best known. Around 90,000 barrels of Venezuelan crude arrive in Havana every day, for example. In exchange, Cuba sends its doctors to help Venezuela’s disenfranchised (Chávez’s primary voters).

Venezuela’s Bolivarian ambitions have stretched since Bolívar’s day. Now Russia tops the 21st Century socialist gravy train. Chávez has invested $34.5bn in the former Soviet Union through arms purchases and energy agreements.

Where does the money come from? In short, oil. The state-run energy company PDVSA has benefited from record high prices in recent years. And Chávez’s regime has not been slow in taking advantage of this cash cow. Now that world oil prices are crashing, it’s unclear how Venezuela’s strategy of cheque book diplomacy will shape up in leaner times.

One country that could feel the pinch is Argentina. International investors have been tempted to give the country a wide berth since it defaulted on its sovereign debt in 2001. Venezuela has ridden to the rescue, buying up government bonds to the tune of $5bn in recent years.

Argentina’s president Cristina Kirchner, is due to speak at the LSE in London later this week. Her relationship with Venezuela has caused problems in the past. In the run-up to her election, airport officials detained a Venezuelan businessman who was found with $800,000 in his suitcase. The money was allegedly destined for Cristina’s election campaign.
What strings are attached to Venezuela’s largesse is not clear. A worthwhile question, perhaps, for any journalist attending Cristina’s LSE speech on Friday?