President Hugo Chávez' policy of using Venezuela's oil wealth to bolster allies in the region and build support for his Bolivarian Alternative for the America (ALBA) could be in danger of starting to unravel even before it really gets off the ground.
Doubts are growing about his plan to build oil refineries in friendly countries that would be supplied with oil at discount prices by Venezuela. The state oil corporation, Petróleos de Venezuela (PDVSA), would foot the construction bill on the basis of low-cost credit, officials say.
The most notable examples have been projects to build refineries in Ecuador, Nicaragua and even Cuba, where ageing leader Fidel Castro has long been seen as a mentor of Chávez in the region.
Elogio Del Pino, a PDVSA vice president, told the Venezuelan newspaper El Nacional in comments published Friday that "international investments like the refineries in Ecuador and Nicaragua are under evaluation."
"We're asking to look for financing" to help pay for the refineries, he was quoted as saying.
The Nicaraguan plan involves building a refinery to process 150,000 barrels a day (b/d) of cheap Venezuelan crude. The project is said to have been costed at $4 billion, an estimate analysts say likely doesn't include transportation costs over the long term. Nicaraguan Sandanista President Daniel Ortega is a self-declared close ally of Chávez. Ortega has allied himself with Chávez' efforts to reduce what he sees as undue United States influence and power in the region.
But whether the refinery planned for Nagarote will still go ahead is open to doubt. A former Nicaraguan foreign minister and opposition leader, Francisco Aguirre Sacasa, is reported to have predicted that the refinery won't be built because of the impact of the world financial crisis on global oil demand. He invited people to go to the site of the project. There, he claimed, they'd find little had been done because the refinery was a "fairy tale."
Whether this sort of consideration will be sufficient to persuade Chávez to change his mind is open to question. The strategy is seen to be have been developed for reasons every much as political as they are economic, if not so. The Cuban plan is expected to go ahead regardless, and it's suggested the same could well apply to Nagarote.
Likewise, this weekend the Latin American Herald Tribune quoted Ecuador President Correa as saying that the Refinery of the Pacific -- which is estimated to cost $10 billion -- will go ahead, and that Venezuela remains committed.
On Tuesday, Ecuador again confirmed that the plans to jointly construct an oil refinery with Venezuela on the Ecuadorian coast will proceed on schedule and that the refinery will be operational in 2013, according to Ecuador's Ministry of Mines and Petroleum in Quito. The expected timetable for the building of the complex remains "unchanged," the ministry said in a statement, in which it ruled out press reports that there would be financing problems to construct the oil facility.
"The idea is to maintain investment in the country, because our idea is to have between 300,000 and 400,000 barrels (of oil) per day of potential — so that when the rebound in oil prices comes ... we can then open up that production," Del Pino was quoted as saying, as he left a congressional meeting Thursday. He said that PDVSA will reevaluate funding only for some international projects, and that domestic investment in the oil industry will be unchanged. But, if oil prices remain low and international capital markets remain closed to Venezuela, much less Ecuador, Nicaragua and Cuba, it is difficult to see where the money for all these political projects will come from when the economic cupboard is increasingly bare.
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