Oil and the economic crisis

Almost all oil-exporting countries have decided to review their budgets for 2009, given the steeply falling prices. Venezuela, however, probably protected by its socialist economic and financial shield, does not seem to be aware of what is happening and confidently expects a possible reduction of OPEC's oil production might grant her the miracle of a rebound in prices to keep pretending that nothing is going on.

Saudi Arabia said recently that oil prices should be at $75 per barrel, an idea other OPEC members have welcomed with enthusiasm. So when the group met recently, it decided to reduce output again, this time by more than 2 million barrels daily. However, the Saudis clearly did not want to assume all the reduction and insisted other producers, including Iran and Venezuela, not only approve the new cuts, but also implement them, which will lead to additional pressure on Venezuela's already dwindling export volumes.

It is still to be seen if the agreed reduction can produce substantial effects on prices, especially in view of the depth and extent of the crisis. Historically, oil production cuts have not always translated into a price recovery, and it appears the global economic slowdown is forcing a lower energy consumption, to levels unimagined until now.

The situation calls for caution, especially when there are no alternatives to weather the storm, unless the Chavez government takes the easy way of using the country's international reserves to cover the anticipated deficit.

Misguided economic policies and fostering of an adverse climate for productive investment, with no other basis than old-fashioned, failed ideological conceptions, have caused an accelerated capital flight from the country and the disappearance of foreign investment. To make matters worse, industrial capacity has been ravaged, as the number of industrial enterprises has halved since 1999. This has diminished the levels of real employment, only to be replaced by an army of inefficient government employees and an array of unprofitable state-owned enterprises.

After squandering a huge fortune in bureaucracy, gifts and fantastic foreign projects throughout the last decade of trials and errors, inefficiency and corruption, Venezuela has missed the train of development.It is past time for Venezuela to reflect on the country we are building - or, better said, destroying.

Norman Pino is a Venezuelan retired career diplomat. He served as ambassador in Saudi Arabia and the Netherlands, among other diplomatic assignments.