Who Can Solve a Problem Like Hugo?


This New York Times story on Venezuela's May 1 oil industry nationalization plans gets interesting near the end:

No one sees an immediate crisis at Petróleos de Venezuela. But its windfall from high oil prices masks the devilish complexity and rising costs of producing heavy oil. Meanwhile, the company acknowledged last month that spending on "social development" almost doubled in 2006, to $13.3 billion, while its spending on exploration badly trailed its global peers. And Petróleos de Venezuela's work force has ballooned to 89,450, up 29 percent since 2001 even as production declined

Petróleos de Venezuela's cash is said to be running short as Mr. Chávez uses its revenue to cement political alliances with Bolivia, Cuba and Nicaragua. The company has borrowed more than $11 billion since the start of the year, a rapid debt buildup that reflects a wager by Mr. Chávez that oil prices will remain high indefinitely.

One way of interpreting that is "He's desperate! He could do anything! Duck!" Another way might be "Gosh, he hasn't thought this stuff through." Chavez has never been capable of some Nasser/Suez stunt, and his planned nationalization and move away from trade with the U.S. would take about 5-7 years to fully implement, in which time all manner of things can go wrong for an oil-based economy. Scary headlines, but lots of punchlines when you read through them.