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A little local difficulty?

The savage drop in oil prices and a populist presidential candidate have given investors in Venezuela the jitters. But, as Bill Hieronymus reports, the scaremongering might just be going too far.

Venezuela, the richest country in the Americas in petroleum and with huge reserves of other natural resources, such as high-grade bauxite, has investors wary on two counts: leading presidential candidate Hugo Chávez Frias and the lowest world oil prices for more than a decade.

Chávez, a former army lieutenant who led an unsuccessful coup attempt in 1992 and who is the populist candidate leading in the polls for presidential elections scheduled for December, "has created a lot of uncertainty", says an international monetary source in Washington, who in the next breath identifies oil prices as the second culprit.

Picking a page from Latin American political campaign manuals for the 1980s, Chávez says he wants less of the budget to be used to service foreign debt and has suggested that Venezuela's privatizations of recent years be reconsidered. Oil, which at $18 billion accounted for almost 80% of Venezuela's exports in 1997, has fallen about 30% in price this year, forcing finance minister Freddy Rojas Parra to make two budget cuts early in 1998. In addition to dominating exports, oil provides more than half of the country's fiscal revenues.

Pared to the bone

"There will be a brutal fall of $5 billion in oil-export revenues for this year," says planning minister Teodoro Petkoff.

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