Full of Gas

If you want to know why, despite committed followers and a fast-growing economy, Hugo Chávez faces real competition in Venezuela’s Oct. 7 presidential election, just flick a switch. Something may or may not happen; it’s quite hard to predict. Blackouts occur in nearly every area of the country several times a week. Sometimes they last a few minutes, sometimes a few hours, sometimes a few days. It drives people crazy. Last May, a power shortage hit right in the middle of the Venezuelan basketball league’s final series. The story of how power failures can plague Venezuela even though it boasts some of the world’s greatest natural gas reserves and massive hydroelectric dams is the Chávez years in miniature, a heady cocktail of ideological rigidity, corruption and mismanagement. The problems started when government nationalized electric sector in 2007. It eventually consolidated the utilities as a single state-owned firm known as Corpoelec. The revolutionary socialist government was determined to protect people from the depredations of capitalism by freezing electricity rates. The trouble is, inflation has been running at 15 to 35% a year, meaning that every year, electricity has been getting that much cheaper in real terms (when it isn’t stolen from high-power mains outright, which is common). That, in turn, means two things. One, in a country where power bills seldom give you a reason to turn off the light when you leave the room, demand keeps rising at rates that even the government admits are unsustainable. Two, perversely, Corpoelec is chronically short of cash. As of August this year, payments from customers couldn’t cover company’s payroll, let alone the billions it takes to build new power plants and dams or upgrade the rickety national grid. A severe drought in early 2010 pushed government to take drastic action. An emergency decree rationed supply of electricity to users while simplifying the bureaucracy needed to buy power-generating equipment abroad. But that decision gave rise to several scandals, as ghost companies in Venezuela landed contracts worth hundreds of millions of dollars to supply gas turbines and other equipment at shamelessly inflated prices, with difference ending up in well-connected pockets. Much of the underlying issue has to do with natural gas. Although Venezuela has enormous reserves, making gas an ideal fuel for generating electricity for the entire country, it doesn’t have a proper delivery system. It has more gas than it knows what to do with in the east but faces a chronic shortfall in the west, where many power plants are located (…..)

Link: http://latitude.blogs.nytimes.com/2012/09/21/chavezs-electric-power-problem/

Acerca de ignaciocovelo
Consultor Internacional

One Response to Full of Gas

  1. Professor Uziel Nogueira says: Even by Latin American standards, Venezuela has one of the worst run public enterprises in the region. The problem is Venezuela’s corrupt political system that rules an incompetent/nepotist public sector, dominated by state enterprises. The power sector is a good example of inefficiency. This is an old problem that was not caused by Chavez. Venezuela has one of the best lands in South America and could become an agricultural exporter power house like Brazil and Argentina. However, the country is a net food importer incapable of feeding its own population.. The state oil company PDVSA was the only efficient/professional enterprise in the country when it was managed by Americans. The problem in Venezuela is not Hugo Chavez. He only made things worse by his blend of populism in which he plays the role of savior of the poor.

    Incidentally, Cristina Kirchner in Argentina is attempting to follow Chavez example but has a tough task ahead. Argentine s are more educated and a tough crowd to be dominated by a messianic politician.



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