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Lower oil prices curtail Chávez's global, domestic influence

Amid a bid for reelection, Venezuelan President Hugo Chávez's oil subsidy and antipoverty programs may be on the chopping block.

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"We are quite confident that Petrocaribe will continue," Ralph Gonsalves, the prime minister of the island nation Saint Vincent and the Grenadines, told McClatchy in an interview. "I specifically raised this issue with Venezuelan authorities recently. I don't see a problem."

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Venezuela also sells 15,000 barrels a day of subsidized oil to Central American nations and an unknown amount of subsidized diesel to Bolivia.

The Chávez government also provides some 100,000 barrels a day of oil and oil products to ally Cuba.

Bolivia gets millions of dollars a year from Venezuela for President Evo Morales to hand out to his nation's mayors for new schools, sewer systems, and health clinics. Venezuelan money also underwrites Cuban doctors in Bolivia who perform free eye surgeries, as well as helicopters that ferry Mr. Morales throughout the country.

In all, the oil subsidies and foreign assistance programs are believed to have cost Chávez billions in 2008, although no one has exact figures because the spending is off-budget.

Chávez could finance all of the programs abroad – and the vast antipoverty programs at home – with the high oil prices of recent years. But at some $50 a barrel, however, global oil prices lag far behind July's record of $147.

"Chávez's meddling will certainly be a lot less effective in 2009," said Jorge Quiroga, a former president of Bolivia. Mr. Quiroga added the oil price dive would scuttle PDVSA's plans to spend hundreds of millions of dollars to find natural gas in Bolivia, a priority for Morales' government.

Miguel Octavio is a Caracas-based financial analyst who writes a political and economic blog that outlined the coming cash crunch for the Chávez government.

In a Dec. 6 posting, Mr. Octavio estimated that Venezuela could receive only some $25 billion a year in oil export income with prices at the current level. Adding non-oil exports of about $5 billion and subtracting imports of about $50 billion, Venezuela is facing a $20 billion shortfall in dollars in 2009, if oil prices don't rise, Octavio estimated.

"The Venezuelan government could be in a lot of trouble," Octavio said in an interview. "Chávez is between a rock and a hard place."

Chávez initially pooh-poohed those warning the global economic crisis could threaten his so-called 21st Century Socialist Revolution. In recent weeks, he said Venezuela will have to tighten its belt but that foreign reserves — estimated to be $40 billion to $75 billion — will tide Venezuela over until oil prices rise again.

No longer providing heating oil to the poor in the US — at a value of about $250 per home — will save the Chávez government some $100 million. The government has saved another $2.5 billion by announcing that it will limit Venezuelans to spending no more than $2,500 abroad a year with inexpensive dollars provided by the government. The previous limit was $5,000.