Andean Oil Producers Ponder Size, Use Of Embargo Windfall
BOGOT'A, COLOMBIA — THE United Nations oil embargo of Iraq and occupied Kuwait is likely to bring economic relief to Colombia, Ecuador and Venezuela, three Latin American petroleum producers burdened with billions of dollars in foreign debt. Each day the region exports more than 2 million barrels of crude. The rise in crude oil prices from $21 a barrel before the Persian Gulf crisis to $26.50 last week will mean an influx of millions of dollars for the three countries.
But the size of each nation's windfall, and how it is used, are subject to each country's economic challenges. Venezuela stands out because of its large exports. Oil analysts say Venezuela, which pumps about 2 million barrels each day, could theoretically raise daily production as much as 1 million barrels in a few months.
Yet the actual increase is likely to be much less. Venezuela is constrained by membership in the Organization of Petroleum Exporting Countries (OPEC). Venezuelan President Carlos Andr'es Per'ez confirmed last week that OPEC nations had agreed his nation could increase oil output by 500,000 barrels per day. Venezuela already supplies the US with 900,000 barrels per day.
``Perez is positioning Venezuela to play a more assertive role in [OPEC],'' says Jack Sweeny, a Caracas petroleum analyst.
If oil prices remain around $26 per barrel, Venezuela could earn $1 billion more in the next year even without increasing exports. But the increase would likely be spent on World Bank and International Development Bank debt-reduction programs.
Mr. Sweeny says a prolonged oil crisis could hurt the country by tempting the government to drop its agreements and to``petrolize'' the economy - using oil money to subsidize imports instead of paying its $29 billion foreign debt.
In Colombia, where the foreign debt stands at a more manageable $16 billion, the oil windfall will be smaller. Colombia's new President C'esar Gaviria Trujillo said last week that he, too, was willing to increase exports. But oil analysts say Colombia's pipeline capacity limits any increase to 50,000 barrels per day. The country currently exports some 200,000 barrels each day.
Luis Soto, a Bogot'a petroleum consultant, says even a small export increase would be unwise. The country's oil reserves have fallen by 200 million barrels recently to 1.92 billion barrels. ``Any additional production should be used to replenish reserves or the country will find itself importing crude by 1996,'' Mr. Soto says.
Ecuador's President Rodrigo Borja is likely to use the oil windfall to make peace with enemies in his own Congress. The public's anger over economic problems contributed to a loss of 15 seats by Borja's Social Democratic Party in elections this year.
Contributing to Ecuador's economic crisis is foreign debt of $11 billion and a federal deficit of $25 million. Though Ecuador (also an OPEC member) cannot increase exports of 150,000 barrels a day by more than 20,000 barrels, the crisis is good for Mr. Borja, analysts say. The president can use the money to repair relations with opposition politicians.
``It's called making friends by building bridges,'' says Rene Ortiz, a consultant and former OPEC secretary general.