Local entrepreneurs anticipate that local politics, specially in the economic area, will hurt because of the dismaying external scenario. Forecasts indicate that the financial crisis will reduce the influx of foreign currency from oil sales as a result of declining oil prices in international markets. This is likely to worsen Venezuela’s fiscal deficit.

In addition, local entrepreneurs anticipate a throttling supply of food in the domestic market. As if such scenario was not enough, data compiled by the Venezuelan Central Bank (BCV) show an annual inflation already at 21.8%.

This gloomy scenario has already caused grief in the local industry. In a recent survey launched by the Venezuelan Chemical and Petrochemical Industry Association (Asoquim), respondents stated that the industry’s production plunged by 40%.

The 100 companies comprising Asoquim evaluated that restricted access to foreign money, administrative bureaucracy and legal uncertainty all have negative implications on production.

With regard to export forecasts for the second semester, 50% of the respondents believe that exports will decrease, 27.3% said that exports will improve and 22.7% stated that export performance will remain the same. A vigilant observer of this new international environment, president Hugo Chávez has called the financial system a target and locked on it.

According to the Venezuelan leader, the International Monetary Fund (IMF) is to be blamed for the crisis. For that reason, says Chávez, the IMF should “dissolve itself”. 

A statement by Venezuela’s president, Hugo Chávez, that he will not leave office until 2021 even though his tenure expires in 2013 hints that the Venezuelan leader may attempt a new constitutional reform. Chávez sought to change the country’s constitution last December but was defeated in the process. According to current electoral rules, he cannot run for a third term because he was first elected in 1998 and re-elected in 2006.

Because no challenging nominees exist in the United Socialist Party of Venezuela (PSUV) that can replace him, and since his oppositionists are expected to emerge victorious in the next regional elections, it seems that the Venezuelan president will remain bent on changing the constitution before the end of his term in office.  

In an attempt to “choke” his opponents and force electors to vote for nominees who support the “21^st Century Socialism”, Chávez has announced that the “Regional Development Acceleration Program”, or PADRE, will only be implemented in Venezuelan states that will support his government in the next November elections. According to the country’s leader, this will be so because oppositionists are planning to throw a coup d’état in Venezuela. 

To President Hugo Chávez, the US financial crisis is also the result of a lack of ethics and of “unjust law”. His words came during the 3rd Summit of Presidents of Judicial Branches of the Union of South American Nations, taking place on the Margarita Island, off the Venezuelan coast.

Due to his stance since the beginning of the global financial crisis, Chávez will use the current scenario to extend his anti-American rhetoric and domestically strengthen the idea that capitalism “is a system in crisis”.

Based on that, he will try to reunite his allies around the “21^st century socialism” thesis. Since Chávez’s project relies on structures rather than conjunctures, the longer the crisis sustains, the better for him. That way, he can resume the discourse that fell into disrepute after his defeat in last-year referendum.

However, he may experience trouble if there is a sharp fall in international oil prices. Even with domestic unity, such a scenario can bring even more alarming economic developments.

In the last three years, the Venezuelan government has spent more than $6.7 billion to buy weapons from countries such as Russia, Belarus, China and Spain. In Latin America, Venezuela is the main buyer of Russian weapons. In 2005 alone, 12 contracts were signed to buy weapons from Moscow.

Venezuela is the main customer of Russian weapons in Latin America. Since 2005, it has signed 12 contracts to purchase weapons from Moscow, estimated at $4.4 billion. In the latest years, Chávez bought 24 Sukhoi-30 MK2 fighter-bombers, 50 different helicopters and 100,000 Kalashnikov AK-103 rifles.

And there is more to the relationship between the two nations. This week, Chávez confirmed that Russia will help Venezuela develop a nuclear energy programme. The agreement may elevate US worries about the ever closer collaboration between the two nations.

According to Chávez, Venezuela will receive assistance to build an atomic reactor. He claims that the US and the European Union have no right to prohibit developing countries from seeking nuclear technology.

In a clear attempt to challenge the US, Hugo Chávez is also defending Iran’s uranium enrichment programme. Thus, the Venezuelan Chief of State is flirting with nations that, like him, are regarded as US enemies. This is important for Venezuela not to become isolated, and for nations such as Russia and Iran on their continents. 

The political presence of the French in Latin America is increasing considerably in the past years. Besides acting strongly in Brazil, where the French tries to sell jet fighters, submarines and helicopters (though possibly only the submarines and helicopters will be successful), they are now increasing the approximation with Venezuela.

Last week, the Minister of Foreign Affairs of both countries (Bernard Kouchner for France and Nicolas Maduro for Venezuela) signed ten cooperation treaties. The focus areas are, as expected, energy, technology, military, industrial, telecommunications and combating narcotics.

As part of the deal, the French will invest in the oil, gas and infrastructure sectors. As announced weeks before the visit, nuclear technology will be shared between the two nations. 

Chavez arrived in Moscow for a series of meetings intended at strengthening the Energy ties of his country and Russia. According to local sources, the military cooperation between the countries will intensify in the next months. Russia will also offer Venezuela plans to develop nuclear energy.

The Energy cooperation began with a contract signed between the Venezuelan government and Gazprom.

The Venezuela – Russia cooperation has distinct objectives for each country. Chavez wants to be the “new Cuba”, while Russia sees the approximation in a more pragmatic way. Nevertheless, Russian activities in South American are not new.

Foz do Iguacu, a Brazilian city in the triple frontier (Brazil, Paraguay and Argentina) a centre of piracy and smuggling, is the city in South American with the largest quantity of special agents from several countries, including Russia. Rumours about FSB agents in the area are not new.

Hugo Chavez has no plans of interrupting the oil he send to the US. He categorically answered the question of a journalist saying that the “never did it, don’t want to do it and have no plans on doing it”.

Nevertheless, Chavez himself reminded that the oil exportation was interrupted for a short period of time when there was an attempt to take him out of office in 2002.

His speech was finalized with a warning: If the US tries another coup against him, than drastic measures would be taken. 

Russia does not consider Venezuela a strategic ally such as Cuba was in the past. Nevertheless, the approximation to Caracas aims at sending a clear message to the United States.

Establishing an agreement with Venezuela is more important to the Russians for the message they are able to send to Washington. Strategically, Venezuela has little to offer Russia.

The “diplomatic message” to the United States says: Interfering in our backyard (Georgia) will lead us to interfere in yours (Venezuela).