Chavez blames Venezuela economic drop on OPEC oil output cut

President Hugo Chavez said on Wednesday the Venezuela oil producer’s economic slide was largely due to its compliance with OPEC mandated oil output cuts as Venezuela GDP shrank 4.5 percent in the third quarter of 2009, a second consecutive three-month contraction that by most economists’ definition puts Venezuela in recession.

Though Venezuela is still heading for a smaller economic decline this year than plenty of other nations, Chavez critics have leapt on this week’s data as evidence of the failure of his decade-long socialist drive. Private sector investment and output have suffered in Venezuela’s state-driven model, with large swathes of the economy nationalized since Chavez came to power in 1999.

But he said Venezuela’s people-first policies, from free health clinics to subsidized food did not show up in data. Lambasting traditional GDP methodology as an “ideologically charged … capitalist instrument”, Chavez said it would be easy to reverse the GDP trend if Venezuela were to disobey agreements by the OPEC group of producer countries.

Venezuela’s cut of about 400,000 barrels per day had helped lift and stabilise global crude oil prices, he said. “One of the biggest factors in the GDP fall is the decline in the so-called oil GDP,” Chavez told a meeting of his United Socialist Party of Venezuela. “But the drop in the oil GDP is the (OPEC) cut.”

Chavez said Venezuela had complied with its roughly 10 percent share of more than 4 million barrels per day OPEC cuts as a “geopolitical decision” to help shore up prices, not due to local wells drying up or lack of investment. Venezuela could, if it wanted, therefore break with OPEC to boost the economic data.

“Fine, GDP would immediately go above zero. But what would that bring as a consequence? That oil prices would collapse to $20 or more. Then we would have no resources to pay salaries next year. It would be catastrophic for Venezuela.”

Tags:  oil output, OPEC, Venezuela