Good Will from Petropower

By George Russell

An OPEC member helps bankroll its less well-off neighbors

In Jamaica, the conservative government of Prime Minister Edward Seaga discovered shortly after its election last October that it desperately needed $100 million in operating funds. Seaga passed the word to a group of visiting U.S. and Venezuelan businessmen who were looking at ways to revive the island's near bankrupt economy. Shortly thereafter, Jamaica received a $50 million grant from a confidential Venezuelan government discretionary fund that may total as much as $500 million. An additional $50 million from Venezuela is now being funneled into the island, earmarked for road and airport development, housing, water supply and electrification.

Throughout Central America and the Caribbean, governments are benefiting from a remarkable spirit of generosity on the part of oil-rich Venezuela, a founding member of OPEC and, with 2.2 million bbl. per day, currently the second largest producer in the cartel. In the Dominican Republic, Venezuelan money is helping to finance the construction of a $64 million hydroelectric project, housing, and a $2.3 million alcohol distillery. The tiny island state of St. Lucia (pop. 120,000) has opened a $400,000 asphalt plant, courtesy of Caracas. In Panama, officials are planning to erect a $100 million bridge to span the canal--with Venezuelan backing. An estimated $100 million in Venezuelan money has flowed into embattled El Salvador to prop up the civilian-military government headed by Christian Democratic President Jose Napoleon Duarte, who spent seven years of exile in Venezuela. Even the right-wing regime of Guatemalan President Fernando Romeo Lucas Garcia, no friend of Venezuela's democratic government, has received an estimated $200 million in oil subsidies.

Venezuelan teachers and technical advisers have fanned out across the Caribbean and Central America; since 1980, in combination with Mexico, Venezuela has offered low-interest loans to needy neighbors to cover as much as 30% of the cost of oil imports. Total Venezuelan foreign aid since 1975 has amounted to some $4 billion, making Caracas the single largest donor in Latin America. (U.S. assistance to the region over the same period totals $2.9 billion.)

As one of only four democracies in South America, along with Colombia, Ecuador and Peru, Venezuela has long been enthusiastic about using its petrodollars to spread its concept of democracy elsewhere in the region. Venezuelan President Luis Herrera Campins, 56, calls his country's assistance program a campaign in favor of "democracy for the poor." Says Energy Minister Humberto Calderon Berti: "Venezuela's oil is the main stabilizer of the democratic system."

Behind the rhetoric, there is hardheaded self-interest. As a relatively rich country with many poor neighbors, Venezuela (pop. 17 million) would rather help pay today for political and social stability than run the risk of eventual political radicalism in the area.

The approach is part of a broad strategy of combatting Communist, specifically Cuban, influence in a region where, says the Venezuelan foreign ministry's Leopoldo Castillo, "during most of the 1960s and 1970s virtually all social change was linked to Havana's influence." Venezuela and Cuba have seldom been easy with each other in recent decades; their relationship turned positively chilly last year after Cuban police shot at refugees seeking political asylum inside the Venezuelan embassy in Havana. Caracas withdrew its ambassador in protest.

Yet for all of Venezuela's riches--$8 billion in foreign currency reserves, at least 18 billion bbl. in proven petroleum reserves--some observers are skeptical about the country's ability to sustain its good intentions toward its neighbors. Venezuela's own economic house is not totally in order. Unemployment is estimated at 12%, inflation at 15%. One reason for the economy's woes is that Herrera Campins' predecessor, Carlos Andres Perez, encouraged a series of ill-advised state enterprises, such as steelmaking and air transport, that last year ran up losses estimated at $2.5 billion. Other important sectors of the economy, mainly agriculture, have been corroded by the massive inflow of oil money: once a self-sufficient food producer, Venezuela now imports more than 50% of what it eats.

Nor has Venezuela been able to solve its glaring social problems. The hills around Caracas' glittering downtown of high-rises and posh apartments remain dotted with ramshackle slums, ranchitos, where water is scarce and living conditions are crowded and unsanitary. Some 700,000 Venezuelans have no proper shelter; the government housing program designed to help them has been stalled for the past two years because of red tape. Over time, Venezuelans could well grow impatient at seeing money spent abroad when their own needs have not been met, provoking a political backlash. Says one Venezuelan economist: "People here are very nervous, very upset. The government has created expectations that can never be met."

There are no signs, however, that the government plans to end its free-spending foreign aid program any time soon. That is much appreciated in Washington. The Reagan Administration, which has given a more military emphasis to the U.S. foreign aid program, is counting on Venezuela's charitable deeds to help stem the kind of political radicalism that produced Nicaragua's Sandinista government. Secretary of State Alexander Haig met in Nassau last month with the Venezuelan, Mexican and Canadian foreign ministers to map the outlines for a long-term development policy in the Caribbean area, and the officials will meet again later this year to discuss the most obvious economic needs. Says one U.S. State Department official: "Venezuela has been very helpful in developing the initiative." There is no doubt that Venezuela's neighbors feel likewise.

--By George Russell.

Reported by William McWhirter/Caracas

With reporting by William McWhirter

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