Word: perez
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...Venezuela. As one of the largest exporters of petroleum outside the Persian Gulf, it stands to reap a windfall of $2 billion this year from the rise in oil prices since Iraq invaded Kuwait. Yet as seen from Miraflores Palace, the official residence of President Carlos Andres Perez, every silver lining has its cloud. "This is phony money that we're making from the crisis," said Perez last week. "Whatever it can buy today, it may bring us damage and danger tomorrow...
...Perez speaks from experience. During an earlier term as President he led his country on a giddy spending spree when oil revenues soared after the Yom Kippur War and the Arab embargo brought on the first oil shock in 1973. Venezuela squandered billions of petrodollars on luxury imports, high- visibility public works and a bloated state bureaucracy. When oil prices fell in the early 1980s, Venezuela retreated behind a wall of protectionism and a popular though inefficient system of price supports for local products...
...then Perez was out of office, with plenty of time to ponder a lesson for the future. "A price spike is bad for everybody, producers and consumers alike," he says. "It is worst for developing countries that have oil, because they tend to go on a binge of happy-go-lucky indebtedness." Since returning to the presidency in early 1989, Perez has reined in government spending, reduced subsidies and tried to stimulate growth by easing restrictions on foreign trade and investment. He hopes that with infusions of capital from abroad, Venezuelan firms will be better able to sell their goods...
...Perez also fears that the spurt in oil prices could jeopardize his efforts to wean his country from the profligacy of the 1970s. "The psychological consequences of these extra revenues conspire against our people's willingness to accept an increase in the cost of living and other austerities that come with reform," he says. "With all these short-term profits, many will say, 'Why worry any longer...
...that Perez plans to leave the Saddam bonus unspent. His government intends to build new wells, refineries and storage facilities. During a meeting in New York in October, Perez told George Bush that Venezuela plans to expand its production capacity. Great, said Bush; a former Texas oil speculator himself, he wasted no time in urging Perez to liberalize Venezuelan foreign-investment laws even further and let U.S. companies join in exploration and production. Perez's political opponents might make that difficult for him, since it was he who nationalized Venezuela's U.S.-dominated oil industry in 1974. But whether Yanquis...