Nine decades hoping to live off petroleum

Gumersindo Rodríguez, a minister of Planning during Carlos Andrés Pérez's first presidential term, has written a book that takes a look back at the birth and development of Venezuela as a petro-state, centering on the vision and actions of Rómulo Betancourt, a key character in 20th Century history.

Throughout the book, Rómulo Betancourt and oil sowing, the authors depicts how Venezuela evolved from an underdeveloped country based on a rural economy to a modern nation. This transformation was due not only to the finding of "Black Gold" at La Rosa in Zulia State, but also to the ideas of a man who would become a key leader of right-wing political party Acción Democrática.

"(Arturo) Uslar Pietri worded a phrase that has lasted throughout the years "to sow petroleum" but it is actually Betancourt who had the vision, the need to protect the seed, control oil revenues and, in the years to follow, he created the OPEC along with (Juan Pablo) Pérez Alfonso," says Rodríguez.

He immediately adds that "Rómulo Betancourt also proposed the idea, being a public officer, that the main wealth of the country is its human capital; therefore, he set out to invest in health and education and rid the country of malaria and illiteracy, which were both at alarming rates and undermined the country's workforce by half."

He admits that Rómulo Betancourt never sought nationalization of petroleum because "it was too big a step to take during his initial term in the 60's; we had a weak economy, and no progress had been made in the production capacity it would have been deeply irresponsible."

Barking up the wrong tree

There is no doubt that Venezuela's living standards soared, but in the 80's direction is lost, and the country begins to feel the effects of stagnation, high inflation and currency devaluation, a cycle that Rodríguez summarizes as "petroleum has been sown, but there is no notion on how to harvest it."

"The country previously affected by limited development has created by 1978 the Venezuelan Guayana Corporation, which produces iron, steel, electricity and exports up to USD 5 billion a year, but that is precisely when we have not idea which way to go."

He explains that "Venezuela should have opened up to foreign investment, which would have found great appeal in the supplies produced by the industries we had created. Had we gone in that direction, a strong private-sector economy would have ensued, and overdependence on oil, the petro-state, would have taken a backseat."

According to Rodríguez, the decision to halt the economy's expansion made by the economic cabinet of former President Luis Herrera Campíns is a highly costly blunder. 

"We believed we had surpassed our production capacity when many of the projects performed were about to blossom, so restrictive measures were taken instead of continuing to grow."                  

A cycle

Since the dawning of the petro-state, the discussion of the impact of currency overvaluation and the need to create and anti-cyclical fund becomes recurrent.

Rodríguez also tells of how Alberto Adriani spoke in 1935 about the need to revalue currency based on petrodollar income being "sluggish and hardly noticed" and explains that even though Betancourt was aware that overvalued currency affected employment and agricultural sector, he never supported devaluation as an option.

"Rómulo Betancourt held that by lowering costs and other incentives there would be a way to encourage sectors other than the oil business."

In 1944, Raúl Prebish recommended a nationwide anti-cyclical fund to prevent a future fall in oil prices.

Rodríguez records this in his book but believes that the "true anti-cyclical core of a country is none other than property rights."

Translated by Félix Rojas Alva