venezuela neg - scdi 2013

8/12/2019 Venezuela Neg - SCDI 2013

1/37

Venezuela Oil Answers


2/37

US Economy


3/37

No Impact to Oil Prices

High Oil Prices dont hurt the economy enough to trigger the impact Economist 12 *3/10/12, The New Grease?, http://www.economist.com/node/21549949]

But the impact on growthand inflation in individual countries will differ. In America, a net importer which

taxes fuel lightly, the standard rule is that a $10 increasein oil prices(which corresponds to a 25-cent rise in the price of

petrol) knocks around 0.2% off output in the first year and 0.5% in the second year. That would

slow, but hardly fell, an economy that is widely expected to grow by more than 2% this year.

There arein any case several reasons why America may be more resilient to dearer oil than in

recent years. The jump inpetrol prices has been far smaller than in 2011 or 2008. Rising

employment gives consumers more incomewith which to pay for fuel. And Americas economy is

becoming ever less energy-intensive, and less dependent on imports. Oil consumption has fallen

in the past two years,even as GDP has risen. Americans are driving less, andthey are buying more

fuel-efficient cars. Net oil imports are well below their 2005 peak, which means more of the money

Americans spend on costlier oil stays within its borders. The development of copious amounts of natural gasmeans gas prices have plunged. That, coupled with an unusually mild winter, has kept bills for

home heating unusually low. In January the share of consumers spending on energy products was the second-lowest in 50

years. These factors do not imply that America is impervious to spiking oil, but they do suggest the impact of price rises to

date will be modest.

High prices dont hurt the economy were preparedCrook 07 Senior editor of The Atlantic Monthly,graduate of Oxford and the London School of

Economics, he has served as a consultant to the World Bank and worked as an official in the

British Treasury

(Clive, Oil Shocks, The Atlantic, December)

Even at that price, the economy still wouldnt seemas vulnerable to oilas it was in the 1970s. For one thing, as

Hamilton points out, the domestic auto industrys importance to the economy has also fallen, and besides, car

makers now offer more small cars and fewer big onesso consumers who fear high gas prices

can (and do) buy smaller models, rather than not buying at all.A recentpaper by the economists Olivier Blanchard

and Jordi Gali attributes the resistance of the U.S. to the oil bug to three other things in addition. One is that previous oil

shocks happened alongside other bad surprises. In the 1970s and 1980s, in other words, we

were just unlucky.The economy also may be more flexiblea point also mentioned by theCongressional

Budget Office in its own recent study, citing deregulation(notably in transport), foreign competition, and advances

in information technology. Todays economyjust copes with shocks of every kind more smoothly

than it used to.Finally, the Federal Reserve is nowadays better equipped to do its job. The reasonfor

that, the argument goes, is the success of the Feds own past efforts in curbing inflation.Many economists

believe, as the CBO puts it, that the deep recession of 1973 to 1975 and back-to-back recessions of 1980

and 1981 to 1982 were caused not by the energy price shocks as such but by monetary policy.

In those previous recessions, inflation was already a problem before the oil price went up. Giventhe additional inflationary impact of dearer oil, restoring stable prices meant having to endure deep recessions. With the Feds

credibility in curbing inflation now established, the argument goes, gentler tightening of monetary policy is enough

to neuter the inflationary impact of dearer oil. One of the more measured pessimists on oil and Iraq back in 2003was Yales William Nordhaus. He too has lately revisited the issue in a paper entitledWhos Afraid of a Big Bad Oil Shock?In this he

underlines another more speculative factor that could be the most important of allnamely, that consumers, businesses,
http://www.economist.com/node/21549949http://www.economist.com/node/21549949http://www.nber.org/papers/w13368http://www.nber.org/papers/w13368http://www.cbo.gov/ftpdocs/74xx/doc7420/07-21-Energy%20DIST.pdfhttp://www.cbo.gov/ftpdocs/74xx/doc7420/07-21-Energy%20DIST.pdfhttp://www.econ.yale.edu/~nordhaus/homepage/Big_Bad_Oil_Shock_Meeting.pdfhttp://www.econ.yale.edu/~nordhaus/homepage/Big_Bad_Oil_Shock_Meeting.pdfhttp://www.econ.yale.edu/~nordhaus/homepage/Big_Bad_Oil_Shock_Meeting.pdfhttp://www.econ.yale.edu/~nordhaus/homepage/Big_Bad_Oil_Shock_Meeting.pdfhttp://www.cbo.gov/ftpdocs/74xx/doc7420/07-21-Energy%20DIST.pdfhttp://www.cbo.gov/ftpdocs/74xx/doc7420/07-21-Energy%20DIST.pdfhttp://www.nber.org/papers/w13368http://www.nber.org/papers/w13368http://www.economist.com/node/21549949


4/37

and workers may see oil-price increases as volatile and temporary movements rather than the

earth-shaking changes of the 1970s. Firms and households have come to expect the oil price to

move around wildly, and they allow for that when deciding where to invest, or what kind of car

to buy, or whether they need to press hard for higher wages(which also can lead to inflation). In the end,

Nordhaus concludes, much of what we should fear from oil-price shocks is the fearful overreactions

of the monetary authority, consumers, businesses, and workers *P]olicymakers should not be

afraid of a Big Bad Oil Shock.


5/37

No Shortage Impact

No risk of shortage

a. Venezuela would never cut us off because their economy depends on selling

us oilthat interdependence trumps the affs scare mongering.

b. Canada would just fill in the gap.

Hussain, 13(3/6/2013, Yadullah, Life after Chavez: Americas oil gains could be Canadas loss,

http://business.financialpost.com/2013/03/06/life-after-chavez-venezuela-u-s-oil-industries-

are-naturally-attractive-trading-partners/?__lsa=d8ad-15ca,JMP)

Despite severe disagreements, the two countries oil industries are naturally attractive oil

trading partners due to their proximity, according to the U.S. Department of Energy. The

robust trade in crude oil from Venezuela to the United States is due to the compatibility

between the configuration of some U.S. refineries and the quality characteristics of Venezuelan

crude, which is predominately sour and medium or heavy. This is a worrying development for

Canadian crude producers, which offer similar type of heavy crude to the U.S. Gulf Coast

refineries, and may lose out if Venezuela reforms its oil industry. Despite shrinking U.S. oil

imports, Canada is now it southern neighbours largest supplier of crude, accounting for nearly

30% of all U.S. imports last year. Much of these gains were at the expense of heavier crudes

from Venezuela and Mexico. A long-term reversal in Venezuela oil production could compete

with Canadain the United States and even China and Asian markets.

c. Or the U.S. could just use its strategic reserves

Hussain, 13(3/6/2013, Yadullah, Life after Chavez: Americas oil gains could be Canadas loss,

http://business.financialpost.com/2013/03/06/life-after-chavez-venezuela-u-s-oil-industries-

are-naturally-attractive-trading-partners/?__lsa=d8ad-15ca,JMP)

But Capital EconomicsMr. Pugh argues that Venezuelan oil and gas is less important to the rest

of the world than it used to be, especially given the boom in North American supply. In a worst

case scenario, the US in particular could draw on ample strategic reserves.
http://business.financialpost.com/2013/03/06/life-after-chavez-venezuela-u-s-oil-industries-are-naturally-attractive-trading-partners/?__lsa=d8ad-15cahttp://business.financialpost.com/2013/03/06/life-after-chavez-venezuela-u-s-oil-industries-are-naturally-attractive-trading-partners/?__lsa=d8ad-15cahttp://business.financialpost.com/2013/03/06/life-after-chavez-venezuela-u-s-oil-industries-are-naturally-attractive-trading-partners/?__lsa=d8ad-15cahttp://business.financialpost.com/2013/03/06/life-after-chavez-venezuela-u-s-oil-industries-are-naturally-attractive-trading-partners/?__lsa=d8ad-15cahttp://business.financialpost.com/2013/03/06/life-after-chavez-venezuela-u-s-oil-industries-are-naturally-attractive-trading-partners/?__lsa=d8ad-15cahttp://business.financialpost.com/2013/03/06/life-after-chavez-venezuela-u-s-oil-industries-are-naturally-attractive-trading-partners/?__lsa=d8ad-15cahttp://business.financialpost.com/2013/03/06/life-after-chavez-venezuela-u-s-oil-industries-are-naturally-attractive-trading-partners/?__lsa=d8ad-15cahttp://business.financialpost.com/2013/03/06/life-after-chavez-venezuela-u-s-oil-industries-are-naturally-attractive-trading-partners/?__lsa=d8ad-15ca


6/37

Venezuela Economy


7/37

Venezuela Econ Up

Venezuelan economy is on the rebound- increase in oil extraction and

diplomatic relations

Smilde/Uzcategui, 3/1(David/Daniel, Senior Fellows at the Washington Office on Latin America,March 1, 2013, Hugo Chvez's Venezuela: What does the political and economic future hold?,

)ZB

Risa Grais-Targo (Eurasia Group) pointed out that since Chvez came to power oil production has declined.

This has been masked by high oil prices, but now a good deal of their oil is already committed to diplomatic deals like

Petrocaribe, and to pay back loans from China. In the medium term they will be able to begin to exploit the

immense reserves of heavy oil in the Orinoco belt. In the question and answer period both Ms. Lpez Maya and

Ms. Grais-Targo argued that Venezuela has some wiggle room in their finances and are not on the brink

of economic collapse as some would suggest. Former US Ambassadorto Venezuela Patrick Duddy (Duke

University) emphasized that the US is still Venezuelas biggest commercial partner and there are a

lot of US companies doing business in Venezuela. Information on attempts to reestablish

diplomatic relations continues to leak. Mr. Duddy emphasized the unsustainability of the Venezuelas monoexporteconomy which now needs to import almost everything. Venezuela has had inflation over 20 percent for ten years. However, it is

undeniable that Chvez remains highly popular, even in his absence. There are also many countries hoping Chvez makes a full

recovery, most particularly Cuba, since Venezuela has been very generous with them.

Venezuela profit nearly double thanks to higher oil prices

Parraga & Wallis 12(Marianna Parraga and Daniel Wallis, Contributors on foreign economic

situations, Apr 17, 2012, UPDATE 4-Venezuela PDVSA's 2011 net profit rises 42 pct, Reuters,

http://www.reuters.com/article/2012/04/17/venezuela-pdvsa-idUSL2E8FH4QI20120417)kw

CARACAS, April 17 (Reuters) - Net profit at Venezuela's state oil company PDVSA leaped 42

percent to $4.49 billion last year, helping to double its funding of President Hugo Chavez's

government programs to almost $50 billion, the company said on Tuesday. Chavez is seeking a

new six-year term in the country's Oct. 7 elections and has been increasingly leaning on PDVSA,one of the world's biggest energy companies, to serve as the financial motor of his socialist

"revolution". PDVSA funds everything from free health clinics to sports and cultural projects,

and is leading an ambitious government plan to build hundreds of thousands of new homes.

Energy Minister and PDVSA President Rafael Ramirez said the company also increased its

investment in the oil industry by about one-third to $17.9 billion last year, compared with 2010.

"PDVSA is one of the top companies in the world in terms of its investment," Ramirez said at a

presentation of its 2011 results. "This is a state company. It doesn't respond to private

companies or stock markets ... It makes special distributions, supporting programs for our

owner, the Venezuelan state." The company's revenue grew to a record $124.8 billion last year

from $94.9 billion a year before, thanks to higher world oil prices that allowed PDVSA an

unprecedented average price for its basket of crude and products of $101.06 a barrel in theyear. Financial debt climbed to $34.9 billion from $21.3 billion over the same period, Ramirez

said. PDVSA said Venezuela's oil production last year was 2.99 million barrels per day (bpd), up

slightly from 2.97 million bpd in 2010, while exports rose 2.5 percent to 2.47 million bpd.

Chavez's government aims to boost output to 3.5 million bpd in 2012, which would be the

biggest annual rise of the 57-year-old former soldier's 13 years in power. Output had peaked at

3.2 million bpd in 2008.
http://www.reuters.com/article/2012/04/17/venezuela-pdvsa-idUSL2E8FH4QI20120417)kwhttp://www.reuters.com/article/2012/04/17/venezuela-pdvsa-idUSL2E8FH4QI20120417)kwhttp://www.reuters.com/article/2012/04/17/venezuela-pdvsa-idUSL2E8FH4QI20120417)kw


8/37

Alt Cause

Inflation is the biggest factor to economic downturn in Venezuela

Holland, 3/7(Tom, finance reporter for the South China Morning Post, March 7, 2013, Chavez was a

clown whose policies cost a ruinous price; The late president squandered vast resources, leaving thepoorest still mired in poverty and Venezuelans burdened by double-digit inflation, lexis)ZB

Venezuela is blessed with greater proven oil reserves than Saudi Arabia. But thanks to Chavez's

policy of resource nationalisation, under his presidency the country's crude production slumped

23 per cent, from 3.5 million barrels a day in 1998 to just 2.7 million in 2011. Meanwhile, the Chavezgovernment lashed out some US$20 billion a year on energy subsidies, more than twice the amount it spent on education. Ordinary

Venezuelans were able to buy petrol at just 1 per cent of the price paid by motorists in Hong Kong, while the handouts for business

were so generous that corporate tax rates were effectively negative. Not surprisingly, domestic oil consumption almost doubled. As

a result, despite surging international demand, under Chavez Venezuela's oil exports collapsed by more than a third. The effect

on Venezuela's economy was devastating. Loose monetary policies combined with profligate

government spending meant that consumer inflation stayed in double figures throughout

Chavez's presidency. In January, the inflation rate hit 21.6 per cent.In response, Chavez's

government was forced to devalue Venezuela's currency repeatedly, with the most recent 30

per cent devaluation coming last month.Altogether over the course of Chavez's presidency, the bolivar lost morethan 90 per cent of its value against the US dollar. And that was during a period when the dollar itself declined 18 per cent in value

against a basket of currencies. No doubt enthusiasts for Chavez's brand of Bolivarian socialism will attempt to defend his economic

record by claiming his policies benefited Venezuela's poor and narrowed the country's income divide. Yes, it is true that between

1998 and 2006 (the last year for which figures are available) Venezuela's Gini co-efficient of income inequality dropped by 3

percentage points. But that narrowing did nothing for the country's poor. According to World Bank figures, when Chavez took over,

the poorest 10 per cent of Venezuelans took home just 1 per cent of the country's household income. By 2006, that share had not

changed, with the poorest 10 per cent still earning only a 1 per cent share of total income. In the meantime, the total size

of Venezuela's income pie barely expanded. Between 1998 and 2011, the country's per capita

income grew by just 10 per cent in real terms. To put that into perspective, compare Venezuela with Chile, anotherSouth American country blessed with natural resources where the Gini co-efficient has also declined. Between 1998 and 2011,

Chile's income per head shot up by 40 per cent, with the share taken home by the poorest 10 per cent rising by a quarter. In

short, for all his colourful costumes, Chavez was an economic disaster.If he was a clown, then ordinary

Venezuelans paid a ruinous price for our entertainment.


9/37

A2: Venezuelan Stability

Latin America stableno risk of widespread chaos

Graham 6(Carol, Senior Fellow in Economic Studies and Global Economy and Development

Brookings Institution, Ph.D.Oxford University, author of multiple books on Latin Americanpolitical and economic development, Is Latin America Going Radical?, 3-1,

http://www.brookings.edu/views/op-ed/graham/20060301.htm)

With Hugo Chavez as an increasingly vocal critic of the United States, the electoral victory of Evo

Morales in Bolivia, continued political instability in Ecuador; and the recent emergence of

Ollanta Humala, an anti-market, extreme nationalist dark-horse political candidate in the

electoral race in Peru, there is much discussion of Latin America's looming lurch to the radical

left, with a host of negative implications for democracy, trade, and foreign investment in the region. Is this reallyLatin America's future? An Humala victory in Peru's April elections would certainly support those who predict that

such a shift is in store. Such a change in the direction of the region's leadership would indeed be a chilling scenario,

particularly after years of failed experiments with populist governments and the time and effort that much of the

region's leadership and citizens have spent investing in democracy and markets in the past two decades. Yet abroader view of economic and political trends in the regionas well as my own research

suggest that these predictions of a region-wide shift to the radical left are far too pessimistic.

First of all, there are clearly radicals on the horizonChavez, Morales, and, in the worst

instance, a victorious Humala. Yet the broader regional picture does not fit this pattern. None of

the representatives of the established "left" in the region, who for the most part are also in

command of the economic powerhouses of the regionLula in Brazil, Lagos and now Bachelet

in Chile, and even Kirschner in Argentinaare anti-market. Instead they more closely resemble

the "new left" of Tony Blair in England and Felipe Gonzales in Spain. The political dominance of

this "new left", coupled with Mexico's structured integration into the US market, Colombia's

long-term record of conservative fiscal policies, and Peru's ability to maintain prudent

macroeconomic management for over a decade, despite major political swings, all suggest that

the region will continue to embrace markets and democratic governments.Secondly, over-

time trends in public opinion, as gauged by my analysis of the region-wide Latinobarometro poll,

suggest that support for markets and democracy remains solid. Just over a year ago I published

an article in the Financial Times highlighting that preference for democracy as a system of

government and for market policies had actually increased during the 2001-2002 economic

crisis in the region, even though satisfaction with how the systems were working had gone

down. Most recently, roughly 60 percent of the region's respondents reported that democracy is

preferable to any other system of government in the 2005 poll, a significant increase over

previous years.1 Thirdly, no doubt the US has been laggard indeed in meeting its promises on

free trade agreements. Yet in the meantime, many countriesand certainly the key economic

playershave wisely developed new trade ties with China, Europe, and a host of other

countries. Those tiesand their continued increaseare unlikely to be reversed, even in theunlikely event that the Bush administration wakes up and begins to deliver on free trade in a

serious way. So what is in store? Bolivia and Venezuela are both a mess, no doubt. Short of a

miracle, Bolivia may implode politically, at high costs to that country's already impoverished

population. Meanwhile, Venezuelaand Chavezcan afford to stumble on with irresponsible

macroeconomic management and political rhetoric (at a cost of a gradually increasing poverty

rate) because it has oil. Neither country provides a credible or attractive model for others to

follow.None of the major leaders of the region's new left have gone out of their way to endorse


10/37

Chavez, despite numerous opportunities.


11/37

A2 Russia Add-on

No Russian threat- motives are strictly geopolitical and cant influence leaders.

Blank, 10 (Stephen, Professor of Strategic Studies at the United States Army War College, April 13, 2010,

Russia and Latin America: Motives and Consequences,)ZB

First, Moscows main motives in Latin America are geopolitical and tied to its self-presentation as

a great global superpower and rival of America.Second, its capabilities for achieving decisive strategic influenceare limited in nature and in appeal to a few struggling Latin American leftist states. Third, the current economic crisis has constricted

those capabilities still further. Fourth, most Latin American states will not follow Russian policies against

their own interests simply to gain trade or let Russia hijack them for its purposes, unless the

Obama administration utterly neglects or disregards them, which is unlikely. Even Russiancommentators and some military officers recognize, and publicly admit, that the posturing seen in exercises in Venezuela and the

Caribbean are just that, posturing with little or no strategic benefit to be gained. The only way in which Russian policy

truly threatens the United States and Latin America is its military and intelligence support for

Chvez and other similar leadersthat then goes to insurgents and drug traffickers to destabilize pro-American regimes

while strengthening Chvez and his allies. The responses to such threats are inherently economic and political and only ultimatelymilitary. We must meet them on the economic and political grounds lest even more areas of Latin

America become truly ungovernable spaces.

Russias economic engagement is irrelevant- arms are the main focus of Russia

in Latin Venezuela and Cuba.

Blank, 10 (Stephen, Professor of Strategic Studies at the United States Army War College, April 13, 2010,Russia and Latin America: Motives and Consequences,

)ZB

The dominance of geopolitics emerges quite strongly in Russian foreign policy towards its main

partners in Latin America, Venezuela and Cuba. Russias interests are fundamentally

geostrategic, not economic, and no Latin economy save perhaps Brazil can offer Russia much tangible benefit.

Therefore, geopolitical and strategic aims outweigh economic interaction with these states. For

example, the BBC reported that Patrushev told Ecuadors government that Russia wanted to

collaborate with its intelligence agency, to expand Moscows influence in Latin America.

Moscow also signed an agreement to sell Ecuador weapons. Most probably Russia wants to link Ecuador andVenezuela with Russian weapons and intelligence support against Colombia. Since they are both antagonistic to Colombia, they can

then support the Revolutionary Armed Forces of Colombia (FARC), threaten a U.S. ally and seek to pin Washington down in another

dirty war. Chvezs open support of the FARC with Russian weapons strongly suggests that Moscow knows all about his efforts and

approves of them. The case of Viktor Bout, the notorious arms dealer who enjoys protection from Russias government, reinforces

this analysis. In 2008 Bout was arrested in Thailand for offering to deliver weapons to the FARC as part of a sting organized by the

United States. It may not be coincidental that Bouts offers coincide with Russian support for Chvezs latest clash with Colombia.

Once Bout was arrested and obliged to undergo an extradition hearing, Moscow brought immense pressure to bear upon Bangkok

so that he would not be extradited to the United States and forced to name names, dates, places and people.


12/37


13/37

Relations Answers


14/37

Inevitable

U.S. influence and relations in Latin America are inevitable

Alvarado, 13--- former diplomat in the Mission of Venezuela to the Organization of American

States (5/31/2013, Liza Torres Alvarado, The U.S. Must Re-evaluate its Foreign Policy in LatinAmerica,http://www.isn.ethz.ch/isn/Digital-Library/Articles/Detail/?lng=en&id=164370 ,JMP)

Although there has been a decline in U.S. influence in the region, its presence is still there. In

Venezuela, for example, U.S. oil companies have seen their actions limited, yet they still operate

there. TheUnited States is Venezuelas top commercial partner, as Venezuela supplies 12 percent of U.S. oil

imports. Relations between theUnited States and Latin America have experienced cyclical ups and

downs. Geographically, theUnited States and Latin America are linked and have a natural shared

market, so there will always be a relationship of one sort or another.TheUnited States will

continue to seek to exert its influence over the region, whether through future plans for the

placement of military bases or the promotion of bilateral trade agreements.
http://www.isn.ethz.ch/isn/Digital-Library/Articles/Detail/?lng=en&id=164370http://www.isn.ethz.ch/isn/Digital-Library/Articles/Detail/?lng=en&id=164370http://www.isn.ethz.ch/isn/Digital-Library/Articles/Detail/?lng=en&id=164370http://www.isn.ethz.ch/isn/Digital-Library/Articles/Detail/?lng=en&id=164370


15/37

Maduro Turn

Attempts to improve relations have negative consequenceslegitimizes

Maduros democratic oppositionempirical evidence

Christy 6/13(By PATRICK CHRISTY June 13, 2013, Patrick Christy is a senior policy analyst at theForeign Policy Initiative. U.S. Overtures to Maduro Hurt Venezuelas Democratic Opposition

http://www.usnews.com/opinion/blogs/world-report/2013/06/13/us-overtures-to-chavez-

successor-maduro-hurt-venezuelas-opposition)

On the margins of a multilateral summit in Guatemala last week, Secretary of State John Kerry met with Venezuelan

Foreign Minister Elias Jose Jaua, marking the Obama administration's latest attempt to reset

relations with the South American nation.What's worrisome is that Secretary Kerry's enthusiasm to find, in his

words, a "new way forward" with Venezuela could end up legitimizing Chavez-successor Nicolas

Maduro's quest for power and undermining the country's democratic opposition and state

institutions. Since the death of Venezuelan strongman Hugo Chavez in March, Maduro's actions have more

resembled those of a Cuban strongman than a democratically-elected official. Indeed, he has taken

drastic moves to preserve his power and discredit his critics in recent months. First, the Maduro regime is refusing to

allow a full audit of the fraudulent April 13th presidential elections, as opposition presidential candidateHenrique Capriles had requested. As the Associated Press notes a full audit "would have included not just comparing votes

electronically registered by machines with the paper ballot receipts they emitted, but also comparing those with the poll station

registries that contain voter signatures and with digitally recorded fingerprints." However, because Chavez-era appointees loyal to

the current government dominate Venezuela's National Election Council and Supreme Courtthe two government institutions able

to challenge election resultsit is unlikely either will accept the opposition's demands for a full election recount. [See a collection of

political cartoons on the economy.] Second, Maduro's government is taking steps to dominate radio and

television coverage of the regime.Last month, Globovision, one of Venezuela's last remaining independent newschannels, was sold to a group of investors with close ties to Maduro. Under Chavez, the independent broadcasting station faced

years of pressure as government authorities frequently threatened to arrest the group's owners and journalists. To no one's

surprise, the company's new ownership has banned live video coverage of opposition leader Henrique Capriles and many of the

station's prominent journalists have been fired or have resigned. Third, the regime and its allies are using fear and

intimidation to silence the opposition. On April 30th, pro-Maduro lawmakers physically attacked

opposition legislators on the floor of Venezuela's National Assembly. Days prior, the regime arrested aformer military general who was critical of Cuba's growing influence on Venezuela's armed forces. More recently, Maduro even

called for the creation of "Bolivarian Militias of Workers" to "defend the sovereignty of the homeland." In light of all this, it

remains unclear why the Obama administration seeks, in Secretary Kerry's words, "an ongoing,

continuing dialogue at a high level between the State Department and the [Venezuelan] Foreign

Ministry"let alone believe that such engagement will lead to any substantive change in Maduro's behavior. To be sure,Caracas's recent release of jailed American filmmaker Timothy Tracy is welcome and long overdue. However, it is clear that the

bogus charges of espionage against Tracy were used as leverage in talks with the United States, a shameful move reminiscent of

Fidel Castro's playbook. [See a collection of political cartoons on defense spending.] While Secretary Kerry said that his

meeting with his Venezuelan counterpart included discussion of human rights and democracy

issues, the Obama administration's overall track record in the region gives reason for concern.

President Obama failed to mention Venezuela or Chavez's abuse of power during his weeklong trip

to the region in 2011.And while Obama refused at first to acknowledge the April election results, the State Department hassince sent very different signals. Indeed, Secretary Kerry declined even to mention Venezuela directly during his near 30-minuteaddress to the plenary session of the Organization of American States in Guatemala last week. For Venezuela's opposition, the

Obama administration's eagerness to revive relations with Maduro is a punch to the gut. Pro-Maduro legislators in the

National Assembly have banned opposition lawmakers from committee hearings and speaking

on the assembly floor. Other outspoken critics of the regime face criminal charges, and government officials repeatedly vilify

and slander Capriles. What's worse, if the United States grants or is perceived to grant legitimacy to the

Maduro government, that could give further cover to the regime as it systematically undermines

Venezuela's remaining institutions. The Obama administration's overtures to Maduro's government come as the region


16/37

is increasingly skeptical of the Chavez successor's reign. Last month, Capriles met with Colombian President Juan Manuel Santos in

Bogota. Chile's Senate unanimously passed a resolution urging a total audit of all polling stations. And in recent weeks, opposition

lawmakers led by Mara Corina Machado, a representative from the National Assembly of Venezuela, have held meetings in capitals

around the region to educate foreign leaders about Maduro's illegitimate hold on power. [Read the U.S. News Debate: Given The

Current Deficit Crisis, Should Foreign Aid Be Cut?] Rather than accept Maduro's strongman tactics, the Obama

administration should take a firm stand and make clear to Caracas that any steps to undermine

the country's constitution or threaten the opposition will be detrimental to bilateral ties with

the United States. The fact is that Washington holds all the cards. Venezuela's economy is in a

free-fall, Maduro's popularity is plummeting, and various public scandalsespecially those related to

institutional corruptioncould further erode public confidence in the current government. By resetting

relations with the Maduro government now, the United States risks legitimizing the Chavez

protg's ill-gotten hold on power and undercutting the Venezuelan democratic opposition

efforts to sustain and expand its popular support. It's time the Obama administration rethink

this hasty reset with Maduro.


17/37


18/37

No Solvency


19/37

Says No

Venezuela wont allow U.S.investmentthe U.S. will be locked out

Epperson & Domm 13(Sharon & Patti, With Hugo Chavez gone, US oil industry eyes

Venezuela, Christian Science Monitor, March 6, 2013,http://www.csmonitor.com/Environment/Latest-News-Wires/2013/0306/With-Hugo-Chavez-

gone-US-oil-industry-eyes-Venezuela)//MJ

Venezuela has more oil reserves than any other country thanks to massive deposits of asphalt-

like crude in whats called the Orinoco oil belt. Development of these deposits is both

technology- and capital-intensive. Chvezs push for more national control over the oil sector

in 2007 led Exxon Mobil Corp. and ConocoPhillips Co. to abandon big Orinoco projects.Other

international companies stayed, including firms from Russia, China and Vietnam, and the

Orinoco now accounts for about 20 percent of Venezuelas oil production. Mark McNabb,

director of the Emerging Markets Research Center at UTDs Naveen Jindal School of

Management, said in a phone interview that he expects U.S. firms will remain on the outside

looking in. Were kind of frozen out for the next three to five years,he said. Venezuelas oil

sector has been in decline for a decade. In 2002, PDVSA employees went on strike and joined

in an anti-Chvez movement that briefly ousted the president. When he regained power,

Chvez fired many of his opponents in the firm and installed thousands of supporters.

PDVSAs been drained of its professionals,said Eric Farnsworth, a vice president with the

Council of the Americas. Its now a political group that pumps oil.Venezuelas Energy

Minister Rafael Ramirez said Wednesday that PDVSA workers would remain on the job. The

key to driving the oil industry is in the hands of the 100,000 valiant men and women who have

shown their loyalty to Commander Chavez in everything we have been through, he said,

referring to PDVSAs staff. That situation will not change. Venezuelas exports to the U.S. are

under pressure from Canada, which produces a heavy type of crude oil from Albertas oil sands

that is similar to Venezuelas thick oil. Many Gulf Coast refineries prefer to use heavy oil because

it can mean higher profits for gasoline, diesel and other refined products.

Venezuela will say no --- anti-Americanism is too entrenched

Drezner 13--- professor of international politics at the Fletcher School of Law and Diplomacy at

Tufts University (3/7/2013, Daniel W., Why post-Chavez Venezuela won't be a U.S. ally anytime

soon, http://drezner.foreignpolicy.com/category/wordpress_tag/venezuela, JMP)The passing of Hugo Chavez has prompted the usual 21st century cycle of news coverage and commentary that follows the death of

a polarizing figure: the breaking news on Twitter, followed by the news obits, followed by the hosannahs from supporters, followed

by denunciations of the figure, followed by official statements, followed by mealy-mouthed op-eds, followed by hysterical, unhinged

criticism of standard diplomatic language. Now that the first news cycle has passed, we can get to the more interesting question of

assessing Venezuela's future. There was always a fundamental irony to Hugo Chavez's foreign policy. Despite his best efforts to

chart a course at odds with the United States, he could never escape a fundamental geopolitical fact of life:

Venezuela's economic engine was based on exporting a kind of oil that could pretty much only

be refined in theUnited States. So, with Chavez's passing, it would seem like a no-brainer for his

successor to tamp down hostility with theUnited States. After all, Chavez's "Bolivarian" foreign policy was rather

expensive -- energy subsidies to Cuba alone were equal to U.S. foreign aid to Israel, for example. With U.S. oil

multinationals looking hopefully at Venezuela and Caracas in desperate need of foreign

investment, could Chavez's successor re-align foreign relations closer to the U.S.A.? I'm not

betting on it, however, for one simple reason: Venezuela might be the most primed country in the world


20/37

for anti-American conspiracy theories.International relations theory doesn't talk a lot about

conspiracy thinking, but I've read up a bit on it, and I'd say post-Chavez Venezuela is the perfect

breeding ground. Indeed, the day of Chavez's death his vice president/anointed successor was

already accusing theUnited States of giving Chavez his cancer.Besides that, here's a recipe for

creating a political climate that is just itching to believe any wild-ass theory involving a

malevolentUnited States:1) Pick a country that possesses very high levels of national self-regard. 2) Make sure that thecountry's economic performance fails to match expectations.3) Create political institutions within the country that are semi-

authoritarian or authoritarian. 4) Select a nation with a past history of U.S. interventions in the domestic body politic.5) Have the

United States play a minor supporting role in a recent coup attempt. 6) Make sure the United States is closely allied with the

enduring rival of the country in question.7) Inculcate a long history of accusations of nutty, American-led conspiracies from the

political elite. 8) Finally, create a political transition in which the new leader is desperate to appropriate any popular tropes used by

the previous leader. Venezuela is the perfect breeding ground for populist, anti-American conspiracy

theories. And once a conspiratorial, anti-American culture is fomented, it sets like concrete.

Only genuine political reform in Venezuela will cure it, and I don't expect that anytime soon.

Maduro is clearly Chavezs Protege

Ellner 7/11 (Steve Ellner, Steve Ellner, professor of economic history at the Universidad de

Oriente, Venezuela, is the editor of Latin Americas Radical Left: Challenges and Complexities ofPolitical Power to be published by Rowman and Littlefield in the Spring of 2013, "Just How

Radical is President Nicols Maduro?, NACLA, July 11th 2013)

On April 2, the first day of Venezuelas 2013 presidential campaign, Nicols Maduro committed

himself to breaking with bureaucratism, which he labeled the mode of the petty

bourgeoisie. In its place Maduro (a former bus driver) pledged to create a government of the

streetsin which he would arrive to individual locations driving a bus along with cabinet

members in order to listen to the people and design policies with them. On that day, Maduro told hisaudience in Zulia that their state would be his first stop. The next day, speaking at a campaign rally in neighboring Tchira, he

promised that his second stop would be in their state.While some may have brushed the statements off as

empty campaign rhetoric, they indicate Maduros intention to follow in the footsteps of his

mentor Hugo Chvez. During his 14 year rule, Chvez occasionally scolded the bureaucrats anddemanded that they get in tune with the people. The reproaches were accompanied by concrete actions in favorof the workers in clashes with state managers and politicians and in favor of the rank and file of his Partido Socialista Unido de

Venezuela (PSUV) in disputes with party bosses.Maduros statements also point in the direction of a

continuation of the ongoing transformations of Chvezs fourteen years as president, although at aslower pace given the narrowness of Maduros electoral victory. Chvez began in 1999 with anemphasis on political reform

embodied in a new constitution and ended up embracing socialist rhetoric and promoting widespread expropriations. The process of

change was slowed down, but not halted, by several disappointing electoral results, such as the proposed constitutional reform

defeated at the polls in 2007 and the National Assembly elections of 2010.Indeed, the underlying message of

Maduros campaign was that he was closely tied to the Chvez legacy and would continue

where his predecessor left off. In rally after rally, the recording of Chvezs last public

appearance in which he implored his followers to maintain unity and support Maduros

presidential candidacy was played. Maduro, who became provisional president following Chvezs death on March 5,received 50.8 percent of the vote as opposed to the 49.0 percent of his main rival Henrique Capriles. The 1.8 point margin comparedunfavorably with the 11.1 decimal points that separated Chvez and Capriles in the October 2012 presidential elections. The

heightened polarization has energized an intransigent opposition but could also have a radicalizing effect as well.


21/37

No Liberalization

Venezuela says no- suspended talks, blame game, empirics

Meacham 6/21(Carl Meacham, M.A. degrees from American University and Columbia

University and is director of the CSIS Americas Program. He joined CSIS from the Senate ForeignRelations Committee (SFRC), where he served on the professional staff for over a decade, 21

June 2013, The Kerry-Jaua Meeting: Resetting U.S.-Venezuela Relations? Center for Strategic

and International Studies, http://csis.org/publication/kerry-jaua-meeting-resetting-us-

venezuela-relations)kw

Q2: Does the Venezuelan government want good relations? A2: Despite recent discussions with

the United States, it doesnt seem to be the case.Earlier this year, the Venezuelan government

suspended talks between the U.S. State Department and Venezuelan Foreign Ministry that had

begun in late 2012, citing alleged U.S. meddling in Venezuelas April election. The Maduro

government has also largely followed the Chvez playbook, constantly accusing the United

States of assassination plots, spying, and economic and political sabotage. While the Kerry-Jaua

meeting may have made for nice headlines, its difficult to imagine that the Venezuelan

government will not play the anti-U.S. card again, if needed. This week, Calixto Ortega

appointed to handle matters with the United Stateswill meet with Assistant Secretary of State

for Western Hemisphere Affairs Roberta Jacobson to continue discussions and establish a new

set of concrete goals to guide the relationship forward. These good-faith gestures made by the

Venezuelan government are neither new nor unheard of. Despite recent efforts, U.S.

policymakers should temper any positive expectations, as a core basis of Chavismo is its anti-

U.S. ideology. Its of course difficult to improve relations with a government that consistently

defines itself as vehemently against your foreign policy agenda. This suggests that Venezuela

may be looking to reestablish a purely economic relationshipone that will eliminate U.S.

sanctions. Still, even if certain positive steps are taken, history suggests that the Venezuelan

government could quickly scuttle progress made, likely with the goal of Maduro shoring up

support within his own ranks.

Liberalization fails- judicial and executive power

Fontaine et al, 6/28(Guillaume Fontaine, Jos Luis Fuentes and Susan Velasco, of The Latin AmericanFaculty for Social Sciences, June 28, 2013, How Instruments Shape Policies: the Case of National Oil

Companies in Venezuela and Bolivia,

)ZB

The leading role of PDVSA in Venezuelan oil policy has been enhanced by the Constitution of 2000,

the Organic Law for Hidrocarbon (in 2001)and their regulation, and the reform of the companys

special status (in 2005). Through this regulation, planning, design and implementation of oil policy was entrusted to theMinistry of Energy and Oils, while the execution of primary activities was entrusted by the executive power to PDVSA, directly or

with the intervention of mixt companies owned by the State or by operators whose capital is owned by the State by 51% or more.

Actually, PDVSA fits exactly this juridical frame and is the only State company with primaryactivities for the moment. According to the Organic Law on Hidrocarbon (Art. 9 and 22), the companys core activity is theexecution of crude exploration, exploitation, transportation and commercialization activities. The State keeps the execution of these

activities back and PDVSA is the institution in charge with dealing with them. Although refination and internal commercialization are

not exclusively of the States responsibility, the company also got involved into these activities. As an operator of the

industry, it is in charge with recollecting the oil rent and then to transfer two thirds of it to the

executive power(for royalties, taxes and pay outs, as defined by the law). The company is allowed to dedicate to activitiescomplementary to the production, such as the emission of commodity bounds with the support of the company, used as a means for

paiement. This has turned PDVSA into a major economics policy instrument and it increased the companys importance for the


22/37

Venezuelan economy. An important share of the companys incomes is dedicated to financing social

programs by the government.

No chance for liberalization- mass employment and political climate

Belsie, 3/7(Laurent, Business Editor and the Christian Science Monitor, March 7, 2013, What willVenezuela do with its oil? Top five energy challenges after Chvez.,

)ZB

Under Chvez, the national oil company became more than just a company. It funded his social

programs, provided foreign aid, and boosted employment.PDVSA has twice the employees it had whenChvez came to power in 1999, even though its production has fallen. The business approach would be to cut back the bloated

payroll and reduce the company's operating costs (and ballooning debt). But with the economy suffering from years of

mismanagement, cuts are politically sensitive. Even Mr. Capriles, the opposition candidate in last year's election, said he would not

cut jobs at PDVSA. Another way to justify the company's bigger payroll is to boost production, something that Venezuela has tried to

do, but with little success so far. Pressures may grow to open up its oil industry to more foreign investment if the economyand oil

productioncontinue to stagnate. Privatizing the PDVSA does not appear to be on the table. First

nationalized in the 1970s, Venezuela experimented with liberalizing the oil sector. That initiative

was quickly squelched when Chvez was elected president. Even the opposition doesn't talk

about privatization.

Says nothe regime is not going to deviate from Chavezs policies

Larison 3/7(By DANIEL LARISON March 7, 2013, 9:10 AM Daniel Larison is a senior editor atTAC, where he also keeps a solo blog. He has been published in the New York Times Book

Review, Dallas Morning News, Orthodox Life, Front Porch Republic, The American Scene, and

Culture11, and is a columnist for The Week. He holds a PhD in history from the University of

Chicago U.S.-Venezuela Relations After Chavez

http://www.theamericanconservative.com/larison/u-s-venezuela-relations-after-chavez/)

Dan Drezner speculates that post-Chavez Venezuela is likely to continue Chavezs foreign policy:

Venezuela is the perfect breeding ground for populist, anti-American conspiracy theories. And

once a conspiratorial, anti-American culture is fomented, it sets like concrete . Only genuine

political reform in Venezuela will cure it, and I dont expect that anytime soon. Drezner could be right

about that, but even in the absence of conspiracy theories I wouldnt expect a dramatic change in Venezuelas

relations with the U.S.A relationship less defined by antagonism on both sides would be welcome, but after more than a

decade of the current strained relationship Chavezs allies and opponents probably feel nourgency to seek

rapprochement with Washington. Chavez leaves behind a large number of supporters that have

incentives to continue his policies and probably dont see why they would change them, and to the extent that his allies

share Chavezs stated ideology they will try to keep conducting Venezuelan foreign policy as he did. Even if the opposition

candidate had prevailed in the last election and Capriles were now president, there would not

be much reason to expect a significant departure from Chavezs foreign policy, at least not in the near

term. Especially in a country with a political culture saturated with anti-imperialist and anti-American

rhetoric, members of the political opposition are limited by their local foreign policy consensus,

and reconciling with the U.S. is usually not a high priority for them (and why would it be?). Whenever there is an authoritarianregime opposed to the U.S. to whatever degree, many Americans make the mistake of assuming that the

current leadership of that regime is the chief and sometimes only obstacle to good relations, but it

is often the case that the authoritarian leadership profits from perpetuating a strained or hostile

relationship because it is broadly popular to do so.Naturally, it doesnt help the cause of improved relations withthe U.S. when the last period of close relations is identified with earlier, widely-despised political leaders. In the near term, Chavezs

would-be successors are probably going to be doing more to compete over who is best-suited to managing and/or improving upon

his legacy rather than planning to throw out parts of it. Michael McCarthy outlines what can be expected from the forthcoming

election campaign: For Maduro, Chvezs legacy is summed up in one word: patria (fatherland). If Maduro, a former union leader

and then a loyal foreign minister in the previous government, follows the Chvez playbook in 2012s elections, he will tamp down


23/37

the Leftist discourse and situate his platform in the nationalist sentiments chavismo cultivates and deploys. This will include

nationalisms jingoistic sidedepicting opponent Capriles as an inauthentic Venezuelan, a piti-yanqui. For Capriles, the relevant part

of the Chvez legacy is the social question. During the campaign, Capriles ran with a center-right party slate but as a center-left

politician promoting a future of progress. He proposed deepening Chvezs social policies, but still lacked populist credibility. After

Chvez, will Capriles continue the same strategy or change gears? Can he frame Maduro, a man who lacks the charisma Chvez used

so effectively to link nationalist and ideological rhetoric, as an out of touch bureaucrat?


24/37

Investment Not Enough

Takes years to solve

AP, 13(5/4/2013, Fabiola Sanchez, Outlook grim in Venezuela's essential oil industry,

http://news.yahoo.com/outlook-grim-venezuelas-essential-oil-industry-143827999.html ,JMP)

Ramirez said that PDVSA's efforts remained focused on developing the remote Orinoco belt, site of the world's biggest oil reserves,

with the aid of oil firms from China, Russia, the U.S., Italy, Vietnam, Malaysia, Japan and Spain. Venezuela hopes to lift overall

production to some 3.32 million barrels a day, 200,000 more than last year. "We're in a process of trying to attract

investment in dollars other than ours,"Ramirez said, assuring reporters that PDVSA would work with private investors

to not take on more debt to make new investment. Outside experts, however, are deeply skeptical. They say

PDVSA is badly mismanaged and that even a radical overhaul would take years to show results.

Oil Collapse Inevitablethe industry is terminally doomed and US fracking

keeps oil prices low.

Nagel 13(Juan Nagel, Foreign Policy, Is Venezuela becoming a failed state?http://transitions.foreignpolicy.com/posts/2013/05/16/is_venezuela_becoming_a_failed_state?

wp_login_redirect=0, Thursday, May 16, 2013)

Venezuela remainsmired in a political and economic crisis that shows no signs of letting up. But while

street protests, soaring inflation, scarcity, and skyrocketing crime are massiveheadaches, the government

can count on still-high oil prices to soothe the pain a bit. The question that begs asking is: How will Venezuela maintain stability if oil prices drop? A

recent report by theInternational Energy Agency underscores the challenges the country faces in the

short term.The United States has made huge progress in oil extraction thanks to frackingtechnology. It is

set to become the world's largest oil producer by the year 2020, and the global spread of

fracking is bound to significantly increase international recoverable oil reservesin the near future. The

agency crows that fracking is creating a "supply shock that is sending ripples around the world."

This

obviously matters to Venezuela, a country that exports large amounts of oil and little else.

Venezuela is increasingly reliant on high oil prices to maintainsome semblance of stability. Aprolonged drop

in oil prices will undoubtedly shake the foundations of the petro-state to its core. Being an oil

producer, Venezuela can earn money in two ways: by sustaining high prices, or by increasing

production. (Obviously, if it can do both things, it has hit the jackpot). Fracking threatens the first, and the country

has seriously failed on the latter. Venezuela produces less oil now than it did in 1999, the year Hugo

Chvez first came to power. Worryingly, the IEA seesfew prospects for increased production. For example, in spite

ofincreasing investment to $22 billion last year, Venezuelan production barely budged. State oil

giant PDVSA vows to increase production by 3 million barrels per day in the next six years, but

the IEA believes that a combination of the company's inefficiency and its heavy debt burden

means the increase will actually be a tenth of that amount. Two other developments conspire

against the future viability of Venezuela's oil industry. The country is increasing sales ofcrude oilto China,as part of a geo-strategic move the Chvez administration embarked on many years ago. The problem is that

the oil being shippedhas already been paid for,and the government has alsoalready spent the

money.The other issue is Venezuela's creaking refining infrastructure. Last year,followingseveral

accidents at its refineries, Venezuela became anet importerof gasoline and other refined products. In the last part of the year alone, PDVSA boughtrefined products for $1.5 billion, only to turn around and give it a way for practically nothing, thanks to the heavy subsidies that characterize its internal

market.The consensus is that Venezuelaneeds high oil pricesjust to stay afloat. But if the fracking oil

boom results in low oil prices, what does the future hold for the South Amer ican country?Sadly, Venezuelans have
http://news.yahoo.com/outlook-grim-venezuelas-essential-oil-industry-143827999.htmlhttp://news.yahoo.com/outlook-grim-venezuelas-essential-oil-industry-143827999.htmlhttp://transitions.foreignpolicy.com/posts/2013/05/16/is_venezuela_becoming_a_failed_statehttp://transitions.foreignpolicy.com/posts/2013/05/16/is_venezuela_becoming_a_failed_statehttp://www.ibtimes.com/iea-says-supply-shock-north-american-shale-tar-sands-transforming-global-energy-scene-1257095http://www2.petroguia.com.ve/pub/?q=node/1803http://settysoutham.wordpress.com/2012/04/17/pdvsa-investment-surged-in-2011-missed-goal-and-other-annual-report-stuff/http://lta.reuters.com/article/domesticNews/idLTASIE94E05T20130515?sp=truehttp://lta.reuters.com/article/domesticNews/idLTASIE94E05T20130515?sp=truehttp://www.reuters.com/article/2012/09/26/us-venezuela-chavez-fund-idUSBRE88P0N020120926http://latitude.blogs.nytimes.com/2012/10/09/mourning-chavezs-reelection-as-venezuelas-president/http://latitude.blogs.nytimes.com/2012/10/09/mourning-chavezs-reelection-as-venezuelas-president/http://news.nationalgeographic.com/news/energy/2012/08/pictures/120830-venezuela-refinery-fire-pictures/http://news.nationalgeographic.com/news/energy/2012/08/pictures/120830-venezuela-refinery-fire-pictures/http://lta.reuters.com/article/topNews/idLTASIE94D01X20130514http://lta.reuters.com/article/topNews/idLTASIE94D01X20130514http://lta.reuters.com/article/topNews/idLTASIE94D01X20130514http://online.wsj.com/article/SB10000872396390444320704577565020463797512.htmlhttp://online.wsj.com/article/SB10000872396390444320704577565020463797512.htmlhttp://lta.reuters.com/article/topNews/idLTASIE94D01X20130514http://news.nationalgeographic.com/news/energy/2012/08/pictures/120830-venezuela-refinery-fire-pictures/http://news.nationalgeographic.com/news/energy/2012/08/pictures/120830-venezuela-refinery-fire-pictures/http://latitude.blogs.nytimes.com/2012/10/09/mourning-chavezs-reelection-as-venezuelas-president/http://latitude.blogs.nytimes.com/2012/10/09/mourning-chavezs-reelection-as-venezuelas-president/http://www.reuters.com/article/2012/09/26/us-venezuela-chavez-fund-idUSBRE88P0N020120926http://lta.reuters.com/article/domesticNews/idLTASIE94E05T20130515?sp=truehttp://lta.reuters.com/article/domesticNews/idLTASIE94E05T20130515?sp=truehttp://settysoutham.wordpress.com/2012/04/17/pdvsa-investment-surged-in-2011-missed-goal-and-other-annual-report-stuff/http://www2.petroguia.com.ve/pub/?q=node/1803http://www.ibtimes.com/iea-says-supply-shock-north-american-shale-tar-sands-transforming-global-energy-scene-1257095http://transitions.foreignpolicy.com/posts/2013/05/16/is_venezuela_becoming_a_failed_statehttp://news.yahoo.com/outlook-grim-venezuelas-essential-oil-industry-143827999.html


25/37

nothing else to fall back on.Its private industry is a shambles, and the country is evenimporting toilet

paper.Years of populism have left the state crippled and heavily in debt. The public deficitreached a whopping 15 percent of GDP last year, even in the context of high oil prices. Most of

the spending came in the form of entitlements and subsidies that will not be easily eliminated.

Furthermore, the country's current power clique seemsparticularly inept in dealing with the

complicated economic and political conditions it has inherited.Nicols

Maduro'sonly claim to legitimacy is

that Hugo Chvez chose him. Now he is left with the thankless task of dealing with theChvez mess.Hehas surrounded himself with a Cabinetcomposed of many of the same old faces, and neither his policies nor his rhetoric suggest any shift toward the type

of solutions that could steer Venezuela away from the precipice. The problemfor Venezuelans is

that there is no great reformer in the governing party. And while opposition leader Henrique

Capriles would undoubtedly steer Venezuela toward greater economic freedoms, there is little

he would be able to do if the price of oil were to tank. A long period of low oil prices spells

doom for Venezuela's political sustainability. Without high oil revenues,basic services would practically

disappear, and the potential for instability would be enormous.Already the country is stuck in a state

of undeclaredin civil war, and there are claims that drug smuggling haspermeated the higher echelons of the government. Venezuela

has so far avoided the fate of its neighbor Colombia, a country still deep in a long civil war with Marxist

guerrillas and drug cartels. This is largely due to the deep pockets oil has afforded the government, which

allowed for state presence even in the most remote corners of the country. It is hard to see how that presence could bemaintained if oil rents were to dry up significantly, and for a prolonged period.This could lead to the typeof problems that have bedeviled Colombia, or even poorer neighboring fa iled states such as Haiti. Even though its problems are of its own making,

the thought of a large, failed state in the heart of the Western Hemisphere should trouble the

continent's leaders.
http://blog.foreignpolicy.com/posts/2013/05/16/venezuela_is_running_low_on_toilet_paper_and_it_s_blaming_the_mediahttp://blog.foreignpolicy.com/posts/2013/05/16/venezuela_is_running_low_on_toilet_paper_and_it_s_blaming_the_mediahttp://blog.foreignpolicy.com/posts/2013/05/16/venezuela_is_running_low_on_toilet_paper_and_it_s_blaming_the_mediahttp://blog.foreignpolicy.com/posts/2013/05/16/venezuela_is_running_low_on_toilet_paper_and_it_s_blaming_the_mediahttp://www.eluniversal.com/economia/121025/research-firm-estimates-venezuelas-fiscal-deficit-at-15-of-gdphttp://www.businessweek.com/news/2013-05-15/venezuela-may-allow-companies-to-repatriate-some-dividendshttp://www.theglobeandmail.com/commentary/editorials/hugo-chavez-leaves-a-mess-behind/article9317467/http://www.theglobeandmail.com/commentary/editorials/hugo-chavez-leaves-a-mess-behind/article9317467/http://www.theglobeandmail.com/commentary/editorials/hugo-chavez-leaves-a-mess-behind/article9317467/http://www.insightcrime.org/groups-venezuela/cartel-de-los-soleshttp://www.insightcrime.org/groups-venezuela/cartel-de-los-soleshttp://www.theglobeandmail.com/commentary/editorials/hugo-chavez-leaves-a-mess-behind/article9317467/http://www.businessweek.com/news/2013-05-15/venezuela-may-allow-companies-to-repatriate-some-dividendshttp://www.eluniversal.com/economia/121025/research-firm-estimates-venezuelas-fiscal-deficit-at-15-of-gdphttp://blog.foreignpolicy.com/posts/2013/05/16/venezuela_is_running_low_on_toilet_paper_and_it_s_blaming_the_mediahttp://blog.foreignpolicy.com/posts/2013/05/16/venezuela_is_running_low_on_toilet_paper_and_it_s_blaming_the_media


26/37

Status Quo Solves

Status quo solvesChina & Russia providing fundingIwata 13(Mari, Venezuela Secures $4 Billion Funding from China, Wall Street Journal, 6/6/13,

http://online.wsj.com/article/SB10001424127887324798904578528922435217366.html)//SRVenezuela has secured $4 billion in funds from China to be used for oil field development, Oil

Minister Rafael Ramirez said Thursday. The minister didn't give details of the new funding from China, which will add to at

least $35 billion of credit Beijing has provided to Venezuela, mostly in return for future oil

deliveries. The South American country's state energy company Petroleos de Venezuela SA, or PDVSA, saidWednesday that

Venezuela was negotiating a $4 billion credit line from Export-Import Bank of China. Mr. Ramirez was

speaking in Tokyo following a trip to Beijing for talks with Exim Bank President Li Ruogu and other officials. Venezuela has also

secured a number of financing agreements with its partners, ranging from Russia's Rosneft to

U.S.oil majorChevronCorp., CVX -0.06%during the past few weeks as it looks for fundingfor its plans to rapidly

boost oil production. The new Chinese funds add to a separate $4 billion loan that PDVSA will receive from the Chinesegovernment to boost oil production at Petrolera Sinovensa, a joint venture in Venezuela's between PDVSA and China National

Petroleum Corp. in Venezuela's rich Orinoco heavy oil belt. "We plan to increase output to four million barrels a

day by 2014and six million barrels a day by 2016. Only Asia can absorb these increases," Mr. Ramirez toldreporters. Venezuela currently produces about three million barrels a day of crude oil. Mr. Ramirez met Japanese Industry Minister

Toshimitsu Motegi and was later due to meet officials ofInpexCorp.1605.TO +2.48%and state-funded Japan Oil, Gas and MetalsNational Corp.

Market pressures will solve the case - will push Venezuela to change

Gonzlez and Vyas 13(4/4/2013, Angel Gonzlez and Kejal Vyas, Unlocking Venezuelas vast

energy potential; Revival of the countrys oil sector post-Chvez on standby,

http://www.businesswithoutborders.com/topics/opportunities/unlocking-venezuelas-vast-

energy-potential/, JMP)

But declining oil output and rising shale-oil production in the U.S., Venezuelas main market, may

force a redirection.Barring any new political or military shocks in the Middle East, global oil prices look like aballoon with a slow leak, said Amy Myers Jaffe, executive director for energy and sustainability at the University ofCalifornia-Davis. The Venezuelan government cant count on high oil prices to match rising public spending, she added. Anticapitalist

rhetoric heated up in the days leading to Mr. Chvezs death. Venezuelan Acting President Nicols Maduro accused Chevron Corp.,

the No. 2 U.S. oil company by market value behind Exxon, of aggression against Ecuador in a multibillion-dollar environmental

lawsuit pitting the company against Ecuadorean plaintiffs. Analysts said they were surprised by the comments, as Chevron, the only

major U.S. oil company to remain in Venezuela, was considered by Mr. Chvez as a key investor, and is lending Venezuela $2 billion

to increase output at a joint-venture oil development. A spokesman for Chevron declined to comment on Mr. Maduros assertion.

Despite the posturing, Mr. Chvezs death presents an opportunity for a new administration to lift some of the burdens heaped on

PDVSA, which has supplied billions of dollars in cheap oil to Cuba and other friendly foreign governments, said Carlos Jord, a

Houston-based oil consultant who was once a senior manager at the oil company. To reach its full potential, Venezuelas entire oil

industry sector needs to be reinvented, something that is unlikely, said Luis Pacheco, a former PDVSA executive fired during the oil

strike of 2003 along with 20,000 other employees who opposed Mr. Chvez. In 2000, Mr. Chvez signed its first oil deal with Cuba,

providing the communist island with 53,000 barrels a day of cut-rate oil, a sum that has risen to 110,000 barrels now. In return, the

Cuban government has sent some 40,000 doctors and experts to support the popular social programs developed by Mr. Chvez. Mr.

Jord, who called those oil deals unsustainable, said that domestic fuel prices, the worlds lowest at around 6 cents a gallon, will alsohave to rise at some point. The cost to the country of the domestic fuel subsidies has also increased because refinery accidents

forced the government to import growing quantities of gasoline, according to the EIA. The Venezuelan government denies it imports

fuel. Worsening fiscal conditions willalso promptMr. Chvezs successors to improve relations with

foreign investorsand eliminate bottleneckscreated by the deceased leaders highly-personal, hands-on

management style, saidJim Loftis, a partner with Vinson & Elkins LLCs international arbitration

practice. The country also needs to increase oil production to pay for tens of billions of dollars in

Chinese loansit undertook to finance large social projects and a big boost in election spending last year. Venezuelans see their
http://online.wsj.com/public/quotes/main.html?type=djn&symbol=CVXhttp://online.wsj.com/public/quotes/main.html?type=djn&symbol=CVXhttp://online.wsj.com/public/quotes/main.html?type=djn&symbol=CVXhttp://online.wsj.com/public/quotes/main.html?type=djn&symbol=CVX?mod=inlineTickerhttp://online.wsj.com/public/quotes/main.html?type=djn&symbol=CVX?mod=inlineTickerhttp://online.wsj.com/public/quotes/main.html?type=djn&symbol=CVX?mod=inlineTickerhttp://online.wsj.com/public/quotes/main.html?type=djn&symbol=1605.TOhttp://online.wsj.com/public/quotes/main.html?type=djn&symbol=1605.TOhttp://online.wsj.com/public/quotes/main.html?type=djn&symbol=1605.TOhttp://online.wsj.com/public/quotes/main.html?type=djn&symbol=1605.TO?mod=inlineTickerhttp://online.wsj.com/public/quotes/main.html?type=djn&symbol=1605.TO?mod=inlineTickerhttp://online.wsj.com/public/quotes/main.html?type=djn&symbol=1605.TO?mod=inlineTickerhttp://online.wsj.com/public/quotes/main.html?type=djn&symbol=1605.TO?mod=inlineTickerhttp://online.wsj.com/public/quotes/main.html?type=djn&symbol=1605.TOhttp://online.wsj.com/public/quotes/main.html?type=djn&symbol=CVX?mod=inlineTickerhttp://online.wsj.com/public/quotes/main.html?type=djn&symbol=CVX


27/37

relationship with oil as if the nations virility is at stake, Mr. Pacheco said. Until that perception changes, the oil industry will keep

dancing in a circle around the fire, waiting for it to rain.


28/37


29/37

Off Case


30/37

Politics Links

Congressional opposition to Venezuela because of ties to Iran

Bowman, 12(2/16/2012, Michael, U.S. Congress Warns Venezuela over Ties with Iran,

http://www.thecuttingedgenews.com/index.php?article=72042&pageid=17&pagename=News ,JMP)

U.S. senators are warning Latin American nations against deepening financial and military ties

with Iran, pledging heightened U.S. vigilance of Iranian activities in the Western Hemisphere.

The Senate's Foreign Relations Subcommittee took a close look on February 16 at Tehrans

dealings with Latin America. Irans increasingly isolated regime retains friends in Latin America,

most notably Venezuelan President Hugo Chavez. U.S. Democratic Senator Robert Menendez

had a stern message for the region. Unfortunately, there are some countries in this hemisphere

that, for political or financial gain, have courted Iranian overtures. They proceed at their own

risk: the risk of sanctions from the United States, and the risk of abetting a terrorist state, he

said. Republican Senator Marco Rubio echoed that message. The leaders of these *Latin

American+ countries are playing with fire,Rubio said. Researcher Douglas Farah said Iran's

intentions in Latin America are twofold. To develop the capacity and capabilityto wreak havoc

in Latin America and possibly the U.S. homeland, if the Iranian leadership views this as necessary

to the survival of its nuclear program, and to develop and expand the ability to blunt

international sanctions that are crippling the regimes economic life, Farah said. Of particular

concern: Irans quest for raw nuclear materials and what U.S. National Intelligence Director

James Clapper recently described as Irans increasing willingness to mount attacks on U.S. soil.

Perceived terror ties makes Venezuela unpopular

Sullivan, 13--- Specialist in Latin American Affairs at Congressional Research Service

(1/10/2013, Mark P., Venezuela: Issues for Congress,http://www.fas.org/sgp/crs/row/R40938.pdf,JMP)

Terrorism Issues

U.S. officials have expressed concerns over the past several years about Venezuelas lack of

cooperation on antiterrorism efforts, President Chvezs sympathetic statements for Colombian

terrorist groups (the FARC and ELN), and Venezuelas relations with Cuba and Iran. Since May

2006, the Secretary of State has made an annual determination that Venezuela has not been

cooperating fully with United States antiterrorism efforts pursuant to Section 40A of the Arms

Export Control Act (P.L. 90-629).143 As a result, the United States has imposed an arms embargo

on Venezuela since 2006, which prohibits all U.S. commercial arms sales and retransfers to

Venezuela. For several years, U.S. officials also expressed concern that Venezuelan citizenship,identity, and travel documents were easy to obtain, making the country a potentially attractive

way-station for terrorists. In June 2011 congressional testimony, State Department officials

again expressed concern about Venezuelas relations with Iran, its support for the FARC, [and]

its lackluster cooperation on counterterrorism.144
http://www.thecuttingedgenews.com/index.php?article=72042&pageid=17&pagename=Newshttp://www.thecuttingedgenews.com/index.php?article=72042&pageid=17&pagename=Newshttp://www.fas.org/sgp/crs/row/R40938.pdfhttp://www.fas.org/sgp/crs/row/R40938.pdfhttp://www.fas.org/sgp/crs/row/R40938.pdfhttp://www.thecuttingedgenews.com/index.php?article=72042&pageid=17&pagename=News


31/37


32/37

China DA Link

Oil investment causes China freakout

Levi and Clayton 12[Michael Levi is the Michael A. Levi is the David M. Rubenstein Senior

Fellow for Energy and the Environment and Director of the Program on Energy Security andClimate Change at the Council on Foreign Relations, and Blake Clayton is a Fellow for Energy and

National Security at the CFR, The Surprising Sources of Oils Influence, Survival, Vol. 54, No. 6,

online]

What about fights over investment?There is no question that cross-border investment in oil production

is often politically charged. In many ways, though, this does not make oil special. China, for example, discriminatesbetween domestic and foreign firms, and among foreign companies too, in determining when to allow investment in a host of

industrial sectors, from telecommunications to banking. That said, in some cases, oil investment is particularly touchy. In Latin

America, for example, oil is typically seen as a countrys patrimony, and selling it to foreigners is

something that triggers deep emotional reactions.6 Oil investment decisions can thus take on a

special cast.3 It is important, though, not to push this too far. In some cases where one would expect international politics to

play a major role in shaping oil investment, it does not. Saudi Arabia, Kuwait, and Iraq, for example, all appear to select foreign firmsfor inward oil investment more on the basis of contract terms and technological potential than on the bilateral relationship with

those firms home countries.7 Chinese oil companies, meanwhile, appear to select their targets for outward

investment primarily based on assessments of commercial attractiveness, with foreign policy

objectives taking a decisive back seat. But that does not mean that politics has not have not

affected where these companies have deployed their capital. Chinese national oil companies

have opportunistically taken advantage of investment opportunitiesin places like Sudan and Burma,

where Western sanctions have kept Western oil majors at bay .


33/37

Consult Brazil

Consultation with Brazil over Venezuela action is critical to solve.

Shifter 13- President of the Inter-American Dialogue and an Adjunct Professor of Latin

American Studies at Georgetown University's School of Foreign Service (3/11, The EmpireMakes Nice, Foreign Policy

http://www.foreignpolicy.com/articles/2013/03/11/the_empire_makes_nice_venezuela_hugo_

chavez?page=0,0.)

To anticipate potential turmoil in Venezuela in the coming period, Washington should be

consulting regularly and at the highest levels with South American allies, especially Colombia

and Brazil, who have the most at stake should the security situation deteriorate. Although many

commentators have drawn attention to Cuba's role in the Venezuelan transition, and have

particularly highlighted Cuba's huge dependence on Venezuelan oil and money, Brazil will

probably end up being just as influential as the situation unfolds. South America's undisputed

superpower -- whose leverage on Venezuela stems from key exports, especially food, and

political backing -- is chiefly interested in maintaining social peace within its own neighborhood.

In keeping with Brazil's own governance and political evolution in recent years, Brasilia will aim

to keep the situation in Venezuela under control and to encourage moderation, gradualism, and

communication on both sides. It does not want trouble on its borders. Venezuela's recent entry

into the Brazil-led MERCOSUR trade group will makes this issue of even greater concern for

President Dilma Rousseff's government. In this respect, there is ample coincidence of interests

between Washington and Braslia.

Brazil consultation is key for Venezuela- assertive foreign policy and regional

power

Durns, 5/21(Sean, co-founder of Global Risk Insights and postgraduate student at the London School ofEconomics, May 21, 2013, Will Venezuelas Crisis Become Brazils Opportunity?,

)ZB

Will Brazil act in an assertive manner to address the unfolding situation in Venezuela? There are

reasons to think so. Brazil has a solid history of leading on the subcontinent and has, at various

times, and to varying degrees encouraged trade stability and settled continental territorial

disputes.Additionally, Brazil has evidenced a dramatically expanding rolein the international

communityunder the able leadership of former President Luiz Inacio Lula da Silva and his foreign minister, Celso Amorim. UnderLula and Amorim, Brazil showed greater independence in its foreign policy than it had for much of the latter half of the 20th century.

Brazil also adopted the policy of seeking to work with Chavez while carefully and skillfully avoiding larger scale backing and support

of the Venezuelan leader. Brazils unique relationship with Venezuela and its increasingly assertive

foreign policy have continued under current President Dilma Rousseffand her foreign minister, Antonio

Patriota. The relationship between Maduro and Rousseff remains to be seen and will likely hinge on Rousseffs willingness to investincreasingly precious political capital in an uncertain situation as she faces her own re-election in 2014. While the risk for Rousseff

may be large, the need for the much needed boost offers a strong incentive. Indeed, regional politics may force Rousseff to do so.

Despite its slowing growth and ensuing international skepticism, Brazil remains a dominant and

persuasive force on the subcontinent with considerable soft power draw and behind-the-scenes

negotiating strength. By leveraging its considerable economic and political strengths, Brazil could do much to lessen growing

regional and international worries about Venezuela and assuage concerns about its own capabilities going forward. By acting as

a mediating force in the increasingly divisive Venezuelan political situation, Brazil has much to

gain.It can restore shaken short-term investor confidence and return to the narrative of an emerging power ready to take its
http://www.foreignpolicy.com/articles/2013/03/11/the_empire_makes_nice_venezuela_hugo_chavez?page=0,0http://www.foreignpolicy.com/articles/2013/03/11/the_empire_makes_nice_venezuela_hugo_chavez?page=0,0http://www.foreignpolicy.com/articles/2013/03/11/the_empire_makes_nice_venezuela_hugo_chavez?page=0,0http://www.foreignpolicy.com/articles/2013/03/11/the_empire_makes_nice_venezuela_hugo_chavez?page=0,0


34/37

rightful place as an economic power, ably managed. This may further assist with more positive impressions of Brazil as it moves

towards the 2016 games. If the aforementioned assessment of expectations playing the largest role in Brazils future is correct, then

the crisis in Venezuela presents an intriguing opportunity to restore perception and quiet the doubters.

US should work with Brazil and they like the planprevious interest to improve

Venezuelan security

Pagano 3/18(By James Pagano | 3.18.13, James Pagano is a contributing writer to the TrumanDoctrine, Moving Venezuela to the Center http://trumanproject.org/doctrine-blog/moving-

venezuela-to-the-center/)

After over a decade in power, Hugo Chavez is now dead, providing U.S. policy makers an

opening to mend fences and steer Venezuelas next president towards the center. With smart

policy and a light touch, the United States can help Venezuelas next president lead his country

out of the mess that Chavez built. Chavez won the presidency in 1999 on a promise to sow the

oil wealth of Venezuela into its social program. Bolstered by record high oil prices, Chavez spent

billions on such programs. While millions of Venezuelans were able to obtain healthcare and an

education, the poorly designed programs left little money to reinvest in oil exploration; output

in Venezuela declined threatening the longevity of all Chavezs initiatives. Meanwhile, Chavez

became an increasingly authoritarian leader, consolidating power in the executive. He

blacklisted opposition figures, altered the constitution and unevenly enforced laws for personal

benefit. By creating a steeply slanted playing field, Chavez was able to retain power. Venezuelas

next president will have to decide whether to reverse these trends, or continue the slide to

outright authoritarianism. The United States can and should influence this decision. The United

States must support the democratic process and engage the likely winner of Aprils election,

Chavezs chosen successor, Nicols Maduro. He will have a real opportunity to put Venezuela

back on the path to a free-market democracy. The next president will face an extremely

politicized Supreme Court and military and reforms are likely more palatable if made by

Maduro. Changes to apportionment, food subsidies or tax rates coming from Enrique Capriles

(the opposition candidate) could spark a legal challenge from the supreme court; or worse,

opposition from the military. What should the U.S. role be? It must work with its Latin American

allies in the region, Chile, Brazil, Colombia and Mexico to gently pressure Maduro into makingthe types of institutional and economic changes necessary for Venezuela to prosper. Failure to

do so could lead to the reemergence of authoritarianism in Latin America, instability in world oil

markets and serious regional security repercussions. Chavez was infamous for his anti-American

tirades. George W. Bushs poor global standing gave Chavez an easy target. With a more positive

global image, the most important step President Obama can take is to normalize relations with

Cuba. As Venezuelas closest ally, Cuba has remained a persistent problem in U.S. -Latin

American relations. By normalizing relations, Obama would take a huge step in reducing anti-

Americanism in Venezuela. Simultaneously, Obama would ingratiate himself to the rest of the

region by ending the dated embargo. Perhaps most importantly, eliminating this issue would

give Venezuelas next president the political cover necessary to mend relations with the United

States. The U.S. should push for economic reform with the help of Brazil which seeks a greaterrole in international and regional politics. Former Brazilian President Lula da Silva has close ties

to Venezuela, and touting the recent successes of his center-left government in Brazil could help

persuade Maduro to moderate his government. Brazil has made huge societal gains without

suffering the kind of economic setbacks seen in Venezuela. Friendly cajoling, along with the

promise of closer economic ties could help lead Maduro onto a path of economic reform

necessary to extend certain Chavista social programs. Colombia, Brazil and the U.S. also have a

shared interest in improving Venezuelan security. Under Chavez, Venezuela became on the most


35/37

violent countries in Latin America, as drug related crimes skyrocketed. Violence is the number

one concern of Venezuelans, and significant reductions would be a major political victory for

whoever is in power. Brazil and Colombia together should pressure Venezuela to accept sorely

needed D.E.A assistance with the tacit acceptance of modest political reforms, most importantly

freer press. The death of Chavez is a critical juncture in U.S.-Latin American relations and it is

important the United States not miss this opportunity. Having a stable trustworthy Venezuela

would allow the United States to continue to draw down operations in the ever-volatile Middle

East, fight narcotrafficking and expand trade. Careful, well thought-out overtures and policy

changes will help quell lingering anti-Americanism while also improving regional stability. Ending

the Cuban embargo would provide absolute economic gain for all parties, while providing cover

for Maduro to thaw relations with the United States and receive aid to stop uncontrollable

violence. Strategic engagement with regional allies could help spur the economic and

institutional reforms necessary for Venezuela to prosper moving forward. The situation in

Venezuela could be potentially destabilizing to the region. The United must act deliberately to

make Hugo Chavezs passing an unmitigated positive development.

Cooperation with other countries is keyonly way Venezuela says yesSires 3/8(By Rep. Albio Sires (D-N.J.) - 03/08/13 01:05 PM ET Sires is the ranking member of

the Foreign Affairs Subcommittee on the Western Hemisphere. Time for a new Venezuela

http://thehill.com/blogs/congress-blog/foreign-policy/287019-time-for-a-new-venezuela)

Venezuelas President Hugo Chavezdied of cancer on Tuesday. His passing has the potential to mark the end of

an antagonistic and divisive 14-year chapter in this hemisphere. Notwithstanding recent accusations of U.S.

involvement in Mr. Chavezs death, for now, incendiary and vitriolic anti-American rhetoric is somewhat

muted. Additionally, the fate of anti-democratic alliances with Cuba, Russia, and Iran are in doubt as are the regionalorganizations of ALBA, the Bolivarian Alliance of the Americas, and CELAC, the Community of Latin American and Caribbean States,

that have excluded the United States and further fragmented the region. The momentum of a perpetual e

venezuela neg - scdi 2013

Documents