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Venezuela borrowing millions to fix ailing electrical grid

DENVER, Colorado
Petroleumworld.com, Oct 23, 2009

If the recent rationing of water in Caracas weren’t bad enough, now Venezuelans in the capital and several other cities are only getting rationed electricity in spurts—if at all.

Four other states in Venezuela have also had to ration electricity, including Mérida, near the border with Colombia, Anzoátegui, Falcón, and Nueva Esparta.

The country’s electric grid has been suffering from too much demand and in inability to meet that demand due to aging infrastructure. In order to update that grid, the Venezuelan government is taking out an $800 million loan from Inter-American Development Bank, or IDB.

According to the Wall Street Journal, the loan is part of a $1.75 billion credit line by the Washington D.C.-based multilateral lender to the Venezuelan government for the development of a $4.3 billion project to boost Venezuela's power-generation capacity, the state news channel reported Tuesday. The loan will be channeled to Corpoelec, the state power company.

Another part of that project is a $1.75 billion IDB loan to complete construction of a 2,320-megawatt hydroelectric project on Venezuela’s Caroni River.

Venezuela’s economy experienced a boom period in recent years due to high oil prices, as petroleum exports account for the majority of the country’s GDP. However, the global economic crisis has caused a sharp decline in oil prices in the last year—and Venezuela’s income.

Some Venezuela observers have noted that the government may be overextended in its plans to fund social welfare programs because it has overestimated projected income from oil exports in its 2010 budget.

The country’s state-owned oil company, PdVSA, recently issued $3 billion in bonds. Demand for the bonds has been light and the sale isn’t going smoothly. However, Venezuela did successfully issue $5 billion in sovereign debt earlier this month, and is receiving $16 billion in investment from PetroChina’s parent company, CNPC.

Regardless, concerns still abound over the Venezuelan government’s economic management skills and priorities in light of its inability to provide basic services like water and electricity to its citizens.

Story by South America Policy Examiner Sylvia Longmire
Examiner.com 10/22/2009

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