From:TheBahamasWeekly.com
Are lower oil prices causing chaos? A Latin-American and Caribbean perspective
By Youri Kemp
Mar 24, 2015 - 12:20:18 PM
As most of us already know, oil prices have
fallen from their triple digit highs to now just about $50 a barrel. Of course,
this is great news for most of us. But for other people that depend on high oil
prices for profit, not so good news.
It's not just that oil prices slowly fell over the course of 2 or 3 years, but
they fell so sharply and suddenly within the last year, oil producing countries
were hit with a blind-sided shot that they were not prepared for.
As you can imagine, governments were in a scramble. Not just a scramble to make
up the short fall, but as oil prices fell, budgets were slashed and that would
spell panic for many oil exporting countries.
Nothing spelled panic as it did with the recent protests in Brazil over the
last week.
Scores of persons in Brazil gathered in major cities in protest of the
government. Over 1.5 million people gathered in the national stadium in protest
and the numbers are expected to grow.
The protestors have asked for President Dilma Rousseff to resign immediately
amidst a corruption scandal coming out of the state run oil company, Petrobras.
This isn't the first major protest Brazil had experienced, and most recently
was the protests prior to the World Cup 2014- cries of wasteful spending, lack
of spending on the poor and wide spread theft were the most serious allegations
about the process.
This Petrobras scandal, however, has rocked the country, leaving people
wondering about the state of the country's finances and the fragility of the
political peace as the scandal from Petrobras has hit a nerve amidst lower oil
prices.
Of course, this author knew that social instability in oil producing and oil
export dependent countries would happen as a result of lower oil prices. For
the mere fact for what we mentioned earlier that budgets were slashed and
spending programmes cut or just simply cut out.
When countries budgeted for a certain price for oil, in the case of Brazil,
over $100 dollars a barrel for oil, and then oil prices plummeted to under $50
dollars, you can imagine the public accounting nightmare and the financial
collapse that would ensue- money would not be spent on social projects, capital
infrastructure projects, people start to watch the pennies a little more
closely and then issues such as wastage- which would have been moderately
acceptable at $100 per barrel- simply would not be tolerated and excesses,
regardless of how long it's been going on, will be scrutinized and blames will
be bandied about.
Thus is the case in Brazil, every penny is now being watched very, very closely
and people have little to no tolerance for wastage.
Venezuela is going through similar challenges as well. In fact, there were
thwarted attempts to oust the current Venezuelan president,Nicolás Maduro
Moros. Thwarted attempts for the time being.Venezuela in particular had a
break-even point of $115 dollars per barrel.
Since the plummet of oil prices and calls for his resignation for his inability
to handle the oil crisis, president Maduro has accused several key people of
plotting to overthrow his government, including a former general in the army
and several key opposition supporters.
President Maduro has, for the moment, staved off the coups and has tried to do
things to inject pure hard cash into the Venezuelan economy, most importantly
of which is securing a $5 billion loan from China, to heap on top of the
already $50 billion loaned to Venezuela from China since, 2007.
Of course, borrowing money and being more in debt to China comes with it's own
problems. The most of which is the neighbour to the North, the USA. While they
too have been in debt to China to the tune of trillions of dollars, it doesn't
mean that they want Chinese involvement in Latin America and the Caribbean to
the point where those nations are no longer counted on as American allies in
America's own backyard.
What's also more important to note is that during the Cold War, a period of
time and instability where most developing nations have not fully recuperated
from its ravages, particularly if the public tide leaned heavily to the left of
centre of the political landscape, president Maduro is not fully out of the
clear yet. Particularly where, to be totally honest with you, all eventualities
should have been covered, and especially scenarios planned for in the event of
a collapse in the oil market. As a side note, it is as if we have not learned
from the financial and economic crisis of 2008 in that any and every thing can
and will happen. Any and every thing!
Take on the other hand what Trinidad has done as a result of falling oil
prices. Trinidad has setout tocut its $10.2 billion budget for this
year. Trinidad is reportedly the sixth largest exporter for oil in the world.
What also happened after oil prices started to fall, and probably not
correlated but worth mentioning in any event, is that president of Trinidad and
Tobago, Kamla Persad Bissessar, dealt very harshly and resolutely with a
scandal that rocked the core of her government.
Within the space of a month, president Bissessar sacked 6 of her cabinet
ministers amidst a witness tampering scandal. Ministers as high up as the
Attorney General and her Minister of National security were all given pink
slips. It was so bad that I often joke that president Bissessar fired herself, as
she gave up her own ministerial post as Minister of the Ministry of the People
and Social Development.
Of course elections in Trinidad are in 2015, this year. Of course. President
Bissessar did the right thing, and that was try to make the best out of a very
bad situation. What comes out of this is how the people read into it, which if
you are a good political strategist you can play it both ways.
Whatever comes as a result, with less money to play around with, with a scandal
that has rocked Trinidad, for president Bissessar dealing with it resolutely,
which may mean fracturing her own party, in addition to the optics of her
stepping down as a cabinet minister herself, particularly the ministry of
the people, election time in Trinidad is shaping up to be a very, very curious
one indeed.
This oil price issue has hit hard, and the ripples are still being felt. No
doubt this is not the end of it. But, lucky for us, we are on this side of the
world. The Western Hemisphere. If this were Africa and the Middle East, things
would not be so cool, to put it mildly.
Youri Aramin Kemp, is
President and CEO of "KEMP GLOBAL", a Management Consultancy firm, based
in the Bahamas which serves all markets. Our core competencies are:
Business and Project Planning and Design; Project Execution; Market
Researchn and Analysis; and Operations Development. Through our
affiliates, we offer Construction Services; Public Relations Services;
and IT and back office support to small and medium sized businesses.
Email: globalviewtoday@gmail.com
Read more by Youri Kemp
Disclaimer:
The views expressed here are solely those of the author in his/her
private capacity and do not in any way represent the views of
TheBahamasWeekly.com
© Copyright 2015 by thebahamasweekly.com -