Low oil prices spell trouble for Venezuela, Latin America

As the global recession begins to slow demand for energy, oil prices are expected to head even lower, from the current price of around $35 dollars a barrel, to as low as $10 dollars according to some sources.

This dramatic decline in prices is already causing severe damage to the Venezuelan economy, which lives and dies by the oil industry. Here is a nice concise article on the toxic combination of low oil income and 20-plus percent inflation that could spell trouble for our obnoxious friend Hugo Chavez. Latin America is becoming increasingly interesting, in my view, and I expect we will be talking about South and Central America quite a bit in the next few years.

The most interesting thing in terms of history and political economies, is that we are undergoing a severe world-wide economic crisis at the tail-end of a massive globalization cycle (historically not the first by the way). This is particularly interesting for Latin America, which has yet to work its way through the fog of cold-war era ideological struggles. Communism and Socialism are still very much alive in parts of Latin America, and the current crisis will likely provide fodder for proponents.

Even more interesting, is that the same crisis could have the opposite effect for Chavez - the current socialist standard bearer - as his support has slipped in recent months. If the Venezuelan economy gets much worse, he could be in real trouble. If things do get worse, expect him to become more vocal, once again, in his attacks on the United States and neighboring adversaries.