SAO PAULO, April 15 (UPI) -- There were two important political shifts for the economies of Latin America this weekend. One in Venezuela, which played across front-pages worldwide, another that passed quietly, unless you happen to be a watcher of Brazilian politics.
Hugo Chavez's dramatic exit and return to power in Venezuela has obvious implications for the world's oil price -- the country is the fourth-leading producer of the stuff and the United States its biggest client. Those facts, coupled with Chavez's fiery "anti-imperialist" drive against the United States in the form of oil production cuts to increase its price, will keep the market jumping. Under Chavez, who took power in 1998, Venezuela's oil production has dropped some 500,000 barrels a day.
Indeed, on Friday the price of oil dropped upon news that Chavez was out. By Monday, with the headlines that Chavez -- and his policy of restricting production -- was back, prices immediately rose. The market is likely to settle relatively soon, especially if Venezuela's oil industry comes fully back online after a strike that largely prompted Chavez's short recess from power. But there is no question that Chavez, who holds office until 2006, equals higher prices in the long term.
Chavez will continue his push for the Organization of Petroleum Exporting Countries to keep production down and prices up. This, coupled with Iraq's embargo to protest the Israeli-Palestinian strife, will mean higher prices at the pumps just as Americans begin the summer traveling season. Which, of course, means political turbulence for President Bush, as an American paying premium for his sport utility vehicle's Interstate adventure is an unhappy American indeed.
But the revolt against Chavez -- constructed by the military and business elite and supported by the middle class -- could make the leader a bit more moderate when it comes to dealings with the state-run oil behemoth Petroleos de Venezuela or PDVSA, an entity which Chavez's core supporters, largely poor workers, distrust as serving only the interests of the rich. Chavez has already shown some flexibility, on Sunday accepting the resignation of his handpicked president and board of directors of the PDVSA, the appointment of whom sparked the strike and revolt. But on Monday there were still some 18 oil tankers lingering off the coast of Venezuela, waiting for the country's production to get going so they could head toward their international destinations.
Now turn your gaze further south toward Brazil, Latin America's biggest economy. Roseana Sarney, once a leading presidential candidate from the center-right and business-friendly Liberal Front Party, or PFL, has bowed out of the October election. She was viewed as the most progressive candidate in regard to furthering free-market reforms in the country, but it will never be known if her ideas would have been politically feasible once she gained office. Quite likely, she would have been tugged left by political realities.
On the surface, Sarney's downfall seems bad for those seeking reforms in the country. For a time, she was the best candidate to battle a leftist who leads all runners. But Sarney's exit is likely to consolidate support behind the government's handpicked candidate, Jose Serra, who despite recent populist chitchat is, at the end of the day, pro-business, much like President Fernando Henrique Cardoso. Although both are more pragmatic in their approach than Sarney would likely have been, they still create the occasional headache for the country's business class.
Sarney's presidential run was mortally wounded by an investigation into a business she and her husband own, which was accused of defrauding an Amazon development fund. Sarney says the charges were false and the investigation carried out at the urging of government officials who wish to see Serra gain the presidency. Not the most unlikely of accusations.
But political realities have won out in Brazil, and the fact is nobody in the center who has even peeked politically right wants to see the man leading all polls gain office: leftist Luiz Inacio "Lula" da Silva from the Workers Party, whose approval rating is at 32 percent. So, at some point soon, there will be an announcement from Sarney's PFL and Cardoso and Serra's Social Democratic Party, PSDB, that the two have agreed to put all support behind Serra, who is in second place in polls at 22 percent. Only the details of what the PFL is to reap from throwing support to Serra remain.
Monday's edition of the daily Estado de Sao Paulo reported that the PSDB is promising the PFL an unspecified large role in an eventual Serra government. For that, the PFL will have to give in return its support to several key bills now stalled in Congress, such as the extension of the financial transactions tax known as the CPMF, the delay of which costs the government about $190 million a week in essential revenue. The tax has exemptions on trading. Cardoso has already been forced to scale back this year's budget -- never advisable in an election year -- because of the bill's delay.
While the political infighting between the PSDB and the PFL was, as good politics tend to be, dirty, the result of the battle is that there is essentially one center candidate to face-off against the left's Lula. And for those with business interests in the country, you cannot ask for a better chance than that.
