Venezuela Oil AFF --- UMich 7wk GJP

1AC

Plan Text

The United States federal government should assist Venezuela in liberalizing its energy sector.

Venezuela Adv

The Venezuelan oil sector is decliningLadislaw and Verrastro 3/6 – Ladislaw is co-director and senior fellow with the Energy and National Security Program at the CSIS and Verrastro is senior vice president and James R. Schlesinger Chair for Energy & Geopolitics at CSIS (Sarah and Frank, “Post-Chavez Outlook for Venezuelan Oil Production,” Center for Strategic and International Studies, http://csis.org/publication/post-chavez-outlook-venezuelan-oil-production)

Despite its enormous oil resources, Venezuela’s oil production (regardless of whose figures you use) has long been in steady decline. In 2011 liquids production was 2.47 million barrels per day (mmbd), down a million barrels per day since 1999. Some of this is reflects the changing cost and economics of Venezuelan oil production but field decline is significant and expertise and reinvestment are questionable and looking harder to come by . The internal technical and managerial capabilities of state run oil and gas

company PDVSA have deteriorated since the 2002 strike and aftermath. Increasingly, PDVSA relies on contractors, as well as other private company partners, to keep the fields in production but reports state that contractors have not been paid in months and that the political uncertainty in the country has even driven routine decision making to a halt. The sustained political uncertainty has also slowed

investment ; Russian and Indian companies were planning to invest in Venezuela’s oil fields but so far have withheld incremental new money. China has not announced a new line of credit or extensions on its development-linked financing since last April. At the same time that production is dropping, highly subsidized domestic consumption of oil is increasing while revenue from exports is also declining . The United States remains the largest recipient of Venezuelan oil exports

at 950,000 barrels per day in 2011, roughly 40 percent, plus another 185,000 barrels per day from the Caribbean that was Venezuelan sourced but those volumes area down as U.S. demand has declined and other crudes have become available. Venezuela’s next largest export destinations are the Caribbean (31 percent) and then China (around 10 percent). Venezuela sells to many of its Caribbean neighbors at below market rates due to extremely preferential financing relationships, including additional heavy subsidies for Cuban exports. All of this culminates in an outlook for continued decline in oil production and a worsening economic outlook for Venezuela

during a politically difficult time.

This will collapse the Venezuelan government Tulchin 13 - Visiting Fellow at the David Rockefeller Center for Latin American Studies at Harvard University, Latin American scholar, member of the task force on Hemispheric Security Issues at the Center for Hemispheric Policy of the University of Miami (Dr. Joseph S. “Oil price is key to success for Venezuela’s President Maduro” World Review April 24 2013 <http://www.worldreview.info/content/oil-price-key-success-venezuelas-president-maduro> 6/27/13)//AH

Mr Maduro now has to follow in some large footsteps . Charismatic Mr Chavez was a regional leader who created the Latin American Bolivarian Alliance (ALBA) within which populist and progressive regimes could express their aspirations as well as their anger with the US. Mr Chavez was also instrumental in creating the Union of South American Nations (UNASUR) and the Community of Latin American and Caribbean

States (CELAC). UNASUR has a modest infrastructure which might become a significant international forum for South America. Mr Chavez and his charisma created something between a political movement and a personality cult in Venezuela, establishing an emotional link with the people, especially the underclass. Mr Maduro will have difficulty maintaining this . The Chavez governments increased social spending to three per cent of gross domestic product (GDP). Inequality, measured by the Gini Index, declined by 10 index points. Extreme poverty was reduced. The Chavista movement - the followers of Mr Chavez - was a politically effective, well-oiled machine. But Mr Chavez’s legacy also includes the failure to establish the participatory democracy that he called part of Socialism of the 21st Century. Political freedoms

have declined, the space for debate has been reduced, and the rule of law has deteriorated. Mr Chavez carries the blame for the terrible macroeconomic policies his government imposed which have brought Venezuela to the verge of dysfunction. Public administration has become a bad

joke. The state simply does not work. The net judgment on the legacy of Hugo Chavez is that his regime represents a lost opportunity. Mr Maduro has to deal with three problems from the moment he assumes power. First is the petroleum industry . The social model built by Mr Chavez will collapse very quickly without increased production. No

Venezuelan government can survive long with the price of oil below US$90 per barrel or if

production continues to decline even at higher prices. Second is inflation. The economy is seriously dysfunctional, largely because of Mr Chavez’s wild spending spree in the year prior to last October’s elections and his dependence on oil revenue. Third is the crime rate which makes Venezuela one of the most violent countries in the world. This is itself symbolic of a more general problem of social cohesion. Today, Venezuelan society is deeply divided. Civil discourse has disappeared, personal freedoms have been severely curtailed, the rule of law is uncertain. It will be a challenge for the new government to avoid civic discord and violence and deal with

widespread crime. A rising proportion of this is connected to international traffic in drugs. But it is petroleum which has dominated Venezuela’s economy for nearly a century. Petroleum revenue equals 82 per cent of Venezuela’s GDP . PDVSA was turned into Venezuela’s largest social benefits ministry using virtually all its petroleum sales revenue to pay for the ambitious government social programmes carried out by Mr Chavez when he was president. The variables that will determine the future capacity of the Venezuelan government to pay its debts, control inflation, and pay for its social welfare programmes are the international price of oil; the level of oil production; and

the level of investment in Venezuela’s petroleum industry. The interplay between these

determines the scenarios for Venezuela’s future.

And that independently causes global conflictManwaring 05 (Max G., retired U.S. Army colonel and an Adjunct Professor of International Politics at Dickinson College, Venezuela’s Hugo Chávez, Bolivarian Socialism, and Asymmetric Warfare, October 2005, pg. PUB628.pdf)//SRPresident Chávez also understands that the process leading to state failure is the most dangerous long-term security challenge facing the global community today. The argument in general is that failing and failed state status is the breeding ground for instability, criminality, insurgency, regional conflict, and terrorism . These conditions breed massive humanitarian disasters and major refugee flows. They can host “evil” networks of all kinds, whether they involve criminal business enterprise, narco-trafficking, or some form of ideological crusade such as Bolivarianismo. More specifically,

these conditions spawn all kinds of things people in general do not like such as murder, kidnapping, corruption, intimidation, and destruction of infrastructure. These means of coercion and persuasion can spawn further human rights violations, torture, poverty, starvation, disease, the recruitment and use of child soldiers, trafficking in women

and body parts, trafficking and proliferation of conventional weapons systems and WMD , genocide,

ethnic cleansing, warlordism, and criminal anarchy. At the same time, these actions are usually unconfined and spill over into regional syndromes of poverty, destabilization, and conflict .62 Peru’s Sendero Luminoso calls violent and destructive activities that facilitate the processes of state failure “armed propaganda.” Drug cartels operating throughout the Andean Ridge of South America and elsewhere call these activities “business incentives.” Chávez considers these actions to be steps that must be taken to bring about the political conditions necessary to establish Latin American socialism for the 21st

century.63 Thus, in addition to helping to provide wider latitude to further their tactical and operational objectives, state and nonstate actors’ strategic efforts are aimed at progressively lessening a targeted regime’s credibility and capability in terms of its ability and willingness to govern and develop its national territory and society. Chávez’s intent is to focus his primary attack politically and psychologically on selected Latin American governments’ ability and right to govern. In that

context, he understands that popular perceptions of corruption, disenfranchisement, poverty, and lack of upward

mobility limit the right and the ability of a given regime to conduct the business of the state. Until a given populace generally perceives that its government is dealing with these and other basic issues of

political, economic, and social injustice fairly and effectively, instability and the threat of subverting or destroying

such a government are real.64 But failing and failed states simply do not go away. Virtually anyone can take advantage of such an unstable situation. The tendency is that the best motivated and best armed organization on the scene will control that instability. As a consequence, failing and failed states become

dysfunctional states, rogue states, criminal states, narco-states, or new people’s democracies. In connection with the creation of new people’s democracies, one can rest assured that Chávez and his Bolivarian populist allies will be available to provide money, arms, and leadership at any given opportunity. And, of course, the longer dysfunctional, rogue, criminal, and narco-

states and people’s democracies persist, the more they and their associated problems endanger global security , peace, and prosperity.65

The Chavez model in Venezuela has limited investment, restricted growth and increased the risk of oil shocks and instability -U.S. investment can reverse the trend and preserve our influenceGoldwyn 13 --- President, Goldwyn Global Strategies, LLC (4/11/2013, David L., “The Impact of the Tight Oil and Gas Boom on Latin America and the Caribbean: Opportunities for Cooperation,” House Committee on Foreign Affairs; Subcommittee on the Western Hemisphere; “Energy Opportunities in Latin America and the Caribbean” http://docs.house.gov/meetings/FA/FA07/20130411/100622/HHRG-113-FA07-Wstate-GoldwynD-20130411.pdf, JMP)

The unconventional revolution will also force the resource-endowed nations of the Western Hemisphere to develop more competitive investment frameworks. North America has become the investment destination of choice, with large markets, attractive fiscal terms, strong rule of law and respect for contract sanctity in the U.S and Canada. As will be discussed in greater depth, many Latin American countries are noted for resource nationalism, volatile investment frameworks , and political extremes rather than stability. In order for Latin America to compete, investment terms will have to improve and regulatory frameworks must be enforced with equity and consistency. In short, the southern half of the Hemisphere must prove that it can adapt to changing markets, resource bases and technologies in order to compete with the opportunities found in North America. The prospects for this adaptation are mixed, providing opportunities for U.S. energy diplomacy.¶ II. Energy Trends in the Western Hemisphere¶ The Western Hemisphere has seen the rise of

two trends in energy governance in recent years. One trend is towards rising state control of energy resources – in Venezuel a , Argentina, Bolivia and Ecuador in particular. The concern here is that this trend will limit the

growth of global supplies of oil and gas by undermining the value of existing investments, discouraging future investment and leading to political instability resulting from declining living standards. The economic consequence of this trend is that the hemisphere will contribute less to the diversification of oil supply, thereby engendering a tighter international oil market more vulnerable to the negative effects of supply shocks , increasing the importance of OPEC supply and, over time, undermining economic development in the region. The political consequences of these trends include the decline of U.S. influence in the region relative to competing ideologies and the erosion of democratic structures . ¶ A second, much more positive, trend is towards creative fiscal regimes that welcome foreign investment and require state owned companies to compete with international companies, with independent regulators that promote fair and efficient regulation. Countries observing this model are increasing production or stalling the decline of existing reserves. Colombia, Trinidad and Tobago, and Peru are key examples of this creative model.¶ When I last testified on Latin American energy trends before Congress, Mexico was generally considered to be a part of the first group, making the net trend negative. Today, however, Mexico’s government is actively seeking reforms that include, but are certainly not limited to, the energy sector. A new question mark hangs over Brazil, however. While Petrobras had been viewed as an exemplar national oil company in recent years, it has recently seen its production estimates curtailed, and its market value tumble. The company is no longer second in value only to Exxon Mobil. Perhaps as a sign of changing regional dynamics, Petrobras is now reported to be worth less than Colombia’s national oil company, a development that would have been thought to be nearly unthinkable just a few years ago. 14 While natural gas production is rising, oil production is falling, as Petrobras has faced major challenges fulfill both its newfound responsibilities in the deep and ultra-deepwater subsalt resources, companies face challenges meeting aggressive local content requirements and Petrobras struggles to meet the political expectations

of the government.¶ Venezuela and Mexico are the most important oil exporters in the hemisphere . While Brazil, Colombia and Argentina are important destinations for foreign investment, and

helpfully produce enough oil to meet their own domestic needs and make some contribution to the global export market, they are not strategic suppliers to the global market at this time. Only Mexico, Brazil and Venezuela produce

more than a million barrels per day, although Colombian crude oil production rose as high as 944,310 barrels per day in 2012,15 and Federico Renjifo, the Colombian Energy and Mining Minister, has stated that the country expects to produce 1.01 mbd in 2013.16 Bolivia has enormous gas reserves, but exports mostly to Brazil and modestly to Argentina. Only Trinidad and Tobago is a key supplier to the world gas market.¶ A. The Rise in State Control¶ From those countries now committed to increasing state control, the U.S. faces two key challenges: the loss of production growth and diversity of supply from the region if new economic frameworks are unattractive to foreign investors and, most critically, the loss of U.S. influence vis-à-vis competing political visions.¶ The Economic

Impact of Rising State Control¶ The recent wave of changes in contractual terms and dramatic changes in tax regimes in Venezuela, Bolivia, Ecuador and, in recent years, Argentina, threaten s to slow new investment and eventually deepen instability and poverty in these nations, as well as destroy shareholder value for the companies invested there. The deterioration in the investment climate for energy in these countries is primarily an economic threat, as it foments an environment where supply is constrained and prices are high. We are seeing the revision of economic terms at a time when producers rather than companies hold more market power.¶ Venezuela¶ In 2007, President Hugo Chavez led the nationalization of oil exploration and production in Venezuela, mandating renegotiation of contracts with a minimum 60 percent PdVSA share. While sixteen companies, including Shell and Chevron, complied with the new agreements, ExxonMobil and ENI refused to cooperate and were forcibly taken over. Both companies have pending complaints before the International Centre for the Settlement of Investment Disputes (ICSID) at the World Bank that are expected to be decided in late 2013. As a result of those claims, particularly the ExxonMobil claim, Venezuela withdrew from the ICSID in 2012.17 The impact of the nationalizations,

according to expert analysts like Deutsche Bank and Wood Mackenzie, was a massive flight of investment capital from Venezuela ’s heavy oil sector to Canada’s oil sands, effectively freezing development of the hemisphere’s largest oil reserves during one of the greatest oil booms in history. The net impact on Venezuela’s credit and credibility are quite negative, again with serious negative

long-term consequences for the global oil market and Venezuela’s own economy . In 2008, ENI and

Total came reached an agreement with PdVSA regarding a 2005 joint venture requirement that they had not previously signed an MOU for. Terms for involvement in natural gas development in Venezuela are slightly more beneficial, although in 2012, the year

before his death, President Chavez expressed some interest in altering those terms. It is generally expected that Venezuela’s oil production will continue to fluctuate or stagnate without considerable outside

investment . According to the EIA, some analysts estimate that PdVSA must spend at least $3 billion annually in order to keep

production at its current levels.18 Venezuela plays a significant role in the Western Hemisphere, acting as a proxy for Cuba and providing oil at favorable cost and financing terms to Caribbean nations through Petrocaribe and the Southern Cone through Petrosur, ventures which add stress to the country’s fiscal situation. While change is unlikely to happen quickly, pressure stemming from the recent failed currency devaluation, rising inflation, and vast external subsidies will take a toll on the economy and are ultimately unsustainable.

U.S. resources and expertise are key to revive the oil sectorFarnsworth 13 - vice president of the Council of the Americas and Americas Society (4/11/2013, Eric, “ENERGY SECURITY OPPORTUNITIES IN LATIN AMERICAAND THE CARIBBEAN, HEARING BEFORE THE HOUSE COMMITTEE ON FOREIGN AFFAIRS SUBCOMMITTEE ON THE WESTERN HEMISPHERE, http://docs.house.gov/meetings/FA/FA07/20130411/100622/HHRG-113-FA07-Wstate-FarnsworthE-20130411.pdf, JMP)More broadly, the U nited S tates has a strategic interest in working with willing nations in the hemisphere to develop their own energy resources effectively, while promoting models that reduce the negative if unintended consequences of regional energy development, including a lack of transparency and official corruption , the distorting impact of consumption subsidies, an over-reliance on a single commodity or sector , environmental concerns, and a concentration of wealth and political power around the sector . In order to develop their

respective industries, nations need U.S. technology , management expertise, and investment

dollars . They need our education system to develop their engineers and seismologists, they

need help to understand regulatory , tax, and policy models that work, they need to be

exposed to best practices in environmental mitigation, and they need our technical

assistance to improve the investment climate and the rule of law .

Relations Adv

The U.S. is losing its influence in Latin AmericaCouncil on Foreign Relations 08 – independent task force project, CFR is an independent, nonpartisan organization (‘US Latin America Relations: A New Direction for a New Reality’, May 2008, http://www.cfr.org/mexico/us-latin-america-relations/p16279)//MJFor over 150 years, the Monroe Doctrine provided the guiding princi- ples for U.S. policy toward Latin America, asserting U.S. primacy in the foreign affairs of the region. Over the past two decades, those principles have become increasingly obsolete . Washington’s basic policy framework, however, has not changed sufficiently to reflect the new reality . U.S. policy can no longer be based on the assumption that the United States is the most important outside actor in Latin America. If there was an era of U.S. hege mony in Latin America , it is over . ¶ In most respects, this shift reflects positive developments within Latin America itself. The region has undergone a historic transformation politically, with military-authoritarian rule giving way to vibrant, if imperfect, democracy in almost every nation. Economically, Latin America is now one of the more open market regions in the world and a crucial global provider of energy, minerals, and food. None of this is to say that Latin America has entirely overcome its history of political tumult or done enough to alleviate poverty, improve competi-

tiveness and human capital, or correct extreme inequality. But it does mean that U.S. policymakers must change the way they think about the region. Latin America is not Washington’s to lose; nor is it Washing- ton’s to save. Latin

America’s fate is largely in Latin America’s hands.¶ A failure to acknowledge how Latin Americans define their own challenges has created new political strains in recent years . It has also caused U.S. policymakers to overlook the ways in which the United¶ States can meaningfully contribute to Latin America’s progress—fur- thering

the United States’ own interests in the process. By truly begin- ning to engage Latin America on its own terms, Washington can mark the start of a new era in U.S.-Latin America relations.

Large-scale rapprochement not likely now but oil investment could catalyze stronger relationsMetzker 13 (6/17/2013, Jared, “Analysts Say Oil Could Help Mend U.S.-Venezuela

Relations ,” http://www.ipsnews.net/2013/06/analysts-say-oil-could-help-mend-u-s-venezuela-relations/, JMP)WASHINGTON, Jun 17 2013 (IPS) - A shift in U.S. foreign policy towards Venezuela may be pending as a bilateral rapprochement suddenly appears more possible than it has in years . On the sidelines of talks held earlier this month in Guatemala by the Organisation of American States (OAS), U.S. Secretary of State John Kerry met with Venezuelan Foreign Minister Elias Jaua, with Kerry’s subsequent statements indicating that relations could be heading in a friendlier direction.¶ “We agreed today – both of us, Venezuela and the United States – that we would like to see our countries find a new way forward, establish a more constructive and positive relationship and find the ways to do that,” Kerry said following the meeting with Jaua, which was reportedly requested by the Venezuelans.¶ The meeting happened on the heels of the release of Timothy Tracy, a U.S. filmmaker whom Venezuela had been holding on accusations of espionage. His release was interpreted by many as an “olive branch” being offered by the new Venezuelan government of Nicholas Maduro, whose presidency Washington still has not formally recognised.¶ Only months ago, before the death of Venezuela’s long-time socialist leader Hugo Chavez, any normalisation of relations between Venezuela and the United States seemed highly unlikely.¶ In 2002, Chavez was briefly removed from power by a military coup d’état that the U.S. Central Intelligence Agency (CIA) had known was imminent. Chavez immediately accused the United States of having played a part in the event. After his suspicions were confirmed partly valid, his rhetoric grew more scathing.¶

In 2006, he famously told the United Nations General Assembly that then-U.S. President George W. Bush was “the devil himself”.¶ Following Chavez’s death from cancer in March, however, his hand-picked successor, Maduro, the former vice-president, has not been as vitriolic in his posturing vis-à-vis the United States.¶ According to Michael Shifter, president of the Inter-American Dialogue, a Washington-based think tank, Maduro has offered “conflicting signals”.¶ “Maduro has so far shifted in his position toward the U.S. between a moderate approach and a more hard-line one,” Shifter told IPS.¶ The new president’s waffling may be a reflection of his tenuous grip on power. By many accounts, Maduro lacks the political prowess and rabble-rousing charm of Chavez, who enjoyed military backing as well as fervent support from the lower classes.¶ In addition to a strong anti-Chavista opposition that openly challenges the legitimacy of his narrowly won election, Maduro has had to deal with a split within Chavez’s own former political base.¶ Shifter pointed out that among the military, which was once a source of significant strength for Chavez, more support is given to Diosdado Cabello, currently head of Venezuela’s parliament and whose supporters believe he was the rightful heir to the

presidency.¶ Maduro’s legitimacy stems largely from his perceived ideological fidelity , the reason for

his selection by Chavez to lead in the first place. Shifter said this leads him to “emulate” his predecessor and makes rapprochement with the U nited S tates less probable.¶ Still, ideological concerns may not

ultimately decide the issue . Venezuela has inherited from Chavez an economy in difficult straits, which continues to suffer from notorious shortages and high inflation.¶ Oil economy¶ Over half of Venezuela’s federal budget revenues come from its oil industry, which also accounts for 95 percent of the country’s exports. Estimated at 77 billion barrels, its proven reserves of black gold are the largest of any nation in the world.¶ Despite a troubled political relationship, its principal customer is the United States, which imports nearly a million barrels a day from Venezuela.¶ Venezuela’s oil industry has been officially nationalised since the 1970s, and, as president, Chavez further tightened government control over its production. His government took a greater chunk of revenues and imposed quotas that ensured a certain percentage would always go directly towards aiding Venezuelans via social spending and fuel subsidies.¶ While these measures may be popular with Venezuelans, who pay the lowest price for gasoline in the world, critics argue such policies hampered growth and led to mismanagement of Petroleos de Venezuela, S.A. (PdVSA), the main state-run oil company.¶ The same critics also point to increasing debt levels, slowdowns in productions and accidents stemming from faulty infrastructure.¶ In order to boost production, PdVSA agreed in May to accept a number of major loans. This includes one from Chevron, one of the largest U.S. oil companies, which will

work with Venezuelans to develop new extraction sites.¶ “ The oil sector is in deep trouble in Venezuela – production is down and the economic situation is deteriorating,” explained Shifter. “They know

they need foreign investment to increase production, and this is in part what has motivated Maduro to reach out.Ӧ If its economy continues to falter, Venezuela may be further tempted to embrace the U nited S tates, which has the largest , most sophisticated fossil fuel industry in

the world . Kerry’s recent words suggest that the administration of President Barack Obama would be waiting with open arms.¶

“Venezuela cannot confront its economic crisis and the United States at the same time,” Diana Villiers Negroponte, a senior fellow at the Brookings Institute, a Washington think tank, told IPS, “and we are a pragmatic country which will deal with Maduro if it is in our interests.”¶ Indeed, Negroponte said she was “optimistic” about the possibility of rapprochement between the two countries within the next six months. She notes a “troika” of issues on which the United States is looking for Venezuelan cooperation: counter-

terrorism, counter-narcotics and assistance in ridding Colombia of its FARC rebels.¶ Nonetheless, major actions remain to be taken if normalisation is to even begin, such as the exchange of ambassadors and official U.S. recognition of the

Maduro government. Shifter (who regards the Kerry-Jaua meeting as “a small step”) was not

optimistic that these larger requirements will be completed in the short term. ¶ “I don’t think Washington is going to push hard to send an ambassador to Caracas,” he said. “It will probably take more time to observe the new government and see where it is going.”

This is critical to boost U.S. influence and mold the regional economic frameworkGoldwyn 13 --- President, Goldwyn Global Strategies, LLC (4/11/2013, David L., “The Impact of the Tight Oil and Gas Boom on Latin America and the Caribbean: Opportunities for Cooperation,” House Committee on Foreign Affairs; Subcommittee on the Western Hemisphere; “Energy Opportunities in Latin America and the Caribbean” http://docs.house.gov/meetings/FA/FA07/20130411/100622/HHRG-113-FA07-Wstate-GoldwynD-20130411.pdf, JMP)III. The Impact of Hemispheric Energy Trends on U.S. Foreign Policy¶ The tight oil boom will produce competitive pressure on the region’s oil and gas producers. If global oil prices soften, revenues could fall significantly and put major fiscal pressure on governments highly dependent on resource revenues for their budgets. The market will impact these

economies far more than any U.S. policy can. But there will be a debate over economic frameworks in the

hemisphere, and the U.S. should be a part of it . While U.S. influence in the hemisphere has

waned in key areas in recent years, our ability to help these economies revive through energy

investment , and to grow through more competitive energy feed stocks can help change this

pattern if we take advantage of it. We have key strategic partners in the region including Brazil, Mexico, Chile,

Argentina, and Colombia. We can effectively use trade as a tool for good, as witnessed by the US-Colombia Free

Trade Agreement. We need to appreciate the salience of legitimate regional issues like poverty and advocate how our economic and political models can alleviate them. Examples of this are addressing trade barriers to agricultural imports, expanding educational opportunities in the U.S. for future leaders, improving the visa application process, dealing with migration issues with Mexico in a spirit of respect and fairness, supporting World Bank and Inter American Development Bank infrastructure programs in the hemisphere, supporting the development of civil society and the capacity of democratic institutions, and treating our relations with our hemispheric neighbors as intrinsically important, not as litmus tests of loyalty to the U.S. on issues external to the region itself. In countries where we face ideological competition, it is crucial that we do not abandon the field. We need to increase our diplomatic engagement and defend our way of thinking.¶ A. Uncertainty in

Venezuela¶ Venezuela has long been seen as the leader of a regional group of states seeking to wage an ideological and political competition for regional influence with the U.S. Yet the death of President Chavez, whose charisma has long been regarded as a key facet of the Bolivarian narrative, and Venezuela’s growing economic problems, which were recently reflected by the government’s efforts to devalue the

currency by more than 30% against the dollar, have led some observers to believe that the influence of the Venezuelan model has peaked. Many are now forecasting that the Brazilian economic model, which still provides for a generous state role in the economy, yet does so in a more market-friendly and democratic context, will gain clout among states in the region that remain skeptical of liberal economics and the Washington consensus.¶ In the wake of Hugo Chavez’s death, many questions remain about whether political change is possible in Venezuela itself. Indeed, the opposition candidate in the April 14 election to succeed Chavez, Henrique Capriles, is a vocal adherent of the Brazilian model that many say is gaining regional traction. Yet it is widely assumed that Chavez’ handpicked successor, Vice President Nicolas Maduro, will win the election. Several divergent

prognostications have been made regarding what a Maduro Presidency would entail for the U.S. While some perceive Maduro as a pragmatist who may be amenable to normalizing bilateral ties , others believe that he will

be eager to prove his Bolivarian credentials to Chavez’s constituency and reject any U.S. entreaties to reengage. Still others doubt whether he will be able to retain the Presidency at all should the economic situation deteriorate further. Diosdado Cabello, a fellow Chavez adherent who is President of the National Assembly and is reported to be a popular figure among the Venezuelan Armed Forces, is commonly cited as an individual capable of seizing the Presidency, potentially through forcible means, should an opportunistic situation present itself.¶ The manner in which the next Venezuelan President manages Venezuela’s oil wealth will have significant implications for international oil markets, which remain fairly tight due to supply disruptions in geopolitical hotspots Iran, South Sudan, Yemen, and Syria. In February 2012, the Economist estimated that international markets have lost 1.25 million barrels per day as a result of these and other recent supply disruptions.28 Venezuela is an even more significant player in international markets; EIA estimates that it exports around 1.7 million barrels of

crude per day.29 The impacts on Venezuela’s own economy will also be very profound, as Venezuela’s economy is far from

diversified and remains nearly entirely dependent on the oil sector . In recent years, PdVSA’s exploration and

production capital expenditures have not been sufficient to reverse production declines in the country’s mature conventional fields or to harness the country’s massive oil sands reserves in the Orinoco Belt. These unconventional resources are thought to account

for around 90% of Venezuela’s remaining proven oil reserves. In order to maintain production at a reasonable clip , the next Venezuelan President will have to improve the country’s oil and gas

investment regime to attract international firms with expertise in enhanced oil recovery techniques in conventional fields and in the unique, challenging technical requirements for producing the extra heavy crude oil

in the Orinoco Belt, and that also have the resources to alleviate massive infrastructure bottlenecks that plague the oil sands production. ¶ It is hard to be optimistic about Venezuela’s near term prospects. Canadian heavy crudes are likely to fulfill a greater share of the US need for heavy crude. While heavy coking refinery capacity is growing world wide, Venezuela will face a challenging market for its crudes and lower profit margins as the distance to market will grow.¶ B.

The Status of Current Dialogues¶ The US has had a number of bilateral and multilateral energy policy forums in the hemisphere over the years. These forums are platforms to understand market dynamics, share best practices on energy efficiency and conservation, share understanding on ways to enhance energy production , and exchange views on how a nation’s energy policies may be enhanced or reformed to promote the nation’s own policy. These policy dialogues are also essential for building the understanding and relationships that are essential for trade

promotion and conflict resolution . ¶ Numerous dialogues and programs have been enacted since 2008, when I wrote that engagement with the

Western Hemisphere needed to be renewed. Among those are a number of programs and initiatives aimed at energy relations.¶ The Energy and Climate Partnership of the Americas (ECPA) was founded at the invitation of President Obama following the April 2009 Summit of the Americas, hosted in Trinidad and Tobago. ECPA was intended to focus

on issues including energy efficiency, renewable energy, cleaner and more efficient use of fossil fuels, energy poverty, and infrastructure, and Secretary of State Clinton later proposed expanding the focus to include sustainable forests and land use and climate change adaptation. ECPA brings together governments and public and private sector partners to implement initiatives and complete projects, and boasts numerous initiatives in Central and South America and the Caribbean.¶ Among the ECPA Initiatives are the Colombia Biomass Initiative, which aims to develop a technological plan for the production of energy from agroindustrial biomass, and the Chile Renewable Energy Center, which is intended to serve as a tool and resource for the region as it seeks to increase its use of renewable fuels. Both projects are undertaken in collaboration with the U.S. Department of Energy, which provides technical assistance and opportunities for collaborative work.¶ Numerous dialogues exist today between the U.S. and Brazil. The U.S.-Brazil Strategic Energy Dialogue (SED), a presidential-level partnership aiming to deepen energy cooperation between the two nations, is one of the most significant. Strengthening energy security, the creation of new jobs and industries and reduction of carbon emissions are key goals of the SED. Major topics of the dialogue include biofuels, renewables and the sustainable development of oil and gas resources.¶ The US has a trilateral energy policy dialogue with Canada and Mexico, which has addressed electric power, energy conservation, harmonization of standards and market outlooks. It has taken many forms, but it functions very well. In May 2012 the U.S., Mexico, Canada Map of Potential Carbon Dioxide Storage Capacity was released, identifying capacity in North America for at least 500 years worth of carbon dioxide emissions. The “New North American Carbon Storage Atlas” was created through the North American Carbon Atlas Partnership, and was developed by DOE, Natural Resources Canada, and the Mexican Ministry of Energy.¶ We have many paths for cooperation. What we need now is a sharper focus on what we should prioritize, so we can maximize our impact and make the most of the limited engagement of our senior officials.¶ IV. Energy Security Opportunities for the U.S.¶ The Committee is wise to see the unique period of opportunity that the

massive changes in oil and gas markets have created for U.S. foreign policy. While we will be more self-sufficient at home, our national security will still depend on a diverse global supply of oil gas, one able to withstand the inevitable disruptions we will face . If we can take this moment to help the hemisphere increase its own self sufficiency, wean itself from high carbon fuels, access more cost competitive feed stocks for power and transportation, and reduce dependence on subsidized Venezuelan fuel oil, we will have helped our own national security interests and helped to foster a freer, more prosperous, and more climate secure hemisphere. Here I offer six steps that the United States can take to meet its energy security goals in the Hemisphere.¶ 1. Sustain Efforts Aimed at Energy Efficiency and the Adoption of Biofuels and Renewable¶ Technologies¶ Lowering global carbon emissions in order to mitigate the impacts of climate change is an important step towards ensuring global energy security. Latin America is highly dependent upon fossil fuels for its energy needs, most notably oil, coal and natural gas. Fuel oil is still a frequently used fuel for power generation, in spite of the fact that it is relatively inefficient and particularly bad for the environment. Hydropower has long been the favored form of renewable energy in Latin America, but changing weather patterns and droughts have prevented it from being fully reliable. The United States has, as described above, undertaken initiatives aimed at expanding the spread of biofuels and renewables in the Western Hemisphere, and this should remain a priority. The expiration of the U.S. tariff on imported biofuels was a step in the right direction, and more can be done to develop biofuels industries in Latin America. The development of new industries, clean energy research centers and government policies incentivizing the use of renewable technologies for power generation will help to build long-term, sustainable industries in the Hemisphere. Regardless of the power source used, energy efficiency is a worthwhile goal for Latin America. The IEA noted in the World Energy Outlook 2012 that while energy intensity is not particularly high in Latin America, it is primarily because high energy intensity in energy producing nations is offset by low energy use in energy importing nations. Improving energy efficiency, particularly in energy producing nations, will permit more efficient use of energy resources, allowing them to stretch farther. Existing forums like the ECPA already have energy efficiency as an issue of focus and can aid in connecting companies that represent successful and proven efficiency technologies with partners in Latin America.¶ 2. Propagate Advanced Production Technologies Abroad¶ Latin America has significant reserves of oil and gas, including potentially huge unconventional resources. One of the fastest, and perhaps easiest, ways for the U.S. to ensure diversification of energy supplies is to help other nations take advantage of the unconventional energy revolution. This will mean sharing technology, building regulatory regimes, improving environmental safety standards and possibly even developing infrastructure in nations with shale gas and tight oil reserves. The U.S. should continue to expand upon the work that the Department of State and partner agencies are attempting to achieve through UGTEP, offering technical, regulatory, geological and other support to countries that want to develop their shale oil and gas resources. There are also roles for companies to play, sharing their technology and technical expertise through partnerships, investment opportunities or service contracts. Helping other nations develop their domestic resources will increase global energy security by increasing and diversifying global supply. Natural gas is also, as far as fossil fuels go, a relatively low-carbon source of energy, and the expansion of the shale gas boom may offset global coal consumption and carbon emissions, serving as a boon for climate goals as well. By helping other nations, such as Colombia, Brazil and Mexico, adapt to changing energy markets and complex new sources of energy, the U.S. will be simultaneously ensuring its own energy security.¶ 3. Research Ways to Encourage Gas Penetration in the Caribbean¶ With abundant natural gas supply a short distance from the Caribbean, the US should look for ways to back out fuel oil and gasoline as a feedstock for power and transportation. While these nations are trying to maximize renewable energy, they still need a non-intermittent source of power generation. But short driving distance makes CNG or other natural gas technologies a real possibility. The key challenges are moving gas to small islands, ensuring storage or other means of security of supply, and identifying the right forms of vehicle technology. How to make this transition economically is a question for engineers as well as policymakers. The U.S. should design ways that private foundations, in tandem with our national laboratories and perhaps the OAS, can look for near-term, practical ways to increase natural gas utilization. Combined with a permissive policy on natural gas exports to the Caribbean, this could be major step forward for climate and national security for the Caribbean.¶ 4. Reconsider the U.S. Policy Regarding Oil and Gas Exports and Swaps¶ In light of the unconventional revolution, the U.S. will have surpluses of natural gas and even light oil, given that the domestic refining system is primarily configured to process heavy oil. Large price differentials also exist for U.S. resources, largely as a result of infrastructure and policy constraints that keep them trapped in the U.S. Current U.S. policy only permits the export of crude oil in highly limited circumstances. A careful reconsideration of U.S. export policy, particularly towards oil, may be warranted. Allowing some exports or swaps of light oil produced in the U.S. for the heavy oil needed for refineries would enable us to supply our hemispheric neighbors, increase export earnings, and sustain domestic job growth. Granting an additional avenue for sale of energy resources, either oil or gas, will also ensure that artificial barriers to export don’t lead to decreased production, high domestic prices and lost value to the economy, while simultaneously adding to global energy supply stability and security.¶ The hemisphere can also benefit from additional exports of natural gas. Mexico imports costly LNG at oil-linked prices. The Caribbean is dependent on fuel oil for power generation and Brent prices gasoline for transportation. These exports could present a political advantage as well as an economic one, granting the U.S. with another tool to use in the Western Hemisphere, where Venezuelan influence is cemented by subsidized sales of crude oil and products.¶ 5. Complete the U.S.-Mexico Transboundary Agreement¶ On February 20, 2012, the U.S. and Mexico signed a transboundary hydrocarbons agreement that allows for the joint the development of oil and gas reservoirs that cross the international maritime boundary between the two countries in the Gulf of Mexico.30 If implemented, the agreement would end the current moratorium on exploration and production in the border area. While the Mexican Senate ratified the agreement on April 12, 2012, the Obama Administration has not formally submitted the agreement to the U.S. Congress for passage. The entry into force of this agreement would render significant benefits for both the U.S. and Mexico.31 It would provide a means for Pemex to collaborate with private companies in the Gulf of Mexico border area, which would give Pemex a crucial opportunity to gain expertise in deepwater activities that could be applied to the firm’s operations throughout Mexico. This would serve U.S. interests by boosting Mexican production and reducing U.S. dependence on imports from more politically troublesome regions, which have replaced lagging Mexican exports in recent years.32 Conversely, U.S. reticence to implement the agreement may send the wrong signal to Mexico and dampen enthusiasm for energy sector reform at a time when the stage may be set for historic change. Indeed, competent implementation of the agreement could demonstrate to Mexico that its interests can be protected in joint production regimes with U.S. companies and bring about an impetus for broader Mexican energy reforms.¶ 6. Revive Energy Diplomacy and

Commercial Engagement¶ Energy diplomacy and commercial advocacy should be vital components of U.S. energy policy in the coming decades. The global energy system is projected to remain dependent upon fossil fuels for the foreseeable future, and as a result, having access to reliable, affordable sources of energy will remain important, as will the stability of energy markets. Energy diplomacy should center on ensuring that the U.S. has good working relationships with the countries that produce and consume energy. Successful energy

diplomacy can serve a critical role in managing tensions over energy development,

transportation, investment, and other issues. ¶ The Department of State has significantly increased its capabilities to conduct energy diplomacy through the establishment of the Energy and Natural

Resources Bureau, led by Ambassador Carlos Pascual. Its programs should be robustly funded. We should also deepen the

international energy diplomacy capacity of the Department of Energy . The Department of Energy’s relationships with civil servants in ministries across the globe provide a bridge across changes in government here and there. They can talk when the politics of non-energy issues obstruct dialogue among the foreign ministries. It is easier to get Energy Ministers

together for regular meetings than Secretaries of State. Their staff should be expanded and serious program

budget established to make our cooperation more than rhetorical . For true reform to be achieved, foreign ministers and heads of government will have to be involved, as this will be the key to integrating energy security into foreign policy.¶ The three countries that need robust attention at this time are Mexico, Brazil and Venezuela. Mexico is considering major reforms and we have much we can share at a technical level on gas markets, unconventional oil and gas technology, safe regulation of the deepwater, and energy efficiency. We should create a quiet bilateral mechanism for sharing this information with Mexican ministries, its nascent regulator and PEMEX. Changing global markets also impact Brazil, and we should ensure that the Strategic Energy Dialogue is reactivated as soon as new officials are on

board at the Department of Energy. Venezuela is trickier because it is in political transition and there is a great deal of rhetorical hostility. But the US had a technical dialogue with Venezuela that lasted over 30 years. We need to know the new officials at the Ministry and PdVSA and to share our view of market realities , even if we may not agree on them. Sometime in 2013,

after the Venezuelan elections, this technical dialogue should be revived , perhaps at the Assistant Secretary, or Deputy Assistant Secretary level.¶ Conclusion¶ Mr. Chairman, the ties between Latin America and the Caribbean and the energy security of the United States are numerous. Here I have addressed only a few of the possible avenues for improving U.S. energy security, and there are undoubtedly more, but the overarching conclusion is that

energy security goals in the Hemisphere can be achieved through improved dialogue and relations with allies and adversaries alike. As I stated in 2008, it will require new approaches to energy and foreign policy. It will require fresh policy approaches, money, and creative diplomacy. But more than anything it will require leadership . As a citizen I thank the committee for its

leadership on this critical issue.

This will boost U.S. standing in important Latin American regional forumsDelahunt 12 --- chairman of the Venezuela-US Friendship Group and retired U.S. Representative (10/30/2012, William, “A new role for the US and Venezuela,” http://www.bostonglobe.com/opinion/2012/10/30/podium-venezuela/EJ6Jd2yRKfaJ76HYrXb4WJ/story.html, JMP)

The recent election in Venezuela offers an opportunity to improve the US-Venezuela bilateral relationship. On Oc. 7th, President Hugo Chavez was reelected to a new six-year term by a nine point margin. I — along with hundreds of other international witnesses — was duly impressed with the transparency of the electoral process and the enthusiasm of Venezuelans for democracy. Eighty-one percent percent of registered voters went to the polls! This turnout was remarkable when compared to the United States and other “mature” democracies.¶ Whether or not one agrees with Chávez’s policies, there can be no doubt that he won these elections fairly. There are so many checks and balances in the electoral system in Venezuela that there is virtually no room for fraud. The voter registry, the voting machines, the electronic ballot and the data transmission system are all fully audited by representatives of all the different political parties and independent observers.¶ Former President Jimmy Carter recently called the Venezuelan voting system “the best in the world.” He noted that the voting machines print out a paper receipt that voters can look at to verify that their selection was recorded correctly, and poll workers check those receipts against the electronic tally.¶ I was particularly struck by the atmosphere of peacefulness and mutual respect in the voting centers, where monitors from both pro-government and opposition groups were present. In contrast with elections past, the two main candidates manifested a similar attitude. Once the election authorities announced the results, opposition candidate Henrique Capriles rapidly conceded defeat, and he quickly scolded “radical” opposition supporters who insisted on alleging that fraud had taken place, despite no evidence to support their claims. Chávez also behaved gracefully, calling Capriles the following day to express his willingness to work together to mitigate the polarization that divided Venezuelans.¶ Most of Venezuela’s political leadership — following a tumultuous power struggle, during which a coup d’Etat and violent protests occurred — appear to have accepted to follow the democratic rulebook and be more tolerant of one another. This is an important step forward, and the United States should encourage Venezuelans to continue seeking common ground, rather than support one group over another, as has at times been the

case in recent years.¶ Most importantly, over 55 percent of Venezuelan voters cast their vote in favor of Chávez. The U nited

S tates should respect this outcome and seek to improve relations in areas where we can

agree. Commercial relations between our two countries have generally been excellent,

despite political differences, and both countries would greatly benefit from their expansion . ¶

Venezuela will no doubt continue to play a central role in the region’s new multilateral

cooperation and consultation mechanisms , such as the Union of South American Nations

(UNASUR) and the Community of Central American and Caribbean States (CELAC). The U nited

S tates, which has increasingly found itself isolated in regional forums , would do well to find ways to work with these new groups on important issues such as drug trafficking and energy cooperation . Improved relations with Venezuela would greatly facilitate this task. Our government will certainly have important differences with Venezuela, particularly in the area of international relations. But we can agree to disagree, as we do with many other partners throughout the world. I am convinced that the Venezuelan government is prepared to respond favorably to such an initiative .

That prevents a global warRochlin 94 [James Francis, Professor of Political Science at Okanagan U. College, Discovering the Americas: The Evolution of Canadian Foreign Policy Towards Latin America, 130-131, Wake Early Bird File]While there were economic motivations for Canadian policy in Central America, security considerations were perhaps more important. Canada possessed an interest in promoting stability in

the face of a potential decline of U.S. hegemony in the Americas. Perceptions of declining U.S. influence in the region – which had some credibility in 1979-1984 due to the wildly inequitable divisions of wealth in some U.S. client states in Latin America, in addition to political repression, under-development, mounting external debt, anti-American sentiment produced by

decades of subjugation to U.S. strategic and economic interests, and so on – were linked to the prospect of explosive events occurring in the hemisphere. Hence, the Central American imbroglio was viewed as a fuse which could ignite a cataclysmic process throughout

the region. Analysts at the time worried that in a worstcase scenario, instability created by a regional war, beginning in Central America and spreading elsewhere in Latin America, might preoccupy Washington to the extent that the U nited S tates would be unable to perform adequately its important hegemonic role in the international arena – a concern expressed by the director

of research for Canada’s Standing Committee Report on Central America. It was feared that such a predicament could generate increased global instability and perhaps

even a hegemonic war . This is one of the motivations which led Canada to become involved in

efforts at regional conflict resolution, such as Contadora, as will be discussed in the next chapter.

And, relations are key to solve proliferation and climate change - only engagement solvesZedillo et al 08 --- Commission Co-Chair for the Brookings Institute Report on the Partnership for the Americas and former President of Mexico [Ernesto Zedillo, Thomas R. Pickering, etc, Rethinking U.S.–Latin American Relations A Hemispheric Partnership for a Turbulent World. Report of the Partnership for the Americas Commission, The Brookings Institution, November 2008, http://www.brookings.edu/~/media/Research/Files/Reports/2008/11/24%20latin%20america%20partnership/1124_latin_america_partnership.PDF, ENDI File]The Need for a Hemispheric Partnership

Historically, the United States and Latin America have rarely developed a genuine and sustained partnership to address regional—let alone global—challenges. Mutual distrust is partly to blame. Also, the

LAC countries were often not ready to make stable commitments. The United States had other preoccupations and did not make hemispheric partnership a priority. Problems and solutions were seen from Washington as country-specific and

were managed mostly on a country-bycountry basis through bilateral channels. Meanwhile, multilateral forums—such as the Organization

of American States and the summits of hemispheric leaders—ran out of steam, became mired in confrontation, or remained

underresourced.¶ If a hemispheric partnership remains elusive , the costs to the United States and its neighbors will be high, in terms of both growing risks and missed opportunities. Without a partnership, the risk that criminal networks pose to the region’s people and institutions will continue to grow. Peaceful nuclear technology may be adopted more widely, but without proper safeguards, the risks of nuclear proliferation will increase . Adaptation to climate change will take place through isolated, improvised measures by individual countries, rather than through more effective efforts based on mutual learning and coordination . Illegal immigration

to the United States will continue unabated and unregulated, adding to an ever-larger underclass that lives and works at the

margins of the law. Finally, the countries around the hemisphere, including the United States, will lose valuable opportunities to tap new markets, make new investments, and access valuable resources. ¶ It is important to note at the outset that the term “partnership” as used in this report does not mean equal responsibility for all. The asymmetries between

the United States and its neighbors are large and will remain so for the foreseeable future. Partnership here means a type of international cooperation whereby a group of countries identifies common interests, objectives, and solutions, and then each partner country undertakes responsibilities according to its own economic and political

capacities to generate shared benefits.¶ Today, four changes in the region have made a hemispheric partnership both possible and necessary . First, the key challenges faced by the United States and the hemisphere’s other countries—

such as securing sustainable energy supplies, combating and adapting to climate change , and combating organized crime and drug trafficking—have become so complex and deeply transnational that they cannot be managed or overcome by any single country . Washington needs partners in the LAC region with a shared sense of responsibility and a common stake in the future.¶ For example, drug trafficking and its associated criminal networks have now spread so widely across the hemisphere that

they can no longer be regarded as a “U.S. problem,” a “Colombian problem,” or a “Mexican problem.” The threat

posed by these networks can only be countered through coordinated efforts across producing, consuming, and transshipment countries, all of which have a shared interest in controlling the flow of arms, money, vehicles,

and drugs. The process of combating and adapting to climate chang e also exemplifies the need for a hemispheric partnership. All carbon-emitting societies contribute to the problem to different degrees,

and all will experience its consequences. The solutions—ranging from developing alternative fuels to adapting to ecological shocks—all require sustained cooperation among the hemisphere’s countries.¶ The second change is that the LAC countries are diversifying their international economic relations. Their range of trading and investment partners is expanding, with China in particular playing a prominent role in the region. Chinese imports from the LAC countries increased twentyfold between 1990 and 2005, while Chinese exports to the region grew even faster, from $620 million in 1990 to $37 billion in 2005. Latin America is also attracting significant foreign investment from nontraditional sources. Between just 2003 and 2005, the stock of Chinese foreign direct investment in the LAC region increased by 40 percent. China has become a key buyer of commodities, driving up prices and reversing the long-term decline in the region’s terms of trade. Meanwhile, the Caribbean countries have recently signed an Economic Partnership Agreement with the European Union, immediately opening all European markets and gradually opening Caribbean ones. With more valuable exports and less expensive manufactured imports, living standards in the LAC region have improved significantly.¶ At the same time, many LAC countries have moved beyond their traditional reliance on resources from the International Monetary Fund, the World Bank, and the Inter-American Development Bank. Chile, Mexico, Peru, and Brazil now enjoy investment-grade status from credit-rating agencies and in recent years have been able to raise capital readily in international markets. The same is true of several other countries, including Colombia, El Salvador, Panama, and Uruguay, which until the recent financial crisis enjoyed ready access to private international capital. Regionally owned institutions, such as the Andean Development Corporation and the Central American Bank for Economic Integration, have

also reduced the region’s dependence on traditional sources of capital.¶ Some Latin American countries are investing abroad on an unprecedented scale. In 2006, for example, Brazil invested more abroad ($28 billion) than it received in foreign direct investment ($19 billion). In Chile, private pension funds and the government have become active international investors. Surpluses have allowed Venezuela to inject billions of dollars into other countries, particularly through subsidized oil exports. Many Latin American multinationals—such as Brazil’s Vale, Gerdau, and Odebrecht; and Mexico’s CEMEX, America Movil, and Grupo FEMSA—have become global corporate giants. The current crisis may no doubt affect the relative magnitude of these investments, but economic relationships in the hemisphere will continue to diversify as the world

economy recovers.¶ The third change is that the LAC countries are diversifying their political and

diplomatic relations. The most notable example is Brazil, which has opened thirty-two new embassies in the past five years. Together with Venezuela, Brazil is playing a more active political role in the region through the Union of South American Nations, which is already active at the presidential level and is expected to become a key forum for the discussion of defense

issues. Mexico and Brazil are also playing prominent roles in international forums and organizations, including the finance ministers’ Group of Twenty and the trade ministers’ Group of Twenty. Brazil has announced its intention to join the Organization of the Petroleum-Exporting Countries and the Paris Club. Chile and Brazil are expected to become members of the Organization for Economic Cooperation and Development (OECD) in the not-too-distant future. Mexico, Peru, and Chile are active members of the Asia-Pacific Economic Cooperation forum. In sum, this diversification of political and economic relations reflects many LAC countries’ new confidence in their

capacity to chart their own course in the world.¶ Their enhanced confidence and autonomy will make many LAC countries much less responsive to U.S. policies that are perceived as patronizing, intrusive, or prescriptive, and they will be more responsive to policies that engage them as partners on issues of mutual concern. Also, the LAC countries’ diversification of economic and political relations means that Washington will have to compete with governments both outside and within the region for regional influence. In particular, Brasília and Caracas are both vying for leadership in South America; and though they may have different visions for regional integration and different ways to approach other governments, they agree that Washington should play a more limited role in their part of the

world.¶ The fourth change is that, today, the LAC countries are better positioned to act as reliable partners.

Despite remaining governance challenges, the vast majority of these countries are stable democracies for which competitive elections and peaceful transitions of power are the norm, not the exception. Throughout these countries, civil society groups now participate extensively in the policymaking process, and there is much less

tolerance of violence as a means of political expression.¶ Economic progress has also made the LAC countries more reliable partners. Leaders, including some on the left, are committed to fiscal responsibility. Most central banks are now independent bodies focused on inflation control. Exchange rates largely reflect market forces. As a result, many LAC countries can now look beyond their borders and

commit to sustained partnerships and responsibilities on regional and global issues.¶ In sum, the countries of the LAC region have made significant strides in economic and social development and will continue to prosper even if U.S. leaders remain disengaged. Washington must decide whether it wants to actively reengage and benefit from the region’s dynamism and resources or be sidelined as other economic and political actors fill the void left by its absence.

Prolif results in a nuclear arms raceGarner 10 (Calvin, ‘Venezuela’s Nuclear Program – The Alarmists are Right’, December 13, 2010, http://www.iar-gwu.org/node/240)Mixed signals from a nuclear Venezuela would have troubling implications for keeping Latin America free of nuclear weapons. Brazil and Argentina would most likely seriously reconsider their earlier decisions to forgo nuclear weapons in the face of a Venezuela with ambiguous nuclear priorities. If either country concluded it could not trust Venezuela’s statements on its nuclear program, a South American nuclear arms race could quite likely happen. Proliferation on the continent may start in Caracas but it would almost certainly spread , ending the international success story of Latin America as a nuclear-weapons free zone.

Climate change causes extinctionMazo 10 – PhD in Paleoclimatology from UCLAJeffrey Mazo, Managing Editor, Survival and Research Fellow for Environmental Security and Science Policy at the International Institute for Strategic Studies in London, 3-2010, “Climate Conflict: How global warming threatens security and what to do about it,” pg. 122The best estimates for global warming to the end of the century range from 2.5-4.~C above pre-industrial levels, depending on the scenario. Even in the best-case scenario, the low end of the likely range is 1.goC, and in the worst 'business as usual' projections, which actual emissions have been matching, the range of likely warming runs from 3.1--7.1°C. Even keeping emissions at constant 2000 levels (which have already been exceeded), global temperature would still be expected to reach 1.2°C (O'9""1.5°C)above pre-

industrial levels by the end of the century." Without early and severe reductions in emissions, the effects of climate change in the second half of the twenty-first century are likely to be catastrophic for

the stability and security of countries in the developing world - not to mention the associated human tragedy. Climate change

could even undermine the strength and stability of emerging and advanced economies, beyond the knock-on effects on security of widespread state failure and collapse in developing countries.' And

although they have been condemned as melodramatic and alarmist, many informed observers believe that unmitigated climate change beyond the end of the century could pose an existential threat to civilisation." What is

certain is that there is no precedent in human experience for such rapid change or such climatic conditions, and even in the best case adaptation to these extremes would mean profound social, cultural

and political changes.

China Adv

U.S. influence in Latin America decliningCouncil on Foreign Relations 08 – independent task force project, CFR is an independent, nonpartisan organization (‘US Latin America Relations: A New Direction for a New Reality’, May 2008, http://www.cfr.org/mexico/us-latin-america-relations/p16279)//MJFor over 150 years, the Monroe Doctrine provided the guiding princi- ples for U.S. policy toward Latin America, asserting U.S. primacy in the foreign affairs of the region. Over the past two decades, those principles have become increasingly obsolete . Washington’s basic policy framework, however, has not changed sufficiently to reflect the new reality . U.S. policy can no longer be based on the assumption that the United States is the most important outside actor in Latin America. If there was an era of U.S. hege mony in Latin America , it is over . ¶ In most respects, this shift reflects positive developments within Latin America itself. The region has undergone a historic transformation politically, with military-authoritarian rule giving way to vibrant, if imperfect, democracy in almost every nation. Economically, Latin America is now one of the more open market regions in the world and a crucial global provider of energy, minerals, and food. None of this is to say that Latin America has entirely overcome its history of political tumult or done enough to alleviate poverty, improve competi-

tiveness and human capital, or correct extreme inequality. But it does mean that U.S. policymakers must change the way they think about the region. Latin America is not Washington’s to lose; nor is it Washing- ton’s to save. Latin

America’s fate is largely in Latin America’s hands.¶ A failure to acknowledge how Latin Americans define their own challenges has created new political strains in recent years . It has also caused U.S. policymakers to overlook the ways in which the United¶ States can meaningfully contribute to Latin America’s progress—fur- thering

the United States’ own interests in the process. By truly begin- ning to engage Latin America on its own terms, Washington can mark the start of a new era in U.S.-Latin America relations.

Large-scale rapprochement not likely now but oil investment could catalyze stronger relationsMetzker 13 (6/17/2013, Jared, “Analysts Say Oil Could Help Mend U.S.-Venezuela

Relations ,” http://www.ipsnews.net/2013/06/analysts-say-oil-could-help-mend-u-s-venezuela-relations/, JMP)WASHINGTON, Jun 17 2013 (IPS) - A shift in U.S. foreign policy towards Venezuela may be pending as a bilateral rapprochement suddenly appears more possible than it has in years . On the sidelines of talks held earlier this month in Guatemala by the Organisation of American States (OAS), U.S. Secretary of State John Kerry met with Venezuelan Foreign Minister Elias Jaua, with Kerry’s subsequent statements indicating that relations could be heading in a friendlier direction.¶ “We agreed today – both of us, Venezuela and the United States – that we would like to see our countries find a new way forward, establish a more constructive and positive relationship and find the ways to do that,” Kerry said following the meeting with Jaua, which was reportedly requested by the Venezuelans.¶ The meeting happened on the heels of the release of Timothy Tracy, a U.S. filmmaker whom Venezuela had been holding on accusations of espionage. His release was interpreted by many as an “olive branch” being offered by the new Venezuelan government of Nicholas Maduro, whose presidency Washington still has not formally recognised.¶ Only months ago, before the death of Venezuela’s long-time socialist leader Hugo Chavez, any normalisation of relations between Venezuela and the United States seemed highly unlikely.¶ In 2002, Chavez was briefly removed from power by a military coup d’état that the U.S. Central Intelligence Agency (CIA) had known was imminent. Chavez immediately accused the United States of having played a part in the event. After his suspicions were confirmed partly valid, his rhetoric grew more scathing.¶

In 2006, he famously told the United Nations General Assembly that then-U.S. President George W. Bush was “the devil himself”.¶ Following Chavez’s death from cancer in March, however, his hand-picked successor, Maduro, the former vice-president, has not been as vitriolic in his posturing vis-à-vis the United States.¶ According to Michael Shifter, president of the Inter-American Dialogue, a Washington-based think tank, Maduro has offered “conflicting signals”.¶ “Maduro has so far shifted in his position toward the U.S. between a moderate approach and a more hard-line one,” Shifter told IPS.¶ The new president’s waffling may be a reflection of his tenuous grip on power. By many accounts, Maduro lacks the political prowess and rabble-rousing charm of Chavez, who enjoyed military backing as well as fervent support from the lower classes.¶ In addition to a strong anti-Chavista opposition that openly challenges the legitimacy of his narrowly won election, Maduro has had to deal with a split within Chavez’s own former political base.¶ Shifter pointed out that among the military, which was once a source of significant strength for Chavez, more support is given to Diosdado Cabello, currently head of Venezuela’s parliament and whose supporters believe he was the rightful heir to the

presidency.¶ Maduro’s legitimacy stems largely from his perceived ideological fidelity , the reason for

his selection by Chavez to lead in the first place. Shifter said this leads him to “emulate” his predecessor and makes rapprochement with the U nited S tates less probable.¶ Still, ideological concerns may not

ultimately decide the issue . Venezuela has inherited from Chavez an economy in difficult straits, which continues to suffer from notorious shortages and high inflation.¶ Oil economy¶ Over half of Venezuela’s federal budget revenues come from its oil industry, which also accounts for 95 percent of the country’s exports. Estimated at 77 billion barrels, its proven reserves of black gold are the largest of any nation in the world.¶ Despite a troubled political relationship, its principal customer is the United States, which imports nearly a million barrels a day from Venezuela.¶ Venezuela’s oil industry has been officially nationalised since the 1970s, and, as president, Chavez further tightened government control over its production. His government took a greater chunk of revenues and imposed quotas that ensured a certain percentage would always go directly towards aiding Venezuelans via social spending and fuel subsidies.¶ While these measures may be popular with Venezuelans, who pay the lowest price for gasoline in the world, critics argue such policies hampered growth and led to mismanagement of Petroleos de Venezuela, S.A. (PdVSA), the main state-run oil company.¶ The same critics also point to increasing debt levels, slowdowns in productions and accidents stemming from faulty infrastructure.¶ In order to boost production, PdVSA agreed in May to accept a number of major loans. This includes one from Chevron, one of the largest U.S. oil companies, which will

work with Venezuelans to develop new extraction sites.¶ “ The oil sector is in deep trouble in Venezuela – production is down and the economic situation is deteriorating,” explained Shifter. “They know

they need foreign investment to increase production, and this is in part what has motivated Maduro to reach out.Ӧ If its economy continues to falter, Venezuela may be further tempted to embrace the U nited S tates, which has the largest , most sophisticated fossil fuel industry in

the world . Kerry’s recent words suggest that the administration of President Barack Obama would be waiting with open arms.¶

“Venezuela cannot confront its economic crisis and the United States at the same time,” Diana Villiers Negroponte, a senior fellow at the Brookings Institute, a Washington think tank, told IPS, “and we are a pragmatic country which will deal with Maduro if it is in our interests.”¶ Indeed, Negroponte said she was “optimistic” about the possibility of rapprochement between the two countries within the next six months. She notes a “troika” of issues on which the United States is looking for Venezuelan cooperation: counter-

terrorism, counter-narcotics and assistance in ridding Colombia of its FARC rebels.¶ Nonetheless, major actions remain to be taken if normalisation is to even begin, such as the exchange of ambassadors and official U.S. recognition of the

Maduro government. Shifter (who regards the Kerry-Jaua meeting as “a small step”) was not

optimistic that these larger requirements will be completed in the short term. ¶ “I don’t think Washington is going to push hard to send an ambassador to Caracas,” he said. “It will probably take more time to observe the new government and see where it is going.”

Failure to rebuild ties on oil issues allows China to solidify its stronghold and use oil as a diplomatic weapon against the U.S.Hurst 08 --- political-military research analyst with the Foreign Military Studies Office and a Lieutenant Commander in the United States Navy Reserve (9/8/2008, “China's Global Quest for Energy; Rocky U.S. Relationship with Venezuela is Playing into China's Energy Policy Despite The Ocean Between Them,” www.thecuttingedgenews.com/index.php?article=740&pageid=&pagename=, JMP)The U.S. rocky relationship with Venezuela is playing into China’s hands , perhaps better than Beijing expected.¶ Venezuela exports approximately 60 percent of its oil to the U.S. However, since Hugo Chavez came into power in Venezuela in 1999, the U.S. and Venezuela have maintained a tense relationship, paving a path of continuous energy deals

with China. Both China and Venezuela have been striking " International cooperation deals " that would not only not only provide increased oil exports to China, but also bolster Venezuela’s economy and oil infrastructure. In 2004, Chavez, who has visited China at least five times since 1999, signed such eight agreements on energy cooperation with the Asian country. According to China Daily, Venezuela currently ships nearly 300,000 barrels per day (bpd) of oil and fuel to China. 80,000 of this is crude oil, which is up from 39,000 bpd the year before.¶ In addition to various business arrangements between Venezuela’s state-run oil company and China Petroleum that include purchasing

Venezuelan fuel oil and power plant fuel, Chinese companies are seeking to invest in oil exploration and

production in the country. In return Chavez expects and is receiving Chinese assistance in the areas of telecommunications, food production and culture.¶ The list of joint project is long, including not only oil sales from existing supply, but also the exploration and development of new fields and the development of older fields. In fact, Chavez visited China in December 2004, where he declared that Venezuela was ready to help China establish its own strategic petroleum reserve. He also spoke “of a budding strategic alliance between the two countries, and signed an agreement that would allow Chinese companies to gain developmental rights to 15 oil fields in eastern Venezuela. Although this would appear to be an excellent opportunity for China, there are still a number of hurdles to overcome before the full export potential can be realized.¶ One issue facing China is transportation. China and Venezuela have a big ocean between them. While Chavez is opening the doors and allowing China access to Venezuela’s oil, transporting the oil is still costly. A tanker capable of hauling 500,000 barrels would be profitable on a short haul. However, that same size tanker will undoubtedly lose money hauling oil all the way to Asia. Currently, supertankers are not permitted to pass through the Panama Canal, which would save time and money by drastically cutting back the travel distance to transport the oil. In September 2007, the Panamanian government began a massive effort to widen the 93-year old canal. But the project is estimated to cost $5 billion and will take up to eight years to complete. The new canal will be able to accommodate maximum capacity ships. China will likely benefit most as it ranks second to the U.S. as the canal’s biggest user. But that will be years from now.¶ Another alternative to delivering the oil to China is to build a pipeline from Venezuelan oil fields across Colombia to Pacific ports in Colombia or Ecuador. Unfortunately such a pipeline would currently be vulnerable to sabotage because it would run across a war zone where rebels have long made a habit of attacking the country’s existing pipelines. Additionally, the necessary Pacific port facilities currently do not exist and would have to be constructed.¶ A third alternative would be an existing, refurbished inter-oceanic pipeline located in Panama. Large-scale oil shipments from Venezuela to China would dramatically increase the pipeline’s use. Additionally, the Venezuelan and Panamanian governments have been negotiating the use of the pipeline to pump the oil for quicker access to China. The pipeline reportedly has a capacity of 800,000 bpd. However, the pumps were installed to move oil from the Pacific to the Atlantic and would require modification or reversal to send the fuel the other direction.¶ Chavez has also signed a contract to have China construct a number of supertankers, which will eliminate its dependency on renting these tankers. It will also, according to Chavez, allow him to create one of the greatest fleets in the world. Additionally, Venezuela plans to

manufacture parts for the tankers, which will enable it to conduct much of its own maintenance.¶ China’s interest in Venezuela’s oil poses a potential threat to U.S. interests. Venezuela is the U.S.’s fourth largest oil supplier after Canada, Mexico and Saudi Arabia. Tensions between the U.S. and Venezuela have been flaring since an April 2002 coup briefly removed Chavez from office. Chavez put the blame on the U.S., accusing Washington of sponsoring the attempted overthrow as well as a devastating oil lockout in 2002-2003. With a severe distrust of the Bush administration, and a marked “anti-imperialist viewpoint,” Chavez has voiced concerns that President Bush had plans to have him assassinated, adding that if he were killed the

U.S. could “forget Venezuelan oil.”¶ As the Venezuelan economy stands today, there is very little likelihood that Venezuela would stop exporting oil to the U.S. Venezuela depends too heavily on its oil industry. In one study it was estimated that over 60 percent of Venezuela’s population live in poverty, earning less than $2 per day. Using the revenues from Venezuela’s oil industry, Chavez has been able to offer a number of programs promoting literacy, job training, land reform, subsidized food and small loans. He has also used the revenue for health care and to import Cuban

doctors.¶ Once Venezuela secures an alternate export partner in China to replace the U.S., it could hurt the U.S., which depends on Venezuela to provide oil for 12 to 15 percent of its consumption rate. Despite statements made by Venezuelan officials, such as Ali Rodriguez, president of Venezuela’s state-owned oil company, PDVSA, who called the assumption of replacing its U.S. business with China “absurd,” Chavez has made a number of threats, including that of putting an embargo on oil shipments to the U.S. The U.S. currently has the infrastructure in place, such as refineries capable of processing Venezuela’s crude. Refineries in China are not currently capable of processing Venezuela’s heavy crude oil. In May of this year, however, China and Venezuela agreed to build a refinery in China’s Guangdong province. The refinery will be capable of processing up to 400,000 bpd and will make Chavez’s goal of shipping one million bpd of oil

to china by 2011 a reality. As China and Venezuela continue to work together, it will become easier for

Chavez to use oil as a geopolitical weapon .¶ China’s influence in certain countries could eventually backfire against the U.S. as certain major U.S. oil supplying nations find an oil export substitute in China. The Venezuelan government and its political disagreements and strong words with

the Bush administration provides a perfect example of a country that could potentially cut off the U.S. in favor of doing business with China. Should China be able to carry the Venezuelan oil business with adequate purchases, oil could be used as a weapon of diplomacy against the U.S. Finally China,

knowing that it could face a bleak future if its appetite is not curbed, is also searching for technology that will stretch its resources.

That triggers great power conflict with ChinaSalameh 11 --- international oil economist, a consultant to the World Bank in Washington, DC on energy affairs and a technical expert of the United Nations Industrial Development

Organization in Vienna (Second Quarter 2011, Mamdouh G., International Association for Energy Economics, “China’s Oil “Adventure” into Venezuela,” www.iaee.org, JMP)China’s Global Oil DiplomacyChina’s growing involvement in Venezuela is an integral part of its global oil diplomacy . China is

very aware that its robust economic growth would falter without secure oil supplies. China’s global oil diplomacy is, therefore,

geared towards ensuring that this never happens.¶ The growing dependence on oil imports has created an increasing sense of ‘energy insecurity’ among Chinese leaders. The Chinese military argue that China’s energy security needs to be taken ‘seriously and dealt with strategically’16 That means less reliance on the Middle East, less transportation of oil via sea lanes policed by the U.S. Navy, more oil brought in by pipeline across

Asia and by tanker across the Pacific and more capability for the Chinese navy to protect Chinese tankers. Henry Kissinger has

warned of a potential great-power conflict over oil: this is it. ¶ For decades the doctrine of peaceful rise has meant that China has tried to secure energy and raw materials without confronting the U nited S tates and the West. China’s long-standing willingness to deal with states that the West

regards pariahs is in part a recognition that dealing with Sudan, Angola, Iran or Uzbekistan allows China to avoid direct confrontation

with Western interests. However, the larger China has become, the sheer scale of its energy needs has forced it more and more to intrude into areas that the U nited S tates regards as its own sphere of influence such as Venezuela . ¶ China’s penetration into the U.S. backyard could have profound political and economic implications for the U.S., as it is dependent for one-third of its oil on imports from South American oil suppliers that it can’t afford to lose to China.

China’s global oil diplomacy could bring it into conflict with the U nited S tates unless both countries

find a constructive accommodation that allows them to do business.¶ Conclusions¶ Under the cloak of Washington’s indifference, President Chavez is making steady progress in cementing strategic relations with

China principally in the oil field . For Chavez, such a strategy enables him to achieve his political ambitions of

eliminating U.S. political influence in his country and also reducing his country’s dependence on oil exports to the United States.

And it kills U.S. heg globallyElton 10 (8/19/2010, Doug, “What would happen if Chavez cut off the US from Venezuelan oil?” http://www.helium.com/items/1926791-chavez-cut-off-the-us-from-venezuelan-oil-china-benefits, JMP)The international game of politics often plays like dominos. Columbia recently accused Venezuela of harboring rebels and this in turn lead Chavez to comment on oil exports to the U.S. If the dominos had fallen, a fourth country would have been the most likely to benefit in the long-term.China is predicted to overcome the U.S. economy one day. Its rapid industrialization equals a need for oil. Venezuela is aware of this and has been keen to advance the relationship between the two countries. At present, exporting oil to the U.S. allows Venezuela leverage when dealing with the Chinese. The greater the demand, the more control favors the distributor. Take the U.S. out of the equation and Venezuela will be desperate to sell oil to the Chinese. It’s the difference of coming to the feast a beggar or a king for Venezuela, but for the U.S. it has a far greater consequence.As the economic playing field levels, China is eager to catch up to the U.S. in the race to be

the world’s superpower . Environmental concerns aside, U .S. consumption of oil gives it control over the market . Essentially, if the U.S. uses more of it, then China has less of it. It’s a strange advantage, but an advantage nonetheless. If Venezuelan oil is exported exclusively to

China, the advantage is lost. This may have little impact at first, but as China attempts to surpass the U.S. this small measure could fuel global change.

US primacy prevents global conflict – diminishing power creates a vacuum that causes transition wars Brooks et al 13 [Stephen G. Brooks is Associate Professor of Government at Dartmouth College.G. John Ikenberry is the Albert G. Milbank Professor of Politics and International Affairs at Princeton University in the Department of Politics and the Woodrow Wilson School of Public and International Affairs. He is also a Global Eminence Scholar at Kyung Hee University.William C. Wohlforth is the Daniel Webster Professor in the Department of Government at Dartmouth College. “Don't Come Home, America: The Case against Retrenchment”, Winter 2013, Vol. 37, No. 3, Pages 7-51,http://www.mitpressjournals.org/doi/abs/10.1162/ISEC_a_00107, GDI File]A core premise of deep engagement is that it prevents the emergence of a far more dangerous global security environment. For one thing, as noted above, the United States’ overseas presence gives it the leverage to restrain partners from taking provocative action . Perhaps more important, its core alliance commitments also deter states with aspirations to regional hegemony from contemplating expansion and make its partners more secure, reducing their incentive to adopt solutions to their security problems that threaten others and thus stoke security dilemmas. The contention that engaged U.S. power dampens the baleful effects of anarchy is consistent with influential variants of realist theory. Indeed, arguably the scariest portrayal of the war-prone world that would emerge absent the “American Pacifier” is provided in the works of John Mearsheimer, who forecasts dangerous multipolar regions replete with security competition, arms races, nuclear proliferation and associated preventive wartemptations, regional rivalries, and even runs at regional hegemony and full-scale great power war. 72 How do retrenchment advocates, the bulk of whom are realists, discount this benefit? Their arguments are complicated, but two capture most of the variation: (1) U.S. security guarantees are not necessary to prevent dangerous rivalries and conflict in Eurasia; or (2) prevention of rivalry and conflict in Eurasia is not a U.S. interest. Each response is connected to a different theory or set of theories, which makes sense given that the whole debate hinges on a complex future counterfactual (what would happen to Eurasia’s security setting if the United States truly disengaged?). Although a certain answer is impossible, each of these responses is nonetheless a weaker argument for retrenchment than advocates acknowledge. The first response flows from defensive realism as well as other international relations theories that discount the conflict-generating potential of anarchy under contemporary conditions. 73 Defensive realists maintain that the high expected costs of territorial conquest, defense dominance, and an array of policies and practices that can be used credibly to signal benign intent, mean that Eurasia’s major states could manage regional multipolarity peacefully without theAmerican pacifier. Retrenchment would be a bet on this scholarship, particularly in regions where the kinds of stabilizers that nonrealist theories point to—such as democratic governance or dense institutional linkages—are either absent or weakly present. There are three other major bodies of scholarship, however, that might give decisionmakers pause before making this bet. First is regional expertise. Needless to say, there is no consensus on the net security effects of U.S. withdrawal. Regarding each region, there are optimists and pessimists. Few experts expect a return of intense great power competition in a post-American Europe, but many doubt European governments will pay the political costs of increased EU defense cooperation

and the budgetary costs of increasing military outlays. 74 The result might be a Europe that is incapable of securing itself from various threats that could be destabilizing within the region and beyond (e.g., a regional conflict akin to the 1990s Balkan wars), lacks capacity for global security missions in which U.S. leaders might want European participation, and is vulnerable to the influence of outside rising

powers. What about the other parts of Eurasia where the U nited S tates ha s a substantial military presence? Regarding the Middle East, the balance begins to swing toward pessimists concerned that states currently backed by Washington— notably Israel, Egypt, and Saudi Arabia—might take actions upon U.S. retrenchment that would intensify security dilemmas . And concerning East Asia, pessimism regarding the region’s prospects without the American pacifier is pronounced . Arguably

the principal concern expressed by area experts is that J apan and South Korea are likely to obtain a nuclear

capacity and increase their military commitments, which could stoke a destabilizing reaction from China . It is notable that

during the Cold War, both South Korea and Taiwan moved to obtain a nuclear weapons capacity and were only constrained from doing so by astill-engaged United States. 75 The second body of scholarship casting doubt on the bet on defensive realism’s sanguine portrayal is all of the research that undermines its conception of state preferences. Defensive realism’s optimism about what would happen if the United States retrenched is very much dependent on itsparticular—and highly restrictive—assumption about state preferences; once we relax this assumption, then much of its basis for optimism vanishes. Specifically, the prediction of post-American tranquility throughout Eurasia rests on the assumption that security is the only relevant state preference, with security defined narrowly in terms of protection from violent external attacks on the homeland. Under that assumption, the security problem is largely solved as soon as offense and defense are clearly distinguishable, and offense is

extremely expensive relative to defense. Burgeoning research across the social and other sciences , however,undermines that core assumption: states have preferences not only for security but also for prestige, status , and other aims, and

theyengage in trade-offs among the various objectives. 76 In addition, they define security not just in terms of territorial protection but in view of many and varied milieu goals. It follows that even states that are relatively secure may nevertheless engage in highly competitive behavior. Empirical studies show that this is indeed sometimes the case. 77 In sum, a bet on a benign postretrenchment Eurasia is a bet that leaders of major countries will never allow these nonsecurity

preferences to influence their strategic choices. To the degree that these bodies of scholarly knowledge have predictive leverage, U.S. retrenchment would result in a significant deterioration in the security environment in at least some of the world’s key regions .

We have already mentioned the third, even more alarming body of scholarship. Offensive realism predicts thatthe withdrawal of the American pacifier will yield either a competitive regional multipolarity complete with associated insecurity , a r ms racing, crisis instability, nuclear proliferation , and the like , or bids for regional hegemony, which may be beyond

the capacity of local great powers to contain (and which in any case would generate intensely competitive behavior,

possibly including regional great power war ).

China is using economic contacts to expand defense ties --- U.S. reengagement key to signal a firm response and deter conflictDowd 13 --- served as an adjunct professor and lecturer at Butler University, a researcher and administrator at leading think tanks, and a congressional aide (4/19/2013, Alan W., “Monroe Doctrine Version 2.0,” http://www.legion.org/landingzone/214857/monroe-doctrine-version-20, JMP)Much has been reported about Washington’s pivot into Asia and the Pacific. What’s not as well-known is Beijing’s pivot into the

Americas. Like a global chess match, Beijing is probing the Western Hemisphere and sending a message that it , too, can cultivate trade and military ties outside its neighborhood. Given that the U nited S tates has been the predominant power in this hemisphere since the 1800s, China’s

message warrants a response . ¶ Before recapping some of China’s moves in Latin America, it’s important to note that

there are pluses and minuses to Beijing’s increased interest and investment in this hemisphere. Investment from China, Europe, Britain and the United States is fueling a much-needed development boom in South America. That’s a plus. But China’s riches come

with strings, and that’s what raises concerns.¶ Driven by a thirst for oil and other resources, China is aggressively and strategically building its economic portfolio in the Western Hemisphere. A study in Joint Forces Quarterly (JFQ) offers the highlights:¶ $1.24 billion to upgrade Costa Rica’s main oil refinery;¶ $28 billion to underwrite oil exploration and development in Venezuela;¶ $2.7 billion, including a new hydroelectric plant, for access to Ecuadoran oil;¶ $10 billion to modernize Argentina’s rail system and $3.1 billion to purchase Argentina’s petroleum company outright;¶ $1.9 billion for development of Chile’s iron mines;¶ a planned “dry canal” to link Colombia’s Pacific and Atlantic coasts by rail, with dedicated ports at the Pacific terminus for shipping Colombian coal to China;¶ $3.1 billion for a slice of Brazil’s vast offshore oil fields.¶ Brazil is a prime example of how Beijing is using its checkbook to gain access to energy resources. As The Washington Times reports, China’s state-run oil and banking giants have inked technology-transfer, chemical, energy and real-estate deals with Brazil. Plus, China came to the rescue of Brazil’s main oil company when it sought financing for its massive drilling plans, pouring $10 billion into the project.¶ “They are buying loyalty,” warns a former British diplomat to the region. Indeed, U.S. diplomatic cables reveal concerns that Beijing’s largesse is making the Bahamas, to cite just one example, “indebted to Chinese interests” and establishing “a relationship of patronage…less than 190 miles from the United States.”¶ That brings us to the security dimensions of the China

challenge. We know from our own history that trade and economic ties often lead to security

and defense ties . And that’s exactly what’s happening as China lays down roots in the Americas:¶ Officials with U.S. Southern Command reported in 2006 that Beijing had “approached every country in our area of responsibility” and provided military exchanges, aid or training to Ecuador, Jamaica, Bolivia, Cuba, Chile and Venezuela.¶ The Argentine defense minister traveled to Beijing in 2012 to hail a “bilateral strategic association in defense cooperation with China.” ¶ JFQ reports that most Latin American nations “send officers to professional military education courses in the PRC.”¶ A congressional commission reports that Venezuela, Bolivia and Ecuador are buying Chinese arms. Bolivia has a military cooperation agreement with Beijing.¶ According to a 2012 Pentagon study, Beijing has sent senior military officials to Peru, Bolivia, Chile, Colombia, Cuba, Brazil, Mexico and Argentina in the past five years.¶ A report in Military Review, a journal of the U.S. Army, concludes that China is “winning a foothold” in the Americas, detailing the flow of Chinese small-arms, medium artillery, air defenses and ground-attack aircraft into Bolivia, Ecuador and Venezuela.¶ The JFQ report concludes that Chinese defense firms “are likely to leverage their experience and a growing track record for their goods to expand their market share in the region, with the secondary consequence being that those purchasers will become more reliant on the associated Chinese logistics, maintenance and training infrastructure.”¶ In short,

China’s moves represent a challenge to U.S. primacy in the region—a challenge that must be answered. But how?¶ A good place to start would be to dust off the Monroe Doctrine. The origin of the threats may change—France and Spain in the 1800s, Imperial Germany in the early 1900s, the Soviet Union during the Cold War—but the Monroe Doctrine remains an important guide for U.S. foreign policy.¶ “Monroe 2.0” should make it clear to Beijing that while the United States welcomes China’s efforts to conduct trade in the Americas, the American people look unfavorably upon the sale of Chinese arms in this hemisphere and would not countenance the basing of Chinese military personnel or export of China’s authoritarian-capitalism model into this hemisphere. To borrow the polite but candid language of the original Monroe Doctrine, a Chinese outpost

in the Americas could only be seen as an “unfriendly” action “endangering our peace and happiness.”¶ Likewise, Washington needs to send the right message —and in the right way—to the Caribbean, Central America and South America.

Specifically, Washington should emphasize that just as they are not U.S. colonies or European colonies, they should not allow themselves to become Chinese colonies. Already, there is a backlash in Brazil and Argentina against China buying up land, and in the

Bahamas against the influx of Chinese workers. Washington should leverage this backlash.¶ U.S. actions should amplify U.S. pronouncements:¶ The United States should make hemispheric trade a priority, instead of allowing trade deals to languish. Colombia

and Panama waited five years for the U.S. to approve free-trade agreements.¶ The U nited S tates should revive aid

and investment in the America s, instead of allowing China to outflank it. It pays to recall that Washington used to conduct the sort of checkbook diplomacy that characterizes Beijing’s approach to Latin America.¶ Washington should be proactive on hemispheric security, building on successful partnership-

oriented models in Colombia and Mexico. China will fill the vacuum created by a distracted United States.¶ Monroe 2.0 would avoid conflict by helping Beijing understand how serious the U nited S tates is about the Americas. What was true in the 19th and 20th centuries must remain true in the 21st: There is room for only one great power in the Western Hemisphere.

InherencyU.S. investment in Venezuelan oil decliningOxford Analytica 13 – international consulting firm providing analysis of world events (“VENEZUELA: No rapid shift in oil policy on the cards” Oxford Analytica Daily Brief June 11 2013 ProQuest 6/25/13)//AH

SIGNIFICANCE: Following the death of Hugo Chavez in March and the subsequent election of President Nicolas Maduro,

companies and governments are looking for indications of any significant change in oil policy.

Production at state oil company PDVSA continues to fall, despite having, with its enormous extra heavy-

oil resource, the biggest oil reserves in the world. ANALYSIS: Impacts. No rapid change in oil policy should be expected. China and Russia will play an increasing role, as US sales decline. Oil majors not already in Venezuela will remain reluctant to enter the market. PDVSA recently published its 2012 results, showing oil and liquefied natural gas (LNG) output down by 3%, to 3.03 million barrels per day (b/d) -- 2.99 million b/d of crude and 138,000 b/d of LNG -- versus 3.13 million b/d in 2011. Its production target for 2013 has now been reduced from 3.45 million to 3.25 million b/d. Rafael Ramirez, the minister of mines and energy and head of PDVSA, recently forecast production of 6 million b/d by 2019 but the government's record on production forecasts leaves this open to challenge ( see VENEZUELA: Hydrocarbons targets appear over-optimistic - March 1, 2012). Financial, and particularly profit, numbers for PDVSA are difficult to interpret, given the massive funding devoted to social

expenditure (more than 16.0 billion dollars in 2012) but the company reported: a 6.2% drop in profit to 4.2 billion

dollars; a fall in revenue to 124.4 billion; and an increase in debts to service providers of more than 35.0%, despite an increase in crude oil realisations, from 101.06 dollars/barrel in 2011 to 103.42 in 2012. Despite falling production, revenue and income, PDVSA must support the massive social expenditure (44 billion dollars in 2012) on which the government's political legitimacy depends. Absent a sharp increase in foreign investment, the government could only finance a major rise in production by reducing social expenditure and/or the gasoline subsidy, both potential sources of major social unrest ( see VENEZUELA: Fuel prices impose political, economic risk - April 5, 2011). Output challenges. A key challenge is the decline in conventional oil production. At one of the largest conventional fields, El Furrial, between August 2012 and February 2013, production declined by some 100,000 b/d. Interestingly, Ramirez recently announced a 1 billion barrel find of light crude (42 deg API, exceptionally light for Venezuelan oil). Some new extra heavy-oil projects came on stream during 2012: Petromiranda, with Russian partners, is aiming to build to 45,000 b/d. Petromacareo, with Vietnamese participation, has initial target production of 4,000 b/d, although ultimate planned production of 200,000 b/d is now being questioned. TNK-BP is reportedly planning to increase the capacity of the Petromonagas upgrading plant. An increase in refining capacity to reduce imports of oil products is needed. This proved impossible during Chavez's administration, given associated county risk. Any deal financed with loans repaid from future crude oil supplies simply mortgages

another share of future production. Oil policy. To date, Maduro's rhetoric and actions suggest 'more of the same'. The key question is whether an ongoing hardline Chavista oil policy will survive the economic and financial pressures facing

the new government. Any change of policy would need to be substantial and sustained to overcome potential investor nervousness. More than a decade of aggressive anti-foreign-investor policies, tougher taxation, PDVSA's poor payment record and under-resourced management make Venezuela a high-risk country. Even if the offer to foreign investors were materially improved, the necessary changes would take a long time to implement. A key signal might be the removal of Ramirez, in post for some years. This would need to be followed by major structural changes within the ministry and PDVSA. It is unclear at this stage whether Maduro would have the political 'clout' to do this, with players like National Assembly President Diosdado Cabello

ready to outflank him in defence of 'Chavismo'. Future trends. Crude and product sales to the United States look likely to continue to decline, having reached just over 600,000 b/d in February 2013 -- a 35% year-on-year fall. Major new investments by US companies not already in Venezuela appear unlikely.

AT Status Quo Solves

No improvements coming to Venezuela’s energy sector --- domestic and foreign investment are lowSaefong 13 --- MarketWatch reporter based in San Francisco (3/6/2013, Myra P., “Post-Chavez Venezuela: oil’s next Saudi Arabia?” http://www.marketwatch.com/story/post-chavez-venezuela-oils-next-saudi-arabia-2013-03-06?link=MW_story_popular, JMP)And it’s well known that the nation’s oil industry suffered under the leadership of Chavez, who died Tuesday after a two-year battle with cancer. Read Commodities Corner from early January: What happens to oil if Chavez goes?¶ His presidency was built on diverting cash from state-owned oil and natural-gas company Petroleos de Venezuelas, or PDVSA, to social spending, said Clinton Carter, associate vice president for Latin America at Frontier Strategy Group. “Little was invested in expanding production and maintaining output.” ¶ Chavez’s politicization of PDVSA also led to an exodus of talent, and political risk in the nation kept foreign investment in energy low. ¶ Now that the president is gone, big improvements in the energy sector won’t happen any time soon. “Venezuela’s declining output is unlikely to be reversed for years to come,” Carter said.¶ But the first change in government leadership since 1999 for a major oil producer certainly offers the market some food for thought.

Venezuela won’t make changes to boost investment or improve oil productionLanders 13 (3/7/2013, Jim, “Crumbling Venezuelan oil sector expected to remain hostile to U.S. investment,” http://www.dallasnews.com/business/energy/20130306-crumbling-venezuelan-oil-sector-expected-to-remain-hostile-to-u.s.-investment.ece, JMP)HOUSTON — Hugo Chávez is gone, but his political allies and alliances are not expected to make major changes in the weak development of Venezuela’s enormous oil reserves.¶

Venezuela’s constitution requires presidential elections within 30 days, and the country has been almost evenly divided between Chávez loyalists and opponents. Chávez was re-elected in October although never inaugurated due to illness.¶ For now, his handpicked vice president, Nicolás Maduro, is acting president and the most likely candidate to lead Chávistas in any election.¶ Oil analysts here for IHS CERAWeek 2013, the energy industry’s big annual conference, blame Chávez’s socialist policies for a decline in Venezuela’s oil industry over the past 14 years. Despite having more oil reserves than any other country, production peaked in 1997 and is down by a fourth since Chávez took power in 1998.¶ “Venezuela is one of the countries with the largest hydrocarbon [oil and gas] endowments in the world,” said Enrique Sira, IHS’s director of Latin American energy research.¶ “Maybe because of that, it is so hard to understand why today there is electric power rationing in some parts of the country, a deficit of natural gas supply across the whole country, and a productive oil capacity that is way below the actual potential that the country has.”¶ U.S. refiners import more than 1 million barrels a day of Venezuelan oil, which made the country second only to Canada last year among U.S. foreign oil suppliers. Much of that oil went to Citgo Petroleum Corp., which is owned by PDVSA, Venezuela’s national oil company. Citgo has three U.S. refineries, including one in Corpus Christi, and more than 6,100 gas stations across the country.¶ Copious reserves¶ Venezuela has more oil reserves than any other country thanks to massive deposits of asphalt-like crude in what’s called the Orinoco oil belt. Development of these deposits is both technology- and capital-intensive.¶ Chávez’s 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 Venezuela’s oil production.¶ Mark McNabb, director of the Emerging Markets Research Center at UTD’s Naveen Jindal School of Management, said in a phone interview that he expects U.S. firms will remain on the outside looking in.¶ “We’re kind of frozen out for the next three to five years,” he said.¶ Venezuela’s oil sector has been in decline for a decade. In 2002, PDVSA employees went on strike and joined in an anti-Chávez movement that briefly ousted the president. When he regained power, Chávez fired many of his opponents in the firm and installed thousands of supporters.¶ “PDVSA’s been drained of its professionals,” said Eric Farnsworth, a vice president with the Council of the Americas. “It’s now a political group that pumps oil.” ¶ Venezuela’s 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 PDVSA’s staff. “That situation will not change.”¶

Venezuela’s exports to the U.S. are under pressure from Canada, which produces a heavy type of crude oil from Alberta’s oil sands that is similar to Venezuela’s thick oil. Many Gulf Coast refineries prefer to use heavy oil because it can mean higher profits for gasoline, diesel and other refined products.

Oil investment and production will remain a disasterLaskoski 13 --- senior petroleum analyst for GasBuddy.com (3/14/2013, Gregg, “Chavez's Death Presents Venezuela With Oil Boom Opportunity,” http://www.usnews.com/opinion/blogs/on-energy/2013/03/14/chavezs-death-presents-venezuela-with-oil-boom-opportunity, JMP)For now, ExxonMobil still has its arbitration case pending against Venezuela before the World Bank-affiliated International Center for Settlement of Investment Disputes. ExxonMobil spokesman David Eglinton said this week that "the larger International Center for Settlement of Investment Disputes arbitration against the government of Venezuela remains. The dispute is not over Venezuela's power to expropriate; the dispute is over Venezuela's failure to meet its obligation under applicable international law to pay compensation based on fair market value of the expropriated investment. We have no indication of when the ICSID decision will be

given."¶ Many remain uncertain. One oil industry veteran, Terri Ignozzi-Little, of Merlin Petroleum, Westport, Conn., says that "if the government remains the same, it will be as much of a disaster as it has been for the last 16 years. Chavez did his best to undermine the efficiency over the past decades and cause tremendous disruptions in supply." She said Venezuela may not see discernible change until after Castro dies in Cuba. "Remember, Venezuela holds the cards for crude oil which is supplying the rest of Latin America and Argentina, which is getting natural gas supplies from them."¶ The International Center for Settlement of Investment Disputes lists 17 pending cases against Venezuela involving companies like ExxonMobil, pursuing billions of dollars in compensation from the oil nationalization effort which unlawfully seized private assets.

Venezuela Adv

Oil/Econ Declining

Venezuelan economy declining due to falling oil productionO’Neil 6/25 (Shannon K., “Venezuela’s Economy and Future”, Council on Foreign Relations, 6/25, http://blogs.cfr.org/oneil/2013/06/25/venezuelas-economy-and-future/)//mmMany Venezuela watchers have been waiting for the other proverbial economic shoe to drop (see here, here,

and here), and for the country to fall into serious crisis. Others, such as Mark Weisbrot co-director of the Center for

Economic and Policy Research, question this premise, arguing in his Guardian column that Venezuela has and will continue to make progress using its own economic model. So where does the nation stand? Those supportive of the Chávez and now Maduro government point to Venezuela’s 2012 GDP growth, which topped 5 percent (due largely to government spending). Over the last decade GDP per capita more than doubled and the poverty rate (using the World Bank’s national poverty line measurement) fell from over 60 percent of population in 2003 to some 30 percent in 2011. Inequality declined as well, and the United Nations publicly recognized the governments’ efforts in halving the number of citizens suffering from malnourishment. Moreover Venezuelans in general seem quite happy—reporting a life satisfaction rating of 7.5 (out of 10), higher

than the global average of 5.5. But the underlying fundamentals question how long this can last. Oil production and exports have bankrolled most of these social programs, pumping hundreds of billions of

dollars into government coffers over the last twelve years. Having spent all this money (and even augmented it with

billions of dollars of debt), one can question the efficiency of Venezuela’s social programs. One also should worry about their sustainability, as the institutions to deliver services—from health care to basic electricity—are weak and in some cases deteriorating. And the flows of oil money behind all of it are increasingly fragile. Though Venezuela has almost 300 billion barrels in proven reserves, PDVSA’s own production figures show stagnation. Independent estimates (such as BP’s) reveal falling production. Whichever is true, there is a real

question as to whether the country can keep supporting the current array of programs. The rest of the economy has been hollowed out over the last decade. While in the 1990s nearly a quarter of exports were non-oil products—foods, agricultural materials, and manufactured goods—today it is less than 5 percent. To put this into perspective, oil makes up 16 percent of Mexico’s total exports, 11 percent of Brazil’s, and some 89 percent of oil giant Saudi Arabia’s—still less than Venezuela’s 97

percent. For day to day life, inflation—estimated at between 20 and 35 percent (compared to 3 percent inflation in

Colombia, or 6 percent in Brazil)—erodes the purchasing power of average Venezuelans, and hits the poorest the hardest. Fueling this spiral is Venezuela’s penchant to print money to fund its social programs and to pay for its imports—

according to Reuters, in 2011 new currency topped $17 billion, more than any other Latin American country. To fight inflation, the government has imposed price caps, leading to shortages of basic goods—from toilet

paper to milk, electricity to communion wine. In fact, the Venezuelan Central Bank’s scarcity index hit 21 percent, meaning that one out of five basic goods in Venezuela can be considered in short supply. Added to these economic woes are broader societal ones, including rising crime rates. The United Nations reports that there were some 45 homicides per 100,000, making Venezuela one of the most dangerous countries in the world. In Latin America, Venezuela is only surpassed by the notoriously bloody Honduras and El Salvador. The recent electoral investigations reaffirmed Maduro’s control over the presidency, despite the many questions that linger. What is less ambiguous is how average Venezuelans would vote today if given the chance—and it would not be for Maduro.

Oil development stagnating due to Chavez policies – it’s a drag on the economy Lavelle 13 - energy editor for National Geographic Digital Media (Marianne, “Hugo Chavez Leaves Venezuela Rich in Oil, But Ailing,” National Geographic, March 6, 2013, http://news.nationalgeographic.com/news/energy/2013/03/130306-hugo-chavez-venezuela-oil/)//SSIn the economic isolation that Chavez imposed, development of the nation's vast oil reserves languished, most outside observers agree. Venezuela's oil production has declined 25 percent since 2001. Crude exports to Venezuela's long-time chief customer, the United States, have fallen roughly to the level seen

before Chavez took office. Indeed, after a deadly explosion last year in its main refinery, Venezuela was forced to rely on gasoline imports from the United States to keep its economy moving. (See

related: "Venezuelan Refinery Under Scrutiny After Deadly Blaze.")¶ Now, in addition to electing a new leader, Venezuela

must choose a path for managing its immense resources—either staying the course that Chavez plotted in support of his "Bolivarian revolution," or attempting to forge a future that better realizes the value of its natural treasure.¶ Large, Sticky Oil Stores¶ Because oil accounts for 95 percent of Venezuela's export earnings and nearly half of its federal budget revenue, Venezuela is deeply dependent upon a factor largely outside its control—the global price of oil. Chavez took office in 1999 amid economic turmoil in Venezuela caused by a precipitous fall in the price per barrel during the Asian economic crisis. As oil prices climbed steadily over the next decade, the new flow of revenue bolstered Chavez's regime.¶ "Oil prices are what made Hugo Chavez possible," said Daniel Yergin, a leading energy industry consultant, in an email from Houston, where he is hosting one of the industry's biggest conferences, IHS Ceraweek, which was abuzz with the news out of Caracas. "The collapse of oil prices [from 1997 to 1998] and the resulting discontent in Venezuela gave him the opening to become president, just seven years after he was sent to jail for leading a coup," said Yergin, author of two histories of the oil industry. "And it was rising oil prices since 2000 that gave him the financial resources to consolidate power, court public opinion and try to turn his Bolivarian revolution into a global campaign for 'twenty-first century socialism.'"¶ Meanwhile, advances in technology had made it possible to extract heavy oil mixed in sandstone, like the vast reserves in Venezuela's Orinoco belt, in the basin of one of the longest rivers in South America. In 2010, in a review of Venezuela's stores based on the current state of technology, the U.S. Geological Survey concluded that, based on the state of technology at the time, Orinoco held the largest accumulation of oil it had ever assessed. One widely followed global review of resources, BP's, put Venezuela ahead of Saudi Arabia as the nation with the largest stores of oil. Others said Venezuela was in a close second place.¶ But much like the tar sands of Alberta, Canada, the heavy oil of the Orinoco belt requires specialized production and refining processes. Canada's tar sands oil

production has skyrocketed over the past decade thanks to application of the new technologies, but Venezuela's heavy oil development has stagnated. The state-run oil company, Petroleos de Venezuela (PdVSA), had made an effort to attract foreign investment and the technical expertise of the large multinational oil companies before Chavez took office, but those efforts were halted. In 2002, nearly half of PdVSA's employees walked off the job in protest against Chavez's management of the company's operations; Chavez responded by firing 18,000 and consolidating control.¶ In 2006 and 2007, Chavez fully nationalized oil exploration and production, forcibly seizing assets of Exxon Mobil, France's Total and Italy's Eni. Last year, Venezuela said it paid Exxon $250 million to settle Exxon's legal claims over the seizure; the company originally had sought to freeze $12 billion in PdVSA assets as compensation.¶ Isolation and Declining Oil Production¶ Expelling the foreign oil companies served Chavez's leftist aims, but deprived Venezuela of the expertise to tap its unique geology and the ability to earn far more oil revenue. "In a way it showed just how ideological Chavez was," says David Jhirad, professor and director of the energy resources and environment program at Johns Hopkins University's School of International Studies, who served during President Bill Clinton's administration as the U.S.

Department of Energy's deputy assistant secretary for international energy policy. "The state still could have gotten a lot of those revenues through taxing the companies and through partnerships. Venezuela could have

achieved far more for the goals of social justice with an approach that was much more pragmatic and smart."¶ While oil production declined, Venezuela's take on each barrel also declined due to Chavez's policies at home and abroad. Venezuelans paid the lowest prices in the world for gasoline—from 6 cents to 12 cents per gallon in recent years—and even Chavez threatened in recent years that the high subsidies for fuel would have to be rolled back, blaming citizens for energy waste. (See related gallery and map: "Eleven Nations With Large Fossil Fuel Subsidies" and "Fossil-Fuel Burden on State Coffers.")

Venezuelan oil suffers from underinvestment- politically volatile situation with new leaderPadgett 13 (Tim, Venezuela’s election- Even if Nicolás MAduro Won, he lost”, http://world.time.com/2013/04/15/venezuelas-election-even-if-nicolas-maduro-won-he-lost/#ixzz2XFk5eiuh, TIME magazine)//SRHere is the one unmistakable reality of Sunday’s special presidential election in Venezuela: even if Nicolás Maduro won, he lost. This race had a rarefied gauge, and it wasn’t simply the vote tally. It was whether the authoritarian-socialist model left by the firebrand Hugo Chávez, who died in office because of cancer last month after a 14-year reign, can survive without his demigod presence. That is, his actual presence and not his reincarnation as a bird, as Maduro goofily claims the late Chávez appeared to him recently. By defeating his centrist rival Henrique Capriles by an embarrassingly tight margin of 50.7% to 49.1% — after Chávez routed Capriles just six months ago by 11 points — Maduro, whom Chávez had handpicked as his successor, laid bare two things about Chavismo without Chávez. The first is that el comandante, who always ran a one-caudillo show,

failed to groom anyone who could fill his red beret politically. The second is that Venezuelans, with Chávez’s blustering figure gone, now recognize the raft of economic and social messes he left behind. (PHOTOS: The

Chavistas Hang On to Venezuela’s Presidency) And that makes the political landscape ahead in Venezuela, which holds the world’s largest oil reserves, volatile if not potentially violent. Maduro, who to his credit said he’d accept the full vote recount Capriles is demanding, called his win “a fair, legal and constitutional triumph,” and it probably was, despite

opposition concerns about the Chavista-packed National Election Council, known as CNE. But Capriles argued he’d scored an equally important victory

by exposing how vulnerable Chávez’s United Socialist Party (PSUV) is in the absence of the late President’s charismatic bond with its base. “This system,” Capriles declared, “is a sand castle.” Yet however flimsy it may be — and the Venezuelan opposition, despite Sunday’s impressive performance, is no reassuring rock, either — Maduro and the Chavista leadership, including military honchos who have strongly hinted they won’t accept an opposition President, have insisted since Chávez’s cancer was diagnosed two years ago that only their leftist, anti-U.S. Bolivarian revolution is divinely anointed to rule. Now, with their humiliated backs against a wall, and bereft of

the political tools their exalted leader possessed, the question is how heavy a hand they’ll resort to in order to preserve Chavismo’s dominance — and the petrowealth it presides over. The wild card is Maduro himself, whose lack of an electoral mandate means he has to worry not only about an emboldened opposition but also about challenges from inside his PSUV. Chávez was never quite the dictator his foes claimed, but he was notorious for measures like “antidefamation” laws that made insulting him a criminal offense. Maduro, 50, a former bus driver and union leader, is a die-hard acolyte of Cuba’s communist regime and its rigidly vertical power structure;

and as a result, says Javier Corrales, an expert on Venezuelan politics at Amherst College in Massachusetts, “the fear is that he’ll go after dissent now to make up for his weak position, that he’ll see sabotage of the fatherland and the revolution all around him.” That’s an especially valid concern, Corrales notes, since “Maduro’s wing of Chavismo is actually not the strongest.” Chavistas like the National Assembly president, Diosdado Cabello, who wields closer ties to business and the armed forces than

Maduro has, may now smell blood in the water, making Maduro a potentially more defensive and authoritarian leader. (MORE: In Hugo Chávez’s Heartland, the Dead President Rules Supreme) But any new Venezuelan leader, mandate or no mandate, would chafe at the crises on his Bolivarian plate. Chávez certainly deserves kudos for using Venezuela’s vast oil resources to reduce its inexcusable poverty. But his often reckless economic MO may have undermined that very crusade in the long run. Lavish and indiscriminate social spending has spawned a currency debacle — the street exchange of more than 20 bolívares to the U.S. dollar mocks the official rate of just over six to the dollar — which in turn has helped make Venezuela’s inflation rate, which consistently tops 20%, among the world’s highest. Chávez’s nationalization of hundreds of private

companies has left the country’s nonoil sector woefully unproductive, but even the state-run oil monopoly, Petróleos de Venezuela, suffers from significant underinvestment. Food shortages, energy blackouts and infrastructure breakdowns have become increasingly common — as has official corruption, the plague Chávez came to power decrying. Some analysts insist the economic perils are exaggerated. “Opponents of the Venezuelan government are hoping for an ‘inflation-devaluation’ spiral that will help bring down the government,” Mark Weisbrot, director of the left-leaning Center for Economic and Policy Research in Washington, D.C., wrote recently in the Guardian. “But none of

these problems present a systemic threat to the economy.” Others, however, aren’t as sanguine: many ratings agencies now consider Venezuelan debt among the riskiest in South America. And that’s hardly helped by the security emergency Chávez let fester during his presidency, which has saddled Venezuela with South America’s highest murder rate and made Caracas one of the world’s most dangerous capitals today.

Venezuelan oil sector is declining now weakening the economyLanders 13 – Washington correspondent for Dallas News (“Crumbling Venezuelan oil sector expected to remain hostile to U.S. investment” Dallas News 3/7/13 < http://www.dallasnews.com/business/energy/20130306-crumbling-venezuelan-oil-sector-expected-to-remain-hostile-to-u.s.-investment.ece> 6/27/13)//AH

Venezuela’s oil sector has been in decline for a decade. In 2002, PDVSA employees went on strike and joined in an

anti-Chávez movement that briefly ousted the president. When he regained power, Chávez fired many of his opponents in the

firm and installed thousands of supporters. “PDVSA’s been drained of its professionals ,” said Eric

Farnsworth, a vice president with the Council of the Americas. “It’s now a political group that pumps oil.” Venezuela’s 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 PDVSA’s staff. “That situation will not change.” Venezuela’s exports to the U.S. are under pressure from Canada, which produces a heavy type of crude oil from Alberta’s oil sands that is similar to Venezuela’s thick oil. Many Gulf Coast refineries prefer to use heavy oil because it can mean higher profits for gasoline, diesel and other refined products. Keystone pipeline Canada wants to increase oil sands exports to the Gulf Coast via the Keystone XL pipeline, where the Canadian supplies are expected to displace U.S. imports of Venezuelan oil. The Obama administration has been reviewing TransCanada’s application to build the pipeline, which many environmental groups oppose because of climate change concerns. Venezuela’s continued hostility is “a reason why the United States should go ahead on the Keystone pipeline,” Farnsworth said. “It would mean positive benefits by delinking American capital flowing to a regime that clearly doesn’t like us.” Chávez opponents were led in October’s elections by Henrique Capriles, a former governor who ran on a platform sympathetic to free markets and the private sector, including in the oil business. Under Chávez, much of the country’s oil revenue was directed to popular anti-poverty programs — including discounted heating oil through Citgo for 100,000 lower-income Americans. Dan

Yergin, vice chairman of IHS and an energy historian, said managing the economy will be a challenge for Chávez’ successor. “He leaves behind an economy greatly weakened by spending, intervention, inflation, capital flight, and shortages. And, beyond Cuba, his effort to create an alliance against what he called ‘the U.S. empire’

managed only to enlist a few countries,” Yergin said. “Without his charisma and force of character, it is not all clear how his successors will maintain the system he created.”

Venezuelan economy facing recession

Neuman 13 (“Venezuela Gives Chávez Protégé Narrow Victory,” New York Times, 4/14/13, http://www.nytimes.com/2013/04/15/world/americas/venezuelans-vote-for-successor-to-chavez.html?pagewanted=all&_r=0)//SRThe new president will face a host of challenges as he serves out the rest of Mr. Chavez’s term, which began in January. The economy suffers from high inflation — just over 20 percent last year — and from chronic shortages of

many basic foods, medicines and other goods. Many economists predict that economic growth will slow significantl y this year and some say the nation could slip into recession. The government-owned oil monopoly, Petróleos de Venezuela, is a crucial source of government revenue, but it has been struggling with stagnant production and problems at its refineries. The country’s electrical grid is plagued by blackouts, which are frequent in many areas of the country outside Caracas. And violent crime is rampant. As recently as Thursday, four people were shot to death in three separate incidents at a sprawling election rally for Mr. Maduro in Caracas, according to local news media accounts.

Venezuela’s economy is on a steep decline – recession is on the brink

Venezuelan economy declining due to struggling oil industry Rapoza 6/3 – Forbes.com contributor (Kenneth, “Post-Chavez Venezuela Economy Gets Messier,” Forbes, June 3, 2013, http://www.forbes.com/sites/kenrapoza/2013/06/03/post-chavez-venezuela-economy-gets-messier/)//SSVenezuela may be soon longing for the early years of Hugo Chavez. The staunch socialist passed away this year after a bout with

cancer, but left Venezuela in worse shape.¶ These aren’t the worst of times for the South American oil giant, but they are far from the best. With inflation running rampant, as in 27.3% this year,

according to the International Monetary Fund, Venezuelans can’t quite figure out how much bread and rice are going to cost them from one month to the next. But one thing is for sure, it will cost them more.¶ To add insult to injury, the country is now heading into a recession.¶ Economic activity in Venezuela ground to a halt in the first quarter. The economy will contract this year. Although Venezuela does not have an open equity market, the country’s sovereign bond market is something many investors watch closely.

Today, that’s especially true for distressed asset fund managers.¶ The government’s 2027 bonds are rated B2 by Moody’s, considered junk status. The bonds are trading at around a 10% discount from par, yielding 10.75%. In a world with low interest rates and generally benign inflation, Venezuela joins Argentina as the region’s second basket case with high inflation. Even Paraguay has a higher credit

rating than Venezuela at a Ba2 rating. Argentina, by the way, is B3 at Moody’s.¶ Venezuelan growth began slipping in the first quarter.¶ GDP registered just a marginal expansion of 0.7% year over year in the first, below market consensus estimates of 1.1%. Last quarter was the lowest quarterly growth in more than two years. Seasonally adjusted, this means that the economy shrank 2.5% from the fourth quarter, which in annualized terms represents a 9.7%

contraction, Barclays Capital analysts led by Alejandro Arreaza said in a note to clients on Monday.¶ The devaluation of the currency in the case of Venezuela represents a reallocation of resources from the private to the public sector, which is practically the only exporter thanks to oil giant PDVSA. Private consumption moderated from 7.0% growth in 2012 to just 3.2% yearly growth in the first.¶ Growth is projected to decelerate sharply and so is private consumption as the rich watch their currency lose value.¶ In Chavez’s last year at the helm, the economy grew at 5.5%, more than any country in the Americas except for Peru, which grew over 6%.¶ What a difference a year makes. Barclays estimated today that GDP will contract by 2.0% in the second quarter and by 1.4% overall this

year. Further delays in the solving the currency supply problem could deepen the recession.¶ It is also worth highlighting the fact that exports fell by 7.5% driven mainly by a 5.6% decline in oil shipments. This, coupled with a 7.4% decline in oil prices, caused a 13% yearly decline in the country’s oil exports. If the decline in oil exports is not reversed, there could be a greater deterioration in the international position of the government, increasing its vulnerability, Barclays analysts said.

Venezuelan economy soon to enter recession – oil exports significantly down

Orozco and Pons 5/31 (Jose and Corina, “Venezuelan Economic Growth Slowed More than Forecast to 0.7%,” Bloomberg, http://www.bloomberg.com/news/2013-05-31/venezuelan-economic-growth-slowed-more-than-forecast-to-0-7-.html)Venezuela’s economy grew less than economists forecast in the first quarter as fewer government dollar sales to importers resulted in the worst currency shortages since 2008. Gross domestic product expanded 0.7 percent from a year earlier, the slowest pace since the last three months of 2010, the central bank said in a statement published on its website. The median forecast of eight analysts in a Bloomberg survey

was for growth of 1.1 percent. GDP had expanded 5.5 percent in the fourth quarter and 5.6 percent in 2012. “ We’re seeing a slowdown in the economy which I’m sure will enter recession in the second quarter ,” said Francisco Rodriguez, an economist at Bank of America Corp., in a phone interview from New York. A reduction in dollar sales “was much stronger in March so that surely it it will show more in the second quarter,” he said. The government has held only one dollar auction since devaluing the bolivar in February, limiting

companies from accessing the foreign currency they need for imports. The scarcity index, which measures the amount of goods that are out of stock in the market, rose to 21.3 percent in April from 20 percent the month before. The government cut the rate of fiscal spending by 3.1 percent in the 23 weeks after late President Hugo Chavez won the

Oct. 7 elections, Bank of America Corp. said in a March 20 report. Chavez died from cancer on March 5. Economy in Turmoil “The Venezuelan economy has suffered turmoil, the president’s death has upset us all, ” central bank President Edmee

Betancourt said May 30. Inflation has accelerated as shortages mount, reaching 29.4 percent last month from 18 percent in November last year. Prices rose 4.3 percent in April from March, the fastest growth since April 2010. A devaluation of 32 percent in the bolivar in February has failed to revive the flow of dollars into the economy. The government is taking action, Finance Minister Nelson Merentes said May 26, reducing by half the delivery time of dollars to 2,000 companies that import essential items. Moreover, the new Sicad complementary foreign exchange system will become more flexible by allowing more companies to participate, Merentes said on May 30, adding that he didn’t know the date for the next dollar auction. Venezuela posted a current account surplus of $1.74 billion up from a gap of $598 million in the fourth quarter of 2013, while the capital account recorded a $3.39 billion deficit. Total imports grew 1.5 percent to $13.9 billion in the first quarter after the government imported about 21 more than

the same period a year earlier. The private sector imported 10.6 percent less. Venezuelan oil exports fell 5.6 percent in volume, the report said. Venezuela reported $21.36 billion in oil exports in the first quarter, 13 percent less than the same period a year earlier.

Venezuelan econ sucks - hyperinflationRobertson 6/7 (Ewan, “Inflation in Venezuela Highest Since Current Measures Began,” Venezuela Analysis, http://venezuelanalysis.com/news/9677)Venezuela has recorded its highest monthly inflation rate since current measures began five years ago, provoking divergent analyses of the country’s economic situation. Inflation in May was 6.1% according to a report by Venezuela’s

Central Bank (BCV) yesterday, an increase from the 4.3% rate recorded in April and bringing total inflation so far this year to 19.4%. The 6.1% figure is the highest recorded since the National Index of Consumer Prices (INPC) was implemented in 2008 as the BCV’s measure of inflation, with Venezuelan media claiming that it is also the highest

monthly rate recorded in general terms since 1996. The annualised inflation rate from June 2012 – May 2013 was 35.2%, significantly higher than the previous annualised inflation rate to May 2012 of 22.6%.“These figures have occurred in a scenario affected by the residual effects of the exchange rate adjustment [a 32% devaluation] in February, and the minimum wage raise in May,” read the BCV’s report. The inflationary spike can be accounted for in large part by a sharp rise in food prices, which increased 10% in May and were the only one of the thirteen product groups measured to rise above the 6.1% average. After food, the products recording the steepest price rises last month were restaurants and hotels,

alcoholic drinks and tobacco, home-ware, transport, and shoes and clothing.The inflation rate news comes among other perceived difficulties for the economy, such as lower than predicted growth of 0.7% in the first quarter of 2013. The country is also experiencing the highest level of food shortages in several years.

Venezuela’s oil industry in shambles but Chavez’ death offers an opportunityGonzalez and Vyas 13 (Angel and Kejal, “In Depth: Venezuela's Oil Revival Is on Stand-By,” March 8, The Asian Wall Street Journal, Proquest)Venezuela's battered oil industry bore the burden of Hugo Chavez's socialist dream. Now the

charismatic leader's death gives his successors the opportunity to unlock its potential, but few in the oil industry expect an immediate renaissance. Under Mr. Chavez's rule, a huge oil-sector

strike, the firing of thousands of top engineers, poor maintenance, frequent refinery accidents and the diversion of oil revenue into social programs and subsidies to foreign allies crippled Petroleos de Venezuela SA, the national oil company. Despite arguably having the world's largest oil reserves, Venezuela's oil output fell by nearly a third to about 2.5 million barrels a day -- about a quarter of Saudi Arabia's output -- since Mr. Chavez took over 14 years ago, according to the U.S. Energy Information Administration.

PDVSA, as the oil company is known, maintains it produces closer to three million barrels a day. A toughening stance on foreign companies through Chavez's presidency also pushed Exxon Mobil Corp. and ConocoPhillips out of the country in 2007

and prompted other oil firms that remained to invest little.

Venezuelan econ will decline in the future due to inefficient oil sectorBMI 13 – Country Risk & Industry Research Firm (“Venezuela Information Technology Report,” Business Monitor International, May 2013, p. 24)//SSNet Exports: We expect net exports will continue to weigh heavily on the economy, shaving over 5 percentage points to real GDP growth over the coming years. Real export growth came in at 1.6% in 2012, and we forecast that a highly inefficient oil sector (see, 'Maduro Election To Bring More Of

The Same', April 15), which accounts for over 95.0% of total exports, will see exports contract by 0.5% in 2013 and 1.0% in 2014. Moreover, a weaker currency will weigh heavily on imports, though the lack of domestic

availability of substitutes to many essential goods will add some support to import growth. We therefore forecast import growth to slow from 24.4% in 2012 to 15.0% and 12.0% in 2013 and 2014, respectively. As such net exports will continue to weigh heavily on the economy, shaving over 5 percentage points to real GDP growth.

Venezuelan economy declining due to troubled oil industry and instabilityMander 6/17 – FT’s Venezuela and Caribbean correspondent (Benedict, “S&P downgrades Venezuelan debt,” The Financial Times Limited, June 17, 2013, http://www.ft.com/intl/cms/s/0/6452f4c0-d791-11e2-a26a-00144feab7de.html#axzz2XFvrG9kZ)//SSStandard & Poor’s, the credit rating agency, downgraded Venezuela’s sovereign debt on Monday over concerns about the mounting economic and political crisis facing the embattled new president, Nicolás Maduro.¶ The US-based agency cited the threat that political instability and infighting within the new administration posed to economic policy making as the principal reason for cutting its rating on Venezuela’s long-term debt to B from B+.¶ Economic growth slowed to 0.7 per cent in the first quarter, compared with 5.9 per cent in the same period last year, with many economists predicting an overall contraction this year. Meanwhile, annual inflation has increased to 32.5 per cent, with prices in May recording their highest monthly rise ever. The 6.1 per cent inflation in May brought the accumulated figure for the first five months of 2013 to 19.4 per cent, almost as high as annual inflation for 2012 of 20.1 per cent.¶ In addition, Standard & Poor's expressed concern over trouble at the state oil company PDVSA, which has led to a slump in oil production, as well as the uncertain outlook for oil prices, endangering Venezuela's income from oil sales, which account for 96 per cent of exports.¶ Mr Briozzo fears that a weakened Mr Maduro could pursue less pragmatic policies, worsening imbalances in the economy and political instability. "Even if the government takes corrective measures, it may not be able to implement them effectively because of the difficult political environment," he added, warning that this could trigger further downgrades.

Venezuelan economy declining due to falling oil production – this undermines stabilityReuters 3-5 (Reuters is an international Intelligence Agency based in London, March 5, 2013. “Instant View: Oil analysts’ reaction to death of Venezuela’s Chavez.” http://www.reuters.com/article/2013/03/06/us-venezuela-chavez-oilmarket-idUSBRE92500820130306)

(Reuters) - Venezuelan President Hugo Chavez died on Tuesday after 14 years in power, during which he remodeled the OPEC country's

oil sector and nationalized foreign-run oil fields. Oil production fell sharply during his era, dropping from some 3.5 million barrels per day when he was elected. After years of decline, Venezuela pumped just 2.34 million barrels per day last month, according to a Reuters survey of analysts who track OPEC output levels. Venezuelan government estimates on production are higher, around 3 million

barrels a day, but they are largely discredited in oil industry circles. Amid refinery woes, Venezuela has also been importing more fuel products from the United States, which remains a big buyer of Venezuelan crude exports. Oil prices rose slightly, by some 30 cents a barrel, in the hour following the announcement of Chavez's death late on Tuesday. AMY MYERS JAFFE, ENERGY AND GEOPOLITICS EXPERT, University of

California at DAVIS IN CALIFORNIA: "Chavez's death may result in a period of political instability and uncertainty in Venezuela. That is never a good thing for oil exports." "Venezuela's oil industry has had major setbacks during the

Chavez era. Venezuela has mortgaged its future and, like Mexico, it depends so heavily on oil (revenue) that it will have little

choice but to do whatever it can to boost exports." "Venezuela needs money. Whatever comes next, it won't have the kind of

charismatic leader that Chavez was. It will have to get serious about rebuilding its oil industry." DANIEL YERGIN, VICE CHAIRMAN OF IHS, INC., ENERGY AUTHOR: "It's too soon to say what Hugo Chavez's death means for oil prices, but it is certainly true that oil prices are what made

Hugo Chavez possible." "The collapse of oil prices in 1997-8 and the resulting discontent in Venezuela gave him the opening to become president, just seven years after he was sent to jail for leading a coup. And it was rising oil prices since 2000 that gave him the financial resources to consolidate

power, court public opinion and try to turn his Bolivarian revolution into a global campaign for "twenty-first century socialism." "He leaves behind an economy greatly weakened by spending, intervention, inflation capital flight, and shortages. And, beyond Cuba, his effort to create an alliance against what he called "the U.S. empire" managed only to enlist a few countries. "Without his

charisma and force of character, it is not all clear how his successors will maintain the system he created." TIM

EVANS, ENERGY FUTURES SPECIALIST, CITI FUTURES PERSPECTIVE, NEW YORK CITY "I don't think anybody gets a windfall out of this. If it opens the country up to more investment, that may be an opportunity for profit, but it's also a risk. Chavez was not the first one to nationalize oil operations in Venezuela. "There was a prior cycle of nationalization in the 1970s so the country has this history of some periods where international investment is welcome and encouraged and other periods in which the government of the day decides they don't like the terms of the investment and they take it back. "So I don't know how eager oil companies would be to return to Venezuela." KATHERINE SPECTOR, HEAD OF COMMODITY

STRATEGY AT CIBC WORLD MARKETS IN NEW YORK "My expectation is that we will see the status quo, with a transition to a similar

style of government from Chavez's successor. "On the off chance that we do see the opposition make some headway, with a move to a more liberal government, the key thing for oil is that even if some in the market think this might weigh on prices in expectations of increased supplies,

the reality is that the industry needs the kind of investment that takes years, not months. "On the flip side, we may see some oil traders decide this is bullish if they expect there might be a period of instability after Chavez's death, but I don't think that's the most likely outcome." ANDREW LIPOW, PRESIDENT, LIPOW OIL ASSOCIATES, HOUSTON, TEXAS "Venezuelan imports of petroleum products have been rising from the U.S. and in fact in December Venezuela imported a record amount of petroleum products from the U.S., 197,000 barrels per day, about half of which happened to be gasoline ... So what we see is Venezuela has actually increased its dependence on the U.S. while, vice-versa, the U.S. is reducing its

dependence on Venezuelan oil." "I don't expect any change in Venezuelan production in the near term." JAMES L. WILLIAMS, ENERGY ECONOMIST, WTRG ECONOMICS, LONDON, ARKANSAS "The uncertainty in Venezuela is going to give us a short-term increase in prices and whatever it contributes to prices because of that uncertainty should go away in 30 to 60 days if the election is peaceful and the transition to a new government is okay ... On the other hand, we've got bad economies in Europe, pretty weak in the U.S., and China with a housing bubble to put downwards pressure on prices."

Venezuelan oil industry failing now Krauss 3/8 – energy correspondent (Clifford, “Dwindling Production Has Led to Lesser Role for Venezuela as Major Oil Power” New York Times March 8 2013 <http://www.nytimes.com/2013/03/09/world/americas/venezuelas-role-as-oil-power-diminished.html?src=recg&_r=0> 6/27/13)//AH

But Mr. Chávez’s death on Tuesday has had surprisingly little impact on global oil markets, highlighting how Venezuela’s dwindling crude production and exports have undercut its global power in recent years. International oil prices have barely moved since Mr. Chávez died. OPEC has

decided to increase shipments to the United States and Europe this month, using oil from Saudi Arabia and other Gulf states. Oil company executives, long frustrated by Mr. Chávez’s nationalizations, are voicing only tepid hopes that they could possibly return in full force to what was once one of their crown jewels. Venezuela’s annual oil production has declined since Mr. Chávez took office in 1999 by roughly a quarter, and oil exports have dropped by nearly a half, a major economic threat to a country that depends on oil

for 95 percent of its exports and 45 percent of its federal budget revenues. “Venezuela’s clout on OPEC and on world oil prices has been greatly diminished because of its inability to exploit its enormous resources,” said Michael Lynch, president of Strategic Energy and Economic Research, a consultancy. “In the 1990s, their production was booming and they could thumb their nose at Saudi Arabia and get away with it, but now they have become OPEC’s

poor cousin.” In a fundamental geopolitical turn, Venezuela now relies far more on the United States than

the United States relies on Venezuela. Venezuela depends on the United States to buy 40 percent of its exports because Gulf of Mexico refineries were designed to process low-quality Venezuelan and Mexican crudes that most refineries around the world cannot easily handle. But in recent years, the United States has been replacing its imports of Latin American crudes with oil from Canadian oil sands fields, which is similarly heavy. American imports of Venezuelan oil have declined to just under a million barrels a day, from 1.7 million barrels a day in 1997, according to the Energy Department. And while Venezuelan exports of oil are in decline, its dependency on American refineries for refined petroleum products has grown to nearly 200,000 barrels a day because of several recent Venezuelan refinery accidents. Experts expect Venezuela to send barrels no longer needed in the United States to China, as payments in kind under oil-for-loans contracts. Venezuela’s broken refinery sector has left shortages of gasoline and diesel

in parts of Latin America, opening the door for valuable markets to American refiners. Over his 14 years in power, Mr. Chávez relied heavily on oil revenues to finance his social programs. Energy experts say his gasoline subsidies doubled domestic consumption, cutting deeply into exports, but that his hostility to foreign investment and mismanagement of the state oil company Petroleos de Venezuela were the primary reasons for the steep decline in production. A strike and the firing of management talent and 20,000 workers at the oil company in 2002 led to a steep decline in the company, which has been underscored by the refinery accidents. “Venezuela is a fraction of what it used to be,” said Sadad Ibrahim al-Husseini, a former head of Saudi Aramco’s exploration and production division, “and that’s really because Venezuela’s technocrats have scattered over the world and are no longer active in Venezuela.” Mr. Chávez further overhauled oil exploration and production with a nationalization program in 2006 that ordered a renegotiation of contracts with foreign companies, mandating that Venezuela’s oil company get a minimum 60 percent share in all production projects. Sixteen foreign companies, including Royal Dutch Shell and Chevron, went along with the

new rules, while Exxon Mobil, Conoco Philips and other companies resisted, and their holdings were nationalized. Venezuela has huge reserves, including its Orinoco heavy oil belt, which the United States Geological Survey estimates to have 513 billion barrels of recoverable oil — enough potentially to make Venezuela one of the top three world producers. But foreign oil companies have been wary of investing. Jose Valera, a Houston energy lawyer, said that if Nicolás Maduro, Mr. Chávez’s vice president until he was sworn in as president on Friday, or another member of the Mr. Chávez’s movement was elected president in a special election “it is reasonable

to expect continuity of a substantial portion of the policies.” But as for Venezuela’s economy, he argued, “the situation right now is not sustainable and it’s only a matter of time before some significant changes will have to be instituted.”

Chavez policies have devastated the Venezuelan oil industry and economyWeissmann 13 – (Jordan, “Hugo Chavez's Sad, Oil-Soaked Economic Legacy”, The Atlantic, 3/6, http://www.theatlantic.com/business/archive/2013/03/hugo-chavezs-sad-oil-soaked-economic-legacy/273758/)//mmAs a politician, Hugo Chavez was a force of nature, as strangely masterful as he was polarizing. But as an economic steward, the socialist firebrand was something sadder and far more ordinary: "an awful manager ," as author Rory Carroll succinctly put it in the New York Times today, who squandered a world of opportunity after he took over Venezuela's

presidency in 1999. ¶ It's not that Chavez's rule was an unqualified failure. His government made real strides towards

alleviating poverty and inequality through a concentrated program of wealth redistribution. But mostly, it spent a decade drunk on easy oil profits, dolling them out on its pet causes -- foreign and domestic -- as the country's petroleum industry decayed from within . Today, with Venezuela beset by high inflation and chronic food shortages, Chavez's "socialismo" seems ever more tenuous. ¶ As Pulitzer Prize winner and oil analyst Daniel Yergin observed yesterday, Chavez's entire career path was in many ways paved by the oil market. Venezuela sits on the world's largest proven crude reserves, and in the late 1990s, the dire impact of collapsing prices helped sweep the former paratrooper and failed coup-leader into democratically elected power. As prices went on a tear in the 2000s, they restored the country's footing. In fact, from 2003 through

2008, its per capita growth was faster than or on par with global darling Brazil's. ¶ But crude didn't simply help power the

economy. For all intents and purposes, it became the economy. The year Chavez took office, oil made up 81 percent of Venezuela's exports. By 2009, that figure had reached about 95 percent. By one measure -- known as "oil rents" -- the value of the crude coming out of Venezuela's fields was at one point equal to 41 percent of the country's GDP. ¶ This happened in spite of the fact that the country's oil industry was falling into shambles. In 2001, Chavez pushed through legislation demanding higher royalties from foreign oil companies, which may have led them to pull back investment. In 2002, the same year political opponents launched a failed coup against Chavez, 18,000 workers at the national oil company went on strike to try and pressure new elections, bringing production to a standstill. They were ultimately fired and replaced with pro-Chavez supporters. Finally, in 2006 and 2007, Chavez moved to outright nationalize the industry, leading foreign oil companies like Exxon Mobil to abandon the country. ¶ The upshot of all this was that production plummeted, along exports, which fell from a high of more than 3 million barrels per day to around 1.7 million barrels per day (as shown in this chart from the U.S. Energy Information Agency). ¶ A degraded oil industry was still a highly profitable oil industry, however. The Chavez government began diverting oil earnings into social programs, such as slum missions

that delivered free healthcare and education, along with cheap food for the poor. Those efforts are, in many ways, the one true bright spot of Chavez's embrace of socialism. As shown in the graph below, Venezuela's poverty rate (in red) began a steep fall in the middle of the last decade. As the World Bank reports in its development data, the poor began to claim a slightly larger share of the national income, and overall inequality also fell. ¶ You can also see the gains in measurements such as child mortality. ¶ But judging Chavez's record on poverty in isolation would be a mistake. Brazil, Peru, and Colombia also made significant progress on measures such as poverty and child death under more traditionally capitalist economies. Latin America, on the whole, was growing. It would have been hard for it not too: It's a resource rich continent that's reached relative political stability at a time when the world is

desperate for oil, food, timber, and minerals. It was a bit like being dealt a pair of queens in Texas Hold 'em -- a very good

though not perfect hand, which Chavez didn't play particularly well. ¶ One sign of that ineptitude has been the return of inflation. After falling to 12 percent by 2001 -- low by Venezuela's standards -- it crept back up into the 20s and 30s, eventually reaching the region's highest rate. Much of that may be due to the government's free spending, and particularly Chavez's largesse in the run-up to the 2012

election meant to secure support from the poor. ¶ Inflation, and the haphazard efforts at combating it, have in turn led to shortages. It's now common for long lines of Venezuelan shoppers to wait outside grocery stores to buy necessities like cornmeal and chicken. Though the government has blamed hoarding by unscrupulous capitalists, the real cause seems to be price controls the government has set so low that companies can no longer make a profit bringing their goods to

market. As a result, they're simply choosing not to produce. The situation is dire enough that Venezuela's central bank felt compelled to put together a "scarcity index" of items missing from shelves, that the Wall Street Journal graphed out below. ¶ Chavez isn't leaving Venezuela's as a full on economic basket case (we're not talking about

Zimbabwe circa 2001, here). But rather than helping the poor by setting his country on a path towards long-term prosperity, he attempted to resurrect a long-discredited version of state driven economics that's led to the deterioration of the country's most important industry and wreaked havoc with its consumer market. It's hard to imagine who in the long run will benefit from that legacy.

Venezuela Has Oil

Venezuela has untapped oil reservesKrauss 13 (Clifford, “Dwindling Production Has Led to Lesser Role for Venezuela as Major Oil Power”, The New York Times, 3/8, http://www.nytimes.com/2013/03/09/world/americas/venezuelas-role-as-oil-power-diminished.html?_r=0)//mmPresident Hugo Chávez relished using Venezuela’s oil wealth to project power internationally, nudging OPEC to raise oil prices when he could, showering allies like Cuba and Nicaragua with subsidized oil shipments, and mocking the United States while selling it his crude.¶ Multimedia¶ But Mr. Chávez’s death on Tuesday has had surprisingly little impact on global oil markets, highlighting how Venezuela’s dwindling crude production and exports have undercut its global power in recent years.¶ International oil prices have barely moved since Mr. Chávez died. OPEC has decided to increase shipments to the United States and Europe this month, using oil from Saudi Arabia and other Gulf states. Oil company executives, long frustrated by Mr. Chávez’s nationalizations, are voicing only tepid hopes that they could possibly return in full force to what was once one of their crown jewels.¶ Venezuela’s annual oil

production has declined since Mr. Chávez took office in 1999 by roughly a quarter, and oil exports have dropped by nearly a half, a major economic threat to a country that depends on oil for 95 percent of its exports and 45 percent of its federal budget revenues. ¶ “Venezuela’s clout on OPEC and on world oil prices has been greatly diminished because of its inability to exploit its enormous resources ,” said Michael Lynch, president of Strategic Energy and Economic Research, a consultancy. “In the 1990s, their production was booming and they could thumb their nose at Saudi Arabia and get away with it, but now they have become OPEC’s

poor cousin.”¶ In a fundamental geopolitical turn, Venezuela now relies far more on the United States than the United States relies on Venezuela.¶ Venezuela depends on the United States to buy 40 percent of its exports because Gulf of Mexico refineries were designed to process low-quality Venezuelan and Mexican crudes that most refineries around the world cannot easily handle. But in recent years, the United States has been replacing its imports of Latin American crudes with

oil from Canadian oil sands fields, which is similarly heavy.¶ American imports of Venezuelan oil have declined to just under a million barrels a day, from 1.7 million barrels a day in 1997, according to the Energy Department. And while Venezuelan exports of oil are in decline, its dependency on American refineries for refined petroleum products has grown to nearly 200,000 barrels a day because of several recent Venezuelan refinery accidents.¶ Experts expect Venezuela to send barrels no

longer needed in the United States to China, as payments in kind under oil-for-loans contracts. Venezuela’s broken refinery sector has left shortages of gasoline and diesel in parts of Latin America, opening the door for valuable markets to American refiners . ¶ Over his 14 years in power, Mr. Chávez relied heavily on oil revenues to finance his social programs. Energy experts say his gasoline subsidies doubled domestic consumption, cutting deeply

into exports, but that his hostility to foreign investment and mismanagement of the state oil company Petroleos de Venezuela were the primary reasons for the steep decline in production.¶ A strike and the firing of management talent and 20,000 workers at the oil company in 2002 led to a steep decline in the company, which has been underscored by the refinery accidents.¶ “Venezuela is a fraction of what it used to be,” said Sadad Ibrahim al-Husseini, a former head of Saudi Aramco’s exploration and production division, “and that’s really because Venezuela’s technocrats have scattered over the world and are no longer active in Venezuela.”¶ Mr. Chávez further overhauled oil exploration and production with a nationalization program in 2006 that ordered a renegotiation of contracts with foreign companies, mandating that Venezuela’s oil company get a minimum 60 percent share in all production projects. Sixteen foreign companies, including Royal Dutch Shell and Chevron, went along with the new rules, while Exxon Mobil, Conoco Philips and other companies resisted, and their

holdings were nationalized.¶ Venezuela has huge reserves, including its Orinoco heavy oil belt, which the United States Geological Survey estimates to have 513 billion barrels of recoverable oil — enough potentially to make Venezuela one of the top three world producers . But foreign oil companies have been wary of investing.¶ Jose Valera, a Houston energy lawyer, said that if Nicolás Maduro, Mr. Chávez’s vice president until he was sworn in as president on Friday, or another member of the Mr. Chávez’s movement was elected president in a special election “it is reasonable to expect continuity of a substantial portion of the policies.” But as for Venezuela’s economy, he argued, “the situation right now is not sustainable and it’s only a matter of time before some significant changes will have to be instituted.”

Oil K2 Econ

Oil key to Venezuelan economy – empirically provenMoscona-Skolnik 13 (Jacob, “A New Doctrine for Sustainable Development: Case Study in Venezuela”, Harvard International Review, 6/12, http://hir.harvard.edu/blog/jacob-moscona-skolnik/a-new-doctrine-for-sustainable-development-case-study-in-venezuela)//mmOn Friday, UN Secretary General Ban Ki-Moon was presented with the proposed set of Sustainable Development Goals (SDGs). This new Development agenda will serve as a replacement of the Millennium Development Goals (MDGs), a set of eight initiatives designed in 2000 to reduce global poverty and increase quality of life by 2015. Anticipating the end of the established timetable for completing the MDGs, in August of 2012 the UN Secretary-General established the Sustainable Development Solutions Network (SDSN), a body representing all branches of civil society and academia, intended to work closely with the UN on a new global development plan. A primary focus of the new plan is to “decouple economic growth from unsustainable patterns of production and consumption,” that is allow for continued economic development without harming the environment. What happens when we consider this goal in the context of oil-wealthy Venezuela? This article focuses on two claims made in the SDSN Report and on the ways in which they relate to one another: (1) that all countries can and must achieve development “within planetary boundaries” and (2) that all countries have the “right to development.” The Report argues that high-income countries may not use environmental concerns as an excuse to limit development in low-income regions. But what happens in an instance where economic prosperity in a developing country (that, as in the second claim, is endowed with the right to individual development) hinges on practices that may not promote healthy global practice? Venezuela presents an illustrative example. ¶ In 2011, former President Hugo Chavez reported 297 billion barrels of oil in Venezuelan reserves, which (assuming this statistic is valid) would place Venezuela above Saudi Arabia as the country with the largest national oil reserves. In January of 2013, Venezuela shipped 898,000 barrels per day to the United

States; while subsequent oil sales to the US have dropped, the drop is largely explained by Venezuela’s shifting economic ties in the direction of the Asian market. Venezuelan oil , the “black gold” of Chavez’s administration, is the foundation of Venezuela’s economy and is largely responsible for recent

economic improvements there, including last year’s 5.6% national economic growth. Indeed, in 2002, a dire economic downturn followed the attempted coup against Chavez and the subsequent strike of state-run oil company workers, conveying the broad importance of the oil industry to Venezuela's economy . Despite increased economic diversification, exemplified by a 10.6% increase in the non-oil sector of the Venezuelan

economy in 2005, high oil sales are still considered essential to the economy by the Council on Foreign

Relations (CFR). Many claim that maintaining high oil sales will be an essential element for new president Nicholas Maduro's ability to maintain popular support and legitimacy. Thus, oil exportation may be a key component of any reasonable plan for economic and social development in Venezuela.

Oil key to the economic growth – 90% of exports, 30% of GDP, 50% of government incomeSullivan 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)Economic Conditions¶ With an estimated 211 billion barrels of proven oil reserves (the largest in the

hemisphere, up from previously reported 99 billion in proven reserves), Venezuela’s major economic sector is petroleum, which accounts for 90% of exports, more than 30% of its gross domestic product, and half of the government’s fiscal income.50 The country is classified by the World Bank as an upper middle income developing country because of its relatively high per capita income of $11,820 (2011).51¶ Despite Venezuela’s oil wealth, economic conditions in the country deteriorated in the 1990s. The percentage of Venezuelans living in poverty (income of less than $2 a day) increased from 32.2% to 48.5% of the population between 1991 and 2000, while the percentage of the population in extreme poverty (income of less than $1 a day) increased from 11.8% in 1990 to 23.5% in 2000.52¶ In 2002-2003, the country’s political instability and polarization between the government of populist President Hugo Chávez and the political opposition contributed to a poor investment climate, capital flight, and declines in gross domestic product (GDP). A national strike orchestrated by the political opposition from late 2002 to early 2003 contributed to a contraction of the national economy by almost 9% in 2002

and 7.8% in 2003.53¶ From 2004-2008, however, Venezuela benefitted from the rise in world oil prices that began in 2004. Fueled by the windfall from oil price increases, the Venezuelan economy grew by over 18% in 2004 and averaged 8.6% growth annually from 2005 through 2008 (see Figure 2). The economic boom allowed President Chávez to move ahead with economic goals that fit into his “Bolivarian revolution.” These included the expansion of a

state-led development model, renegotiation of contracts with large foreign investors (especially in the petroleum sector) for majority government control, and the restructuring of operations at the state oil company, Petroleos de Venezuela S.A. (PdVSA). The government also nationalized numerous enterprises, including telecommunications, electricity, and steel companies, as well as cement, coffee, sugar, flour, and milk production facilities.

Oil/Econ K2 Stability

Oil key to stability and preventing Venezuela from becoming a failed stateNagel 5-16 (Juan Nagel, Writer for Foreign Policy, May 16, 2013. “Is Venezuela Becoming a Failed State” http://transitions.foreignpolicy.com/posts/2013/05/16/is_venezuela_becoming_a_failed_state) //MJFurthermore, the country's current power clique seems particularly inept in dealing with the complicated economic and political conditions it has inherited. Nicolás Maduro's only claim to legitimacy is that Hugo Chávez chose him. Now he is left with the thankless task of dealing with the Chávez mess. He has surrounded himself with a Cabinet composed 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 problem for 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 undeclared in civil war, and there are claims that drug smuggling has permeated 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 be maintained if oil rents were to dry up significantly, and for a prolonged period. This could lead to the type of problems that have bedeviled Colombia, or even poorer neighboring failed 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.

The U.S. oil relationship with Venezuela is key to stability Ladislaw and Verrastro 13 - Sarah O. Ladislaw is co-director and senior fellow with the Energy and National Security Program at the Center for Strategic and International Studies (CSIS) in Washington, D.C. Frank Verrastro is senior vice president and James R. Schlesinger Chair for Energy & Geopolitics at CSIS.(Sarah and Frank, “Post-Chavez Outlook for Venezuelan Oil Production”, http://csis.org/publication/post-chavez-outlook-venezuelan-oil-production, Center For Strategic and International Studies)//SRWhat about Venezuela’s relationship with the United States? Over the last ten years the s ustained trading relationship between the United States and Venezuela has been one of the stabilizing forces in an otherwise contentious and sometimes volatile relationship. U.S. refineries in the Gulf Coast are specifically designed to process Venezuela’s sour and medium to heavy crude and serves as its natural market. Despite oil production being down, the United States still imports just under a million barrels of crude per day from Venezuela (down from a peak of 1.4 mmbd in 1997) and, as stated earlier, the government of Venezuela is highly dependent on those revenues for their ongoing stability, especially as revenue from other exports and domestic consumption decline. As we look ahead to another period of transition in Venezuela it is important to be mindful of the potential for disruption and to look for ways to mitigate the impacts of such disruption, but it is equally important to remember the trade ties that bind the two countries for the time being and to find opportunities to drive change in a positive direction.

Expanding market-based investment is essential to Venezuelan stability and Maduro’s grip on powerCampbell 13 (4/16/2013, Darren, “A new leader could signal change for Venezuela’s troubled oil and gas sector; If Nicolas Maduro can reverse the industry's decline, it could siphon off investment in Alberta's oil sands,” http://www.albertaoilmagazine.com/2013/04/a-new-leader-could-signal-change-for-venenzuelas-oil-and-gas-sector/, JMP)That’s because Venezuelan heavy oil is a competitor to the bitumen and heavy oil Alberta produces, and as long as the Venezuelan oil and gas industry is badly underperforming, some of the investment that could be going to develop its reserves will flow to the oil sands.¶ But now that Maduro is the new boss in Venezuela, is he likely to reverse the decline?¶ Devon Energy Big Box¶ To gain some insight into that question, I contacted Roger Tissot – a native of Colombia who is now a British Columbia-based industry consultant who specializes in South America. Last June, Tissot wrote an essay on Chavez and the future of the Venezuela oil and gas industry that appeared in Alberta Oil.¶ Maduro was Chavez’s hand-picked successor, and knowing that, Tissot says no one should expect a

drastic reversal of policies – or a drastic turnaround in the industry’s fortunes.¶ However, the status quo can’t continue,

either. Maduro needs oil and gas revenue to fund the country’s social programs and keep the

country from falling into chaos . A better run, more free market-leaning oil and gas industry will help Maduro accomplish this and keep him in power longer.¶ Therefore, Tissot thinks Maduro has little choice but to shake things up when it comes to oil and gas matters.¶ “One could expect a government more accessible to foreign investments, and foreign investors concerns (rule of law, security of payments, stability of contracts.) Although it is too early to say, one should expect the Venezuelan oil sectors – after years of stagnation and mismanagement – to perhaps start showing some signs of life again,” he

wrote in an email exchange. “How soon and how deep is something that will depend on how Mr.

Maduro’s administration performs.

The oil industry is key to political and economic stability in Venezuela—statistical data and empirical analysis Wilkerson 12 – Master of Arts in Political Science at the University of Texas (Susan Janell, “Venezuela; A Case Study,” The University of Texas at Arlington, Proquest)The qualitative analysis of events between 1976 and 2010 support the fact that when the market value of petroleum significantly decreased, so did the stability and sustainability of Venezuela’s socialist democracy; first

with neoliberal reform and next as two coup attempts shortly followed. The data suggests that when the market value of petroleum significantly declined, austerity measures and neoliberal reform created a greater division of classes that left a majority of Venezuelans in poverty. The austerity measures and

neoliberal reform brought a decline to Venezuela’s socialist policy of state ownership and redistribution. The growing division of classes led to the growing dissatisfaction with the nation’s redistributive system and the possibility of successful revolt increased as two coup attempts temporarily brought political instability that threatened Venezuela’s democracy. While the market value of petroleum was on the decline during the Bolivarian Revolution, the revolution was a successful democratically instituted

revolution. However, as the market value of petroleum increased, so did Venezuela’s socialist policy and support for President Chavez. As a result, the opposition was successful at a coup attempt or subsequent

neoliberal reform. Therefore, for the case of Venezuela, the qualitative data supports the fact that there is a positive correlation between the market value of petroleum and the voters’ satisfaction with the nation’s redistributive system and possibility of successful revolt. Moreover, the quantitative data also supports the fact that there is a positive correlation between the market value of petroleum and the nation’s GDP/cap. As a result of these observations, it can be argued that the nationalization of Venezuela’s oil industry created a significant positive correlation between the market value of petroleum and the stability and sustainability of the nation’s current socialist democracy.

The poor economy is creating political instability and a rough transition

Nagel 5/10 – Professor of Economics at the Universidad de los Andes in Santiago, Chile (Juan, “Venezuela’s economy is a tangled mess,” Foreign Policy, May 10, 2013, http://transitions.foreignpolicy.com/posts/2013/05/10/venezuela_s_economy_is_a_tangled_mess)//SSVenezuela's economy is in an endless state of disarray. Inflation is soaring, and basic staples are increasingly harder to find. Electricity blackouts are frequent, and crime presents an enormous problem for citizens and companies crazy enough to do business there.¶ The problem for Venezuelans is that their government has no clue as to what to do.¶ The dire state of the economy is the one thing both sides of Venezuela's contentious political scene can agree upon. Yesterday, the Central Bank announced that the monthly inflation rate for April was 4.3 percent, up from 2.8 percent in March. These monthly rates are higher than what many countries see in an entire year. In fact, accumulated inflation for the first four months of 2013 has already reached 12.5 percent, and it shows no sign of slowing down. Crucially, the prices of "food and non-alcoholic beverages" segment -- which affects poor consumers the most -- grew by 6.4 percent last month.¶ Venezuela's persistently high inflation has several root causes. Because of repeated elections and populist tendencies, the government continues to spend much more than it earns via taxes. Since it has few options to finance its deficit, it has been forced to devalue the currency twice this year, and this means producers - who mostly rely on imports to supply the market - are forced to pass this on to consumers.¶ Taming inflation would require the government to order their finances, but the administration seems reluctant to do so. For example, according to government sources, giving away gasoline for (practically) nothing costs Venezuelan taxpayers $24 billion in direct subsidies and lost

revenues. This amount represents roughly a quarter of all spending included in the 2013 budget. But regardless of how dire the situation is, the government refuses to consider decreasing subsidies because it is fearful of a public backlash.¶ Unsurprisingly, it is getting harder to find items such as sugar, cooking oil, and corn flour -- an essential part of any Venezuelans' diet. According to latest figures from the Central Bank, scarcity peaked in April to reach a historic record of 21.4 percent. This means that roughly 1 of every 5 products consumers want to purchase is missing from the shelves. Not surprisingly, Venezuelan consumers are being forced to queue for basic staples, sometimes in an undignified manner. The photo above shows shoppers noting their place in line while shopping for corn flour.¶ Rolling electricity blackouts continue to be yet another thorn in the government's side. They've been the norm following the complete state takeover of the electricity industry in 2007. Sadly, newly appointed Electricity Minister Jesse Chacón has already shown signs that he does not have the understanding or the willpower to seriously address the problem.¶ Chacón has hinted that part of the issue is the bloated workforce in the state electricity companies, which currently has at more than 50,000 employees. However, he has vowed not to let workers go. Instead, he proposes dividing the state-owned electricity holding into different subsidiaries, something that will clearly not alter the underlying financial realities of the company.¶ He has also announced a rise in heavily subsidized electricity rates, although several details -- such as the amount of the rise and who it would apply to -- remain unknown. This might make sense in theory, but in practice will do nothing to inject fresh cash into the sector, since the country's soaring inflation will eat away any short-term financial benefit from the rate hike.¶ On the issue of crime, the government is also showing little creativity. They have publicly met with gang leaders, and are calling out to them, urging them to change their ways. Sadly for the government, they do not seem to realize that gangsters are not susceptible to persuasion or public pleas. The government's other response -- putting the military on to the streets -- may create more problems than it solves, since the

military is not adept in law enforcement tactics, and is corrupt anyway.¶ Noted Mexican journalist Alma Guillermoprieto recently wrote in the New York Review of Books that the Venezuelan government is collapsing "into a scary collective insanity." She adds that "the growing tumult and disorder is so extreme, so clearly provoked, and so destructive that one must at least consider the possibility that it is being encouraged by defeated chavista rivals now smelling wounded prey, or from those sectors of the military who have never welcomed the Cuban presence in Venezuela, or both."¶ Whether the chaos in Venezuelan society is provoked or not, the fact remains that ordinary Venezuelan citizens are suffering the brunt of these mistakes. The problems currently accumulating are so large, so seemingly intractable, it's not a stretch to say that solving them will be a task for an entire generation.

Economic crisis causes instabilityCórdova and Seligson 09 – *post-doctoral fellow in the department of political science at Vanderbilt University and the Latin American Public Opinion Project (LAPOP) AND **Centennial Professor of Political Science, professor of sociology, and director of the Latin American Public Opinion Project (LAPOP) (Abby and Mitchell A., “Economic Crisis and Democracy in Latin America,” Academy For Future International Leaders, October 2009, http://afil.tamu.edu/Readings%202013/Economic%20crisis%20and%20Democracy%20in%20Latin%20America.pdf)//SSOur analysis suggests that¶ adverse economic conditions¶ associated with the current¶ global economic crisis are¶ likely to have ominous consequences for citizen support for¶ key elements of democracy in¶ Latin America and the Caribbean. While Davies’s “sudden¶ downturn/revolution connection” is

far from a certainty,¶ declines in consolidation and¶ movements in the direction of¶ illiberal democracy (Diamond¶ 1999) are likely in countries in¶ which the crisis strikes the hardest. In those

countries, if the¶ economic crisis is not managed well, it may result in growing¶ numbers of discontented individuals who lack trust in elections¶ and representation and who express low support for electoral¶ democracy as the best form of government. This combination,¶ depending

on the duration and severity of the crisis may well¶ create a fertile ground for growing support for non-democratic¶ choices

and, as Davies long ago suggested, for political unrest.

Spills Over - LAInstability in Venezuela spills over to rest of the regionShifter 13 --- vice president for policy at the Inter-American Dialogue (7/16/2003, Michael, “Why Venezuela Matters,” http://nationalinterest.org/article/why-venezuela-matters-2388?page=1, JMP)For the United States, Venezuela is not just another Latin American country in turmoil. It is, after all, the fourth largest oil supplier to the U nited S tates, accounting for 15 percent of its oil imports. Senior US officials point to oil as the overriding interest in Venezuela. In the wake of US military action in Iraq, and the tremendous uncertainty in the Middle East, one would think that Venezuela would acquire even greater urgency for the United States. Oil works both ways, however. Shrewdly, the Chavez government allows the oil to flow precisely to avoid antagonizing foreign operations and, especially, the United States. Oil aside, there are other key U.S. interests at play in Venezuela, though these are less widely recognized. Regional stability and security top the list. The five countries that make up the Andean region of South America are particularly convulsed. Continued chaos and escalating violence in Venezuela would not only inflict damage on the country itself, but could well undermine the ability of neighboring countries to achieve and maintain social peace. In this regard, Colombia deserves special mention. The United States has long sought to bolster the Colombian government's efforts to extend state authority and control. Since 1999, Colombia has received some $2.5 billion in security aid from the United States, making it the largest beneficiary outside of the Middle East. Yet, there has been increasing violence on the Colombia/Venezuela border involving Colombian guerrilla and paramilitary forces - and even Venezuela's armed forces. Should the Venezuelan crisis become a military conflagration , the resulting instability would be detrimental to longstanding US policy objectives. The conditions are combustible, and the risks are growing.

Instability spills overBlanco & Grier 09 – Department of Economics University of Oklahoma (Luisa & Robin, “Long Live Democracy: The Determinants of Political Instability in Latin America”, 2009, Journal of Development Studies, Vol. 45 Issue 1, http://www.tandfonline.com/doi/abs/10.1080/00220380802264788#.Uc3p_j7wJa8)//MJPolitical instability can be contagious since revolutionary groups and ideologies ¶ can cross borders. Countries in “bad neighborhoods” might suffer from neighboring ¶ instability, especially if that instability causes a flood of refugees into the country or if ¶ guerilla armies use a country as a base from which to attack their home country. ¶ Goldstone et.al. (2004) find that

countries with four or more political unstable neighbors ¶ are more likely to experience political instability, while Schatzman (2005) finds that ¶ political instability in neighboring countries increases the probability of a country ¶ experiencing collective protests.15 We create a variable that is equal to the number of ¶ neighbor countries that experienced political instability during each five-year period. We ¶ follow Goldstone et.al.’s approach and consider a country as politically unstable if there ¶ was either an ethnic conflict or a revolutionary war during the year, since these are the ¶ types of instability that are most likely to affect neighboring countries. Figure 1 ¶ illustrates the “bad neighborhoods” in Latin America and shows that countries in trouble ¶ tend to be clustered in the same region. There are two main blocs: the first is in Central ¶ America and includes Guatemala, El Salvador, and Nicaragua; the second is in ¶ northwestern South America and includes Colombia and Peru.

Instability in Venezuela will spill over

Cheney 5/13- (Catherine, “Venezuela’s Opposition in a Favorable Position Amid Political Instability”, http://www.worldpoliticsreview.com/trend-lines/12937/venezuela-s-opposition-in-a-favorable-position-amid-political-instability, World Politics Review)//SRSince Nicolas Maduro’s narrow victory over opposition candidate Henrique Capriles Radonski in Venezuela’s

presidential election last month, tensions have escalated in the country, most recently with rival marches in the streets.Last week, lawmakers engaged in a fistfight in the Legislative Assembly, in an altercation

underscoring Venezuela’s political uncertainty following the death of former President Hugo Chavez. Michael Shifter, president of the Inter-American Dialogue, called Maduro’s inability to keep order striking.“A lot of his

rhetoric and a lot of his actions reflect a kind of flailing about,” Shifter said of Maduro, explaining that while “he is trying to just keep this government on course and have it settle down, it’s not settling down.”Chavez had a unique ability to preserve political stability, Shifter said, explaining that Maduro does not have the skills nor command the loyalty Chavez did.Meanwhile, Capriles is trying to sustain the unity of the opposition “in the face of what seems to be almost an implosion of the government,” Shifter said. Capriles must strike a balance between being prepared for the possibility that the Maduro government might fall, while also demonstrating restraint given the risk of violence. “You just have this sense of tremendous disorder within the government, and that helps Capriles,” Shifter said. “His challenge, of course, is how to figure out in a smart way how to keep the opposition together and have them show restraint and patience until the right moment.”“Demanding the recount and pressing the government at every turn makes a lot of sense,” Shifter said. “At the same time, [Capriles] clearly doesn't want to be part of what could be a violent scenario.”While Capriles may have some legitimacy, Shifter said the dispute between Maduro and Capriles is “a might versus right situation.” “The forces are aligned against Capriles in the sense that the government controls all the institutions and the military is on their side and the media is on their side and the oil company on their side,” Shifter said, referring to PDVSA, the national energy company. Shifter once thought the Maduro victory meant Capriles would fade from the headlines,

but he told Trend Lines he has revised this view.“The forces are moving in a direction that is more favorable to the opposition than the government,” Shifter said, noting that the unraveling of the government is a mobilizing factor for the opposition.Shifter said Capriles, who also lost a previous presidential vote in October 2012, has worked to build bridges with more moderate figures in the Chavista camp. But it remains to be seen whether he can keep hard-liners within his own opposition camp in check, Shifter said. He also emphasized how, even as the dynamics in Venezuela point to spreading chaos and disorder, the rest of Latin America is keeping quiet. “The recount that the electoral council agreed to has not been a serious process, and Capriles has called them on it, and he has very little support from around the region for this,” Shifter said, adding that even when opposition figures were bloodied in congress last week, regional silence about Venezuela’s domestic politics continued. Economic relationships with countries that depend on Venezuela for oil may be part of the reason for this

inaction, Shifter explained. “The deterioration is pretty dramatic. If it gets worse, at what point does it become a real issue for the rest of the region?” Shifter said. He said the most interesting question to him is at

what point other Latin American governments will break their silence to avoid “a disastrous scenario.”

Spills Over – Columbia

Venezuelan economic and political instability spills over to ColumbiaCohn and Rao 6/10 - *Reuters correspondent AND **Reuters investment strategy correspondent (Carolyn and Sujata, “Venezuela instability a risk for Colombia growth - finance minister,” Reuters, June 10, 2013, http://uk.reuters.com/article/2013/06/10/uk-colombia-economy-idUKBRE9590SS20130610)//SS(Reuters) - Colombia's economy faces its greatest risks this year from instability in neighbouring Venezuela and the slump in commodity prices, the country's finance minister said on Monday.¶ Growth forecasts for the Andean country are likely to be downgraded, with 4.4-4.5 percent a likely rate for 2013, Mauricio Cardenas told Reuters

editors and Reuters Television.¶ Future growth however could see an annual boost of two percentage points, thanks to planned increases to infrastructure spending and if peace talks with Marxist-led FARC rebels - due to restart on Tuesday - succeed in ending half a century of insurgency.¶ "We are going to make an announcement by the end of this week of between 4.4 and 4.5 percent, we are revising our projections a little downward," he said of the growth forecast which is currently at 4.8 percent.¶ The exact revision is dependent on economic data coming through this week.¶ Falling commodity prices are an issue for Colombia, whose main exports include oil, coal and coffee.

The other worry is Venezuela, which is facing shortages of basic goods from toilet paper to wheat flour, raising fears of instability.¶ "Developments in Venezuela are very important to us - a stable growing economy in Venezuela is very important from Colombia's perspective," Cardenas said.¶ He added Colombia has been talking with Venezuelan ministers about the possibility of offering food for oil, or food for future oil reserves.¶ "We are very dependent on commodity prices, and whatever happens to future oil prices," Cardenas said.¶ The government was likely to keep a Brent crude oil reference rate of around $100 (64.25 pounds) a barrel for budget purposes, he said, not far below the current $104 level.¶ The U.S. shale gas revolution has also cut the United States as an export destination for Colombia's coal, he added.

Econ/Stability K2 LA Democracy

Strong economy and solving regional security k2 Latin American democracyCasas-Zamora 11(Kevin, Brookings, http://www.brookings.edu/research/opinions/2011/02/02-latin-america-casaszamora, 2/2/2011Second, the survey consistently found that the perception of governmental economic performance and opinions about the president are among the most important factors underlying democratic attitudes in Latin America. Both variables are statistically significant to explain support for democracy, support for the political system, and satisfaction with democracy. This is as interesting as

it is unnerving. For what this implies is that two of the crucial factors that explain the resilience of democratic attitudes are highly volatile. These results suggest that a lot of people in the Americas appear to like democracy because they are fond of their current government or president. Yet, we know well that public opinion can be terribly fickle when it comes to judging governments and leaders. The more interesting question is why opinions of the government’s and the president’s performance have come to matter so much to explain support for democracy as a whole in the Americas. Part of the answer is clearly inherent in the nature of the presidential system –prevalent in the region—, an institutional arrangement in which politics largely revolves around the presidential figure. To this we must add the impact of television, which gives visibility to leaders rather than parties and institutions, and hence turns political debates into personality contests. All this is straightforward and, in the case of television, is happening more or less everywhere. Yet, I suspect that the sheer consistency and intensity of this finding in the Americas is related to the very low opinions that citizens have of other critical representative institutions, such as political parties and congresses, a low regard that the Americas Barometer confirms. Even in a region riddled with law enforcement inefficacy, corruption and brutality, the national police (46.9 on a 0 to 100 scale) and the judiciary (46.5), are more trusted than Congress (45.2) and political parties (35.2). Levels of trust in the latter, in particular, trail by a long margin those enjoyed by any other institution. The truth is that people in Latin America care very little about parties and congresses, and expect even less from them. What this survey seems to be saying is that citizens in Latin America support the political system and feel represented by it to the extent that they perceive that the president and the government deliver tangible benefits to them. This is risky. When parties and congresses are endowed with greater legitimacy, democratic systems have an extra layer of protection against the reversals of fortune of governments and presidents. The citizenry’s demand for representation and accountability as well as their expectations for a functioning political system are shared by a broader range of political actors, in a way that makes the system more resilient to the faults and shortcomings of any one of them. This is obviously better for the sake of democratic stability. Third, as in other opinion polls,

crime and insecurity emerge in the Americas Barometer 2010 as very serious obstacles for democratic consolidation. While some of the national crime victimization figures provided by the survey appear counterintuitive (showing, for instance, that twice as many people are victims of crime in Ecuador and Peru as in Honduras), the 31% victimization rate detected by the survey for the region as a whole is in fact exactly the same figure yielded for Latin America by Latinobarómetro 2010. This number is twice as high as the average rate detected in thirty developed countries by the International Crime Victimization Survey in 2005. Moreover, the Americas Barometer shows that for eleven countries in Latin America where this question has been consistently asked, the victimization rate has grown almost 50%

since 2004. The deleterious political effects of both crime victimization and perception of insecurity are extensive. According to the results of this survey, both variables visibly and negatively affect support for the political system, levels of interpersonal trust, and support for the rule of law. They make people less likely to be in the comfort zone for democracy (i.e. where high support for

political system and high tolerance are robust). Interestingly, the real danger here is less that people in Latin America would be willing to support a dictatorship to solve the security problems.

Instability in Venezuela undermines democracy in Latin AmericaIASW 13 (“Venezuela’s Uncertain Political Transition”, International Crisis Group Latin America Briefing, 6/11, http://interamericansecuritywatch.com/venezuelas-uncertain-political-transition/)//mmThe death from cancer on 5 March of President Hugo Chávez triggered a snap presidential election just 40 days later that his anointed successor, Nicolás Maduro, won by a margin of less than 1.5 per cent over Henrique Capriles of the Democratic Unity

(MUD) alliance. But the tight result and legal challenges to the validity of the vote cast a shadow over the sustainability of the new administration. A country already deeply polarised is now clearly divided into two almost equal halves that appear irreconcilable. The validity of the election

result remains to be clarified and the full independence of the electoral authorities, judiciary, and other key institutions restored. But to address the governance crisis and allow Venezuela to tackle its serious economic and social problems, national dialogue must prevail over confrontation and consensus over partisan violence.¶ With institutions weakened by the Chávez government’s long-term policy of presidential co-optation, the MUD may ultimately have little practical recourse at the domestic legal level, leaving – it believes – few options but a policy of peaceful street demonstrations and other forms of political pressure, including appeal to international public opinion. When political discourse takes the form of large-scale street protest, there is always a risk of violence. There have already been several deaths and numerous injuries, often in confused circumstances, that the government seems keen to exploit so as to discredit the opposition.¶ The power vacuum produced by Chávez’s death is a fundamental source of potential instability. His personal authority over his movement, the armed forces and the state bureaucracy is irreplaceable for the regime, certainly in the short term. This vacuum is particularly grave because the country is on the brink of a recession, has a large public-sector deficit and suffers from a growing scarcity of basic goods and one of the world’s highest inflation rates . ¶ An extremely personalised political regime has been replaced by an unpredictable collection of group and even individual interests. The costs of having dismantled important elements of democracy and the rule of law over the past fourteen years are being paid by both the regime and the political opposition. Venezuela is ill-prepared for the post-Chávez transition and urgently needs to reconstruct its social and political fabric. The immediate efforts need to focus on avoiding escalation of extreme polarisation into political violence, complemented by a strong push for a basic understanding on how to coexist without Chávez.¶ Short-sighted behaviour by either side could propel the country into a political and economic crisis from which it would be difficult to recover. It is encouraging that the opposition leadership has emphasised non-violent forms of dissent. There have also been indications from the government that some of its members understand the need for dialogue and consensus, though this has not yet been followed by corresponding actions. Ideally Maduro would appoint some opposition figures to his government, but at the very least those in position to do so on both sides need to initiate dialogue and consensus building now.¶ Most of the international community, particularly regional partners and neighbours, have tended to look the other way when assessing democracy and human rights in Venezuela. This must change. Instability would at the least further undermine the regional consensus on democratic norms . Multilateral organisations, such as the Union of South American Nations (UNASUR) and the Organisation of American States (OAS), and regional powers, such as Brazil, need to make clear that they will not tolerate further destruction of the rule of law and democratic values.¶ To avoid unpredictable escalation of the polarisation and political violence:¶

Stability K2 FARC Negotiations

Venezuelan stability is key to negotiations with FARCSanchez 13 – (Fabiola, “Venezuela will Continue to Support Colombian Peace Talks with FARC Rebels, Foreign Minister Says,” Huffington Post, 1/18/13, http://www.huffingtonpost.com/2013/01/18/venezuela-pledges-to-keep_n_2507332.html)//SRVenezuela's vice president and foreign minister assured Colombia's top diplomat on Friday that their government is willing to keep backing peace talks between the Colombian government and leftist rebels. Venezuelan President Hugo Chavez has expressed support for the talks in Havana, and newly appointed Foreign

Minister Elias Jaua said that policy would continue. "Vice President Nicolas Maduro and I reiterated all our willingness to accompany the Colombian people's effort for peace," Jaua said after meeting with Colombian

Foreign Minister Maria Angela Holguin. Maduro was present during part of their meeting, which came several days after talks between representatives of the Colombian government and the Revolutionary Armed Forces of Colombia resumed in Cuba following a holiday break. Delegates from Venezuela and Chile have been designated as facilitators for the talks between the rebel group known as the FARC and Colombia's government, though their exact roles have not been explained. The foreign ministers also discussed efforts to boost ties and border security, and Holguin expressed solidarity with Chavez amid his struggle with cancer. Chavez remains out of sight in Cuba more than five weeks after undergoing cancer surgery. "We accompany you constantly at this difficult time you're going through," Holguin said after the meeting. Holguin said she understands the president has been recovering. Without giving details, she expressed confidence that "everything is going to be through the proper path." Chavez hasn't spoken publicly since before his Dec. 11 operation, and Maduro announced Jaua's appointment as foreign minister on Tuesday after meeting with the president in Havana. A decree appointing Jaua and bearing Chavez's signature was published in the Official Gazette, but opposition politicians and legal experts have questioned the validity of the signature noting that the decree states it

was signed in Caracas, though the president was in Cuba at the time. Since Colombian President Juan Manuel Santos took office in

2010, he has built friendly ties with Chavez, ending the animosity between the two countries during the presidency of Santos' predecessor, Alvaro Uribe. Political tensions during Uribe's tenure had led to a drop in trade, and in the past two years commerce between Colombia and Venezuela has been rebounding. In previous years, Colombian officials accused Chavez's government of providing refuge to rebels, and the U.S. government has said some senior Venezuela military officials have provided the FARC with arms and helped it traffic in cocaine. Chavez and his government have denied those accusations, though

the rebels have expressed affinity with the socialist leader's ideals. Fernando Gerbasi, a former Venezuelan ambassador to Colombia, said Holguin's visit to Caracas had been scheduled weeks ago and said he didn't think her visit was related

to the uncertain situation in Venezuela surrounding Chavez's condition. He said Colombia's foreign minister in particular

wanted to make sure Venezuela will keep cooperating in the peace talks. Vicente Torrijos, a political

analyst at Rosario University in Bogota, said stability in Venezuela is crucial for Colombia so that

Venezuela's government continues supporting the negotiations.

That’s key to solve narcoterrorECR Group 12 – (“ECR Welcomes Colombian Leadership in Bringing FARC to Negotiating Table,” European Conservatives and Reformists Group, 9/4/12, http://ecrgroup.eu/?p=6983)//SRColombian President Santos should be congratulated for showing significant leadership that has led Latin America’s oldest insurgency to the table for peace talks, Charles Tannock MEP, European Conservatives and Reformists group foreign affairs spokesman, said today. His words were echoed by ECR Vice-President Jan Zahradil MEP who is the European Parliament’s shadow rapporteur on a forthcoming Free Trade Agreement between the EU and Colombia-Peru. Both men said that the EU can play a positive role in the peace

talks by swiftly agreeing a Free Trade Agreement with the country that will create new business opportunities. FARC is a narco-terrorist organisation whose insurgency has been responsible for thousands of murders and kidnappings over the past 45 years. However, its public support has been dramatically waning in Colombia thanks both to a strengthening of the security and justice

apparatus, and economic growth. Dr Tannock said that the time has now come for FARC to lay down its arms. It has seen the number of fighters in the organisation cut in half, and one of its leaders – Alfonso Cano – killed thanks to the improved security apparatus and military resistance in Colombia. Dr Tannock said: “Recent Colombian governments have shown that a tough stance on terror is effective. The

strengthening of the security apparatus of Colombia has caused homicide and kidnapping in the country to fall significantly, but only a lasting settlement will bring them to an end. “President Santos should be congratulated for

showing strong leadership in bringing FARC to the table. Negotiations will doubtless be tough but FARC should surely realise that it has negligible public support and achieving its objectives through violence will never be possible. “The turnaround in Colombia’s campaign against FARC has been assisted by strong economic growth. The greatest contribution the EU can make to the peace process is to swiftly agree the Free Trade Agreement on the table so that we can open up new opportunities for businesses on both sides. Creating new economic activity will help us, and help Colombia during times of great transition.” Jan Zahradil said: “The ECR group leadership visited Columbia last year and we were extremely impressed with the country. Our visit reinforced the view that there is an enormous potential for the EU and Colombia to increase business and trade. A Free Trade Agreement will deliver significant benefits for both sides and the ECR will continue to support its swift adoption and implementation.”

Stability Good – Laundry List

Venezuelan instability undermines democracy, collapses regional counternarcotic efforts and kills U.S.-LA relationsDuddy 12 (Patrick A. Duddy, Visiting Senior Lecturer, Duke University. September 2012. Contingency Planning Memorandum. “Political Unrest in Venezuela.” http://www.cfr.org/venezuela/political-unrest-venezuela/p28936)

Political instability and violence in Venezuela would damage U.S. efforts to promote democracy, increase regional cooperation, combat narcotics, and protect its economic interests in the region. Democracy Promotion: The United States has worked for decades to promote democracy in the Western

Hemisphere. In recent years, Chavez has become increasingly authoritarian, undermining important political institutions, giving more powers to the presidency, and

weakening both civil society and the independent media. The United States should view a suspension or further deterioration in the quality of

Venezuela's democracy as a setback for U.S. policy and for the hemisphere. The emergence of a military junta or a compromised Chavez regime would also likely increase Iranian and Cuban influence in Venezuela. It already has a close relationship with Iran from which it reportedly receives advanced weapon systems and other assistance. Cuba sends thousands of teachers and technical, medical, and security advisers in exchange for an estimated ninety to one

hundred thousand barrels of oil per day. Regional Cooperation: The United States has an interest in nurturing regional cooperation particularly under the auspices of the Organization of American States (OAS), of which it is a core member. While often disappointing to both the United States and Latin America, the OAS provides the only regional forum in which all of the countries with democratically elected governments participate. A failure by the

OAS to play an effective role in Venezuela if it appears democracy is at risk would further undermine support for the

organization both in the region and in the United States. How the United States manages its relations with Venezuela if violence does break out would likely affect U.S. relations with others in the hemisphere, especially Brazil, which has cordial relations with Chavez and reacts badly to perceived U.S. efforts to dictate to Latin America. A repetition of the acrimony that characterized the hemisphere's efforts to resolve the Honduras crisis of 2009 would be corrosive to U.S. relations with the region. Counternarcotics: Venezuela does not cooperate with the United States on counternarcotics, except at the most minimal level. Drug trafficking has, consequently, surged. A number of Venezuelan military officers, including the current minister of defense, have been plausibly accused by the U.S. Treasury of cooperating with the Colombian insurgent group Fuerzas Armadas Revolucionarias de Colombia (FARC) and facilitating drug shipments through Venezuela, especially from Apure State. Venezuelan recalcitrance in counternarcotics clearly undermines other regional efforts to combat the drug trade. Even low levels of violence would create new opportunities for the FARC and other drug traffickers to retrench and extend their reach.

Relations Adv

Relations Poor Now

Obama has done little to improve relationsLehmann 5/30 (Catalina, “Officials: Obama Has Yet To Improve U.S.-Latin America Relations,” http://www.talkradionews.com/us/2013/05/30/officials-obama-has-yet-to-improve-u-s-latin-america-relations.html#.UcysHL9c_ww, 5/30/2013)//SRLatin America, particularly South America, has experienced unprecedented political change in the past 15 years said officials who discussed the issue

during a briefing held by the Center for Economic Policy and Research. The briefing analyzed how the Obama administration has responded to the region’s leftward shifting of political dynamics. In the past, during the Bush administration, efforts were made to isolate and suppress left-leaning political movements in Latin America, said the officials. When President George W. Bush attended the Summit of the Americas in Argentina, his lecture was received with

protests against his administration’s polices. When President Barak Obama attended the Summit in Columbia, he spoke about the need for “equal partnerships” and “a new chapter of engagement” with the countries that make up Latin America. Leaders such as President Hugo Chavez had a new sense of hope instilled after President Obama’s remarks, said CEPR Co-Director Mark Weisbrot. “When Latin America’s left presidents watched the campaign of Barack Obama for president in 2008, they thought

that they might finally see a U.S. president who would change Washington’s foreign policy in the region,” said Weisbrot. However, panelists

claimed that up to this point in time, little has been done to improve U.S.-Latin America relations. “The Obama administration, like that of President Bush, does not accept that the region has changed, Weisbrot stated. “That goal is to get rid of all of the left-of-center governments, partly because they tend to be more independent from Washington.”

Efforts to improve relations have stalledNeuman 13(William, “US Expels 2 Venezuelan Envoys”, 3/12/2013http://www.nytimes.com/2013/03/12/world/americas/us-expels-two-venezuelan-diplomats.html?_r=0, NY Times)//SRThe United States said Monday that it had expelled two Venezuelan diplomats in response to the ouster last week of two American military attachés by Venezuela. “Around the world, when our people are thrown out unjustly, we’re going to take reciprocal action,” Victoria Nuland, the State Department spokeswoman, said at a news conference. “And we need to do that to protect our own people.” She said that the two Venezuelan diplomats had already left the country. The State Department identified them as Orlando José Montañez Olivares, a second secretary at the Venezuelan Embassy in Washington, and Víctor Camacaro Mata, a consular officer in New

York. The diplomatic tit for tat started last Tuesday when Venezuela said it had expelled two Air Force attachés because of what it

described as an effort by the United States to destabilize the country. In a television broadcast, Nicolás Maduro, who was President Hugo Chávez’s vice president, accused one of the attachés of trying to recruit Venezuelan military personnel to conduct destabilizing acts. Later that day, Mr. Maduro announced that Mr. Chávez had died. Mr. Maduro will serve as the interim president until a special election to replace Mr. Chávez is held

on April 14. Venezuela and the United States began informal talks late last year to improve relations, but American officials have said that the effort has since stalled. “We do hope for better relations with Venezuela,” Ms. Nuland said. “There is work that we would like to do together, particularly in the areas of counterterrorism, counternarcotics, economics and energy relations, but it’s going to take a change of tone from Caracas.” Meanwhile, Globovision, a television channel here that actively supports the country’s political opposition and is highly critical of the government, announced Monday that it was being sold to a financier who is seen as being sympathetic to the government. The election will pit Mr. Maduro against Henrique Capriles Radonski, a state governor. Globovision serves as a counterpoint to the main state-run channel’s pro-government coverage.

U.S. Leadership Low

U.S. leadership in Latin America is low nowHill 08 – (James-chairman, “US Latin America Relations: a New Direction for a New Reality: Report of an Independent Task Force”, Council on Foreign Relations-Independent Task Force on US-Latin America Relations, 2008)//SRBut even with such integration, the opening of Latin American economies and the globalization of Latin American societies means

that U.S. policy is now but one of several competing factors capable of influencing the region.

Latin American states, especially the larger ones, do not consider their interests to be primarily determined by diplomatic, trade, or security ties with the United States. Brazil has made inroads into groupings such as the South-South Dialogue with South Africa and India and the Group of 20 (G20), while countries such as Chile and Mexico have struck trade and investment agreements with the EU and a number of Asian countries, China most prominently. The

economic and political diversification of Latin America is reflected in Latin American attitudes as well. Esteem for U.S. global and hemispheric leadership is at its lowest level in the region in recent memory. In 2002, according to the Pew Global Attitudes Project, 82 percent of Venezuelans, 34 percent of

Argentineans, and 51 percent of Bolivians had a favorable view of the United States; those numbers had fallen to 56, 16,

and 43 percent by 2007. The percentage of Latin Americans who approved of U.S. ideas on democracy decreased from 45 percent in 2002 to 29 percent in 2007.3 This general distrust of the United States has allowed Presidents Hugo Cha vez of Venezuela ́� , Evo Morales of Bolivia, Rafael Correa of Ecuador, and even Felipe Caldero n of ́� Mexico to bolster their domestic popular support by

criticizing Washington. Most Latin Americans still prefer a mutually respectful and productive relationship with the United States, but the factors driving Latin America’s desire for greater independence are likely to shape the region’s posture toward the United States well into the future.

US leadership in Latin America is declining now—countries are exercising increased political and economic independence and expanding ties with other parts of the worldBen-Ami 6/5 - former Israeli foreign minister and internal security minister and current Vice President of the Toledo International Center for Peace (Shlomo, “Is the US Losing Latin America?”, Project Syndicate, http://www.project-syndicate.org/commentary/the-new-nature-of-us-influence-in-latin-america-by-shlomo-ben-ami)

MADRID – It is a mantra increasingly heard around the world: US power is in decline. And nowhere does this seem truer than in Latin America. No longer is the region regarded as America’s “backyard”; on the contrary, the continent has arguably never been so united and independent. But this view fails to

capture the true nature of US influence in Latin America – and elsewhere as well. It is true that US attention to Latin America has waned in recent years. President George W. Bush was more focused on his “global war on terror.” His successor, Barack Obama, seemed to give the region little thought as well, at

least in his first term. Indeed, at the Summit of the Americas in Cartagena in April 2012, Latin American leaders felt sufficiently confident and united to challenge US priorities in the region. They urged the US to lift its embargo on Cuba, claiming that it had damaged relations with the rest of the continent, and to do more to combat drug use on its own turf, through education and social work, rather than supplying arms to fight the drug lords in Latin America – a battle that all acknowledged has been an utter failure. It is also true that Latin American countries have pursued a massive expansion of economic ties beyond America’s sway. China is now Latin America’s second-largest trading partner and rapidly closing the gap with the US. India is showing keen interest in the region’s energy industry, and has signed export agreements in the defense sector. Iran has strengthened its economic and military ties, especially in Venezuela. Similarly, in 2008, Russia’s then-President Dmitri Medvedev identified the US war on terror as an opportunity to create strategic partnerships with

rising powers such as Brazil, and with the Bolivarian Alliance for the Americas (ALBA), a Venezuelan-inspired bloc opposed to US designs in the region. The energy giant Gazprom and the country’s military industries have spearheaded the Kremlin’s effort to demonstrate Russia’s

ability to influence America’s neighborhood – a direct response to perceived American meddling in Russia’s own

“near abroad,” particularly Georgia and Ukraine. Yet it would be a mistake to regard Latin America’s broadening international relations as marking the end of US preeminence. Unlike in the bygone era of

superpowers and captive nations, American influence can no longer be defined by the ability to install and depose leaders from the US embassy. To believe otherwise is to ignore how international politics has changed over the last quarter-century.

US leadership declining in LANoriega 12 – former U.S. Ambassador to the Organization of American States, and former Assistant Secretary of State for Western Hemisphere Affairs (Roger, “Latin America is Crucial to US Interests,” American Enterprise Institute Ideas, 10/22/13, http://www.aei-ideas.org/2012/10/latin-america-is-crucial-to-us-competitiveness/)//SRA stable and prosperous Americas is indispensable to US economic success and security. However, the US economic and fiscal crises and preoccupation with two controversial wars distracted policy makers in Washington and undermined US leadership in the region. Although access to the US market, investment,

technology, and other economic benefits is valued in most countries in the region, the United States is not the only partner to choose from– with China’s influence growing. The United States must recover its own credibility by making bold decisions to restore fiscal responsibility, aggressive trade promotion, energy interdependence, and economic growth. The security challenges in the Americas are very real and growing more complicated every day. Illegal narcotics trafficking, transnational organized crime, and radical populism fueled by Venezuela’s petrodollars and allied with dangerous extra-regional forces pose a daunting set of challenges. Alongside a positive economic engagement, assessing and addressing threats is an indispensable obligation to US security and regional leadership. Expanding Regional Economic Cooperation

and Trade Integration An aggressive trade promotion and foreign investment strategy in today’s hypercompetitive globalized economy are imperatives. Mexico, Chile, Peru, Brazil, and Colombia have been at the forefront in modernizing their economies, liberalizing trade, opening their economies to investment, and becoming more competitive overall. Since 2003, an estimated 73 million Latin Americans have risen out of poverty. Moreover, between then and 2010, the average Latin American income increased by more than 30 percent, meaning that today nearly one-third of the region’s one-billion population is considered middle class. And in just the next five years, regional economies are projected to expand by one-third. That macroeconomic stability generates even greater opportunities for US business. Already the Western Hemisphere supplies one-quarter of the world’s crude oil, one-third of the world’s natural gas, nearly one-fourth of its coal, and more than a third of global electricity, while offering tremendous potential for the development of renewable energy technologies. Three of the United States’ top four foreign sources of energy are in the Americas. The US administration must recognize this reality and act to take full advantage of the opportunities.

U.S. leadership low –Snowden provesKinzer 13 – (Stephen, “Latin America is Ready to Defy the US Over Snowden and Other Issues,” The Guardian, 6/25/13, http://www.guardian.co.uk/commentisfree/2013/jun/25/edward-snowden-ecuador-defy-united-states)No offense to Iceland, but Latin America is where the fugitive leakerEdward Snowden should settle. He apparently has the same idea. News reports suggest that he is in Moscow awaiting transport to Cuba, Venezuela, and/or Ecuador. A Facebook post suggests Bolivia may have granted Snowden asylum. Nothing has been heard from Nicaragua, Peru, Brazil, or Argentina, but any or all might

also welcome him. Any country that grants asylum to Snowden risks retaliation from the United States , including diplomatic isolation and costly trade sanctions. Several don't seem to care. The fact that Latin America has become the favored refuge for a United States citizen accused of treason and espionage is an eye-popping reminder of how fully the continent has emerged from Washington's shadow. "Latin America is not gone, and we want to keep it," President Richard Nixon told aides as he was pressing the covert operation that brought down the Chilean government in 1973. A decade later, the Reagan administration was fighting proxy wars in Nicaragua, El Salvador and Guatemala. In the 1980s the US Army invaded two Caribbean countries, Grenada and Panama, to depose leaders who had defied Washington. During the 1990s the United States sought to impose the "Washington Consensus" on Latin American governments. It embodied what Latin Americans call "neo-liberal" principles: budget cuts, privatization, deregulation of business, and incentives for foreign companies. This campaign sparked bitter resistance and

ultimately collapsed. In spite of these military, political, and economic assaults – or perhaps because of them – much of Latin America has become profoundly dissatisfied with the made-in-USA model. Some of the continent's most popular leaders rose to power by denouncing the "Washington Consensus" and pledging to pull their countries out of the United States orbit. Because President Hugo Chavez of Venezuela was the most flamboyant of these defiant leaders, some outsiders may have expected that following his death, the region would return to its traditional state of submission. In fact, not just a handful of leaders but huge populations in Latin America have decided that they wish for more independence from Washington. This is vital for Snowden because it reduces the chances that a sudden change of government could mean his extradition. If he can make it to Latin America, he will never lack for friends or supporters. One would be the American-educated President Rafael Correa ofEcuador, an avowed socialist and admirer of Fidel Castro. In 2009 Correa forced the United States to abandon its military base in his country, despite repeated protests from Washington. He has already granted a form of asylum to Wiki-leaks founder Julian Assange, who is living inside the Ecuadoran embassy in London. Having publicly welcomed Assange to "the club of the persecuted," he would presumably embrace Snowden as another member. Ecuador, with its long coastline, majestic mountains, and lush rain forest, is an ideal place for such a club to

assemble. It is more than twice the size of Iceland and considerably warmer. Its people, not just its president, are known for gentle hospitality. From Ecuador, Snowden could travel widely. Everything from the splendor of Bolivia's Lake Titicaca to the vibrancy of teeming Caracas awaits him. With luck, he might even be able to visit Guatemala in September to attend the grand festival being planned for the 100th anniversary of the birth of Jacobo Arbenz, the reformist president who the United States deposed in 1954. Snowden would have much to celebrate upon landing in Latin America, and much to anticipate. He might not be truly free, however. Some in Washington have raised his case, like those of Assange and Corporal Bradley Manning, into major national security tests. They might press for a "rendition" in which Snowden would be snatched and brought home for trial. Two breathtakingly different possible lives await Snowden. If the United States has its way, he will probably end up with something like the long prison sentence that is being prepared for Corporal Manning. If not, he could spend years in an Ecuadoran beach town like Playas, where the lobster is cheap, the sunsets are spectacular, and internet connections could keep him on the front line of the information war for years.

There is a growing schism between the U.S. and Latin America Buxton 11(Julia, “Forward into History: Understanding Obama's Latin American Policy”, http://lap.sagepub.com.proxy.lib.umich.edu/content/38/4/29.full.pdf, 6/23/2011 )//SRFor some commentators, the United States is an empire in decline, an increasingly discredited former superpower that is incapable of understanding and responding to the social, economic, and political change under way around the globe (Eland, 2002; Golub, 2007). This situation is understood as a

result of imperial overreach and the failure to maintain “hegemonic stability.” Nowhere is this deterioration of U.S. legitimacy, credibility, and capacity to project the national interest more evident than in Latin America , the heart of the old—if informal—U.S. empire. In recent decades the majority of Latin American countries have experienced profound and progressive change. This has occurred despite rather than as a result of U.S. policy, with countries of the region opting for their own unique models rather than adoption of a

culturally unspecific “other.” Latin America’s newfound sense of confidence, progress, and national aspiration runs against historical and unrevised U.S. strategies of containment and domination, with the result that the unstoppa- ble force of change in Latin America now smacks against the immovable object of the U.S.

national interest. The result is a foreign policy deadlock that the United States is unable to respond to. The presidency of George W. Bush dramatically accelerated the schism between Latin America and the United States, with U.S. neglect allowing for a gradual deimperialization by default. The urgent need for a recalibration of relations was ignored by the United States , partly because of the disastrous interventions in Afghanistan and Iraq. These

foreign policy “ distractions” hid seismic challenges to U.S. hegemony in Latin America, not least in terms of a growing rejection of the increasingly discredited American ideology . And yet perceptions of

U.S. exceptionalism and the right to leadership of the region have been sustained, ever inflexible and resistant to change. The Obama presidency created the expectation that it would acknowledge and respond to the new dynamic of hemispheric relations and to the logic of deteriorating U.S.

power, but instead it has demonstrated that Democrats are as ill posi- tioned to respond to epochal shifts as

Republicans. This continuity is here accounted for through the dead weight of U.S. history and the inability of U.S. government and policy makers to reappraise and reorient approaches, strate- gies, and institution s to promote the U.S. national interest in a changed global and regional environment. The trend is toward progressive isolation of the United States in the region and detachment from regional priorities and initia- tives. The concern is that panic-driven U.S. unilateralism will continue to come at the cost of security and peace in Latin America.

Now Key

Now is key – the longer poor relations persist the harder it will be to reverse the damageInter-American Dialogue 12(“Remaking the Relationship the United States and Latin America”, http://www.thedialogue.org/PublicationFiles/IAD2012PolicyReportFINAL.pdf, April 2012)//SR Every country in the Americas would benefit from strengthened and expanded economic relations, with improved access to each other’s markets, investment capital, and energy resources. Even with its current eco-nomic problems, the United States’ $16-trillion economy is a vital market and source of capital (including remittances) and technology for Latin America, and it could contribute more to the region’s economic perfor- mance . For its part, Latin America’s rising economies will inevitably become more and more crucial to the United States’ economic future. The United States and many nations of Latin America and the Caribbean would also gain a great deal by more cooperation on such global matters as climate change, nuclear non-proliferation, and democracy and human rights . With a rapidly expanding US Hispanic population of more than 50 million, the cultural and demographic integration of the United States and Latin America is proceeding at an accelerating pace, setting a firmer basis for hemispheric partnership . The US position on these troublesome issues— immigration, drug policy, and

Cuba—has set Washington against the consensus view of the hemisphere’s other 34 governments. Despite the multiple opportunities and potential benefits, relations between the United States and Latin America remain disappointing . If new opportuni- ties are not seized, relations will likely continue to drift apart . The longer the current situation persists, the harder it will be to reverse course and rebuild vigorous cooperation . Hemispheric affairs require urgent attention—both from the United States and from Latin America and the Caribbean.

Oil K2 Relations

Developing Venezuela’s energy industry will transform broader Latin American relations and provide regional stabilityHill 08 – (James-chairman, “US Latin America Relations: a New Direction for a New Reality: Report of an Independent Task Force”, Council on Foreign Relations-Independent Task Force on US-Latin America Relations, 2008)//SR

The increasing importance of energy resources has further deepened U.S.-Latin America ties, while heightening anxiety over growing ‘‘resource nationalism’’ in countries such as Venezuela, Bolivia, and Ecuador. Latin America already supplies more oil to the United States than does the Middle East, and the region has great potential to be a major provider of alternative fuel sources, increasing U.S. and regional energy security through diversification. The Task Force finds that the issues of migration and energy security represent not only policy challenges, but also opportunities for the United States and for deepening U.S.-Latin America ties. The United States can play a positive role in the development of Latin America’s traditional and alternative energy markets, enhancing U.S. energy security in the process, while a true reform of immigration policy would bring economic benefits and, through cooperation, enhanced border security for the United States and Latin America alike. While many policy concerns span the hemisphere, attention to particular bilateral relations is also in order. Although all the countries in Latin America present unique challenges and opportunities, the Task Force focuses on the complex bilateral relations with four nations: Brazil, Mexico, Venezuela, and Cuba. The Task Force believes that deepen- ing strategic relationships with Brazil and Mexico, and reformulating diplomatic efforts with Venezuela and Cuba, will not only establish more fruitful interactions with these countries but will also positively transform broader U.S.-Latin America relations. The realities of poverty and inequality, public security, human mobility, and energy require a more fulsome approach toward Latin America, one that recognizes urgency as well as the primacy of Latin American governments in these efforts. The limits on U.S. policy are equally clear, as these four areas demand concerted efforts by local, state, national, and international governments; the private sector; civil society organizations; and multilateral institutions. As importantly, these issues present real opportunities to engage Latin American countries as partners on problems of mutual concern. This expanded policy framework, combined with greater attention to strategic regional part- nerships, will provide a more effective foundation for U.S. policy goals—stability, security, and ultimately prosperity for the United States and for its neighbors.

Venezuela’s oil nationalization has undermined diplomatic relationsDaly 13 --- non-resident Fellow at The Johns Hopkins University Paul H. Nitze School of Advanced International Studies’ Central Asia-Caucasus Institute and one of the leading specialists on the post-Soviet space, particularly the Caucasus and Central Asia energy issues, having provided professional audiences with indepth analysis of energy issues there for more than a decade (5/28/2013, John, “Venezuelan President Maduro Offers Olive Branch to Washington,” http://www.economonitor.com/blog/2013/05/venezuelan-president-maduro-offers-olive-branch-to-washington/, JMP)To say that U.S. relations with Venezuela’s former President Hugo Rafael Chávez grew increasingly strained would be an understatement. But Chávez succumbed to cancer on 5 March, and the winds of change are blowing through Caracas.¶ Why was Chávez in Washington’s bad books? His choice of allies, which included the Russian Federation, Iran and Cuba, but worse still were the social programs that Chávez implemented to benefit his people, which were socialist in nature, anathema to Washington’s

proscriptions.¶ But, tying the U.S. and Venezuela together like Siamese twins is – oil. According to the U.S. Energy Administration, Venezuela is the fourth largest provider of crude oil imports to the U.S., averaging 930 thousand barrels per day. In itscountry report on Venezuela the EIA succinctly noted, “Venezuela contains some of the largest oil and natural gas reserves in the world. It consistently ranks as one of the top suppliers of oil to the U.S. Venezuela is one of the world’s largest exporters of

crude oil and the largest in the Western Hemisphere. The oil sector is of central importance to the

Venezuelan economy. As a founding member of the Organization of the Petroleum Exporting Countries (OPEC),

Venezuela is an important player in the global oil market .” ¶ Venezuela has the largest conventional oil reserves and the second-largest natural gas reserves in the Western Hemisphere and two years ago OPEC reported that of the organization’s 81.33 percent of the globe’s known oil reserves Venezuela had 24.8 percent, exceeding Saudi Arabia with 22.2 percent. According to state oil company Petróleos de Venezuela, S.A. (PDVSA) figures, Venezuela currently has 77.5 billion barrels of oil reserves, the largest in the Western Hemisphere. PDVSA has a production capacity, including its strategic associations and operating agreements, of 4 million barrels per day, the highest production capacity in the Western Hemisphere.¶ To fund his social programs, Chávez was determined to bring the country’s oil sector under government control, putting him into direct conflict with Washington’s belief in free markets.¶ Venezuela’s oil industry had been under private control until 1974, when Venezuela nationalized it, setting up PDVSA. Venezuela’s oil production is centered in the Orinoco Oil Belt, which analysts believe contains the world’s largest reserves of extra-heavy oil, with an estimated 300 billion recoverable barrels. In the 1990s PDVSA began a so-called “oil opening,” where it allowed more and more foreign private companies

to extract oil, via majority shares in joint ventures and the operating agreements.¶ But difficulties began with Washington in

February 2007, when Chávez announced a new law to nationalize the last remaining oil production sites that are under foreign company control, to take effect on 1 May. Under the law, which allowed foreign

companies to negotiate the nationalization terms, earlier joint ventures, involving ExxonMobil, ChevronTexaco, Statoil, ConocoPhillips, and BP, were transformed to give PDVSA a minimum 60 percent stake. The process completed a government initiative begun in 2005, when the Chavez administration transformed earlier “operating agreements” in Venezuela’s older oil fields into joint ventures with a wide variety of foreign companies. Thirty out of 32 such operating agreements were transformed, with most foreign companies accepting the new arrangements, but ExxonMobil

and ConocoPhillips refused, instituting lawsuits for compensation that continue to this day.¶ The policies had

repercussions in the diplomatic sphere . On 28 June 2010 President Obama nominated Palmer as U.S. Ambassador to Venezuela but three months later Chávez announced on his weekly TV program

that he would not allow Larry Palmer to take up his post after Palmer told a US senator that morale in the Venezuelan army was low and that members of Chávez’s government had ties to leftist FARC Colombian rebels. On 28 December Chávez flatly refused to accept Palmer because of his derogatory remarks and the following day the U.S. revoked the accreditation of Venezuelan ambassador, Bernardo Álvarez Herrera.¶ And there relations have remained until now, even as oil sales have continued unabated.

Expanding U.S. investment and partnership with Venezuela oil industry will revive relationsClarke 13 --- Associate Editor of America The National Catholic Review and MA in International Studies from DePaul University (3/25/2013, Kevin, “Chavez Death Brings New Chance For U.S.-Venezuela Engagement,” http://americamagazine.org/issue/chavez-death-brings-new-chance-us-venezuela-engagement, JMP)The passing of President Hugo Chávez of Venezuela unleashed an epic outpouring of grief among his supporters in Venezuela, the likes of which may only be eventually paralleled with the passing of another larger-than-life figure in Latin American socialism,

Cuba’s Fidel Castro. Matthew Carnes, S.J., assistant professor of government at Georgetown University, said

Chávez will be remembered as a leader who had an “outsized impact in Venezuelan politics.”¶ Father Carnes said Chávez’s passing offers an opportunity for the U nited S tates, politically and economically, to revive its

relationship with Venezuela. Occasionally “capricious and doctrinaire,” Chávez was “someone the United States had a

hard time negotiating with,” according to Father Carnes.¶ Whether his designated political heir, Vice President Nicholas Maduro, or an opposition candidate, most likely Henrique Capriles Radonski, governor of the Venezuelan state of Miranda, is elected to replace

Chávez, Father Carnes expects a more pragmatic and less confrontational leadership to emerge.

That could mean improved ties not just with Venezuela but throughout the region, he said, and a possible opening

for renewed U.S. investment and partnership with the Venezuelan state oil industry . Despite Chávez’s notorious distaste for U.S. political leaders, under his leadership Venezuela remained one of the largest suppliers of oil to the U nited S tates. This is likely to continue.

Investment Key

Investment is key to fostering a better relationship with LARestrepo 06 – Director of the Americas Project, Center for American Progress (Dan, “US-Venezuela Policy: A Reality Based Approach,” Center for American Progress, December 2006, http://www.americanprogress.org/issues/2006/12/pdf/venezuela.pdf, pp. 9-11)//SREngage on Inequality The primary challenge facing the Americas today is a staggering level of social and economic inequality. The United States must engage allies and potential allies throughout the region on this critical issue. The United States needs to do more to make its commitment to the socio-economic advancement of broad swaths of the populace throughout the Americas unmistakable. Just as it cannot promote democracy alone in the Americas, it cannot advance social and economic equality in the region by itself. It must, however, structure policies to assist our allies in the Americas to advance this crucial work. A down payment in such a process would be bringing to fruition the Social Investment and Economic Development Fund for the Americas, which was first proposed by Democratic Sen. Bob Menendez of New Jersey. Importantly, the Fund proposal calls on an increased U.S. commitment to social investment in the Americas—$1.25 billion over five years—as well as increased participation by the Inter-American Development Bank in that endeavor. Establishment of the Fund would add substance to the rhetoric of standing with the people of the Americas. U.S. assistance to the countries of the Americas was approximately $1.8 billion in fiscal year 005, with approximately one-third of that being for police and military assistance to Colombia. Aside from the massive funding provided to Colombia, the level of U.S. assistance to the Americas mocks the notion that the United States is committed to improving the daily lives of the people of the Americas. Although the U.S. economy, through the hard work of immigrants, currently generates large levels of de facto assistance to the Americas in the form of remittances, it is vitally important that the U.S. government step up its official assistance efforts. Despite the nearly $45 billion that immigrants from the Americas were expected to remit

in 006,4 the symbolic importance of greater direct U.S. government investment in the people of the Americas

should not be underestimated. A Social Investment Fund with some heft also could add to the diminishing tool box at U.S. disposal in

the Americas. As the U.S. commits relatively fewer resources to supporting our neighbors in the Americas, our ability to influence those neighbors diminishes proportionately. Importantly, confronting inequality in the Americas

does not mean abandoning trade as a vehicle for engaging our allies and potential allies in the region. Smart trade policies and social

investment, in fact, must go hand and hand. Gone should be the days of the false “trade, not aid” dichotomy. Smart trade policies should provide

significant gains for U.S. workers, consumers, and businesses and support development, democracy, and the rule of law in our trading partners. Because trade agreements inevitably create losers as well as winners, smart trade policy requires that steps be taken to ensure economic opportunity for all those who may be displaced or missed by trade. Agreements should be negotiated with a full cognizance of their potentially adverse effects on poverty and certain economic sectors, and a desire to minimize that impact. Effective social investment must help ensure

economic opportunity for those displaced by or who are beyond the reach of smart trade policy. Grasp the Energy Opportunity A smart trade policy toward the Americas would be enhanced if the United States effectively seized the transformative

opportunity presented by new energy sources and technologies. Doing so would help foster the common

good both at home and abroad as well as spur economic development throughout the Americas while advancing the interests of U.S. workers, farmers, consumers, and businesses. Moving toward a U.S. economy built upon renewable fuel sources and technologies also would help change the dynamic surrounding the key hemispheric impasse on trade—the stalemate between the United States and Brazil. Although Chávez’s rhetorical flourishes against trade are seized upon by many to explain the breakdown in hemispheric trade talks, Chávez benefits from a de facto free trade agreement with the United States. His main export commodity, oil, enters the United States duty-free. The trade relationship between the United States and Latin America’s largest economy, Brazil, is far more complex and needs repair. A new era in U.S.-Brazil trade relations could help usher in a new era in hemispheric relations. Seizing the energy opportunity and diversifying the fuel base for the United States also would alter the geopolitics of energy in the Americas. It would place the United States on the side of innovation with a future focus and leave Venezuela as a symbol of a backward-looking approach. Greater energy flexibility and independence would also provide the kind of short-term policy flexibility sorely lacking in the current

U.S.-Venezuela dynamic. Conclusion By focusing on the real problems facing the Americas, rather than obsessing over Chávez, the United States can advance its long-term interests by making clear that it stands on the side of democracy with socio-economic advancement throughout the region. The long journey toward greater prosperity and equality in the region must begin with the first step of reducing Chávez down to the proper size. With that achieved, the United States can focus on fashioning policies to address the changes occurring throughout the Americas.

U.S. Leadership K2 Stability

US leadership in LA is key to stability Sabatini and Marczak 10 – (Christopher and Jason, “Obama’s Tango”, Foreign Affairs, 1/13, p.1, http://www.unc.edu/world/2010Seminars/LANC%20reading%202.pdf)//mmSince he took office, U.S. President Barack Obama has articulated a policy toward Latin America that is centered on the idea of partnership. As he said last April, there would be “no senior or junior partner to this new engagement.”

The United States, in other words, would be but one actor on the regional stage, not its director . But recent crises -- from the coup in Honduras to simmering tensions in the Andes -- have revealed a fundamental weakness in the Obama administration’s nascent Latin America policy. ¶ Without strong U.S. leadership, partnership in the Americas risks inertia or, even worse, an escalation of tensions on many of the hemisphere’s critical issues, such as transnational crime, democracy, and security. Although some countries -- including Brazil and Chile -- have been willing to take on diplomatic responsibilities commensurate with their economic status, they remain averse to conflict with neighbors, even to the point of willfully downplaying existing disagreements.¶ Such an approach may have served Latin American governments well in the past, when a unified front helped to push issues such as debt relief and alternative thinking on

antinarcotics policy. But the failure of any one country to assume a larger regional profile -- especially with regards to protecting norms and security -- has allowed problems to fester . Yet again, the United States has been forced into a position of default leadership.¶ But simply reasserting U.S. leadership will not be easy. For one, distrust of Washington’s motives still runs deep in the region. The George W. Bush administration was hampered by missteps and its perceived unilateralism and interventionism. Allegations that the United States supported a coup attempt against Venezuelan President Hugo Chávez in 2002 have proven hard to shake. Although general suspicions have since softened, skepticism and latent resentment of the United States remain potent forces.

Leadership in LA K2 Heg

U.S. leadership in LA is key to global hegemonySabatini and Berger 12 – (Christopher and Ryan, “Why The US Can’t Afford to Ignore Latin America”, CNN, 6/13, http://globalpublicsquare.blogs.cnn.com/2012/06/13/why-the-u-s-cant-afford-to-ignore-latin-america/)//mmSpeaking in Santiago, Chile, in March of last year, President Obama called Latin America “a region on the move,” one that is “more important to the prosperity and security of the United States than ever before.”¶ Somebody forgot to tell the Washington brain trust.¶ The Center for a New American Security, a respected national security think tank a half-mile from the White House, recently released a new series of policy recommendations for the next presidential administration. The 70-page “grand strategy” report only contained a short paragraph on Brazil and made only one passing reference to Latin America.¶ Yes, we get it. The relative calm south of the United States seems to pale in comparison to other developments in the world: China on a seemingly inevitable path to becoming a global economic powerhouse, the potential of political change in the Middle East, the feared dismemberment of the eurozone, and rogue states like Iran and North Korea flaunting

international norms and regional stability.¶ But the need to shore up our allies and recognize legitimate threats south of the Rio Grande goes to the heart of the U.S.’ changing role in the world and its strategic interests within it.¶ Here are three reasons why the U.S. must include Latin America in its strategic calculations:¶ 1. Today, pursuing a global foreign policy requires regional allies.¶ Recently, countries with emerging economies have appeared to be taking positions diametrically opposed to the U.S. when it comes to matters of global governance and human rights. Take, for example, Russia and China’s stance on Syria, rejecting calls for intervention.¶ Another one of the BRICS, Brazil, tried to stave off the tightening of U.N. sanctions on Iran two years ago. And last year, Brazil also voiced its official opposition to intervention in Libya, leading political scientist Randall Schweller to refer to Brazil as “a

rising spoiler.”¶ At a time of (perceived) declining U.S. influence, it’s important that America deepens its ties with regional allies that might have been once taken for granted. As emerging nations such as Brazil clamor for permanent seats on the U.N. Security Council and more representatives in the higher reaches of the World Bank and the International

Monetary Fund, the U.S. will need to integrate them into global decision-making rather than isolate them.¶ If not, they could be a thorn in the side of the U.S. as it tries to implement its foreign policy agenda. Worse, they could threaten to undermine efforts to defend international norms and human rights.¶ 2. Latin America is

becoming more international.¶ It’s time to understand that the U.S. isn’t the only country that has clout in Latin America.¶ For far too long, U.S. officials and Latin America experts have tended to treat the region as separate , politically and strategically, from the rest of the world. But as they’ve fought battles over small countries such as Cuba and Honduras and narrow bore issues such as the U.S.-Colombia free-trade agreement, other countries like China and India have increased their economic presence and political influence in the region.¶ It’s also clear that countries such as Brazil and Venezuela present their own challenges to U.S. influence in the region and even on the world forum.¶ The U.S. must embed its Latin America relations in the conceptual framework and strategy that it has for the rest of the world, rather than just focus on human rights and development as it often does toward southern neighbors such as Cuba.¶ 3. There are security and strategic risks in the region.¶ Hugo Chavez’s systematic deconstruction of the Venezuelan state and

alleged ties between FARC rebels and some of Chavez’s senior officials have created a volatile cocktail that could explode south of the U.S. border.¶

FARC, a left-wing guerrilla group based in Colombia, has been designated as a “significant foreign narcotics trafficker” by the U.S. government.¶ At the same time, gangs, narcotics traffickers and transnational criminal syndicates are overrunning Central America.¶ In 2006, Mexican President Felipe Calderón launched a controversial “war on drugs” that has since resulted in the loss of over 50,000 lives and increased the levels of violence and corruption south of the Mexican border in Guatemala, El Salvador, Honduras and even once-peaceful Costa Rica. Increasingly, these already-weak states are finding themselves overwhelmed by the corruption and violence that has come with the use of their territory as a transit point for drugs heading north.¶ Given their proximity and close historical and political connections with Washington, the U.S. will find it increasingly difficult not to be drawn in. Only this case, it won’t be with or against governments — as it was in the 1980s — but in the far more complex, sticky situation of failed states.¶ There are many other reasons why Latin America is important to U.S. interests.¶ It is a market for more than 20% of U.S. exports. With the notable exception of Cuba, it is nearly entirely governed by democratically elected governments — a point that gets repeated ad nauseum at every possible regional meeting. The Western Hemisphere is a major source of energy that has the highest potential to seriously reduce dependence on Middle East supply. And through immigration, Latin America has close personal and cultural ties to the United States. These have been boilerplate

talking points since the early 1990s.¶ But the demands of the globe today are different, and they warrant a renewed engagement with Latin America — a strategic pivot point for initiatives the U.S. wants to accomplish elsewhere. We need to stop thinking of Latin America as the U.S. “backyard” that is outside broader, global strategic concerns.

Relations Good – Laundry List Cards

U.S.-Latin American relations are key to solve various transnational threats such as energy security, global warming, and environmental and health issuesLowenthal 09 - nonresident senior fellow with the Latin American Initiative in the Foreign Policy program at Brookings. He is the first Robert F. Erburu professor of ethics, globalization and development and also professor of international relations at the University of Southern California (USC). He is president emeritus and a senior fellow of the Pacific Council on International Policy, of which he was the founding president from 1995-2005 (Abraham, “The Obama Administration and Latin America: Will the Promising Start Be Sustained?,” http://wwww.nuso.org/upload/articulos/3617_2.pdf, July-Aug 2009)//SR

Apart from the scheduling coincidence that the Fifth Summit of the Americas was already on the calendar, the main reason for the Obama administration’s early engagement with Latin America is the new team’s perception that although the countries of Latin America and the Caribbean pose no urgent issues for the United States, many of them are likely to be increasingly important to its future. This is so not because of long-standing axioms about Western Hemisphere security, extra-hemispheric threats and Pan-American solidarity, but rather for four much more contemporary reasons. First, the increased perceived significance of Latin America for confronting such transnational issues as energy security, global warming, pollution and other environmental concerns, crime, narcotics and public health. The new administration recognizes that these issues cannot be solved or even managed effectively without close and sustained cooperation from many countries of the Americas.

Relations solve economic collapse, warming, proliferation, etc.Inter-American Dialogue 12 – leading US center for policy analysis, exchange, and communication on issues in Western Hemisphere affairs (“Remaking the Relationship: the United States and Latin America,” Inter-American Dialogue, http://www.thedialogue.org/PublicationFiles/IAD2012PolicyReportFINAL.pdf)

There are compelling reasons for the United States and Latin America to pursue more robust ties. Every country in the Americas would benefit from strengthened and expanded economic relations, with improved access to each other’s markets, investment capital, and energy resources. Even with its current economic problems, the United States’ $16-trillion economy is a vital market and source of capital (including remittances) and technology for Latin America, and it could contribute more to the region’s economic performance . For its part, Latin America’s rising economies will inevitably become more and more crucial to the United States’ economic future. The United States and many nations of Latin America and the Caribbean would also gain a

great deal by more cooperation on such global matters as climate change, nuclear non-proliferation, and democracy and human rights . With a rapidly expanding US Hispanic population of more than 50 million, the cultural and demographic integration of the United States and Latin America is proceeding at an accelerating pace, setting a firmer basis for hemispheric partnership.

Relations solve a laundry list of global challenges – criminal networks, prolif, climate change, immigration, etc.Brookings Institute 08 (The Brooking Institution, November 2008, “Rethinking U.S.-Latin American Relations. A Hemispheric Partnership for a Turbulent World.” http://www.brookings.edu/~/media/research/files/reports/2008/11/24%20latin%20america%20partnership/1124_latin_america_partnership.pdf)

Developments in Latin America and the Caribbean (LAC) have a very significant impact on the daily lives of those who

live in the United States. Yet because of a lack of trust, an inability to undertake stable commitments by some countries, and different U.S. priorities, the United States and Latin America have rarely developed a genuine and sustained partnership to address

regional—let alone global—challenges . If a hemispheric partnership remains elusive, the costs to the United States and its neighbors will be high, in terms of both

growing risks and missed opportunities. Without a partnership, the risk that criminal networks pose to the region’s people and institutions

will continue to grow. Peaceful nuclear technology may be adopted more widely, but without proper regional safeguards, the risks of nuclear proliferation will increase. Adaptation to climate change will take place through isolated, improvised

measures by individual countries, rather than through more effective efforts based on mutual learning and coordination. Illegal immigration to the United States will continue unabated and unregulated, adding to an ever-larger

underclass that lives and works at the margins of the law. Finally, the countries around the hemisphere, including the United States, will lose valuable

opportunities to tap new markets, make new investments, and access valuable resources. Today, several changes in the region have made a hemispheric

partnership both possible and necessary. The key challenges faced by the United States and the hemisphere’s other countries—such as

securing sustainable energy supplies, combating and adapting to climate change, and combating organized crime and drug trafficking—have become so complex and deeply transnational that they cannot be managed or overcome by any single country. At the same time, the LAC countries are diversifying their international economic and political relations, making them less reliant on the United States. Finally, the LAC countries are better positioned than before to act as reliable partners. This report does not advance a single, grand scheme for reinventing hemispheric relations. Instead, the report is based on two simple

propositions: The countries of the hemisphere share common interests; and the United States should engage its hemispheric neighbors

on issues where shared interests, objectives, and solutions are easiest to identify and can serve as the basis for an effective partnership. In this spirit, the report offers a

series of modest, pragmatic recommendations that, if implemented, could help the countries of the region manage key transnational challenges and realize the region’s potential. The report identifies four areas that hold most promise for a hemispheric partnership: (1) developing sustainable energy sources and combating climate change, (2) managing migration effectively, (3) expanding opportunities for all through economic integration, and (4) protecting the hemisphere from drug trafficking and organized crime. The next section of this report explores the growing need for a U.S.-LAC partnership. The subsequent four sections offer an analysis of each promising area for the potential partnership and provide concrete recommendations for U.S. policymakers—which are previewed below.

Relations key to U.S. heg and a laundry list of international security concernsSabatini and Berger ’12 - editor-in-chief of Americas Quarterly/senior director of policy at Americas Society/Council of the Americas and policy associate at the Americas Society/Council of the Americas (Christopher and Ryan, “Why the U.S. can’t Afford to Ignore Latin America,” CNN World, 6/13/12, http://globalpublicsquare.blogs.cnn.com/2012/06/13/why-the-u-s-cant-afford-to-ignore-latin-america/)//SRSpeaking in Santiago, Chile, in March of last year, President Obama called Latin America “a region on the move,” one that is “more important to the prosperity and security of the United States than ever before.” Somebody forgot to tell the Washington brain trust. The Center for a New American Security, a respected national security think tank a half-mile from the White House, recently released a new series of policy recommendations for the next presidential administration. The 70-page “grand strategy” report only contained a short paragraph on Brazil and made only one passing reference to Latin America. Yes, we get it. The relative calm south of the United States seems to pale in comparison to other developments in the world: China on a seemingly inevitable path to becoming a global economic powerhouse, the potential of political change in the Middle East, the feared dismemberment of the

eurozone, and rogue states like Iran and North Korea flaunting international norms and regional stability. But the need to shore up our allies and recognize legitimate threats south of the Rio Grande goes to the heart of the U.S.’ changing role in the world and its strategic interests within it. Here are three reasons why the U.S. must include Latin America in its strategic calculations: 1. Today, pursuing a global foreign policy requires regional allies. Recently, countries with emerging economies have appeared to be taking positions diametrically opposed to the U.S. when it comes to matters of global governance and human rights. Take, for example, Russia and China’s stance on Syria, rejecting calls for intervention. Another one of the BRICS, Brazil, tried to stave off the tightening of U.N. sanctions on Iran two years ago. And last year, Brazil also voiced its official opposition to intervention in Libya, leading political scientist Randall

Schweller to refer to Brazil as “a rising spoiler.” At a time of (perceived) declining U.S. influence, it’s important that America deepens its ties with regional allies that might have been once taken for granted. As emerging nations such as Brazil clamor for permanent seats on the U.N. Security Council and more representatives in the higher

reaches of the World Bank and the International Monetary Fund, the U.S. will need to integrate them into global decision-making rather than isolate them. If not, they could be a thorn in the side of the U.S. as it tries to implement its

foreign policy agenda. Worse, they could threaten to undermine efforts to defend international norms and

human rights. 2. Latin America is becoming more international. It’s time to understand that the U.S. isn’t the only

country that has clout in Latin America. For far too long, U.S. officials and Latin America experts have tended to treat the region as separate, politically and strategically, from the rest of the world. But as they’ve fought battles over small countries

such as Cuba and Honduras and narrow bore issues such as the U.S.-Colombia free-trade agreement, other countries like

China andIndia have increased their economic presence and political influence in the region. It’s also clear that countries such as Brazil and Venezuela present their own challenges to U.S. influence in the region and even on the world forum. The U.S. must embed its Latin America relations in the conceptual framework and strategy that it has for the rest of the world, rather than just focus on human rights and development as it often does toward southern

neighbors such as Cuba. 3. There are security and strategic risks in the region. Hugo Chavez’s systematic

deconstruction of the Venezuelan state and alleged ties between FARC rebels and some of

Chavez’s senior officials have created a volatile cocktail that could explode south of the U.S. border. FARC, a left-wing guerrilla group based in Colombia, has been designated as a “significant foreign narcotics trafficker” by

the U.S. government. At the same time, gangs, narcotics traffickers and transnational criminal syndicates are overrunning Central America. In 2006, Mexican President Felipe Calderón launched a controversial “war on drugs” that has since resulted in the loss of over 50,000 lives and increased the levels of violence and corruption south of the Mexican border in Guatemala, El Salvador, Honduras and even once-peaceful Costa

Rica. Increasingly, these already-weak states are finding themselves overwhelmed by the corruption and violence that has come with the use of their territory as a transit point for drugs heading north. Given their proximity and close

historical and political connections with Washington, the U.S. will find it increasingly difficult not to be drawn in. Only this case, it

won’t be with or against governments — as it was in the 1980s — but in the far more complex, sticky situation of failed states. There are many other reasons why Latin America is important to U.S. interests. It is a market for more than 20% of U.S. exports. With the notable exception of Cuba, it is nearly entirely governed by democratically elected

governments — a point that gets repeated ad nauseum at every possible regional meeting. The Western Hemisphere is a major source of energy that has the highest potential to seriously reduce dependence on Middle East supply. And through immigration, Latin America has close personal and cultural ties to the United States. These have been boilerplate talking points since

the early 1990s. But the demands of the globe today are different, and they warrant a renewed

engagement with Latin America — a strategic pivot point for initiatives the U.S. wants to accomplish elsewhere. We need to stop thinking of Latin America as the U.S. “backyard” that is outside broader, global strategic concerns.

Prolif Extinction

Increased prolif causes extinctionKissinger et al 11—Shultz was secretary of state from 1982 to 1989. Mr. Perry was secretary of defense from 1994 to 1997. Mr. Kissinger was secretary of state from 1973 to 1977. Mr. Nunn is former chairman of the Senate Armed Services Committee (“Deterrence in the Age of Nuclear Proliferation: The doctrine of mutual assured destruction is obsolete in the post‐Cold War era”, Wall Street Journal, March 7, 2011, http://www.nti.org/c_press/Deterrence_in_the_Age_of_Nuclear_Proliferation.pdf, ZBurdette)As long as there has been war, there have been efforts to deter actions a nation considers threatening. Until fairly recently, this meant building a military establishment capable of intimidating the adversary, defeating him or making his victory more costly than the projected gains. This, with conventional weapons, took time. Deterrence and war strategy were identical. The advent of the nuclear weapon introduced entirely new factors. It was possible, for the first time, to inflict at the beginning of a war the maximum casualties.

The doctrine of mutual assured destruction represented this reality. Deterrence based on nuclear weapons, therefore, has three elements: It

is importantly psychological, depending on calculations for which there is no historical experience. It is therefore precarious. It is devastating. An unrestrained nuclear exchange between superpowers could destroy civilized life as we know it in days.

Mutual assured destruction raises enormous inhibitions against employing the weapons . Since the first use of nuclear weapons against Japan, neither of the superpowers, nor any other country, has used nuclear weapons in a war. A gap opened between the psychological element of deterrence and the risks most leaders were willing to incur. U.S. defense leaders made serious efforts to give the president more flexible options for nuclear use short of global annihilation. They never solved the problem, and it was always recognized that Washington and Moscow both held the keys to unpredictable and potentially catastrophic escalations. As a result, nuclear deterrence was useful in preventing only the most catastrophic scenarios that would have threatened our survival. But even with the deployment of thousands of nuclear weapons on both sides of the Iron Curtain, the Soviet moves into Hungary in 1956 and Czechoslovakia in 1968 were not deterred. Nor were the numerous crises involving Berlin, including the building of the Wall in 1961, or major wars in Korea and Vietnam, or the Soviet invasion of Afghanistan in 1979. In the case of the Soviet Union, nuclear weapons did not prevent collapse or regime change. Today, the Cold War is almost 20 years behind us, but many leaders and publics cannot

conceive of deterrence without a strategy of mutual assured destruction. We have written previously that reliance on this strategy is becoming increasingly hazardous. With the spread of nuclear weapons, technology, materials and know‐how, there is an increasing risk that nuclear weapons will be used. It is not possible to replicate the high‐risk stability that prevailed between the two nuclear superpowers during the Cold

War in such an environment. The growing number of nations with nuclear arms and differing motives, aims and ambitions poses very high and unpredictable risks and increased instability. From 1945 to 1991, America and the Soviet Union were diligent, professional, but also lucky that nuclear weapons were never used. Does the world want to continue to bet its survival on continued good fortune with a growing number of nuclear nations and adversaries globally? Can we devise and successfully implement with other nations, including other nuclear powers, careful, cooperative concepts to safely dismount the nuclear tiger while strengthening the capacity to assure our security and that of allies and other countries considered essential to our national security? Recently, the four of us met at the Hoover Institution with a group of policy experts to discuss the possibilities for establishing a safer and more comprehensive form of deterrence and prevention in a world where the roles and risks of nuclear weapons are reduced and ultimately eliminated. Our broad conclusion is that nations should move forward together with a series of conceptual and practical steps toward deterrence that do not rely primarily on nuclear weapons or nuclear threats to maintain international peace and security. The first step is to recognize that there is a daunting new spectrum of global security threats. These threats include chemical, biological and radiological weapons, catastrophic terrorism and cyber warfare, as well as natural disasters resulting from climate change or other environmental problems, and health-related crises. For the United States and many other nations, existential threats relating to the very survival of the state have diminished, largely because of the end of

the Cold War and the increasing realization that our common interests greatly exceed our differences. However, an accident or mistake involving nuclear weapons, or nuclear terrorism fueled by the spread of nuclear weapons, nuclear materials, and nuclear know-how, is still a very real risk. An effective strategy to deal with these dangers must be developed. The second step is the realization that continued reliance on nuclear weapons as the principal element for deterrence is encouraging, or at

least excusing, the spread of these weapons, and will inevitably erode the essential cooperation necessary to avoid proliferation, protect nuclear materials and deal effectively with new threats. Third, the U.S. and Russia have no basis for maintaining a structure of deterrence involving nuclear weapons deployed in ways that increase the danger of an accidental or unauthorized use of a nuclear weapon, or even a deliberate nuclear exchange based on a false warning. Reducing the number of operationally deployed strategic nuclear warheads and delivery vehicles with verification to the levels set by the New Start Treaty is an important step in reducing nuclear risks. Deeper nuclear reductions and changes in nuclear force posture involving the two nations should remain a priority. Further steps must include short‐range tactical nuclear weapons. Fourth, as long as nuclear weapons exist, America must retain a safe, secure and reliable nuclear stockpile primarily to deter a nuclear attack and to reassure our allies through extended deterrence. There is an inherent limit to U.S. and Russian nuclear reductions if other nuclear weapon states build up their inventories or if new nuclear powers emerge. It is clear, however, that the U.S. and Russia—having led the nuclear buildup for decades— must continue to lead the build‐down. The U.S. and its NATO allies, together with Russia, must begin moving away from threatening force postures and deployments including the retention of thousands of short‐range battlefield nuclear weapons. All conventional deployments should be reviewed from the aspect of provocation. This will make America, Russia and Europe more secure. It will also set an example for the world. Fifth, we recognize that for some nations, nuclear weapons may continue to appear relevant to their immediate security. There are certain undeniable dynamics in play—for example, the emergence of a

nuclear‐armed neighbor, or the perception of inferiority in conventional forces—that if not addressed could lead to the further proliferation of nuclear weapons and an increased risk they will be used. Thus, while the four of us believe that reliance on nuclear weapons for deterrence is becoming increasingly hazardous and decreasingly effective, some nations will hesitate to draw or act on the same conclusion unless regional confrontations and conflicts are addressed. We must therefore redouble our efforts to resolve these issues.

AT Relations Will Improve

Improvement in relations unlikely in the squoWeisbrot 13 --- co-director of the Center for Economic and Policy Research (5/3/2013, Mark, “What Does the Future Hold for U.S.-Venezuela Relations?” http://www.thedialogue.org/page.cfm?pageID=32&pubID=3297, JMP)A: Mark Weisbrot, co-director of the Center for Economic and Policy Research: "According to a New York Times report on April 15, Maduro reached out to the Obama administration through Bill Richardson just before the election. The administration gave its answer within 48 hours, and it was a lot worse than 'no, thank you.' By refusing to recognize Venezuela's election results, and saying that a '100 percent audit' of the vote count was 'necessary,' the Obama administration was saying, 'we hate you, and we are going to do everything we can to undermine your ability to govern.' It was really an escalation of Washington's involvement in Venezuelan politics not seen since its support for the military coup of 2002. It was also disingenuous: given the results of the election-day audit of votes from 53 percent of the voting machines, a further audit could not possibly change the result. A statistical analysis we did shows that the probability of getting the April 14 audit result if the true winner were Capriles is far less than one in 1 quadrillion. The Obama administration's attempt to delegitimize Venezuela's election, although it was completely isolated in the world, indicates that there is no inclination from Washington to significantly improve relations with Venezuela in the foreseeable future. This is regardless of what Maduro does. As for businesses' political risk, I don't see any reason these would increase. The risk of expropriation has always been very small compared to normal investment risks such as prices of outputs or inputs."

SQ relations will be conditioned on Venezuelan cooperationDE CÓRDOBA and MUÑOZ 13 (1/11/2013, JOSÉ DE CÓRDOBA and SARA MUÑOZ, “Venezuela, U.S. Start Talks to Mend Ties,” http://online.wsj.com/article/SB10001424127887324581504578235911777903292.html, JMP)But both sides have cautiously reached out to each other since then. During their talk in November, Mr. Maduro was interested in the possibility of exchanging ambassadors again, U.S. officials say. Mr. Maduro said this month that the contacts had been made "with the authorization" of Mr. Chávez.For its part, the U.S. prefers to move slowly. Before restoring ambassadors, it would like to see Venezuelan instances of cooperation, U.S. officials say. They say they would like to beef up the number of antidrug agents in the country as a first step."It is just going to take two to tango," Ms. Nuland said.Other areas the U.S. would like to see progress on are counterterrorism cooperation and in resolving commercial disputes involving U.S. companies in Venezuela, some of which have been nationalized, and many of which sometimes have difficulty getting dollars from Venezuela's government to pay for needed imports and repatriate AT Relations Impossible

AT Relations Inevitable

Relations are ineffective now even if there isn’t open conflictInter-American Dialogue 12 --- the leading U.S. center for policy analysis, exchange, and communication on issues in Western Hemisphere affairs (April 2012, An Inter-American Dialogue Policy Report, The Dialogue’s select membership of 100 distinguished citizens from throughout the Americas includes political, business, academic, media, and other nongovernmental leaders, “Remaking the Relationship: The United States and Latin America,” http://www.thedialogue.org/PublicationFiles/IAD2012PolicyReportFINAL.pdf, JMP)In the main, hemispheric relations are amicable. Open conflict is rare and, happily, the sharp antagonisms that marred relations in the past have subsided. But the US-Latin America relationship would profit from more vitality and direction. Shared interests are not pursued as vigorously as they should be, and opportunities for more fruitful engagement are being missed. Well-developed ideas for reversing these disappointing trends are scarce. Some enduring problems stand squarely in the way of partnership and effective cooperation. The inability of Washington to reform its broken immigration system is a constant source of friction between the United States and nearly every other country in the Americas. Yet US officials rarely refer to immigration as a foreign policy issue. Domestic policy debates on this issue disregard the United States’ hemispheric agenda as well as the interests of other nations.

Relations declining --- delay makes them worseInter-American Dialogue 12 --- the leading U.S. center for policy analysis, exchange, and communication on issues in Western Hemisphere affairs (April 2012, An Inter-American Dialogue Policy Report, The Dialogue’s select membership of 100 distinguished citizens from throughout the Americas includes political, business, academic, media, and other nongovernmental leaders, “Remaking the Relationship: The United States and Latin America,” http://www.thedialogue.org/PublicationFiles/IAD2012PolicyReportFINAL.pdf, JMP)Despite the multiple opportunities and potential benefits, relations between the U nited

S tates and Latin America remain disappointing. If new opportunities are not seized, relations will likely continue to drift apart. The longer the current situation persists, the harder it will be to reverse course and rebuild vigorous cooperation. Hemispheric affairs require urgent attention—both from the United States and from Latin America and the Caribbean.

AT Relations Impossible

Thaw in relations is possibleMetzker 13 (Jared, ‘Analysts say oil could help mend U.S-Venezuela relations’, July 17, 2013, http://www.ipsnews.net/2013/06/analysts-say-oil-could-help-mend-u-s-venezuela-relations/)WASHINGTON, Jun 17 2013 (IPS) - A shift in U.S. foreign policy towards Venezuela may be pending as a bilateral rapprochement suddenly appears more possible than it has in years. ¶ On the sidelines of talks held earlier this month in Guatemala by the Organisation of American States (OAS), U.S. Secretary of State John Kerry met with Venezuelan Foreign Minister Elias Jaua, with Kerry’s subsequent statements indicating that relations could be heading in a friendlier direction. ¶ “We agreed today – both of us, Venezuela and the United States – that we would like to see our countries find a new way forward, establish a more constructive and positive relationship and find the ways to do that,” Kerry said following the meeting with Jaua, which was reportedly requested by the Venezuelans.¶ The meeting happened on the heels of the release of Timothy Tracy, a U.S. filmmaker whom Venezuela had been holding on accusations of espionage. His release was interpreted by many as an “olive branch” being offered by the new Venezuelan government of Nicholas Maduro, whose presidency Washington still has not formally recognised.¶ Only months ago, before the death of Venezuela’s long-time socialist leader Hugo Chavez, any normalisation of relations between Venezuela and the United States seemed highly unlikely.

Maduro signaling he wants better relationsNeuman 13 (“Venezuela Gives Chávez Protégé Narrow Victory,” New York Times, 4/14/13, http://www.nytimes.com/2013/04/15/world/americas/venezuelans-vote-for-successor-to-chavez.html?pagewanted=all&_r=0)//SRIn an unexpectedly close race, Venezuelans narrowly voted to continue Hugo Chávez ’s revolution , electing his handpicked political heir, Nicolás Maduro, to serve the remainder of his six-year term as president, officials said late Sunday. But the thin margin of victory could complicate the task of governing for Mr. Maduro, emboldening the political opposition and possibly undermining Mr. Maduro’s stature within Mr. Chávez’s movement. His opponent, Henrique Capriles Radonski, refused to recognize the results, citing irregularities in the voting and calling for a recount. Mr. Maduro, the acting president, narrowly defeated Mr. Capriles, a state governor who ran strongly against Mr. Chávez in October. Election authorities said that with more than 99 percent of the vote counted, Mr. Maduro had 50.6 percent to Mr. Capriles’s 49.1 percent. More than 78 percent of registered voters cast ballots. “These are the irreversible results that the Venezuelan people have decided with this electoral process,” Tibisay Lucena, the head of the electoral council, said as she read the result on national television late Sunday. Mr. Maduro gave a defiant speech that suggested little willingness to make concessions. “We have a just, legal, constitutional and popular electoral victory,” he said. Mr. Capriles was equally defiant. “We are not going to recognize the result until every vote is counted, one by one,” Mr. Capriles said. “The big loser today is you, you and what you represent,” he said, referring to Mr. Maduro.

Meanwhile, there were also signs that the strident, Chávez-style anti-American message that Mr. Maduro used during the campaign would now be set aside to improve Venezuela’s strained relations with the United States. Venezuela is a major oil supplier to the United States with immense reserves, and

under Mr. Chávez it has also been a major thorn in Washington’s side, wielding its oil and its diplomatic muscle to oppose American policy everywhere from Cuba to Syria. Mr. Chávez, who succumbed to cancer on March 5, built his political career on flaying the United States and its traditional allies in the Venezuelan establishment, and Mr. Maduro followed his mentor’s script throughout the campaign with an acolyte’s zeal. He accused former American diplomats of plotting to kill him, suggested that the United States had caused Mr. Chávez’s illness, and had his foreign minister shut the door on informal talks with the United States that began late last year. A senior State Department official in Washington said the harsh rhetoric had made the

possibility of improved relations more difficult. But over the weekend, with his election victory looking likely, Mr. Maduro sent a private signal to Washington that he was ready to turn the page. Bill Richardson , the former

governor of New Mexico, who was in Caracas as a representative of the Organization of American States, said in an interview that

Mr. Maduro called him aside after a meeting of election observers on Saturday and asked him to carry a message. “He said, ‘We want to improve the relationship with the U.S., regularize the relationship,’ ”

Mr. Richardson said. The foreign minister, Elías Jaua, met with Mr. Richardson on Sunday, and said Venezuela was ready to resume the talks that it had cut off, Mr. Richardson said.

Maduro will have to be more pragmatic --- better relations are possibleFabian 13 (3/6/2013, Jordan, 3/6/2013, “Hugo Chávez Death: Fixing the U.S.-Venezuela Relationship Won't Be Easy,” http://abcnews.go.com/ABC_Univision/Politics/hugo-chavez-death-fixing-us-venezuela-relationship-easy/story?id=18668275#.UZr5x8r3Ugk, JMP)The death of Venezuelan President Hugo Chávez removes one of the United States' foremost geopolitical foes from Latin America,

sparking hope among U.S. officials that the ensuing changes could lead to improved relations in the region. But it won't be easy.¶ The United States and Venezuela have shared a rancorous relationship since Chávez was first elected in 1998. Chávez angered multiple U.S. presidents by establishing ties to regimes in countries like Cuba and Iran that are hostile to the United States, and for fomenting anti-U.S. sentiment in other nations in the Western Hemisphere. And the Chávez regime repeatedly accused the U.S. of plotting to overthrow his rulership, fueling distrust between the two countries.¶ Relations have become so frayed that the U.S. and Venezuela have not exchanged ambassadors since 2010.¶ Those tensions were evident even on Tuesday, the final day of Chávez's life. Venezuela expelled two U.S. embassy officials from the country on allegations they tried to destabilize the country. Upon their ejection, Venezuelan Vice President Nicolás Maduro even

suggested that U.S. interests were behind the cancer that eventually claimed Chávez's life.¶ But now that Chávez has passed away, elected officials see an opening to reestablish ties with Venezuela.¶ "Hugo Chávez ruled Venezuela with an iron hand and his passing has left a political void that we hope will be filled peacefully and through a constitutional and democratic process," Senate Foreign Relation Committee Chairman Bob Menendez (D-N.J.) said in a statement. "With free and fair elections, Venezuela can begin to restore its once robust democracy and ensure respect for the human, political and civil rights of its people."¶ "It is my sincere hope that Venezuela's leaders will seek to rebuild our once strong friendship based on shared democratic and free enterprise principles," added Sen. Marco Rubio (R-Fla.), a member of the Senate Foreign Relations Committee.¶ The path, however, could be difficult.¶ Venezuelan officials have said a new election will be called within 30 days. That contest will likely pit Maduro against Henrique Capriles Radonski, an opposition leader who touts free market policies and is perceived as friendlier to the U.S. But it's not clear that Capriles will fare better than he did in October, when he was defeated by Chávez.¶ The former president sparked a passionate and loyal following among Venezuela's poor and lower-classes that's morphed into a strong social movement, known as chavismo. Maduro, who will lead the country on an interim basis and is considered the front runner, has pledged to continue Chávez's work. But experts are divided on whether chavismo can outlive its charismatic namesake.¶ Some foreign policy observers believe that, even if Maduro wins, ties could

improve between the U.S. and Venezuela.¶ "I think it is an opportunity for us to step into a new relationship with Venezuela," Former U.N. ambassador Bill Richardson, who met with Chávez in 2008, said on MSNBC. "The

opposition candidate Capriles is pro-U.S. The vice president Maduro is not pro-U.S., but is, I think, going to be more pragmatic than Chávez."¶ Still, the U.S. will have to work to improve its image and standing in Venezuela following nearly a decade-and-a-half of anti-U.S. sentiment being imbued into the country's government and political culture.

AT Chavez Death/Maduro Solves

Absent policy changes, U.S.-Venezuela relations won’t improve much under MaduroBloomberg 4/17 (“Venezuelan Leader’s Taunts Won’t Provoke U.S., Diplomat Says” Bloomberg April 17 2013 <http://www.bloomberg.com/news/2013-04-17/venezuelan-leader-s-taunts-won-t-provoke-u-s-diplomat-says-2-.html> 6/27/13)//AHThe U.S. is unlikely to adopt a more confrontational stance toward Venezuela even as President- elect Nicolas Maduro ratchets up his rhetoric in the wake of his narrow victory, the State Department’s top official

for Latin America said. Echoing charges frequently levied by his political mentor, the late President Hugo Chavez, Maduro

yesterday accused the U.S. of trying to oust him by supporting opposition calls for a recount of ballots in the April 14 election he won by about 270,000 votes. Today, he likened President Barack Obama’s policy towards Venezuela to U.S. support for the overthrow of Chile’s Salvador Allende in 1973. Enlarge image While Russia, China and most of Latin America has congratulated Venezuelan President

Nicolas Maduro for his win, the U.S. and European Union have held back support while seeking a recount to address opposition claims of irregularities. Photographer: Juan Barreto/AFP via Getty Images Roberta

Jacobson, assistant secretary of state for Western Hemisphere affairs, said such rhetoric has become more commonplace since Maduro took control of Venezuela’s troubled economy following Chavez’s death from cancer last month. While that makes it harder for relations to improve, the U.S. is unlikely to respond in kind, she said.

“I don’t think there’s going to be a marked difference in the way we respond to Maduro versus the way we responded to Chavez,” Jacobson, a career diplomat, said in an interview from the State Department in Washington. “It still doesn’t make sense to get in, you’ll excuse me, a pissing match with Nicolas Maduro any more

than it did with Chavez.” While relations between the U.S. and Venezuela have long been strained -- the two countries have gone without ambassadors since 2010 -- former president George W. Bush in his second term adopted a more conciliatory tone toward Chavez, which Obama continued. Other Cheek At the heart of what Jacobson called a “turning of the cheek” approach are strong commercial ties -- Venezuela was the U.S.’s fourth-biggest supplier of oil last year -- and a sense of political realism. That means that

while the U.S. won’t back away from expressing its disappointment with the fairness of the election and the lack of a recount, that shouldn’t lead relations to deteriorate further, she said. While Russia, China and most of Latin America has congratulated Maduro for his win, the U.S. and European Union have held back support while seeking a recount to address opposition claims of irregularities.

The death of Chavez cannot alone solve relations Rodgers 13 (Bill Rodgers, Writer for the Voice of America, March 7, 2013. “Venezuela-US Relations Unlikely to Change after Chavez.” http://www.voanews.com/content/venezuela-us-relations-unlikely-to-change-after-chavez/1616806.html)

CARACAS — The death of Venezuelan President Hugo Chavez is raising questions about what happens next in Venezuela, both

internally and with its relations to other nations, including the United States. Analysts do not expect the tense relationship between Washington and Caracas to change soon. The death of President Chavez is being mourned by his supporters, while many inside and outside Venezuela wonder what the future holds. A commanding and charismatic figure in life, Chavez played an outsized role on the world stage - largely by challenging the United States and what he saw as Washington's economic and political dominance of Latin America. "He was a guy about power, you can’t really understand Chavez, the way he operated, what he did, what he couldn’t do, unless you understand his tremendous appetite for power," explained Michael Shifter, head of the Inter-American Dialogue in Washington. "And that meant power within Venezuela, power within Latin America and that meant challenging and defying the superpower." He

repeatedly accused the United States of undermining his socialist revolution. A failed coup attempt in 2002 tacitly supported by the Bush administration further antagonized the Venezuelan leader and his supporters. This antagonism is unlikely to change soon. At a meeting convened the day Chavez died, Vice President Nicolas Maduro accused Washington of plotting to undermine Venezuela and announced the expulsion of two American diplomats. That does not bode well for future relations, says Carl Meacham of the Center for Strategic and International Studies. "It is sort of sticking to the playbook that Chavismo has used in the past: always blame the United States or blame some foreign entity to distract them from problems that they have going on in Venezuela," he said. Despite this, Venezuela is a major supplier of petroleum to the United States - and even provides free heating oil to poor Americans through a non-profit group. American University professor Philip Brenner says this shows that relations between the two countries would be better if Washington recognizes certain realities. "I think the important thing to remember about Venezuela is that they have never even threatened to cut off our oil. Venezuela has done nothing to actually harm U.S. interests except to challenge U.S. dominance," Brenner noted.

AT Not Recognizing Maduro Alt Caus

Failure to recognize Maduro not make or break for relationsBusiness Recorder 13 (6/18/2013, “US, Venezuela take steps towards mending ties,” http://www.brecorder.com/general-news/172/1197252/, JMP)***Note --- Elias Jaua is Venezuela's foreign minister Jaua also downplayed Obama's failure to recognise Maduro's victory. It is "not an issue that matters," he said. During his lengthy presidency Chavez regularly criticised US "imperialism" and courted US foes like Iran and Syria. Jaua however said it was the late leader who told Venezuelan officials "that we had to work towards normalising these relations" with Washington. On Wednesday Jaua met with US Secretary of State John Kerry in Antigua in a first step to mend ties.

China Adv

China War

Failure to maintain our heg in Latin America results in war with China Dowd 12 – Senior fellow at the American Security Council Foundation (Alan, “Crisis in the America’s,” American Security Council Foundation, http://www.ascfusa.org/content_pages/view/crisisinamericas)//SRFocused on military operations in the Middle East, nuclear threats in Iran and North Korea, and the global threat of terrorism, U.S.

policymakers have neglected a growing challenge right here in the Western Hemisphere: the expanding influence and reach of China. Eyeing energy resources to keep its economy humming, China is engaged in a flurry

of investing and spending in Latin America. In Costa Rica, China is funding a $1.24-billion upgrade of the country’s oil refinery; bankrolling an $83-million soccer stadium; backing infrastructure and telecommunications improvements; and pouring millions into a new police academy. In Colombia, China is planning a massive “dry canal” to link the country’s Pacific and Atlantic coasts by rail. At either terminus, there will be Chinese ports; in between, there will be Chinese assembly facilities, logistics operations and distribution plants; and on the Pacific side, there will be dedicated berths to ship Colombian coal outbound to China. In mid-January, a Chinese-built oil rig arrived in Cuba to begin drilling in Cuba’s swath of the Gulf of Mexico. Reuters reports that Spanish, Russian, Malaysian and Norwegian firms will use the rig to extract Cuban oil. For now, China is focusing on onshore oil extraction in Cuba. New offshore discoveries will soon catapult Brazil into a top-five global oil producer. With some 38 billion barrels of recoverable oil off its coast, Brazil expects to pump 4.9 million barrels per day by 2020, as the Washington Times reports, and

China has used generous loans to position itself as the prime beneficiary of Brazilian oil. China’s state-run oil and banking giants have inked technology-transfer, chemical, energy and real-estate deals with Brazil. Plus, as the Times details, China came to the rescue of Brazil’s main oil company when it sought financing for its massive drilling plans, pouring $10

billion into the project. Astudy in Joint Force Quarterly (JFQ) adds that Beijing plunked down $3.1 billion for a slice of Brazil’s vast

offshore oil fields. The JFQ study reveals just how deep and wide Beijing is spreading its financial influence in Latin America: $28 billion in loans to Venezuela; a $16.3-billion commitment to develop Venezuelan oil reserves; $1 billion for Ecuadoran oil; $4.4 billion to develop Peruvian mines; $10 billion to help Argentina modernize its rail system; $3.1 billion to purchase Argentina’s petroleum company outright. The New York Times adds that Beijing has lent Ecuador $1 billion to build a hydroelectric plant. There is good and bad to Beijing’s increased interest and investment in the Western Hemisphere. Investment fuels development, and much of Latin America is happily accelerating development in the economic, trade, technology and infrastructure spheres. But China’s riches come with strings. For instance, in exchange for Chinese development funds and loans, Venezuela agreed to increase oil shipments to China from 380,000 barrels per day to one million barrels per day. It’s worth noting that the Congressional Research Service has reported concerns in Washington that Hugo Chavez might try to supplant his U.S. market with China. Given that Venezuela pumps an average of 1.5 million barrels of oil per day for the U.S.—or about 11 percent of net oil imports—the results would be devastating for the U.S. That brings us to the security dimension of China’s checkbook diplomacy in the Western Hemisphere. Officials with the U.S. Southern Command conceded as early as 2006 that Beijing had “approached every country in our area of responsibility” and provided military exchanges, aid or training to Ecuador, Jamaica, Bolivia, Cuba, Chile and Venezuela. The JFQ study adds that China has “an important and growing presence in the region’s military institutions.” Most Latin American nations, including Mexico, “send officers to professional military education courses in the PRC.” In Ecuador, Venezuela and Bolivia, Beijing has begun to sell “sophisticated hardware…such as radars and K-8 and MA-60 aircraft.” The JFQ report concludes, ominously, that Chinese defense firms “are likely to leverage their experience and a growing track record for their goods to expand their market share in the region, with the secondary consequence being that those purchasers will become

more reliant on the associated Chinese logistics, maintenance, and training infrastructures that support those products.” Put it all together, and the southern flank of the United States is exposed to a range of new security challenges. To be sure, much of this is a function of China’s desire to secure oil markets. But there’s more at work here than

China’s thirst for oil. Like a global chess match, China is probing Latin America and sending a message that just

as Washington has trade and military ties in China’s neighborhood, China is developing trade and military ties in America’s neighborhood. This is a direct challenge to U.S. primacy in the region—a challenge that must be answered. First, Washington needs to relearn an obvious truth—that China’s rulers do not share America’s values—and needs to shape and conduct its China policy in that context. Beijing has no respect for human rights. Recall that in China, an estimated 3-5 million people are rotting away in laogai slave-labor camps, many of them “guilty” of political dissent or religious activity; democracy activists are rounded up and imprisoned; freedom of speech and religion and assembly do not exist; and internal security forces are given shoot-to-kill orders in dealing with unarmed citizens. Indeed, Beijing viewed the Arab Spring uprisings not as an impetus for political reform, but as reason “to launch its harshest crackdown on dissent in at least a decade,” according to Director of National Intelligence James Clapper. In short, the ends always justify the means in Beijing. And that makes all the difference when it comes to foreign and defense policy. As Reagan counseled during the Cold War, “There is no true

international security without respect for human rights.” Second, the U.S. must stop taking the Western Hemisphere for granted, and instead must reengage in its own neighborhood economically, politically

and militarily. That means no more allowing trade deals—and the partners counting on them—to languish. Plans for a hemispheric free trade zone have faltered and foundered. The trade-expansion agreements with Panama and Colombia were left in limbo for years, before President Obama finally signed them into law in 2011. Reengagement means reviving U.S. diplomacy. The Wall Street Journal reports that due to political wrangling in Washington, the State Department position focused on the Western Hemisphere has been staffed by an interim for nearly a year, while six Western Hemisphere ambassadorial posts (Uruguay, Venezuela, Ecuador, El Salvador, Nicaragua and Barbados) remain empty. Reengagement means reversing plans to slash defense spending. The Joint Forces Command noted in 2008 that China has “a deep respect for U.S. military power.” We cannot overstate how important this has been to keeping the peace. But with the United States in the midst of massive military retrenchment, one

wonders how long that reservoir of respect will last. Reengagement also means revitalizing security ties. A good

model to follow might be what’s happening in China’s backyard. To deter China and prevent an accidental war, the

U.S. is reviving its security partnerships all across the Asia-Pacific region. Perhaps it’s time to do the same in Latin America. We should remember that many Latin American countries—from Mexico and Panama to Colombia and Chile—border the Pacific. Given Beijing’s actions, it makes sense to bring these Latin American partners on the Pacific Rim into the alliance of

alliances that is already stabilizing the Asia-Pacific region. Finally, all of this needs to be part of a revived Monroe Doctrine. Focusing on Chinese encroachment in the Americas, this “Monroe Doctrine 2.0” would make it clear to Beijing that the United States welcomes China’s efforts to conduct trade in the Americas but discourages any claims of control—implied or explicit—by China over territories, properties or facilities in the Americas. In addition, Washington should make it clear to Beijing that the American people would look unfavorably upon the sale of Chinese arms or the basing of Chinese advisors or military assets in the Western Hemisphere. In short, what it was true in the 19th and 20th centuries must remain true in the 21st: There is room for only one great power in the Western Hemisphere.

Chinese adventurism in Latin America erodes U.S. hegemony and causes U.S.-China warEllis 05 – (R. Evan, U.S. National Security Implications of Chinese Involvement in Latin America, p. 23-24, http://books.google.com/books?id=7PyXyhZ7MfoC&pg=PA36&lpg=PA36&dq=chinese+involvement+in+venezuela&source=bl&ots=D9rjJRTONg&sig=KYnluPPLYNJPn-3ryI0PAJBYQ2A&hl=en&sa=X&ei=wvzJUenkE8iIyAG59oDgBw&ved=0CEoQ6AEwAw#v=onepage&q=venezuela&f=false)//mmIn general, the Chinese presence in Latin America reflects significant erosion in the relative power and geopolitical position of the United States, and the advent of a new century in which the United States is preoccupied about Chinese adventurism in the Americas, balancing out traditional Chinese

concerns about the U.S. presence in Asia. The dynamics and potential consequences of these trends range from economic damage to the United States to the potential for significant crises which, if mismanaged, could bring about direct conflict between the United States and China in this hemisphere.¶ Some of the most immediate consequences of the current Chinese engagement in Latin America involve the economic security of the United States and the livelihood of U.S. citizens. To the extent that Latin American countries sign free trade agreements both with China and with the United States, American markets will become increasingly open to duty free Chinese products – something that China has never been able to obtain through direct negotiations with the United States. The free trade accord that Chile has negotiated with the United States, for example, in combination with the one that Chile is currently negotiating with China, raises the possibility that Chile (or other Latin American nations pursuing similar agreements) could be used as a “pass through,” country, by which Chinese goods were sold without tariffs to U.S. markets. Although the U.S.-led initiative for a Free Trade Area of the Americas (FTAA) is currently experiencing difficulties, its achievement would compound U.S. vulnerability to this Chinese competition.

AT No China War

Even if there is no war, Chinese influence in LA ensures the end of U.S. primacy Ellis 10 – Assistant Professor of National Security Studies in the Center for Hemispheric Defense Studies at the National Defense University (R. Evan, “Chinese Soft Power in Latin America: A Case Study”, NDU Press, http://www.ndu.edu/press/chinese-soft-power-latin-america.html)//mmAnalysts looking for signs of imminent Chinese coercion or intervention in Latin America are likely to be disappointed. Nonetheless, Chinese soft power in Latin America still raises important national security issues, even if the PRC does not explicitly seek to subvert or marginalize the United States as part of its reemergence onto the world stage.¶ In Latin America, as elsewhere, China's currently modest influence is providing

it with triumphs of ever-growing scale in strategically important business, culture, and technology arenas. Although no specific event may directly threaten the U.S. national interest, the collective effect is to restructure the global flows of value added and influence in a manner beneficial to China, making the ability of the United States to successfully pursue its own national goals and interests increasingly dependent on the acquiescence of the PRC.

U.S. Rapprochement Solves

U.S. assistance prevents exclusive Chinese influenceFillingham 13 --- Managing Editor & Asia Analyst and MA in Chinese Studies from the School of Oriental and African Studies in London (3/10/2013, Zachary, “Post-Chavez US-Venezuelan Relations: Headed for a Thaw?” http://www.geopoliticalmonitor.com/post-chavez-us-venezuelan-relations-headed-for-a-thaw-4790/, JMP)Current polls indicate that Maduro would triumph in the coming election, a scenario that does not bode well for a thaw in US-Venezuelan relations. Maduro has dropped several indications that he plans to carry on his predecessor’s anti-American tone, notably by suggesting that the U.S. might be behind Chavez’s illness and by kicking out two U.S. military attaches under the

accusation of “trying to destabilize Venezuelan politics.”¶ But to take the inevitability of another United Socialist government as proof of a perpetual flatline in US-Venezuelan relations would be premature. It is a short-term consideration, and it’s only in the medium term that things will likely get interesting.¶ First off, Maduro will have to grapple with the problem plaguing every political system that favors individual personality over rule of law. A vacuum has opened up at the very top of Venezuelan politics, and it remains to be seen whether Maduro has the charisma, and perhaps more importantly, the personal networks with which to fill it. The Chavez-era Venezuelan state was one that operated on a complex system of personal patronage that led all the way to the top; supporters were rewarded and detractors were marginalized. It remains to be seen whether this system will function smoothly with its head cut off.¶ Political patronage goes hand in hand with Venezuela’s other pressing issue: an increasingly dysfunctional economy. Many Chavez-era policies could be described as political patronage on a mass scale, and while these policies did help Venezuela’s poor, they tended to be inefficient and short-sighted. For example, the Chavez government’s adult literacy program cost anywhere from $543 to $977 per adult learner. Compare that to Brazil’s program that uses pre-existing educational infrastructure to achieve a cost of $2.50 per learner. In Venezuela’s case, most of this money went into hiring adult literacy trainers, thus providing people with jobs- but only for

as long as the government’s finances can hold out.¶ And by all indications, Venezuela’s finances aren’t going to hold out for very long. The country is currently running a deficit of over 20 percent, and its national inflation rate fluctuates between 20 and 30 percent. Though it presides over one of the world’s largest oil reserves and is a card-carrying member of OPEC,

Venezuela’s oil yields have been dropping throughout the Chavez era due to a lack of foreign investment. The same is true of Venezuela’s food industry. A lack of foreign investment, inefficiency, and costly subsidies have stunted overall output, resulting in food shortages that are now showing themselves in the huge lineups spilling out of government food depots nationwide.¶ A reoccurring theme of Chavez’s economic policy was a willful ignorance regarding the creation of infrastructure and social capital that could drive economic growth beyond the era of direct government handouts. Given the structural challenges that the Venezuelan economy now faces, challenges that will preclude the government’s ability to continue

Chavez-era patronage ad infinitum, a Maduro government will inevitably be faced with an economic reckoning of sorts. In the aftermath of this economic reckoning, there will be an opportunity for both domestic opposition forces within Venezuela, and American foreign policy to make inroads.¶ Just to recap: what we are likely to see is a Maduro win, followed by a politico-economic crisis that ushers in either a return to credible multi-party democracy or a descent into conspicuous authoritarianism.¶ But how will this impact US-Venezuelan

relations?¶ Given its precarious economic situation, Venezuela will need outside assistance in the near future. And while some would say that China is best suited to step up and bail out Caracas, there are a few reasons to question whether this will actually come to pass. First of all,

The Chinese Development Bank has already provided a huge amount of money to the Chavez

government, about $40 billion between 2008 and 2012 alone. Thus, if Venezuela were to be faced with a default, it would be Chinese investors with their money on the line. Any debt renegotiations would surely include provisions that didn’t sit well with the Venezuelan public. After all, there have already been agreements reached between Venezuela and the Chinese state-owned company Citic Group that have raised populist alarm

bells regarding the signing of mineral rights over to foreign companies.¶ In this context, a limited rapprochement makes sense from a Venezuelan point of view, as it would balance against a preponderance of

Chinese economic influence . Now that the “Bolivarian Revolution” is all but discredited, and countries like Brazil have

proven that it’s possible to alleviate poverty through trade and keep US influence at arm’s length, a US-Venezuelan thaw is theoretically possible. However, authorities in Washington will likely have to endure another round of vitriol and wait until the dust settles in Venezuelan domestic politics before their window of opportunity presents itself.

Canada Add-On

Canada Oil Sands Add-On

Investment in Venezuela will force a tradeoff with Canadian oil sandsCampbell 13 (4/16/2013, Darren, “A new leader could signal change for Venezuela’s troubled oil and gas sector; If Nicolas Maduro can reverse the industry's decline, it could siphon off

investment in Alberta's oil sands ,” http://www.albertaoilmagazine.com/2013/04/a-new-leader-could-signal-change-for-venenzuelas-oil-and-gas-sector/, JMP)Oil-rich Venezuela has a new president and his name is Nicolas Maduro.¶ On Monday, Maduro was declared the winner of the closest presidential election the country has had in 45 years. He succeeds Hugo Chavez, who died of cancer on March 5.¶ Normally, we wouldn’t write about the results of an election from a far-off outpost like Venezuela here at Energy Ink. But Venezuela isn’t just any outpost.¶ It has some of the largest oil and gas reserves in the world. And under Chavez, the industry and the state-run company, the Petroleos de Venezuela, S.A (PDVSA), have been run badly.¶ That, of course, has been good for Alberta’s own oil and gas industry, particularly the oil sand sector.¶ That’s because Venezuelan heavy oil is a competitor to the bitumen and heavy oil Alberta produces, and as long as the Venezuelan oil and gas industry is badly underperforming, some of the investment that could be going to develop its reserves will flow to the oil sands.

Impact is extinction from runaway climate changeHansen 12 --- directs the NASA Goddard Institute for Space Studies (5/9/2012, James, NYT, “Game Over for the Climate,” http://www.nytimes.com/2012/05/10/opinion/game-over-for-the-climate.html?_r=0)GLOBAL warming isn’t a prediction. It is happening. That is why I was so troubled to read a recent interview with President Obama in Rolling Stone in which he said that Canada would exploit the oil in its vast tar sands reserves “regardless of what we do.” ¶ If Canada proceeds, and we do nothing, it will be game over for the climate .¶ Canada’s tar sands, deposits of sand saturated with bitumen, contain twice the amount of carbon dioxide emitted by global oil use in our entire history. If we were to fully exploit this new oil source, and continue to burn our conventional oil, gas and coal supplies, concentrations of carbon dioxide in the atmosphere eventually would reach levels higher than in the Pliocene era, more than 2.5 million years ago, when sea level was at least 50 feet higher than it is now. That level of heat-trapping gases would assure that the disintegration of the ice sheets would accelerate out of control. Sea levels would rise and destroy coastal cities. Global temperatures would become intolerable. Twenty to 50 percent of the planet’s species would be driven to extinction. Civilization would be at risk. ¶ That is the long-term outlook. But near-term, things will be bad enough. Over the next several decades, the Western U nited S tates and the semi-arid region from North Dakota to Texas will develop semi-permanent drought, with rain, when it does come, occurring in extreme events with heavy flooding. Economic losses would be incalculable. More and more of the Midwest would be a dust bowl. California’s Central Valley could no longer be irrigated. Food prices would rise to unprecedented levels.¶ If this sounds apocalyptic, it is. This is why we need to reduce emissions dramatically. President Obama has the power not only to deny tar sands oil additional access to Gulf Coast refining, which Canada desires in part for export

markets, but also to encourage economic incentives to leave tar sands and other dirty fuels in the ground.

Venezuela Production Competes With Canada

Expanded Venezuelan oil will tradeoff with Canada’s oil exports to the U.S.Hussain 13 (3/6/2013, Yadullah, “Life after Chavez: America’s oil gains could be Canada’s 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 U nited S tates 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 neighbour’s 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 Canada in the U nited S tates and even China and Asian markets.

Expanded Venezuela production will compete with Canadian imports to the U.S.Kohl 13 --- insider in the energy markets, one of few financial reporters to have visited the Alberta oil sands (3/8/2013, Keith, “Reviving Venezuela's Oil Industry; Heavy Oil Investments,” http://www.energyandcapital.com/articles/reviving-venezuelas-oil-industry/3151, JMP)Rex's RevengeThe bitter court battle that followed Chavez's May Day takeover didn't sit well with ExxonMobil Executive Rex Tillerson. But fear not, because he's about to have his revenge...¶ When the company announced it was spending $190 billion over the next five years, an interesting detail was where they're directing the capital. Out of 28 oil projects the company will start during that time frame, two dozen deal with heavy oil.¶ It's a good bet not a drop of it will come from Venezuelan fields.¶ Herein lies our opportunity, and I guarantee you most investors won't see it coming...¶ Battle for the Gulf¶ We've always known what the late Venezuelan president never said: The country needs us much more than we need them.¶ About 40% of Venezuela's oil exports are shipped to the U nited S tates. Take it a step further, and you'll notice these barrels are heading for refineries along the Gulf Coast that are specifically designed to handle heavy crude.¶ Nearly half of all our oil imports are shipped to the Gulf Coast area (PADD 3). Our PADD 3 area will become a battleground for heavy oil producers (and there are more of them than you might think).¶ Refiners like Valero, meanwhile, have performed admirably for investors over the past year:¶ Valero¶ The heavy oil showdown in the Gulf will come down to Canada and Venezuela. ¶ Both are developing their own massive heavy oil deposits, and although our initial reaction is to side with our Canadian friends, Chavez's death could breathe new life into Venezuela's dying oil industry. ¶ Next month's election for Hugo's successor will be the first clear indication of whether that will happen...¶ If the current vice president fails to win, it'll be interesting to see if the country will become more market-friendly and open its doors once again for foreign investment.

Expanded Venezuelan production will compete with Canadian heavy oil

Ross 13 (4/30/2013, Elsie, Daily Oil Bulletin, “Venezuela, Mexico Could Once Again Compete Against Canada In Heavy Oil Market,” Lexis-Academic, JMP)Canadian heavy oil, which in recent years has increased its share of the United States Gulf of Mexico market at the expense of Venezuela and Mexico, could face increasing competition from those two countries, an oil conference heard Monday.¶ "There is going to be competition from Venezuela," Alberto Cisneros Lavaller, president and chief executive officer of Global Business Consultants, told the Canadian Energy Research Institute event. "The question is the degree of competition and the amount of exports that we can expect."¶ At present, the U.S. imports less than one million bbls of oil a day from Venezuela but that could increase to 1.2 million bbls a day or 1.6 million bbls a day depending on whether the recently-elected government of Nicolas Maduro maintains the socialist approach of former President Hugo Chavez or whether there is a return to democracy, he said.

Oil Sands Increase Warming

Canadian oil sands makes climate change unsolvableCarrington 13 (5/19/2013, Damian, “Tar sands exploitation would mean game over for climate, warns leading scientist; Prof James Hansen rebukes oil firms and Canadian government over stance on exploiting fossil fuel, which he says would make climate problem unsolvable,” http://www.guardian.co.uk/environment/2013/may/19/tar-sands-exploitation-climate-scientist, JMP)Major international oil companies are buying off governments, according to the world's most prominent climate scientist, Prof James Hansen. During a visit to London, he accused the Canadian government of acting as the industry's tar sands salesman and "holding a club" over the UK and European nations to accept its "dirty" oil."Oil from tar sands makes sense only for a small number of people who are making a lot of money from that product," he said in an interview with the Guardian. "It doesn't make sense for the rest of the people on the planet. We are getting close to the dangerous level of carbon in the atmosphere and if we add on to that unconventional fossil fuels, which have a tremendous amount of carbon, then the climate problem becomes unsolvable ." Hansen met ministers in the UK government, which the Guardian previously revealed has secretly supported Canada's position at the highest level.Canada's natural resources minister, Joe Oliver, has also visited London to campaign against EU proposals to penalise oil from Alberta's tar sands as highly polluting. "Canada can offer energy security and economic stability to the world," he said. Oliver also publicly threatened a trade war via the World Trade Organisation if the EU action went ahead: "Canada will not hesitate to defend its interests."The lobbying for and against tar sands has intensified on both sides of the Atlantic as the EU moves forward on its proposals, which Canada fears could set a global precedent, and Barack Barack Obama considers approving the Keystone XL pipeline to transport tar sands oil from Canada to the US gulf coast refineries and ports. Canada's prime minister, Stephen Harper, was met by protesters when he visited New York last week to tell audiences that KXL "absolutely needs to go ahead".Canada's tar sands are the third biggest oil reserve in the world, but separating the oil from the rock is energy intensive and causes three to four times more carbon emissions per barrel than conventional oil. Hansen argues that it would be "game over" for the climate if tar sands were fully exploited, given that existing conventional oil and gas is certain to be burned.

Canadian oil sands produce 3 time more C02Reinhard 09 --- LCDR, USN (April 2009, Paul B., “A Long-Term United States’ Energy Policy Without Venezuelan Oil,” http://www.dtic.mil/dtic/tr/fulltext/u2/a539679.pdf, JMP)While Canada’s oil sands appear to be a panacea for a loss to Venezuelan oil, its importation poses significant political and environmental problems for the U.S. Oil sands, when refined, produce three times more carbon dioxide per barrel than contained in a barrel of conventional oil.67 The refining of oil sands in Canada is expected to account for half of its carbon dioxide emissions by 2010.68 Importing and refining Canadian oil sands will only increase the amount of greenhouse gases emissions produced by the U.S. Due to concern over greenhouse gases, the 2007 Energy and Independence Security Act (EISA) included a provision

which prevents the U.S. Air Force from developing coal to liquid fuels. Authors of the bill categorize Canadian oil sands under the same provision, which would prevent the U.S. military from purchasing Canadian oil sand syncrude.69 With the U.S. military being the largest domestic consumer of oil, purchasing 136 million barrels worldwide in fiscal year 2007, the impact of EISA will present challenges for the U.S. if ever placed in a position of supplanting Venezuelan oil. 70

Solvency

General

U.S. energy engagement solves - Maduro’s acceptance likelyShifter 13 - Adjunct Professor of Latin American Studies at Georgetown University's School of Foreign Service (3/11/2013, Michael, “The Empire Makes Nice: Is it time for a Venezuela reset?” http://www.foreignpolicy.com/articles/2013/03/11/the_empire_makes_nice_venezuela_hugo_chavez, JMP)Four years ago, when the first Obama administration was still hopeful about the prospects of resetting relationships with U.S. adversaries in the world, Venezuela was high on the list. "Eight years of isolation has resulted in the kinds of outreach that, I think, both you and I find troubling," then Secretary of State Hillary Clinton told the Senate in 2009. "Our belief is, if it hasn't worked, why keep it going? Let's see what else might be possible." Things

haven't turned out quite as planned, but following the death of Hugo Chávez, the U nited S tates may get a new opportunity to improve one of its most frustrating relationships, and find out if a new way of operating might indeed be possible. Some progress has been made, of course. The Obama administration learned some important lessons from the George W. Bush years. It wisely avoided becoming embroiled in rhetorical tit-for-tats -- a game Chávez played with relish and of which he was the undisputed master. In 2006, for instance, then-Defense Secretary Donald Rumsfeld likened Chávez to Adolf Hitler. The Venezuelan president responded in kind at a rally in Caracas, "The imperialist, genocidal, fascist attitude of the U.S. president has no limits. I think Hitler would be like a suckling baby next to George W Bush." The Obama White House also seemed to accept the fact that, for all his faults and the problems he posed for the United States, Chávez was Venezuela's legitimately elected president. Had there been another attempt to oust him, Obama officials would, one hopes, not have expressed undisguised glee, as the Bush White House did during the brief putsch of 2002. Seven years after that failed coup attempt, and three months into his presidency, Obama shook hands and bantered a bit with Chávez at a hemispheric summit in Trinidad and Tobago. (Chávez, ever the showman, gave Obama a copy of a book by leftist historian Eduardo Galeano, a gift presumably aimed at enlightening the incoming president about

the evils of U.S. imperialism.) True, Obama has eschewed Bush's military adventurism, which touched a deep nerve in Latin America. But a more restrained U.S. foreign policy and a commitment to "engage" with the region as "partners" did little to persuade Chávez that Washington had changed its tutelary ways. "Obama, to me, until now, has been a great disappointment." Chavez told CNN in 2010, comparing the U.S. president to a highly rated baseball pitching prospect who "end up being wild." Today, three months into Obama's second term, Washington will have to deal with a Venezuela -- a country with the world's largest oil reserves that accounts for roughly 10 percent of U.S. imports today -- without Chávez. No one can match the riveting theater Chávez reliably provided -- his trademark, strident rhetoric and audacious, provocative moves on the regional and global stages, so often targeted at Washington. Still, after 14 years of distancing and mutual suspicions, the U.S.-Venezuela relationship is sure to be very difficult. Though uncertainty abounds in the country that Chávez so thoroughly dominated for so long, the most likely scenario is that acting President Nicolás Maduro, Chávez's designated successor, will win the election scheduled for April 14. He will benefit from an emotional boost from Chavez's death and a demoralized opposition that that was thrown off balance by major defeats in presidential and gubernatorial elections in late 2012. Maduro will preside over a government made up of diverse factions that, absent Chávez's charisma and political shrewdness, will have a hard time

staying together -- particularly as the country's already serious economic conditions worsen. The Obama administration should take two critical facts about Venezuela's post-Chávez political reality into account. First, since Maduro is not Chávez, he will have little choice but to govern in a different fashion than his predecessor. Lacking comparable magnetism and resources, Maduro will likely be somewhat more

accommodating to those Chávez treated with utter intransigence, such as the private sector,

foreign investors, and the opposition . Maduro, acting out of self-interest, will need, and look for, political oxygen. The second is simply the risk of turbulence in Venezuela, especially after the upcoming electoral cycle. To be sure, analysts' occasional predictions about political violence during the Chávez years were (happily) not borne out. And given the extent of rancor and polarization in the society, it is striking how little political violence there has been (common crime, on the other hand,

has skyrocketed). Still, the security situation is far from settled -- a militia force of 125,000 answered directly to Chávez -- and it would be a mistake to rule out chaotic and perilous scenarios that should be of great concern to the entire hemisphere. What does this mean for Washington? Assuming that Maduro succeeds Chávez, the Obama administration

should be amenable to taking steps toward establishing a better relationship with Caracas. Since the relationship today is practically nonexistent, that would not require a big leap. It might simply entail opening up channels of communication and seeking to establish an ambassadorial presence in both capitals which -- absurdly, given the strong commercial relationship between the two countries -- have not existed since 2010. Beyond that, depending on how Venezuela's economic

situation unfolds, it might be worth exploring some degree of cooperation and support in energy . Under Chávez, Venezuela's state oil company PDVSA has suffered from declining production and investment and heavy politicization. Maduro may not want to change that right away -- he will need to show that he is a loyal Chávista. But if the country's fiscal pressures prove

untenable, he may have few options, and the U nited S tates should be open to helping out.

Collaboration on counternarcotics and law enforcement would also be desirable but for the time being are probably non-starters politically, given the depth of mutual mistrust (not to mention that seven Venezuelan officials are on a Treasury Department blacklist for their alleged involvement in drugs and arms dealing). To its credit, the State Department reached out to Maduro several months ago, and following Chávez's death the Obama administration has expressed an interest in improving the tense bilateral relationship. Its entreaty was surely not helped by Maduro's broadside against the United States, just hours before he announced that Chávez had died -- a move right out of Hugo's playbook. Maduro not only expelled two military attaches from the U.S. Embassy but also intimated that Washington might have been responsible in some way for Chávez's death. Absent a shred of evidence, Maduro's words were

outrageous, but aimed at proving to the base that he was a worthy heir to Chávez before the election. But it's far too early for the

U nited S tates to give up hope on Maduro. Despite his reckless words in recent days, his ideologically hard-line views, and close relationship with Cuban leaders, Maduro's style contrasts sharply with Chávez's. Chávez was a military man, a former paratrooper who attempted a coup in 1992. Maduro was not only foreign minister and head of the National Assembly, but earlier in his career was a union official who negotiated deals. He will be tough rhetorically, but some give-and-take

behind the scenes seems feasible -- a balancing act Washington will have to understand and deal with. Maduro will likely also confront more dire economic circumstances than Chávez ever did. Politically, he will not be able to afford to reject communication and some

accommodation with the private sector. In fact, Maduro has been instrumental in the Venezuelan government's constructive

role in current peace talks in Havana between the Colombian government and the Revolutionary Armed Forces of Colombia (FARC). His support to what is arguably Washington's closest South American ally in an effort to bring to an end the only remaining armed conflict in the hemisphere can be construed as an example of his pragmatism. A peace accord between the Colombian government and the FARC (which uses Venezuelan territory as a sanctuary and was supported by Chávez) would reduce a key source of instability in the wider region. 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 Brasília. Absent Chávez, Venezuela will continue to be tricky in the second Obama administration. The administration will need to arrive at a more accurate on-the-ground reading of what is happening in the country. It will need to engage in quiet, steady, high-level diplomacy with key allies in the region not only to closely monitor the security situation and guard against dire scenarios but to press for free and fair elections and adherence to the rule of law.

None of this will be easy, and recent history is not encouraging. But Chávez is gone, and although for now some measure of continuity in Venezuela is most likely, conditions of scarcity -- in charisma, money, and political astuteness -- will soon be acutely felt. It is important not to forget that Chávez was able to do what he did for 14 years for a simple reason -- because he could.

Oil nationalization is undermining the industry and causing economic stagnation – investment and a more market-based oil policy is key Ellsworth 5-23 (Brian Ellsworth, Writer for Reuters- Reuters is an international Intelligence Agency based in London, May 23, 2013. “Venezuela business group sees dire economy in 2013.” http://www.reuters.com/article/2013/05/23/us-latam-summit-venezuela-economy-idUSBRE94M0QD20130523)

(Reuters) - Venezuela is slipping into high inflation and economic stagnation this year due to a shortage of

hard currency and a decade-long weakening of domestic industry, the head of the country's main business group Fedecamaras

said. Jorge Botti, president of business group Fedecamaras, said the OPEC nation's economy could see no growth and even shrink as much as 3 percent with inflation of more than 30 percent even though the price of oil - Venezuela's main export - is seen steady

near $100 per barrel. He said this year's expected "stagflationary" scenario is the result of an economic model built on oil-financed government spending, the backbone of the self-styled socialist revolution of president Hugo Chavez, who

ruled Venezuela for 14 years until his death from cancer on March 5. Sketching a dire scenario for 2013, Botti said most companies will see declines of 40 to 50 percent in inflation-adjusted billing, while manufacturing activity could slump more than 4 percent as a shortage of hard currency leaves businesses without raw materials. "It's the worst of all worlds, we're going to have a nefarious

combination that's going to hit consumers and businesses," he said. The economic paradigm inherited form Chavez must be replaced with market-based public policy that supports entrepreneurs and creates jobs, he said. "What we are seeing

is nothing less than the final chapter in the failure of an economic model based on redistribution of oil wealth at the expense of productivity," Botti, a fierce critic of Chavez's rule, said at the Reuters Latin America Investment Summit.

"This model is so bad - so bad - that even with high oil prices, we're seeing a tremendous crisis," he

said in the interview on Wednesday. Businesses say Venezuela's currency control mechanism is creating dollar shortages and import bottlenecks that have caused shortages of products ranging from vehicle replacement parts to corn flour and even

toilet paper. Critics also say Chavez's six-year campaign of nationalizations weakened industry and scared off investment - leaving Venezuela more dependent on imports. Inflation in the 12-month-period to April reached 29.4 percent, and most private economists see economic growth slowing sharply from last year's robust 5.6 percent expansion. President Nicolas Maduro is targeting 6 percent growth and 15 percent inflation for 2013. Venezuela suffered stagflation in 2009 when the global financial crisis caused oil prices to plummet from record highs

and did not fully resume economic growth until 2011, well after the recovery of global markets. NEED FOR DIALOGUE Maduro's narrow victory

in last month's election, triggered by Chavez's death, gave him a weak mandate. His government has shown signs of warming to the private sector, meeting with the country's largest private employer and promising that more dollars will be available. But Botti said authorities

have only offered limited dollar disbursements to solve specific shortages rather than a broad discussion of how to renew private investment and spur industry. "The dialogue we need is one focused on how to resolve the economy's biggest problems rather than a discussion of how to pass out the few dollars we have left," he said. Fedecamaras' relations with the government have been tense since a botched 2002 coup briefly ousted Chavez and made the business group's then-chief Pedro Carmona the country's de facto president. It also backed a two-month national strike launched the same year that devastated the economy. Fedecamaras has since acknowledged these were mistakes. "This institution is designed to influence public policy, not to exercise power. Aspiring to hold power is a fundamental error," Botti said. Chavez was revered by millions for generous social programs that ranged from subsidized groceries to brand-new apartments, financed in large part by strong oil prices. His supporters point to a sustained reduction in poverty and an expansion of social services including health and education as Chavez's economic achievements. Botti said a currency devaluation earlier this year, which took the bolivar to 6.3 per dollar from 4.3, has still left the bolivar stronger than it would be without exchange controls. He said the government needs to make gradual adjustments to the entire currency and price control system to avoid economic shocks that could cause social unrest. "This is going to be a 'hangover year,' not unlike what one feels after getting really drunk," he said. "We've said before, 2012 will be remembered as the last year of the illusion of prosperity."

AT Venezuela Says NoVenezuela will accept – they know they need foreign investmentMetzker 13 (Jared, ‘Analysts say oil could help mend U.S-Venezuela relations’, July 17, 2013, http://www.ipsnews.net/2013/06/analysts-say-oil-could-help-mend-u-s-venezuela-relations/)//MJOver half of Venezuela’s federal budget revenues come from its oil industry, which also accounts for 95 percent of the country’s exports. Estimated at 77 billion barrels, its proven reserves of black gold are the largest of any nation in the world.¶ Despite a troubled political relationship, its principal customer is the United States, which imports nearly a million barrels a day from Venezuela.¶ Venezuela’s oil industry has been officially nationalised since the 1970s, and, as president, Chavez further tightened government control over its production. His government took a greater chunk of revenues and imposed quotas that ensured a certain percentage would always go directly towards aiding Venezuelans via social spending and fuel subsidies.¶ While these measures may be popular with Venezuelans, who pay the lowest price for gasoline in the world, critics argue such policies hampered growth and led to mismanagement of Petroleos de Venezuela, S.A. (PdVSA), the main state-run oil company.¶ The same critics also point to increasing debt levels, slowdowns in productions and accidents stemming from faulty infrastructure.¶ In order to boost production, PdVSA agreed in May to accept a number of major loans. This includes one from Chevron, one of the largest U.S. oil

companies, which will work with Venezuelans to develop new extraction sites.¶ “The oil sector is in deep trouble in Venezuela – production is down and the economic situation is deteriorating,” explained Shifter.

“They know they need foreign investment to increase production, and this is in part what has motivated Maduro to reach out.”¶ If its economy continues to falter, Venezuela may be further tempted to embrace the United States, which has the largest, most sophisticated fossil fuel industry in the world. Kerry’s recent words suggest that the administration of President Barack Obama would be waiting

with open arms.¶ “Venezuela cannot confront its economic crisis and the United States at the same time,” Diana Villiers Negroponte, a senior fellow at the Brookings Institute, a Washington think tank, told IPS, “and we are a pragmatic country which will deal with Maduro if it is in our interests.”¶ Indeed, Negroponte said she was “optimistic” about the possibility of rapprochement between the two countries within the next six months. She notes a “troika” of issues on which the United States is looking for Venezuelan cooperation: counter-terrorism, counter-narcotics and assistance in ridding Colombia of its FARC rebels.

Maduro would accept greater U.S. oil investmentDE CÓRDOBA and MUÑOZ 13 (1/11/2013, JOSÉ DE CÓRDOBA and SARA MUÑOZ, “Venezuela, U.S. Start Talks to Mend Ties,” http://online.wsj.com/article/SB10001424127887324581504578235911777903292.html, JMP)Both sides remain deeply suspicious of the other. Many Republicans in Congress are opposed to trying to forge a new relationship with the Venezuelan government. On the Venezuelan side, Mr. Maduro or any other potential successor to Mr. Chávez is likely to try to claim the populist's revolutionary mantle and mimic his anti-U.S. rhetoric.But Mr. Maduro's pragmatism and his several years of experience on the international stage as the government's foreign minister could make him more willing to open diplomatic channels privately, say experts and observers."It will be very slow, very difficult, but I think Maduro would be inclined to open up a little bit," said Michael Shifter, president of the Inter-American Dialogue, a Washington think tank. Mr. Shifter said the subjects of drug-trafficking and terrorism remain "very sensitive, delicate issues, and there is a lot of mistrust that isn't going to be easily overcome." greater cooperation between the two countries could come from the private sector. With Venezuela's oil production in decline, giving the government less power to spend its way out of a likely recession, successors may be more willing to reopen its border once again to U.S. investment than it was under Mr. Chávez, who expanded state control over parts of the oil sector.

Venezuela will consider oil sector reforms to boost investmentHussain 13 (3/6/2013, Yadullah, “Life after Chavez: America’s oil gains could be Canada’s 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)Oil is critical to Venezuela’s earnings, so there could be the potential for a change in approach to foreign investment in the sectorBrent crude prices didn’t move much as traders absorbed the death of Hugo Chavez who ruled the world’s sixth largest OPEC producer, but it may mask a long-term shift that could impact North American energy trading patterns.“Over the longer term, changes in policy towards the energy sector might eventually allow Venezuela’s oil production to return to the much higher levels seen in the late 1990s,” said Tom Pugh, commodities economist at Capital Economics. “However, any such recovery would take many years.”Venezuela is home to the world’s largest proven oil reserves of around 296.5 billion barrels, but its production has steadily fallen under Mr. Chavez who diverted Venezuela’s oil revenues to his pet projects and weakened the state-owned Petróleos de Venezuela, which is responsible for developing the country’s enormous riches.Evan as 40% of Venezuelan oil exports headed towards the United States, Mr. Chavez’ despised Washington’s policies and was actively pursuing a policy to shift exports to China, the Caribbean, Central America and other Asian markets.“U.S. imports of Venezuelan petroleum products peaked in 1997, at 379,000 bbl/d, and have since fallen to as low as 23,000 bbl/d in October 2012,” the U.S. Department of Energy said in a January note.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.

Venezuela supports U.S. oil investmentGardner & Doggett 10 (4/15/2010, Timothy Gardner and Tom Doggett, “UPDATE 3-Venezuela oil minister seeks U.S. investment,” http://www.reuters.com/article/2010/04/15/venezuela-oil-opec-idUSN1523721520100415, JMP)WASHINGTON, April 15 (Reuters) - Venezuelan Oil Minister Rafael Ramirez on Thursday welcomed investment by U.S. oil companies to help develop his country's vast crude reserves, as he held energy talks in Washington for the first time in six years.Ramirez said Venezuela is signing agreements with companies in Russia, China, Europe and Japan to develop its reserves and U.S. companies should be there as well."This U nited S tates cannot miss this opportunity," he told reporters on the sidelines of a two-day conference of Western Hemisphere countries meeting to address energy and climate change issues.

Venezuela will say yes --- expanding oil production is critical for the country Holland 13 --- American Security Project’s Senior Fellow for Energy and Climate (3/9/2013, Andrew, “In Venezuela, oil and idealism won't mix forever; Venezuela's oil is too big for major energy companies to ignore and too risky to plunge into. Eventually, post-Chávez Venezuela will choose pragmatism over idealism,” http://www.csmonitor.com/Environment/Energy-Voices/2013/0309/In-Venezuela-oil-and-idealism-won-t-mix-forever, JMP)On Tuesday, the government of Venezuela announced that President Hugo Chavez had died from cancer. Recently re-elected, Chavez had long used the country's vast reserves of oil for his "Bolivarian Socialist Revolution." His successor will face many

challenges in continuing Venezuela's status as a major oil producer, largely due to the legacy of Chavez over the last decade.¶ Venezuela ranks as the country with the number one, two, or three oil reserves in the world, depending on who's doing the counting, along with Saudi Arabia and Canada. These reserves led the country to be a founding member of OPEC, and one of the petro monopoly's most ardent supporters. However, its oil has more in common with the heavy tar sands oil of Canada than the

light, sweet crude of the Persian Gulf. Future production in the country will require new investment capital and expertise in the heavy oil of the Orinoco belt.¶ When Chavez came to power, PdVSA, the national monopoly oil producer, was widely admired as one of the most professional in the world. Over the last decade, however, Chavez has wrung the golden goose to pay for the social spending that has underwritten his social programs. The company is showing the stress resulting from poor management and underinvestment.¶ The Amuay refinery fire in August of 2012, killing 48, was symptomatic of the problems faced by the company. And, in a country in which about 95% of export revenue and 50% of the budget is due to profits from oil, the importance of PdVSA can not be overstated. Perhaps an even stronger symptom of the problems faced by PdVSA was that in September, it was forced to pay contracts with IOUs, not cash. It was widely speculated that the company's coffers were emptied in the lead-up to the October 7 election, in which Chavez was reelected.¶ An additional problem has been that Chavez has mixed his unique foreign policy with PdVSA's business, midwifing partnerships (with various degrees of success) with Russia's Rosneft and Iran's Petropars in projects in the Orinoco belt, and with China's CNPC in developing a refinery in China's Guangzhou Province. Meanwhile, Chavez had expropriated holdings from PdVSA's joint ventures with Exxon and Conoco-Phillips in 2007 - a process that dragged through international courts until 2012.¶ The major oil companies know that Venezuela is too large of a prize to leave because of political risk. At the same time that Exxon and Conoco-Phillips were kicked out of the country, other majors, like Chevron, Shell, Total, and BP renegotiated their partnerships, leaving them operating in the country. Releases from the Wikileaks cables, however, showed that these companies were not reinvesting their profits - largely out of concern about future returns.¶ If Chavez's successor wants to continue his aggressive foreign policy and the social spending of his domestic policy, increased revenues from PdVSA will be needed. However, the nationalism that undergirds these policies also makes it difficult for

the government to accept that the capital and heavy oil expertise that it needs can only come from the western majors. Like Mexico's "will-they, won't they" push to bring in private investment, Venezuela is likely to face the same questions.¶ Ultimately, I believe that the economic argument will win, and new partnerships will begin. The companies most likely to benefit are those already operating in the country, particularly Chevron, ENI, or Total

Venezuela has been pragmatic on economic issues with U.S. --- traditionally been coop on oilFabian 13 (3/6/2013, Jordan, 3/6/2013, “Hugo Chávez Death: Fixing the U.S.-Venezuela Relationship Won't Be Easy,” http://abcnews.go.com/ABC_Univision/Politics/hugo-chavez-death-fixing-us-venezuela-relationship-easy/story?id=18668275#.UZr5x8r3Ugk, JMP)During his presidency, Chávez earned the scorn of U.S. officials for cracking down on his political opposition and hostile media outlets. He also had a knack for spinning conspiracy theories against the American government. For example, in 2002 he accused the U.S. of being involved in a failed coup attempt.¶ Chávez also made overtures to Cuba's Fidel Castro and to Iran's Mahmoud Ahmadinejad, who lead governments that are also hostile toward the United States. A Univision documentary that aired last year revealed that a Venezuelan consulate official in Miami was involved in plotting cyber attacks on the U.S. that allegedly involved agents from Iran and Cuba.¶ The U.S. government expelled the Venezuelan official, Livia Acosta Noguera, from the country and

Venezuela eventually shuttered its Miami consulate.¶ But on a key economic front, Venezuela's government has taken a pragmatic approach to the U nited S tates. The South American nation remains one of the top contributors to the U.S.'s oil imports, ranking in the top four last year, according to the U.S. Energy Information Administration.¶ "Oil is their political weapon, but with the U.S., they never used it," Richardson said.¶ Eric

Farnsworth added that the Venezuelan people have not traditionally been anti-American throughout their history and it may be possible for a leader to eventually bridge the gap between the two nations.¶ And it is uncertain whether Venezuela can sustain its efforts to enrich its neighbors with its oil wealth. The country has a gaping budget deficit, which was exacerbated by the millions of dollars in foreign aid doled out by Chávez. That has done damage to the nation's domestic economy.¶ But regardless of what happens next, any healing process will will take

time.¶ See Photos of Venezuelans Mourning the Death of Hugo Chavez¶ "This isn't going to change one day to the next, you're going to build out a constructive relationship piece by piece starting with small things if you have a willing partner in Venezuela," said Restrepo.

Investment Key

Investment is key – failing infrastructure, lack of exploration and productionCouncil on Foreign Relations 08 – independent task force project, CFR is an independent, nonpartisan organization (‘US Latin America Relations: A New Direction for a New Reality’, May 2008, http://www.cfr.org/mexico/us-latin-america-relations/p16279)//MJThe rise of resource nationalism represents a difficult challenge for both the United States and Latin American countries. One side effect of this has been the decline of high-level multilateral energy forums, further lessening the likelihood that political, financial, environmental, and other impediments will be tackled aggressively. In particular, the termination of the Western Hemisphere energy ministers meetings (held annually between 1999 and 2004 under U.S. leadership and the rubric of the Summit of the Americas process) has left a void. While South American leaders pledged at an April 2007 regional energy summit to initiate a

ministerial-level South American Energy Council, the success of this effort is far from assured. Infrastructure deficiencies are another obstacle. According to the International Energy Agency (IEA), in order to meet increased energy demands, Latin America will require close to $1.3 trillion in overall investment in the energy sector between 2001 and 2030, the equivalent of 1.5 percent of GDP each year.

49

The sheer size of the deficiency should encourage Latin American governments to adjust regulatory frameworks and provide opportunities for public and private investment from the United States and around the world. The Task Force finds that Latin America remains a relatively stable oil- producing region and potentially an important source of natural gas exports, though state ownership and political turmoil limit international and

private sector involvement in some countries, impeding efficiency and growth. Future output will depend on substantial investments in exploration and production, favoring the energy sectors in countries more open to investment, expanded collaboration, and trade. In these nations, in particular Brazil, Mexico, and Peru, the extent of dialogue and

collaboration taking place among Mexico, Canada, and the United States should serve as a positive model. Expanding and stabilizing the energy trade across the region would have important benefits to economic development, political stability, and the U.S.-Latin America relationship.

Investment key Belsie 13 – (Laurent, “What will Venezuela do with its Oil? Top Five Energy Challenges After Chávez,” Christian Science Monitor, 3/7/13, http://www.csmonitor.com/Environment/2013/0307/What-will-Venezuela-do-with-its-oil-Top-five-energy-challenges-after-Chavez/Foreign-investment)//SR1. The Orinoco Belt The biggest issue for Venezuela is what to do with its immense deposits of tar sands (also known as oil sands). If one counts the technically recoverable oil estimated to lie in a 375-mile stretch of land along the Orinoco River, then Venezuela has bigger oil reserves than anybody, including Saudi Arabia – some 296.5 billion barrels of oil, by one estimate. The big question: Is it economically feasible to produce that oil? The process is energy intensive, costly, and environmentally questionable. Environmentalists have attackedvCanada for producing oil from its tar sands – and have mounted a highly visible campaign to stop a planned pipeline that would carry its oil product to US refiners in the Gulf of Mexico. Venezuela's effort could turn out to be even

bigger. Venezuela needs to do something. Under Mr. Chávez, its economy became even more reliant on the oil industry even as production fell. In the mid-1990s, Venezuelan production peaked at around

3.5 million barrels of oil a day. Today, it's closer to 2.5 million barrels a day. In the 1990s, Venezuela created four projects to begin to convert its tar sands into a lighter crude, known as syncrude. The facilities have the capacity to produce 600,000 barrels per day, according to the US Energy Information Administration , but they are estimated to be producing less than 500,000 a day. Venezuela could use more investment to develop its tar sands, but that would require outside help. 2.

Foreign investment When Chávez re-nationalized his country’s huge oil company, Petróleos de Venezuela SA (PDVSA), it sent a message to the international oil industry: no more business as usual in Venezuela. Instead of foreign companies owning a majority share of development products, the PDVSA would get a minimum 60 percent share. Royalty rates had already been raised. Companies who didn't agree to the new rules, such as Italy's Eni andFrance's Total, saw their facilities taken over. Others, like the US-owned Exxon Mobil andConocoPhillips, simply left. By 2009, it was clear that Chávez's strategy had failed to stop the slide in Venezuela's oil production, and he began allowing more foreign investment in the Orinoco Belt. China, India,Russia, Spain, Japan, Vietnam, and even Chevron in the US gained access to six blocks in the belt as minority partners with PDVSA. If all these projects

come on stream, Venezuela projects that they would produce 2.1 million barrels of syncrude a day. Western analysts are

pessimistic that Venezuela will achieve that boost without liberalizing its rules and opening up to more foreign investment . With a chaotic and arbitrary business environment within the country, foreign producers may be reticent to commit large investment sums to bring Venezuela's oil production back to pre- Chávez levels.

Without expertise and investment, Venezuelan oil reserves are uselessJegarajah 12 – (Sri, “Why Venezuela’s World-Beating Oil Reserves Are ‘Irrelevant’”, CNBC, 6/14, http://www.cnbc.com/id/47823420)//mmVenezuela now boasts the world's largest proven oil reserves but the claim is “irrelevant” because the Latin American producer is struggling to secure enough investment and technical expertise to unlock the resource, Ed Morse, Managing Director and Global Head of Commodities Research for Citigroup Global Markets told CNBC.¶ A founding member of the Organization of Petroleum Exporting Countries, Venezuela's total deposits stood at an estimated 296.5 billion barrels at the end of last year, according to the annual Statistical Review of World Energy published Wednesday. That compared to Saudi Arabia's 265.4 billion barrels.¶ “It has no bearing whatsoever,” Morse, a former adviser to the U.S. Departments of State, Energy and Defense and to the International Energy Agency, told CNBC Asia’s “Squawk Box” on Thursday.¶ “The issue is not what's in the ground and commerciable, rather how quickly it can be put into production and so long as there's no capital flowing into the upstream in Venezuela, especially capital by the companies that have the technology to develop the heavy oil reserve base, the resource levels are going to remain kind of irrelevant,” he added.¶ Venezuelan President Hugo Chavez, seeking re-election in Presidential polls scheduled for October 7, said he will more than double the country’s oil-production capacity to 6 million barrels a day by 2019 mainly from the resources-rich Orinoco oil belt if he wins a popular mandate.¶ Following his re-election in 2006, Chavez nationalized oil, steel, cement and banking assets, hurting foreign investor sentiment. Production and investment in the country's oil sector has also stagnated under the Chavez administration. The country’s state-owned oil company, PDVSA invested $11 billion, or just 9 percent of its income in the oil sector last year.¶ That’s much less than Mexico’s state oil company Pemex, which invested more than $19 billion or about 17 percent of its income in 2011, while Brazil's Petrobras spent $42 billion, or 29 percent during the same period.

Investment key – current uncertainty deters investorsSanati 13 – financial journalist, writes for the New York Times, Wall Street Journal, CNN (Cyrus, “Chávez’s Death won’t Spur New Venezuela Oil Drilling,” CNN Money, 3/6/13, http://finance.fortune.cnn.com/2013/03/06/hugo-chavez-death-oil/)//SRThe death of Venezuelan President Hugo Chavez is no panacea for the nation's dysfunctional energy industry. Political

and economic uncertainty will likely continue to deter foreign investors from fully committing the necessary cash,

resources, and expertise that are desperately needed to effectively tap the nation's oil wealth. Whoever takes over the reins of the nation will need to dismantle the policies, structures, and rhetoric that have made investing in Venezuela a fool's errand. It is not hyperbole to

say that Hugo Chavez's death Tuesday rocked the energy industry. The "Bolivarian" strongman has been the oil

industry's biggest villain for over a decade. In his tenure as president of Venezuela, Chavez not only trashed contracts and expropriated lands and equipment from foreign oil companies, like ExxonMobil (XOM) and ConocoPhillips (COP); he also managed to crush the national oil company, Petróleos de Venezuela (PDVSA), by using it as a piggy bank to fund the programs and policies associated

with his nebulously defined "21stCentury Socialism" experiment. There was a time when Venezuela was seen as a bastion of liberalism -- an exception to the so-called resource curse, which posits that oil wealth fosters corrupt and dictatorial regimes. Its democratically-

elected governments, while far from perfect, were seen as more stable than other oil-rich nations, such as those in the Middle East. This stability attracted foreign investors from around the globe, especially U.S. oil giants like ConocoPhillips and Chevron (CVX). By the 1990s PDVSA and its foreign partners, which at the time included pretty much all the big U.S. and European oil giants, were pumping around three million barrels a day of oil from Venezuelan fields, making it the third-largest oil exporter in OPEC. PDVSA's long-term plan was to gradually increase its

production capacity to around eight million barrels a day, which would have put Venezuela on par with oil exporting giants like Russia and Saudi Arabia.

But the ineptitude and corruption of the Chavez kleptocracy have contributed to a decline in overall Venezuelan oil output, which at last count came in at 2.4 million barrels a day, 25% less than what it was when Chavez took power 14 years ago. That would have been excusable if Venezuela's oil reserves were rapidly depleting, but that isn't the case -- not by a long shot. Indeed, in 2010,

OPEC confirmed that Venezuela's Orinoco oil belt contained tar sand deposits equivalent to around 300 billion barrels of oil, enough to fulfill current world demand for 10 years. That would mean Venezuela would have the largest oil reserves on the planet, outstripping Saudi Arabia's 260 billion barrel oil stash. With today's oil price being 10 times higher than where it was when Chavez took power in 1998, one would surmise that the Orinoco oil belt today would be littered with equipment and workers trying furiously to tap its abundant oil wealth. But, of course, that isn't the case. During his reign, Chavez instituted a series of devastating "reforms" to the nation's oil industry, which ended up breaking its back. He ripped up production sharing contracts signed under the previous government, forcing foreign oil companies to hand over more of their profit to the state. Chavez then used PDVSA as his own personal ATM, starving the company of the necessary investment capital needed to expand its operations in the Orinoco. In 2011, PDVSA was left with just $11 billion, or 9%, of its total income, to fund future operations. That was barely enough to keep the lights on, let alone go out and enough to drill. By contrast, Pemex, Mexico's state owned-oil company (and all-around bureaucratic basket case), spent around $19 billion, or 17%, of its income on operations, while Brazil's Petrobras invested $42 billion, or 29%, of its income. PDVSA says it will be investing some $140 billion in the Orinoco by 2015. It is hard to see how that can happen given how much the government is siphoning off. In January, Chavez ordered PDVSA to increase its payments to his off-the-books slush fund, Fonden, which is used to support the "revolution," further draining its resources. Lastly, the government has saddled PDVSA with around $35 billion in debt, slapping the company with fat interest payments,

which will only augment its money woes. But probably the fatal blow to Venezuelan oil investment came in 2007 when Chavez essentially "renationalized" the industry, booting out a number of foreign oil companies who

refused to (once again) renegotiate their contracts, namely U.S. oil giants ExxonMobil and ConocoPhilips, which had each invested billions of dollars in the country since the early 1990s. The new rules, which are more or less the same today, require foreign investors to form partnerships with PDVSA in which the state-owned oil company would have a 60% ownership. The foreign company, which would have 40% ownership, would still have to fund 100% of the investment. Furthermore, whatever the foreign company made would be subject to a 50% tax rate and a 33% royalty (tax). Oh, and investors must agree that any dispute that may arise in the future concerning their ownership with the government will be heard by Venezuelan courts, not those pesky impartial international arbitration courts. But while the risk/reward ratio is clearly off, Venezuela says that it has auctioned off 36 lease blocks in the Orinoco to 27 companies hailing from 21 nations. Most are bizarre state-owned or controlled oil companies from places like Iran, Belorussia, and Cuba. But some of the big publicly traded oil companies like Spain's Repsol, Brazil's Petrobras, Italy's Eni and France's Total have stakes as well. Even Chevron was allocated a block -- albeit a small one. While it makes sense to have a few foreign partners to help to spread out the risk, one can go too far, especially when those partners have pretty much zero experience working with oil sands. Indeed, this split looks

more like a bizarre public relations stunt than a real division of labor. It should therefore come as no surprise to learn that there isn't too much drilling going on in the Orinoco right now. While PDVSA says that it has started to drill wells with its Russian and

Vietnamese partners, the initial production numbers reported are trivial. Meanwhile, India's ONGC and several other companies are reportedly

holding back from investing any more cash until there is some clarity as to the political situation in the country. You can bet even Venezuela's staunchest allies, like China, which has loaned the Chavez regime some $46 billion in the last few years, will be among those taking a breather. It is difficult to see what, if anything, could change in Venezuela's oil industry in the next few months. The political apparatus

Chavez has set up seems fully entrenched. It would probably take a full-fledged revolution for it to be wiped out at this point. Nevertheless, Venezuela is nearing a breaking point when it comes to oil production. The government cannot continue to rely on PDVSA to pay

its bills. It needs real foreign partners with real experience to come in and help it boost production. That means bringing back companies like ConocoPhilips, which before getting the boot in 2007, was the largest foreign operator in the

country. They have the engineers and know-how to help Venezuela quickly get off the ground. Venezuela would be wise to also consult with oil companies like Husky, Suncor (SU), Syncrude and Nexen, all of which have extensive experience working in Canada's vast Athabasca oil sands. To lure the right talent, Venezuela needs to make some serious changes to its ownership and tax laws.

Companies must feel safe to make their investments so security and legal protections will need to be ironclad. But even if Venezuela's new leaders give in to all of the oil companies' demands, it will probably be a while before you see any real drilling. Chavez obliterated the nation's credibility, and it will take some time for Venezuela to earn back that trust. So when Venezuelans go to the polls in a month to choose their new leader, they would be wise to choose someone who knows how to eat a big helping of humble pie.

Maduro has inherited a sinking ship - increased investment is key to the oil industryAlic 13 – geopolitical analyst, co-founder of ISA Intel, former editor in chief of ISN Security Watch (Jen, “Foreign Oil and Gas Companies Look to Status Quo in Venezuela,” Oilprice.com, 4/15/13, http://oilprice.com/Geopolitics/South-America/Foreign-Oil-Gas-Companies-Look-to-Status-Quo-in-Venezuela.html)//SRNow that Nicolas Maduro—the late Hugo Chavez’s choice for successor—has narrowly won Sunday’s presidential elections in Venezuela, oil and gas investors can expect a perpetuation of the status quo. In Sunday’s vote,

Maduro won with a very narrow 50.7% and a vow to continue with Chavez’s “revolution,” which has seen the oil industry nationalized and the state-run PDVSA oil company funding social programs and voraciously courting China and Russia.

The narrow vote will not be without its challenges. Opposition rival candidate Henrique Capriles has refused to recognize the results and is

demanding a recount, though the electoral commission is standing firm on Maduro’s victory. For foreign oil and gas companies, we can expect more of the same. There are no regulatory changes in the works, and an unattractive windfall tax

system announced in January will likely be pushed forward under Maduro. What Maduro is inheriting, though, is a nightmare situation that will see him stuck between using PDVSA to fund expensive social programs that cost it $44 billion last year alone diverted from oil revenues, and cutting social spending or allowing a rise in the price of fuel that could spark regime-threatening unrest. If Maduro feels compelled to reduce fuel subsidies, it could lead to riots as cheap fuel—which cannot be sustained—is one of the most crucial social benefits for Venezuelans, who

pay around 6 cents per gallon. Maduro has inherited a “sinking ship” and does not appear to have the political capital to make any short-term changes in Venezuela’s energy policy, experts at Southern Pulse told

Oilprice.com. “The main energy issue for Venezuela is that oil production is struggling, down from a peak of about 3.2 million barrels per day in 1998 to less than 2.8 million bpd now. One would hope that fixing infrastructure, completing refinery repairs and

construction, and investing in exploration and new technology would be priorities but Maduro will not have funds to invest unless he makes controversial cuts to social programs,” according to Southern Pulse, which does not believe that

Maduro will attempt to cut fuel subsidies any time soon. A top priority for Maduro will be boosting refining capacity, says Southern Pulse. Towards this end, Maduro may be willing to negotiate if a partner steps forward to build a new refinery, which is a goal Chavez failed to realize.

“If PDVSA fails to increase production, PDVSA President Rafael Ramirez may be replaced this year. One way for Maduro to keep his presidency

afloat is to bring new proven wells online in the Orinoco Belt; but that will require major investment. PDVSA may need more than a minority-partner-with-a-service-contract at those fields if they want to start pumping soon.” In the meantime, China’s foothold in Venezuela remains on solid ground. China is already privy to 600,000 bpd from Venezuela in return for $42 billion in loans. Maduro is not likely to rock this boat with Beijing, and according to the terms already in place, Venezuelan exports are set to increase to one million bpd by 2015, though most of the loan money has already been spent. According to Southern Pulse, Maduro will likely seek new loans from China, but this will depend on the terms

and stability in Venezuela. If this doesn’t work, Maduro will have to look elsewhere—first to Russia and then perhaps to US Chevron or Spanish Repsol, the latter two having only limited operations in the country. Overall, we should consider that Maduro will pursue all-out chavismo. “As president, Maduro will govern as he thinks Chavez himself would have ruled. However, Maduro probably will not begin pandering to the most radical elements of his party, PSUV, because he has little to gain from that. Maduro is not blind to the myriad problems facing the next president such as blackouts, food shortages and rampant criminal violence,” according to Southern Pulse. While it’s status quo for now for the oil and gas industry, it’s clearly bad news for Maduro. “Despite Chavez’s immense popularity, his memory will fade. And with time citizens who loved Chavez will blame Maduro for their struggles,” experts at Southern Pulse say. “If Maduro survives that long, the next election in 2018 will involve a much deeper conversation about the direction of the country.” “In fact, some think that one reason former military leader and current National Assembly Diosdado Cabello—a Chavez loyalist--did not dispute Maduro’s succession is precisely because of the precarious financial and political situation he would have inherited.”

Venezuelan oil industry needs capital – investment keyGue 3-21 (Elliot H. Gue, Earned a bachelor’s and master’s degree from the University of London in energy studies. Elliot has written about 2 published books about energy and has been quoted in major publications. Elliot is an expert in the energy field and has worked with investors on two highly regarded research publications, MLP Profits and The Energy Strategist. Elliot is also the founder of the Energy and Income Advisor newsletter. March 21, 2013. “Venezuela Oil Production: No Overnight Recovery.” https://www.energyandincomeadvisor.com/venezuelan-oil-production-no-overnight-recovery/)Nicolas Maduro, Venezuela’s former vice president and current acting president, has campaigned as Hugo Chavez’s hand-picked successor and is all but certain to be elected president on April 14. Maduro’s victory would ensure that Chavismo, the socialist ideology that’s dominated Venezuelan politics since the late 1990s, will continue to hold sway. That being said, economic realities

may undermine Maduro’s efforts to maintain many of Chavez’s populist programs: Venezuela’s economy is in shambles and on the verge of outright collapse. Since assuming office in 1999, Chavez has steadily increased government expenditures on social programs and subsidies to cultivate support among Venezuela’s poor, with public spending usually spiking in advance of presidential elections. To fund these social programs, Chavez’s government relied primarily on cash from Petroleos de Venezuela (PDVSA), the national oil company. According to the BP’s (LSE: BP, NYSE: BP) most recent Statistical Review of World Energy, Venezuela’s oil reserves stood at 296.5 billion barrels at the end of 2011–the largest in the world, eclipsing

Saudi Arabia’s 265 billion barrels. But unlike Saudi Arabia, heavy oil accounts for much of Venezuela’s resource

wealth. Exploiting these complex deposits requires significant investments in infrastructure

and the technical expertise of major international oil companies and services firms. Industry observers

estimate that maintaining production from Venezuela’s Orinoco Belt and other fields would require annual capital expenditures of between USD3 and USD5 billion. But Chavez’s plethora of social programs robbed PDSVA of the necessary capital to fund ongoing development of the nation’s considerable hydrocarbon resources. Under Chavez, the Venezuelan government has always had a vexed relationship with the energy industry. When PDVSA workers went on strike in late 2002, the country endured a severe economic downturn and the unemployment rate skyrocketed to more than 20 percent. The state responded by firing 18,000 PDVSA workers, including many of its most talented and experienced

engineers and employees. In 2006 and 2007, Venezuela moved to nationalize exploration and production, seizing assets held by foreign companies such as ExxonMobil Corp (NYSE: XOM) and Italian energy giant Eni (Milan: ENI, NYSE: E). Although Chevron Corp (NYSE: CVX) and a handful of other oil and gas companies opted to renegotiate their agreements with PDSVA and

continue to operate in Venezuela, the state’s increasingly heavy-handed moves have discouraged

foreign investment in the domestic energy industry. Against this backdrop, it’s no surprise that Venezuela’s oil production has declined steadily since Chavez became president in 1999. At the same time, Venezuela’s oil consumption has surged to well over 800,000 barrels per day in 2012 from an average of about 560,000 barrels per day in 1998-99. Much of this increase reflects generous subsidies that have limited the domestic price of gasoline to between USD0.04 and USD0.10 per gallon. To worsen matters, the nation transfers a large portion of its hydrocarbon production to other nations as part of special arrangements that generate minimal cash proceeds. For example, Venezuela sends about 100,000 barrels of oil per day to Cuba in exchange for medical services for Venezuela’s poor. Cuba has even sold discounted heating oil to parts of the US in recent years as part of a public relations ploy–you may recall the television spots featuring Joseph Kennedy that advertised this program. Analysts from Morgan Stanley(NYSE: MS) estimate that an astounding 43 percent of Venezuela’s total oil exports aren’t sold at market-based

prices. Meanwhile, a fire at one of Venezuela’s largest refineries last year has increased the hydrocarbon-rich nation’s

reliance on imported refined products. In fact, US gasoline exports to Venezuela have jumped from zero in 2008 to

94,000 barrels per day at the end of 2012. Recent developments also suggest that PDSVA is strapped for cash. Although

the government’s nationalization of its oil resources has deterred foreign investment , PDSVA

has relied on international oil-field services firms to help the nation exploit its vast resource base. In a conference call to discuss Schlumberger’s (NYSE: SLB) fourth-quarter results, CEO Paal Kibsgaard noted that PDSVA had delayed payment on some of its bills: In Venezuela, we have in recent years actively managed our activity levels relative to our receivables balance. During the fourth quarter we saw a significant slowdown in the rates of payment, and we are currently working closely with our customer to resolve the situation. Massive government spending on social programs and yet another currency devaluation–the seventh since Chavez took office–have pushed the inflation rate in Venezuela to 22.8 percent. Meanwhile, mandated price controls on basic goods have resulted in widespread shortages of food and other household necessities. The government has attributed these problems to hoarding by the wealthy and large companies, backing up these claims by televising raids of well-stocked warehouses. These inflammatory actions are unlikely to encourage suppliers to keep the nation stocked with basic goods. Ever since Hugo Chavez announced that doctors had discovered a baseball-sized tumor in his pelvic region, investors have been bullish on

Venezuelan sovereign debt that’s denominated in US dollars. This rally reflects a belief that Chavez’s death would

hasten a return to market-friendly policies that would encourage foreign investment in

Venezuela’s floundering energy industry. Over the long run, this investment thesis should pan out. Although

Maduro will likely coast in the upcoming presidential election, the country can’t afford to continue Chavez’s magnanimous social programs because PDSVA flagging hydrocarbon output can no longer support these expenditures. However, the national oil

company can’t restore production growth overnight; reversing years of neglect will require significant foreign investment in exploration and development. The idea that an upsurge in Venezuelan hydrocarbon production in the aftermath of Chavez’s death will depress global oil prices in the near term betrays a lack of familiarity with the recent history of the country’s

oil industry. A more likely outcome: Murado will continue Chavismo until the situation truly becomes untenable and the

requisite foreign investment revitalizes Venezuela’s neglected oil fields.

U.S. Key

U.S. has the technological expertise to ensure sustainable infrastructureCouncil on Foreign Relations 08 – independent task force project, CFR is an independent, nonpartisan organization (‘US Latin America Relations: A New Direction for a New Reality’, May 2008, http://www.cfr.org/mexico/us-latin-america-relations/p16279)//MJPromote Cooperation and Investment in Traditional Energy Sources In the oil and gas sectors, more effective production and extraction will increase worldwide energy supply and put downward pressure on prices. While U.S. influence is limited (particularly with the growing role of national oil companies in the region and worldwide), it can encourage two developments. First, the Task Force recommends supporting the creation of subregional and regional energy working groups on the model of the North American Energy Working Group. To depoliticize energy cooperation, such organizations should concentrate on technical issues such as data exchange, electricity connectivity, fuel standards, infrastruc- ture protection, environmental sustainability, and lessons learned. Sec- ond, the Task Force recommends that the United States actively support environ- mentally sustainable energy infrastructure financing in Latin America through multilateral lending institutions and foreign direct investment. In particular, the United States can facilitate funding for the last stages of Peru’s Camisea natural gas project.

US key – technological experience & expertise – and Venezuela must model our policy environmentPascual 4/11- Special envoy and coordinator for international energy affairs, US Department of State(Carlos, “Hearing before the Subcomittee on the Western Hemisphere of the House Committee of Foreign Affairs”, http://docs.house.gov/meetings/FA/FA07/20130411/100622/HHRG-113-FA07-20130411-SD002.pdf, 4/11/13)//SRThe United States is undergoing an energy revolution. Innovative technology, entrepreneurship and strong commodity prices have spurred the production of shale gas, shale oil, and offshore oil. Combined with vehicle-efficiency measures,

the United States has decreased fossil fuel import dependence. Our experience in unconventional oil and gas opens commercial and technological opportunities for U.S. businesses. We are on the verge of comparable

breakthroughs in renewable energy, which could provide similar benefits for U.S. industry and job creation. U.S. leadership on these opportunities will have an important implication for continuing and long-term energy security in North America and the rest of the Western Hemisphere. The U.S. Energy Information Administration estimates that the United States has 24 billion barrels of shale oil resources. The State of North Dakota produces more oil than Ecuador, an OPEC member. We have gone from importing more than 60 percent of the oil we consumed in 2005 to less than 40 percent last year. Canada and Mexico alone accounted for 38 percent of our oil imports in 2012. The potential for North America can multiply this type of transformation that we are seeing today. While Canadian and U.S. oil production have been rising, Mexican production has dropped since 2004. Mexican President Enrique Pena Nieto, as Congressman Sires has noted, has now made energy reform a priority. If it is successful, imagine these possibilities: If Mexican production could regain the level it had in 2004, by 2035 North American production can rise from 18 million barrels a day to over 23 million barrels a day. That jump alone in volume approaches the current combined production of Iraq and Venezuela, to give you the scale of possibility that exists in our hemisphere. A similar story is playing out in global natural gas markets. In the last 5 years, U.S. gas production has increased 24 percent. Natural gas once intended for the United States is meeting demands in markets around the world. New supplies for Mozambique, Nor- way, Russia, and Australia are revolutionizing the world’s gas markets. The potential in Mexico has only started to be explored. These revolutions in oil and gas build a picture in which North America can be a hub not only for U.S. energy security,

but global energy security. We have to keep seeing the hemisphere in that context that is the foundation for stability and security for the en- tire world, and this can come with benefits for stabilizing markets and contributing to our economic growth at home. There are also opportunities in Argentina, Brazil, Colombia, Peru, Trinidad and Tobago. Their challenge, the challenge of these countries, will be to attract the commercial investment needed to

enable development, and each country is approaching this challenge differently. Venezuela, with one of the largest oil reserves

in the world, faces a critical moment. Since a peak in 1997, production has declined by about 1 million barrels per day. With the upcoming elections Venezuela’s new leadership will have the chance to create an environment that attracts investments and technologies that are revolutionizing global markets elsewhere and potentially could benefit Venezuela’s people, its economy, and world markets as well. That choice is one they have to make regarding the kind of policy environment they set for international investment.

U.S. leadership and expertise is keySnow 13 --- Washington Editor (4/29/2013, Nick, “US can play constructive Western Hemisphere role, House panel told,” http://www.ogj.com/articles/print/volume-111/issue-4d/general-interest/us-can-play-constructive-western-hemisphere.html, JMP)*** Matthew M. Rooney is deputy assistant secretary in the US Department of State's Bureau of Western Hemisphere Affairs¶ "The U nited S tates has extensive experience and has developed significant expertise in permitting, regulatory oversight, and incident response planning for conventional and unconventional resource exploration and extraction," Rooney said, adding, "The Obama administration is sharing these environmental,

regulatory, legal, and commercial best practices with other countries in the region."¶ Rooney did not mention TransCanada Corp.'s revised crossborder permit application for the Keystone XL project, which the

State Department is reviewing. He noted in his written testimony that transparent, effective market structures are essential in the Americas, but major challenges must be overcome.¶ "Countries that have pursued statist, nontransparent energy policies have seen their production decline despite high energy prices over the past couple of years," he said. "These countries have found it difficult to attract the necessary investments, both foreign and domestic, to help

their energy production and economies grow.¶ 'Avenue of engagement'¶ Rooney continued, "But our balanced approach of focused technical cooperation and broad policy discussions has provided an avenue of engagement with most countries in the

region—even some with which we have significant differences. We continue to advocate open and transparent energy markets, free from corruption and reinforced by strong protections for investments, to help countries enhance output and promote long-term economic growth."¶ He said the US has made clear to Argentina's government that expropriating assets is a bad idea, while Chile and a few others are "fairly clean." Still others "are somewhere in the middle on transparency and anticorruption efforts," Rooney said, adding, "It's clear that in some countries, foreign companies have to have a strong stomach. That said, many US companies do business there."¶ Other witnesses emphasized that the US will need to not make other countries feel it is not interfering in their internal affairs as it offers encouragement and assistance. That may prove difficult as China and other countries from outside the region negotiate resource agreements with teams of state energy companies

and national banks, they conceded.¶ "The US still leads the world in energy technology," said David L. Goldwyn, the Special Envoy and Coordinator for International Energy Affairs at the State Department during 2009-11

who now heads Goldwyn Strategies LLC. "It also has a business development model that is more favorable than China's, which is increasingly seen as colonial with employees who keep to themselves and don't work to help develop local economies."¶ Jorge R. Pinon, associate director of the Latin American and Caribbean Program at the University of Texas at Austin's Center for International Energy and Environmental Policy, said, "One thing US oil companies have done so well is that they're well separated from the federal government. We have to be careful how the US government becomes involved in US companies' overseas operations."¶ China could realize 600,000 b/d of production from the Western Hemisphere sooner than some people think, he added. "Its companies are partners in several ventures with Statoil and Petrobras, which already have deepwater expertise," Pinon said.¶ 'Deeply complex'¶ Carlos Pascual, who succeeded Goldwyn as Special Envoy and Coordinator for International Energy Affairs at the State Department, said in his written statement that the Western Hemisphere's energy picture "is deeply complex and interconnected, with spectacular opportunities for US jobs, commercial interests, economic development, and energy supply linked to the political perspectives in Canada, Mexico, Venezuela, the Caribbean, and beyond."¶ He noted that as world energy markets transform

as a reflection of the US's own energy revolution, it has much to share and to gain from being a formative part of the picture, especially in the Americas.¶ "From building North American energy security and shaping natural gas markets to paving the road for tomorrow's commercial and innovative transformation, the US must continue to lead , to share our best practices and lessons learned, to support transparency and an even playing field, and to give our companies and innovators access to tomorrow's energy markets," Pascual, who formerly was US Ambassador to Mexico, told the subcommittee.¶ He said that Mexico's president, Enrique Pena Nieto, backs comprehensive energy policy reform and is working across three political parties to achieve it. "The goal is to protect Mexico's natural resources while creating conditions that attract foreign investment and participation," Pascual said, adding the country appreciates growing US congressional interest in approving and implementing the 2012 Trans-Boundary Hydrocarbons Agreement.¶ Eric Farnsworth, vice-president of the Council of the Americas in Washington, said, "Approval of legislation to implement the agreement will be seen as a sort of 'proof of concept' to find creative ways to introduce outside investment into Mexico's energy sector. It also creates mechanisms to increase collaboration on environmental protection and disaster response, and will open new avenues for US commercial activity which has been desired for many years."¶ Other witnesses said it's vital that any energy policy changes in Mexico be seen as internally driven, and part of bigger economic reforms. Pinon said this could be difficult since the national oil company, Petroleos Mexicanos (Pemex), is only active within Mexico, unlike Brazil's Petrobras and Colombia's Ecopetrol have international operations.¶ Chavez's legacy¶ Witnesses acknowledged that Venezuelan President Hugo Chavez's strategy of giving several countries deep discounts on their purchases of Venezuelan crude oil was having an impact before he died earlier this year. Pascual said it perpetuated some smaller nations' dependence on diesel fuel to generate electricity, making prices in them 4-5 times higher than in the US. "We are working with them to create alternative power generation," he said. "Projects can't run for long on subsidies. They need to compete economically."¶ Rooney conceded that the State Department has concerns about Chavez's discounts and subsidies program: Petro-Caribe. "Several countries bought into it 2-3 years ago because there was a spike in petroleum prices," Pascual said. "I don't think many, if any, did it for ideological reasons."¶ Speaking days before Venezuelans voted to elect Chavez's successor, Rooney said the US plans to watch what happens there in the next 2 years from a distance. "We have had a testy relationship with Venezuela," he told the subcommittee. "We see possibilities to work with them on energy, narcotics, and counterterrorism.

Unfortunately, they've been cool to that idea, but we hope it will change."¶ Goldwyn added, "The conversation is going to be difficult for a while, but we need to start talking to Venezuela again. There still may be some senior people at [national oil company

Petroleos de Venezuela SA] who could be helpful."¶ Pascual said, "It bothers me that a country with so much of the Western Hemisphere's oil is broke."

AFF Answers

AT Dutch DiseaseVenezuelan diversification causes Cuban economic collapseFredman 13 (Rachel, ‘Latin American Socialism: Churning Along, Economic Failures Aside’, May 30, Diplomatic Courier, http://www.diplomaticourier.com/news/regions/latin-america/1473-latin-american-socialism-churning-along-economic-failures-aside)//MJDepending on oil exports rather than developing other competitive industries is just one of Venezuela’s economic problems. It also is a key link between Venezuela and Cuba. Since 2000, Venezuela has provided oil shipments to Cuba well below market rates, amounting to $6-$8 billion in annual subsidies. This is a crucial lifeline to the hard currency-starved Cuban government, as Venezuela essentially took the place of the Soviet Union as Cuba’s primary benefactor. Until its collapse in 1991, the USSR provided $4 billion in annual oil subsidies to Cuba. The loss of these subsidies caused the GDP of Cuba to fall by nearly 50 percent between 1989 and 1993. Cheap Venezuelan oil–along with limited privatization and an opening of the island to tourism–allowed Cuba to stave off economic catastrophe.

A lower degree of export diversification benefits Venezuela through heightened commodity pricesGottschalk and Prates 06 – *Research Fellow, Institute of Development Studies (IDS), University of Sussex, United Kingdom AND ** Associate Professor, University of Campinas (Unicamp), Brazil (Ricardo and Daniela, “EAST ASIA’S GROWING DEMAND FOR PRIMARY COMMODITIES MACROECONOMIC CHALLENGES FOR LATIN AMERICA,” United Nations Conference on Trade and Development, February 2006, http://dspace.cigilibrary.org/jspui/bitstream/123456789/13189/1/East%20Asias%20Growing%20Demand%20for%20Primary%20Commodities%20Macroeconomic%20Challenges%20For%20Latin%20America.pdf?1)//SSThe impact that seems to predominate among¶ our four countries is the complementary one, given¶ the high share of primary commodities in their total¶ exports (see chart 6). The only country in our sample that also faces the threat of China’s competition¶ in the manufacturing sector is Brazil, which has the¶ lowest share of primary commodities in total exports.¶ China is a potential competitor in the steel market.¶ Since 2004, the divergence between steel production¶ in China (which has more than doubled since 2000)¶ and domestic demand (mainly for semi-finished¶ products, due to the investment boom) has decreased.¶ This has resulted in

a weaker demand for steel imports and lower prices as well.4¶ The balance between these two effects in the¶ terms of trade of Brazil was positive in 2003 and¶ 2004, but the gains were significantly smaller than¶ in the other countries (see calculations by UNCTAD,¶ 2005, chap. II). Another factor that has contributed¶ to that has been the lower degree of openness of the¶ Brazilian economy, relative to Chile and Venezuela¶ (see table 3).¶ The higher the degree of openness, the larger¶ the potential gains in

export earnings from an improvement in the terms of trade. If we considered¶ the traditional indicators to gauge the degree of openness of a country (exports/GDP and total trade/GDP),¶ the countries that would benefit the most from higher¶ commodity prices would be Chile and Venezuela,¶ followed by Brazil

and Peru. The degree of export ¶ diversification has also impacts on these gains: the¶ lower this degree, the greater the variability of the¶ terms of trade and so the potential gains from higher¶ commodity prices. In terms of this variable, Venezuela and Chile, where the degree of export¶ concentration is most pronounced, are also the¶ countries that would benefit most. Calculations¶ by UNCTAD (2005, chap. III) confirm this hypothesis. Taking the average for 2002–2004, the gains¶ from the terms of trade for Chile were 2.9 per cent¶ of GDP, and for Venezuela, 3.6 per cent of GDP,¶ while for Brazil it was 0.2 per cent, and for Peru,¶

1.4 per cent.

AT Spending/Econ

A loss of Venezuelan oil would slow economic growth in the U.S.Alvarez 09 – (Cesar J., “Venezuela’s Oil-Based Economy”, Council on Foreign Relations, 2/9, http://www.cfr.org/world/venezuelas-oil-based-economy/p12089#p7)//mmThough Venezuela has repeatedly threatened to cut off its oil exports to the United States, analysts say the two countries are mutually dependent. Venezuela supplies about 1.5 million barrels of crude oil and refined petroleum products to the U.S. market every day, according to the EIA. Venezuelan oil comprises about 11 percent of U.S. crude oil imports, which amounts to 60 percent of Venezuela’s total exports. PDVSA also wholly owns five refineries in the United States and partly owns four refineries,

either through partnerships with U.S. companies or through PDVSA’s U.S. subsidiary, CITGO. A U.S. Government Accountability Office (GAO) report (PDF) says Venezuela’s exports of crude oil and refined petroleum products to the United States have been

relatively stable with the exception of the strike period.¶ The World Bank's Frepes-Cibils says “Venezuela will continue to be a key player in the U.S. market.” He argues that in the short term it will be very difficult for Venezuela to make a significant shift in supply from the United States. Nevertheless, Chavez has increasingly made efforts to diversify his oil clients in

order to lessen the country’s dependence on the United States. The GAO report says the sudden loss of Venezuelan oil in the world market would raise world oil prices and slow the economic growth of the United States.

AT Politics – Plan Popular

Economic engagement with LA is popular – top priority for Boehner, Republicans view it as a means to check IranPalmer 5-8 (Doug Palmer, writer for Reuters- Reuters is an international intelligence agency based in London. May 8, 2013. “Top Republican Urges deeper engagement in Latin America.” http://www.reuters.com/article/2012/05/08/us-usa-trade-boehner-idUSBRE84718520120508)

(Reuters) - The Congress' top Republican called on Tuesday for deeper economic engagement with

Latin America as a bulwark against Iran's attempt to gain influence in the region and the destabilizing effects of international drug cartels.

"The best defense against an expansion of Iranian influence in Latin America - and against the destructive

aspirations of international criminals in the region - is for the United States to double down on a policy of

direct engagement," U.S. House of Representatives Speaker John Boehner said at the State Department. "We must be clear that we will be there, with our friends and partners in the region, committed to fighting and winning the war for a free, stable, and prosperous hemisphere," Boehner said in a speech to the Council of Americas, which represents companies that do business in Latin America.

Boehner said Iranian President Mahmoud Ahmadinejad's visits to Venezuela , Cuba, Nicaragua and Ecuador this year

"underscored the designs Iran has for expanding its influence in Latin America, and its eagerness to forge bonds with governments in the Western Hemisphere that have demonstrated a lesser interest in freedom and democracy." Iran's attempt to gain influence was one of three "major threats" facing Latin America, Boehner said, along with the violence caused by drug trafficking and the possibility of

the United States losing interest in the region. "The threat of U.S. disengagement is the most serious of the three

threats I have identified because if it occurs, the other two threats will multiply exponentially," he said. Boehner called for a re-

energized "Plan Colombia" program, referring to the billions of dollars in military aid the United States has poured into the country. "Colombia still has the second largest insurgency in the world, and we need to take seriously the threat it still poses to the people of Colombia and to the region," he said. Boehner received an award from the group for his work last year on winning congressional approval of free trade agreements with Colombia, Panama and South Korea. The pacts were negotiated during the Republican administration of President George W. Bush. But President Barack Obama, a Democrat, did not submit the agreements to Congress until October 2011, after negotiating changes to make them more palatable

to Democrats and securing a commitment for renewal of a worker retraining program known as trade adjustment assistance. Boehner called the upcoming entry-into-force of the U.S-Colombia agreement on May 15 "an important moment for the prosperity" of the Western Hemisphere and said it

was vital the Panama agreement be fully implemented in the months ahead. He said it was important the United States "keep the momentum going" by negotiating new agreements to open markets to American exports. He expressed disappointment that Obama has not sought legislation known as "Trade Promotion Authority" which would help the White House do that. In an apparent reference to Argentina's expropriation of Spanish oil giant Repsol's subsidiary YPF and the billions in unpaid debt obligations the country still owes foreign investors, Boehner said the United States "must also be clear about what we expect from all of our neighbors." "We will insist that every nation honor the rule of law, meet its obligations, and respect international norms. That means paying debts to bondholders, honoring legal commitments and the decisions made by international arbiters, and respecting private property," he said. "Some governments in the region have demonstrated an alarming willingness to drift away from such norms when it suits their objectives. When this occurs, it's harmful not only to the people of those countries, but to the potential of all of the Americas. And it cannot be excused."

AT China Sphere of Influence

No impact to U.S.-China competition in LA – transparency & dialogue check escalation and the U.S. doesn’t view Chinese presence as a threatHilton 13 – London-based writer and broadcaster, formerly Latin America editor of The Independent newspaper and is editor of www.chinadialogue.net, a non-profit Chinese/English platform for environmental and climate change news and analysis (Isabel, Norwegian Peacebuilding Resource Centre, ‘China in Latin America: Hegemonic Challenge?’, February 2013, http://www.peacebuilding.no/var/ezflow_site/storage/original/application/26ff1a0cc3c0b6d5692c8afbc054aad9.pdf)The United States, distracted elsewhere in recent years, ¶ has reacted calmly to date to China’s increasing presence ¶ in Latin America. In a striking acknowledgement of China’s ¶ importance in the region, the U.S. and China have created ¶ a mechanism for mutual transparency through the U.S.– ¶ China Dialogue on Latin America . This started in 2006, just ¶ before then-President Hu Jintao’s visit to Washington, and ¶ continues under the Obama administration. Through four ¶ rounds of dialogue to date, the U.S. has conceded China’s ¶ standing in Latin America, while seeking successfully to set ¶ limits to China’s action in troublesome countries such as ¶ Venezuela and Cuba. In 2006, for instance, when Venezuela ¶ sought a chair on the United Nations Security Council, ¶ China was reluctant to lend its support. Although China ¶ eventually voted in favour, it did not otherwise back the ¶ campaign.¶ The shale oil revolution in the U.S. has also diminished ¶ fears of Chinese competition for the region’s energy resources , despite a strong Chinese presence in Venezuelan ¶ and Ecuadorian markets, and China’s success in locking up ¶ the major sub-salt oil in Brazil and securing major acquisitions in Argentina. Venezuela now exports less than 50% of ¶ its oil to the U.S., down from 80% in the past. There are warnings within the U.S. security community ¶ about the potential implications of Chinese involvement in ¶ Latin America in the future, and concerns about China’s ¶ still modest military sales to the region. Examples of these ¶ sales include Venezuela’s 2010 purchase of 18 K-8 fighters ¶ from China. Despite the concerns of the State Department, ¶ however, there has been little response in senior policy ¶ circles to the “China threat”. Regardless of whether there ¶ is any real “threat” to the U.S., key decision-makers have ¶ not reacted.

AT China CP

No solvency - China doesn’t have the expertiseGAO 06 – (Issues Related to Potential Reductions in Venezuelan Oil Production, Energy Security, 6, p. 21, http://www.gao.gov/ assets/260/250666. pdf)//mmFuture production could be impaired by the Venezuelan government’s preference to use national oil companies from developing countries (such as China) and other geopolitically strategic countries (such as Brazil) as partners to explore and develop new fields in Venezuela, instead of relying on experienced international oil companies. Several oil industry officials and experts told us

that national oil companies generally do not have the expertise of the international oil companies to develop heavy oil fields.

China can’t solve – poor environmental record and widespread negative perceptionsHilton 13 (Isabel, “China in Latin America: Hegemonic challenge?,” Norwegian Peacebuilding Research Centre, http://www.peacebuilding.no/var/ezflow_site/storage/original/application/26ff1a0cc3c0b6d5692c8afbc054aad9.pdf, January 2013)//SRThe environmental and ethical practices of Chinese companies have drawn unfavourable comment. The first major Chinese mining company in the hemisphere was Shougang Group, which began operations in Peru in 1992 with the purchase of the state-owned Hierro Peru for 14 times an independent valuation. Shougang has contributed heavily to the poor reputation of Chinese companies, over fines for environmental damage for the contamination of water supplies, low wages and dangerous working conditions. It has been the object of frequent strikes and protests. Other companies have experienced problems with community relations. After buying the Canadian company Corriente in 2010, Tongling and China Railway Construction Corporation proposed an open-pit mine in the province of Zamora Chinchipe in Ecuador. National protests followed an agreement with the government, including a march on the capital by the country’s most powerful Indigenous movement, Confederación de

Nacionalidades Indígenas del Ecuador (CONAIE). Chinese companies lack experience of compliance with much higher environmental or community relations standards than prevail at home. Some are adapting,

hiring local managers, public relations (PR) and law firms, but they are likely to struggle for some time with the cultural gaps and the lack of understanding of local concerns and political considerations. One example of an attempt to meet those concerns is the Chinese mining company Chinalco’s relocation of 5,000 residents of the town of Morococha, 150 kilometres east of the Peruvian capital, Lima, to remove them from an area likely to be contaminated by the new $2.2 million Toromocho opencast copper mine. Advised by local managers and PR consultants, Chinalco is investing $50 million in an entirely new town nearby, a project it describes as “the biggest privately-funded social project in Peru’s history” (http://www.strategicstudiesinstitute.army.mil/pubs/ people.cfm?authorID=580). Two-thirds of the residents have moved, although the project has also been dogged by complaints about inadequate housing and compensation. Although some dispute the claim that

Chinese conduct is worse than U.S. or local equivalents, China suffers from widespread negative perceptions and the identification of Chinese companies with the Chinese state. Local labour groups, some government officials and many indigenous and social groups in the region make little distinction between private Chinese companies and state-owned enterprises. Local opinion surveys reveal that most companies, whether large or small, state owned or private, suffer from anti-Chinese sentiment and the perception that they put profit above environmental and social concerns.

China can’t solve – squo investment proves – culture gapHearn 12 (Kelly, “Venezuelan oil a risky investment for China,” The Washington Times, http://www.washingtontimes.com/news/2012/mar/12/venezuelan-oil-a-risky-investment-for-china/?page=all)

BUENOS AIRES — China has poured billions of dollars into Venezuela’s oil sector to expand its claim over the country’s massive oil reserves. But Beijing is getting relatively little for its investments, and Chinese officials are increasingly frustrated with Venezuelan President Hugo Chavez, according to energy analysts and former managers of the state oil company, Petroleum of Venezuela, or PDVSA as it’s known by its Spanish acronym. Mr. Chavez, who is battling a life-threatening recurrence of cancer, said his goal is to send 1 million barrels of oil a day to China, which has given Venezuela more than $30 billion in loans and promised billions of dollars more in energy investments by 2016. PDVSA claims to send 410,000 barrels a day to Chinese markets, the bulk of which is used to pay back the loans. Already this year, PDVSA has announced that Citic Group Corp., China’s largest state-owned investment company, will

acquire a 10 percent stake in the Petropiar heavy-crude project held with PDVSA and U.S.-based Chevron Corp. It also said that the China Development

Bank will spend $4 billion to help boost production in a joint venture with China National Petroleum Corp., or CNPC. The Chinese bank and the Venezuelan government also have agreed to renew a $6 billion bilateral investment fund, of which $2 billion will help boost PDVSA production. But Tom O’Donnell, an oil analyst who teaches at the New School University and writes an oil-industry blog, the Global Barrel, said the payoffs of China’s loans amount to a “consolation prize.” He said China’s goal is not to get oil for loans, but to have its own national oil companies contract for major oil-production projects in Venezuela’s Orinoco Tar Sands, the largest

single known petroleum reserve in the world, with 513 billion barrels of heavy crude oil. Chinese displeased “The Chinese have not gotten the kind of

preferential access they want [to the tar sands], and my sources tell me they are extremely unhappy,” said Mr. O’Donnell. In 2010, CNPC signed a deal to help Venezuela develop a major Orinoco oil field known as Junin 4, which includes the construction of a facility to convert heavy oil to a lighter crude that could be shipped to a refinery in Guangdong, China. “Although the contract was signed in December 2010, not one barrel of oil has yet been produced, much less upgraded,” said Gustavo Coronel, a former PDVSA board member. “So far, nothing much seems to be happening, except for the arrival of a large group of Chinese staff to the CNPC’s Caracas office,” he added, referring to the Venezuelan capital, Caracas. “Apart from money, there seems to be little that China can offer Venezuela in the oil industry,” he said, adding that a “culture gap will make working with China

very difficult for Venezuelan oil people, who were mostly trained in the U.S.” Erica Downs, a former

energy analyst for the Central Intelligence Agency now with the Brookings Institution in Washington, said the Junin-4 project could be key to China’s future in Venezuela. “If all that happens, China will be in a position to take substantial volumes of Venezuelan oil,” she said. “The problem is that the project hasn’t gotten off the ground.” Ms. Downs said Venezuela is far from living up to Mr. Chavez’s export goals for Beijing and that PDVSA’s claims of sending 410,000 barrels a day do not match Chinese customs data, which show 322,000 barrels per day of crude and fuel oil imported from Venezuela last year. “Although Venezuela’s oil exports to China have grown along with the volume of oil-backed loans extended by China Development Bank to Caracas, the delivered volumes still fall short of Chavez’s goal of eventually shipping 1 million barrels per day to China,” she said. Critics of the loans say

Mr. Chavez is using the so-called “China fund” as his personal piggy bank. The Chinese also seem to be increasingly wary. Internal PDVSA documents released by a Venezuelan congressman show that the Chinese balked at a $110 billion loan request by Mr. Chavez in 2010, after PDVSA officials failed to account fully for where the money would go.

China can’t solve our internal links – CP will just export state capitalismAraújo and Cardenal 13 – authors of China’s Silent Army on Chinese economics (Heriberto and Juan Pablo, “China’s Economic Empire,” New York Times, 6/1/13, http://www.nytimes.com/2013/06/02/opinion/sunday/chinas-economic-empire.html?pagewanted=all&_r=0)//SRTHE combination of a strong, rising China and economic stagnation in Europe and America is making the West increasingly uncomfortable. While China is not taking over the world militarily, it seems to be steadily taking it over commercially. In just the past week, Chinese companies and investors have sought to buy two iconic Western companies, Smithfield Foods, the American pork producer, and Club Med, the French resort company. Europeans and Americans tend to fret over Beijing’s assertiveness in

the South China Sea, its territorial disputes with Japan, and cyberattacks on Western firms, but all of this is much less important than a phenomenon that is less visible but more disturbing: the aggressive worldwide push of Chinese state capitalism. By buying companies, exploiting natural resources, building infrastructure and giving loans all over the world, China is pursuing a soft but unstoppable form of economic domination. Beijing’s essentially unlimited financial resources allow the country to be a game-changing force in both the developed and developing world, one that threatens to obliterate the competitive edge of Western firms, kill jobs in Europe and America and blunt criticism of human rights abuses in China. Ultimately, thanks to the deposits of over a billion Chinese savers, China Inc. has been able to acquire strategic assets worldwide. This is possible because those deposits are financially repressed — savers receive negative returns because of interest rates below the inflation rate and strict capital controls that prevent savers from investing their money in more profitable investments abroad. Consequently, the Chinese government now controls oiland gas pipelines from Turkmenistan to China and from South Sudan to the Red Sea. Another pipeline, from the Indian Ocean to the Chinese city of Kunming,

running through Myanmar, is scheduled to be completed soon, and yet another, from Siberia to northern China, has already been built. China has also invested heavily in building infrastructure, undertaking huge hydroelectric projects like the Merowe Dam on the Nile in Sudan — the biggest Chinese engineering project in Africa — and Ecuador’s $2.3 billion Coca Codo Sinclair Dam. And China is currently involved in the building of more than 200 other dams across the planet, according to International Rivers, a nonprofit environmental organization. China has become the world’s leading exporter; it also surpassed the United States as the world’s biggest trading nation in 2012. In the span of just a few years, China has become the leading trading partner of countries like Australia, Brazil and Chile as it seeks resources like iron ore, soybeans and copper. Lower tariffs and China’s booming economy explain this exponential growth. By buying mainly natural resources and food, China is ensuring that two of the country’s economic engines — urbanization and the export sector — are securely supplied with the needed resources. In Europe and North America, China’s arrival on the scene has been more recent but the figures clearly show a growing trend: annual investment from China to the European Union grew from less than $1 billion annually before 2008 to more than $10 billion in the past two years. And in the United States, investment surged from less than $1 billion in 2008 to a record high of $6.7 billion in 2012, according to the Rhodium Group, an economic research firm. Last year, Europe was

the destination for 33 percent of China’s foreign direct investment. Government support, through hidden subsidies and cheap financing, gives Chinese

state-owned firms a major advantage over competitors. Since 2008, the West’s economic downturn has allowed them to gain broad access to Western markets to hunt for technology, know-how and deals that weren’t previously available to them. Western assets that weren’t on sale in the past now are, and Chinese investments have provided desperately needed liquidity. This trend will only increase in the future, as China’s foreign direct investment skyrockets in the coming years. It is projected to reach as much as $1 trillion to $2 trillion by 2020, according to the Rhodium

Group. This means that Chinese state-owned companies that enjoy a monopolistic position at home can now pursue ambitious international expansions and compete with global corporate giants. The unfairness of this situation is clearest in the steel and solar- panel industries, where China has gone from a net importer to the world’s largest producer and exporter in only a few years. It has been able to flood the market with products well below market price — and consequently destroy industries and employment in the West and elsewhere. THIS is the real threat to the United States and other countries. However, most Western governments don’t seem to be addressing China’s state-driven expansionism as an immediate priority. On the contrary, European governments dealing with their own economic crises see China as a country that can help, either by buying sovereign debt or going ahead with investments in their countries that will create jobs. The Chinese state-owned company Cosco currently manages the main cargo terminal in the biggest Greek port, Piraeus, near Athens — a 35-year concession deal. And China’ssovereign wealth fund, C.I.C., took a 10 percent stake in London’s Heathrow Airport in 2012, as well as a nearly 9 percent stake in the British utility company Thames Water. The state-owned firms Three Gorges Corporation and State Grid are the main foreign investors in Portugal’s power-generation sector, and C.I.C. also bought a 7 percent stake in France’s Eutelsat Communications. In the Greek port the Chinese have been able to triple capacity, amid local unions’ criticism of worsening labor conditions. It’s too early to measure China’s impact in the other investments, but the fact that Chinese companies are able to invest in sectors that are closed or restricted for European firms in China says a lot about how minimal Europe’s leverage with China is. Take Germany, which accounts for nearly half of the European Union’s exports to China. It’s highly unlikely that Berlin would make unfair competition the cornerstone of its China policy. Moreover, the lack of leverage and leadership in Brussels means that the union is unable to take firm action to force China into adopting measures that would level the playing field or guarantee reciprocity in its domestic market. The only exception is the United States, which seems to be addressing the issue by pushing forward the Trans-Pacific Partnership, a regional trade association that is seen by critics in Beijing and elsewhere as an American-led policy to contain China. The club is thought to be restricted to countries that meet high American standards on issues like free competition, labor and environmental standards and intellectual property rights. As China doesn’t meet those standards, it will have to reform or risk regional isolation. Moreover, the United States has made life difficult for the Chinese telecom giant Huawei by refusing to grant it contracts from leading American telecom companies. This is not just about national security concerns but also about sending Beijing a clear message that the United States government is willing to block one of China’s most visible and successful companies. While Western companies complain about barriers to public procurement and bidding and struggles to compete in restricted sectors in China, Chinese companies enjoy red carpet treatment in Europe, buying up strategic assets and major companies like Volvo and the German equipment manufacturer Putzmeister. The perception is that China is now unavoidable and, consequently, the only option is to be accommodating — offering everything from a generous investment environment to essentially dropping human rights from the agenda. “We don’t have any stick. We can just offer carrots and hope for the best,” a senior European official told us. Greenland, a massive resource-rich territory largely controlled by Denmark, is a case in point. Last year, it passed legislation to allow foreign workers into the country who earned salaries below the local legal minimum wage (the minimum wage there is one of the highest in the world). Chinese representatives had made it clear that Chinese state-owned banks and companies would invest in the high-risk, costly exploitation of Greenland’s vast mining resources only if the modification of local regulations would allow the arrival of thousands of low-wage Chinese workers. The Arctic territory didn’t have too many alternatives. No other country is in a position to become Greenland’s strategic partner for its future development, given the business risks involved in the Arctic region and the scale of the investment needed in a territory bigger than

Mexico but without a single highway. An American oil company couldn’t have handled the task alone. The Chinese state capitalist system, by contrast, allows multiple state-owned companies to work together, making it possible for the China National Petroleum Corporation, for instance, to extract oil while China Railway builds basic infrastructure. Greenland’s leaders accepted China’s terms because they likely believed these costly projects might never go ahead if the Chinese didn’t get involved; only China has the money, the demand, the experience and the political will to proceed. Moreover, there are not enough skilled workers in Greenland for such projects, so the Greenlandic government made an exception to the law, allowing Chinese laborers to earn less than minimum wage figuring that local residents would benefit from new infrastructure and royalties. China’s deep pockets, as well as its extensive labor force and unlimited demand for natural resources, made all the difference, and accordingly Greenland was prepared to pass tailor-made legislation to meet Chinese needs. Even Denmark, which holds authority in Greenland in areas like migration and foreign policy, decided not to interfere. IT is even happening in progressive bastions like Canada. President Obama’s refusal thus far to approve the Keystone pipeline project has made Prime Minister Stephen Harper’s conservative government turn to China to secure an export market for Canadian crude oil reserves. The Calgary-based oil industry has lobbied Mr. Harper to adopt a new diversification strategy that includes the construction of a controversial pipeline to western British Columbia, despite strong opposition from environmental groups, the First Nations aboriginal communities and the public. In the meantime, Canada also signed a Foreign Investment Promotion and Protection Agreement with China, which gives remarkably generous investment protection to the Chinese. With China in the center of debates over FIPA and the west coast pipeline, Canada’s government then approved the takeover of the Canadian energy giant Nexen by the Chinese state-owned oil firm Cnooc. The $15.1

billion transaction was China’s largest foreign takeover. Closer economic ties have had political side effects; the Harper administration now seems much more cautious in criticizing China’s human rights record. Given that Canada was until very recently one of the fiercest

voices on China’s handling of dissidents, this is not only a remarkable 180-degree turn, but also a clear indication of how China’s economic influence can push the political agenda to the sidelines, even in the West. In Australia, Chinese accumulated investment inflows at the end of 2012 surpassed $50 billion. The trend is striking: Chinese direct investment in Australia in 2012 increased 21 percent from 2011 levels to reach $11.4 billion, making it an important player in Australia’s mining industry. Australia’s trade portfolio remains highly diversified, but the Chinese share is growing rapidly. China has also become the biggest investor in Germany (in terms of the number of deals), surpassing the United States. Chinese companies are looking for companies that, like Putzmeister, have a technological edge and have become world leaders in niche markets. Those takeovers also allow them to absorb Western know-how on branding, marketing, distribution and customer relations. Others are more opportunistic. Faced with recession, struggling European firms like Volvo quickly welcomed Chinese partners who were ready to inject

capital and take full control. The loans that Beijing is giving worldwide are even more significant, in dollar terms,

than direct foreign investment. These loans include $40 billion to Venezuela and more than $8 billion to Turkmenistan in

recent years. China’s policy banks (China Development Bank and Export-Import Bank of China) are the key institutions

supporting China’s “Go global” strategy, as they provide billions of dollars in loans to foreign countries to acquire

Chinese goods; finance Chinese-built infrastructure; and start projects in the extractive and other industries. This is clearest in countries where the West claims to link its aid to human rights and good business practices. Chinese loans have been crucial in countries like Angola that have faced threats of a cutoff in financing from Western creditors, the World Bank and the International Monetary Fund. Ecuador, Venezuela, Turkmenistan, Sudan and Iran have all faced such difficulties, and China has stepped in without political or ethical strings attached. Chinese statistics reveal little about these loans, but a study by The Financial Times showed that, between 2009 and 2010, China was the world’s largest lender,

doling out $110 billion, more than the World Bank. It is important to remember what is really behind China’s global economic expansion: the state. China may be moving in the right direction on a number of issues, but when Chinese state-owned companies go

abroad and seek to play by rules that emanate from an authoritarian regime, there is grave danger that Western countries will, out of economic need, end up playing by Beijing’s rules. As China becomes a global player and a fierce competitor in American and European markets, its political system and state capitalist ideology pose a threat. It is therefore essential that Western governments stick to what has been the core of Western prosperity: the rule of law, political freedom and fair competition. They must not think shortsightedly. Giving up on our commitment to human rights, or being compliant in the face of rapacious state capitalism, will hurt Western countries in the long term. It is China that needs to adapt to the world, not the other way around.

Chinese investment has negative impacts on the Latin American economy – increases trade deficits and prevents economic and political reformJohnson 05– Senior Policy Analyst for Latin America in the Douglas and Sarah Allison Center for Foreign Policy Studies, a division of the Kathryn and Shelby Cullom Davis Institute for International Studies, at The Heritage Foundation (Stephen, “Balancing China’s Growing Influence in Latin America,” The Heritage Foundation, October 24, 2005, pp. 5-6)//SSHowever, closer ties to China also have significant disadvantages for both Latin America and the United States:¶ Growing trade deficits. Latin American leaders who sign trade and investment deals with the PRC

have noticed that China’s exports are more affordable than their own goods, which contributes to trade deficits. Chinese goods are made by laborers who work for one-third of the wages of Latin American counterparts and who tolerate worse working conditions. Officials in Argentina, Brazil, and Mexico have signaled their unease about trade with such a hot competitor. In September 2005, Mexican President Vicente Fox made it clear to visiting President Hu Jintao that dumping electronics and clothing was unacceptable. For every dollar that Mexico makes from exports to China, the PRC makes $31 from

exports to Mexico.9 ¶ Disinterest in economic reform . Some analysts believe that the commodities- based trade model used by China will undermine the progress that Latin America has made toward industrialization. While countries like Chile and Brazil have moved beyond raw materials exports, others with

powerful presidents or ruling oligarchies may be tempted to fall back on plantation economics. Income gaps between the rich and poor may widen as a result. More- over, such narrowly focused economies are vulnerable to downturns in

commodity prices. Some 44 percent of Latin Americans already ¶ live below the poverty line. If these countries fail to adopt reforms, social inequality and political instability could depress U.S. exports to the region and increase migration problems.¶ • Scramble for resources . To obtain commodities, China offers

tempting investments in infra- structure. In contrast, the United States cannot offer direct tie-ins to state industries and can only

offer development aid, now in decreasing amounts. Chinese competition may make Millennium Challenge Account

( MCA ) money a less effective incentive to democratize governments and liberalize markets. The one-to-two year lead time from proposal to disbursement of MCA aid gives volatile governments a chance to back away from market-oriented performance requirements.¶ • Evasion of American-style bottleneck diplo- macy. China’s flexibility counters more rigid U.S. approaches.