Feast or famine.

Venezuela's banks have a problem: Increasingly, critics charge that their biggest client, the government, is running the nation into the ground--with bank financing backing it all. Government bonds are a high-liquidity, low overhead, tax-free investment. And the nation's political impasse has boosted their profitability. Threatened by a possible recall, the government of leftist President Hugo Chavez has borrowed heavily to pay for popular programs for the poor. The banking system now holds about as much in government papers as it does in all the rest of its credit portfolio combined, with some individual banks holding twice as much. "Now, when the population is dying of hunger, the banks are earning like never before:' says Oscar Garcia Mendoza, president of Banco Venezolano de Credito, which has not purchased government bonds, although it does buy Central Bank paper. Others say lending to the only customer in the market is simply doing what banks do--make money from money. "What else are we to do with the bolivars?" says Francys Rugeles, executive vice president for marketing at Banco Provincial.

Oil-rich Venezuela is still a good credit risk, analysts note. However, the banks are helping Chavez accumulate a huge debt, one that could fuel an eventual devaluation. Since depositors' money is bolivar-denominated, devaluation won't cause an Argentine-style collapse, but it would suddenly escalate the cost of living for Venezuelans.