Venezuela: spreading the wealth.

A high oil price has pumped billions of extra U.S. dollars into the public budgets of Venezuela, giving President Hugo Chavez plenty of money to spend on poverty and housing programs for the poor, as he promised. Poverty is endemic in the oil-rich country; 80% of Venezuelans are poor, and social spending has been down in recent years. According to analysts Milton Guzman, Asdrubal Oliveros and Claudia Verde at Santander Investment, however, it's less clear what will happen once the party is over.

Santander estimates that oil-revenue increases account for US$7 billion in new revenues for Chavez. Social spending, mainly on housing, education, food assistance and employment programs, is at $5 billion, a figure that is 3.8% of economic output expected in 2005, rising to 4.3% in 2006.

It's not hard to imagine why. Whatever the effectiveness of the government's largesse, Venezuelans like it: Polls show 92% of aid recipients are pleased with the food and health programs, while 85% approve of housing programs.

social spending as % of GDP

                   2005E     2006E

Education          1.03%     1.37%
Housing            0.67%     0.85%
Health programs    0.50%     0.57%
Employment         0.41%     0.85%
Food programs      0.33%     0.28%
Other              0.90%     0.41%

SOURCE: Santander Investment

E = Estimate

Note: Table made from bar graph.