14-01-99 During the oil boom of the early 1970s Venezuela was riding the crest of a wave.
Glistening new skyscrapers and sprawling highways transformed the capital. The government spent lavishly on subsidies and social programs for the poor.
The easy wealth that Venezuela once derived from oil exports is a memory now. Tumbling oil prices, rampant corruption and profligate public spending have plunged the country into economic crisis, triggering an angry backlash that culminated last month in the election as president of a populist former army officer and onetime coup leader, Hugo Chavez.

Many of the country's woes can be traced to the government's failure to diversify the economy and protect it from the boom-and-bust cycles of international oil markets. With oil prices at 12-year lows, Venezuela is mired in its third recession in five years.
The government is strapped with a huge budget deficit that has forced it to cut back on social services and lay off tens of thousands of workers from its bloated bureaucracy, a major source of employment. Meanwhile, Venezuela spends nearly 40 % of its budget to service its $ 24 bn foreign debt.
"Since it was perceived that oil was a finite resource, the thought was that it would continue to skyrocket," said an American political consultant.

During an anti-establishment campaign, Chavez, who takes office Feb. 2, skilfully played on popular discontent over the failed economic policies and perceived dishonesty of the two main parties. His vows to attack corruption and redistribute the country's oil wealth were especially well received among the poor, who account for an estimated 80 % of the population.
Although financial circles were unsettled by his left-wing campaign speeches, Chavez has since calmed the fears of some investors by announcing the reappointment of the country's respected finance minister, Maritza Izaguirre. The business community has welcomed his plan to merge government ministries, cutting the number to 10 or 12.

Venezuelans who voted for Chavez, meanwhile, are eager for him to begin to implement his campaign promises. Throughout the capital, crime and homelessness have increased as the economic situation has worsened. In the busy Sabana Grande section of Caracas, poor Venezuelans amble by the rows of outdoor cafes asking patrons for money or food or eating any leftovers they can find.

The task of reviving the economy will not be easy, thanks in part to the outgoing government of President Rafael Caldera, which avoided deep cuts in public spending and chose instead to drain cash-rich government agencies -- such as PDVSA.
"Previous administrations did not have a clear development plan," said a Latin American strategist.
Chavez will inherit a $ 9 bn budget deficit, an annual inflation rate of 30 % and a national oil company whose profits have been plummeting. Last month, the company announced that net profits had plunged from $ 4.7 bn in 1997 to $ 1.4 bn last year.