CARACAS Venezuelan President Hugo Chavez will likely emerge unscathed from the current global financial contagion even if tumbling crude prices force the oil-dependent OPEC nation to scale back spending in the coming months.
The crisis, which the socialist Chavez gleefully calls the end of capitalism, has helped push crude oil to an 8-month low after it hit a record near $150 per barrel and sparked dire predictions by Chavez adversaries of an economic meltdown.
But analysts say billions of dollars in cash reserves and widely available financing by political allies will let Chavez ride out a sustained oil price fall of even several years.
"They're going to have to tone down the usual expenditure programs, but it's obviously not an emergency situation," said Enrique Alvarez, head of Latin American debt strategy with financial research group IDEAGlobal.
Venezuela has suffered little direct effect from the market chaos because Chavez nationalized the most important companies that once traded on the minuscule Caracas stock exchange and because its currency is fixed by exchange controls.
But the falling price of oil, which provides almost all of Venezuela's foreign exchange and close to half the government budget, has raised concern among top officials and even sparked a rare call for "austerity" in the 2009 budget.
Chavez would not likely slow spending until after November's tough regional elections for governors and mayors in which his supporters are expected to lose some key posts.
IDEAGlobal says Venezuela may have to devalue its heavily overvalued exchange rate, possibly aggravating the continent's highest inflation. But the group expects the economy will grow around by 5 percent this year and by slightly less than that in 2009.
The anti-U.S. Chavez has used oil wealth to finance booming growth that reached 8.4 percent in 2007 while boosting the government's role in the economy and redistributing oil revenues to poor supporters.
Economists say billions of dollars stashed in government funds run largely at Chavez's discretion will keep Venezuela afloat for several years even if crude prices tumble.
Venezuela's central bank has close to $40 billion in reserves, while analysts say the balance of discretionary government funds is likely in the tens of billions.
Chavez could halt investments in new infrastructure projects if revenues begin drying up or possibly draw down an estimated $6 billion from the National Development Fund, or Fonden, to cover day-to-day expenses.
He could even access financing amid the implosion of global capital markets, since allies such as China and some Middle Eastern countries with swollen coffers have shown their willingness to offer bilateral loans.
This year alone, Chavez has borrowed $8 billion from China.
And the nation's economy will not collapse overnight -- even if the credit crisis drastically reduces oil prices.
Venezuela's lavish, oil-driven consumer culture of the 1970s continued for years after the 1981 crude oil collapse.
The country did not even devalue its pegged exchange rate until 1982, and used heavy government borrowing to delay an economic collapse until 1989 -- when a humbled Caracas was forced into IMF-backed austerity that led to deadly riots.
Patrick Esteruelas, a Latin America analyst with the Eurasia Group in New York, said a fall in oil prices below $80 per barrel would give Chavez less money for social programs and trim down the nation's robust current account surplus.
"But Chavez has ample financial public assets to draw from even in the event of a sustained oil price fall," he said.