Oil boom brings no relief to Venezuelan poor

LA TAZAJERA, Venezuela (Reuters) -- Like most residents of this slum in Venezuela's oil heartland, Jose Nava has no drinking water, toilet or electricity. So where, he asks, are the benefits of soaring fuel prices that have enraged Western consumers?

As heads of state and dignitaries of OPEC countries gather in the Venezuelan capital, Caracas, this week amid pleas from developed nations to lower oil prices, the dirt streets and tumbledown shacks of La Tazajera on the shore of Lake Maracaibo show no signs of the bonanza.

"This is a forgotten village. It has been here for years and the government has ignored it," said 35-year-old Nava, part of an army of unemployed in the slums of Maracaibo who scavenge for part-time work in the oil industry.

This dusty village is typical of the South American nation, where more than half the population lives in poverty despite the biggest oil reserves outside the Middle East.

The heyday of the 1960s, when Venezuela was the world's largest oil exporter and Caracas one of its most expensive cities, is long gone.

As OPEC leaders arrive for only the second summit in the cartel's 40-year history, their first sight of Caracas will be the dirt-poor shanties that spill down the mountainside from the Venezuelan capital and house around a third of its 6 million inhabitants.

For the oil-rich western state of Zulia, the "black gold" of Lake Maracaibo has brought its own problems.

The 1,000 or so people of La Tazajera are sheltered by a 20-foot embankment from the polluted waters of South America's largest lake, where hundreds of oil rigs stretch to the horizon producing more than a million barrels of crude a day, about half of Venezuela's oil exports.

Now, the dike is starting to crack. A ditch beside the embankment has filled with putrid, dark green slime, and some nearby houses stand derelict after their residents moved.

"We fear that one night a downpour will come, widen those cracks and drown the village," said Nava, his three young children playing at his feet.

Since its first commercial well in 1914, Venezuela's oil riches have proved a mixed blessing.

A founding member of the Organization of Petroleum Exporting Countries (OPEC) in 1960, Venezuela embarked on a disastrous experiment in nationalization 15 years later that slashed its oil production and killed off foreign investment.

Billions of dollars from oil exports encouraged a bloated nanny state and lined the bank accounts of corrupt politicians. Volatile fuel prices pitched the economy from boom to bust for three decades, eroding living standards and bringing Venezuela's once-flourishing middle class to its knees.

Nevertheless, petroleum remains a sacred cow. A government attempt to remove fuel subsidies in 1989 provoked bloody demonstrations, and Venezuelan gasoline remains among the cheapest in the world. To fill a mid-sized car tank costs around $6, or about a tenth of the price in Europe.

Although the oil industry employs only about 30,000 people from a population of 24 million, promise of work there still represents an escape from poverty for ordinary Venezuelans.

Rueben Mavarez, a 12-year-old from Maracaibo who pitched his baseball team to the Little League World Series last month, described his dream as either to play for the Atlanta Braves or work in state oil company Petroleos de Venezuela (PDVSA).

For Javier Blanco, 53, who joined PDVSA 20 years ago amid the optimism of nationalization, the lure of oil is still a good wage and the guarantee of a job for life.

"Oil has been our past and it will be our future for a long time to come," he said, on the deck of a drilling rig in Lake Maracaibo.

Like his predecessors, leftist President Hugo Chavez has pledged to end Venezuela's reliance on oil, which accounts for three-quarters of its exports.

But, after 20 months, his government is more reliant than ever on high oil prices to fund its runaway spending and boost a recovery from last year's recession.

Chavez has rebutted pressure from Western governments to lower the cost of fuel. The maverick former coup leader has billed this week's summit as a forum to consolidate support for strong oil prices, which he describes as "fair" for the needs of the developing nations of OPEC.

Despite its oil riches, Venezuela, like other Latin American states, has fallen victim to demographics.

Its population tripled in 40 years amid a wave of immigrants and a baby boom. Urban migration created rambling shanties, home to millions of young families, often dangerously lacking any urban planning or basic infrastructure.

One such shantytown was El Larense, which sprang up beside an oil pipeline in the outskirts of Maracaibo. Henrique Colinas, 23, moved there six years ago in search of work, abandoning the rural town of Mene Grande, the cradle of the Venezuelan oil industry.

When the oil duct outside their homes burst five months ago, villagers had minutes to gather their belongings before the crude caught fire and razed 24 houses to the ground.

"If it had been night, about 200 people would have died, because that was all houses before," Colinas said, gesturing to a barren patch of land beside his corrugated iron shack.

With pressing economic needs, ecological issues have taken a back seat in oil development. Defunct wells have been abandoned in Lake Maracaibo and are now home to colonies of oil-black cormorant and local boys practicing their diving.

El Larense is one of a handful of shanties around the oil installations of Lake Maracaibo to suffer environmental damage. In some, the state has tried to improve housing and services and limit pollution problems.

The mirage of Venezuela's oil wealth still persists in these sweltering slums. The people of La Tazajera and El Larense are waiting for the government to resettle them, encouraged by promises from the populist Chavez.

"Venezuela is a rich country, with oil and plenty of land. ... They must move us from here, give us dignified homes," said Nava, invoking the oil mantra of Venezuela's poor.

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