Venezuela to Cut Oil Contracts as Prices Fall

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Source: WSJ

Venezuela said it will seek to renegotiate contracts with oil-service companies and force food producers to make basic items covered by the government's price-control policies -- moves that point to increased economic strain.

More than 90% of Venezuela's hard currency comes from its oil production, which populist President Hugo Chávez has used to fund a splurge in consumer imports and underwrite social spending programs.

In the past few months, Mr. Chávez also spent freely on a political campaign to persuade Venezuelan voters to scrap term limits and allow him to run for president as many times as he likes. He won that referendum last month.

But as oil prices have plummeted, Mr. Chávez is increasingly hard-pressed to pay for his programs. Adding to woes is falling production at state oil company Petroleos de Venezuela SA....

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An economy based on oil is not a good idea.