International Business : The Dark Side of Venezuela’s Vast Wealth : Energy: Despite its huge oil reserves, the nation remains mired in poverty and inflation.

Venezuela’s best-known writer, Arturo Uslar Pietri, says historians can sum up his country in nine words: Columbus discovered it. Bolivar liberated it. Oil rotted it.

“Oil riches,” Uslar says, “sank us.”

More than 75 years after a large oil deposit was discovered beneath Lake Maracaibo along the western border with Colombia, some Venezuelans say crude riches have been a curse as well as a blessing.

During the past two decades, an estimated $175 billion poured into this country of 21 million people that is roughly twice the size of California.

Some of that windfall was put to good use. Venezuela’s 2,170-mile highway system is the most extensive in South America. The Caracas subway is swift, clean and indispensable in the capital city of 4 million, and the country has a large, university-educated populace.

Venezuela’s per-capita income, $2,850, is among the highest in Latin America, and its Petroleos de Venezuela Inc. has become the world’s second-largest state-owned oil company behind Saudi Aramco.

Yet prosperity has been ephemeral. Public services--schools, hospitals, roads and police--function poorly. Urban crime is rampant. Unemployment is rising, and the government estimates that at least four of every 10 Venezuelans live in poverty.

On top of that, the economy is entering its third year of recession, and inflation last year reached an annual rate of 71%.

What went wrong? Some blame oil.

“Let’s be frank,” political analyst Michael Rowan wrote in the Caracas Daily Journal newspaper. “Once oil began to flow, the . . . idea was not to earn money but to spend it.”

Corruption became widespread, with reports of bribes, kickbacks and no-show jobs on government contracts common. Governments in the 1970s and ‘80s subsidized food, university tuition, home mortgages and a host of other things; the price of gas is still held at the equivalent of 14 cents a gallon.

Venezuelans came to believe the oil bounty was as God-given and limitless as the sun on the country’s hundreds of miles of Caribbean beach.

The result was “a pinata culture,” economist Robert Bottome said, referring to the candy-filled, papier-mache animals broken open at children’s parties. People came to expect government handouts.

“The standard of living had a support that didn’t depend on productivity and investment: oil income,” agreed Asdrubal Baptista, former economic adviser to President Rafael Caldera.

“Venezuelans lost their values,” said Mary Goodwin, an environmentalist who used to work as a translator for an oil company. “It’s much better to be street-smart and cunning than to be hard-working and honest.”

For most of its 165-year history, ever since Simon Bolivar led it to independence, Venezuela has been a farming nation, producing coffee and sugar for export and ranking as nearly self-sufficient in other basic commodities.

Today, most food is imported.

“The misuse of oil money has been the great Venezuelan tragedy,” said Janet Kelly, dean of the Institute of Higher Administrative Studies, the country’s leading business school.

Obviously, oil itself isn’t the culprit. Many nations would love to have the largest proven reserves in the hemisphere, 64 billion barrels. And Venezuela sees oil as its future. Annual production is projected to reach 4 million barrels a day by 2003, up from the current 2.6 million.

The issue is how the bonanza was handled. Uslar, a former newspaper publisher, national politician and respected social commentator, says the answer is “not wisely.”

He notes that the country not only spent all its oil income, but also borrowed billions during the past two decades--and despite those efforts, poverty increased rather than declined.

“Venezuela is a country unique in Latin America. The country was poor, small and not very developed, with limited possibilities,” Uslar said. “Then suddenly--without effort, without work--it became immensely wealthy. That is the short history of Venezuela.”