How Venezuela bungled its oil fortune and racked up a $34 billion debt

For anyone wanting to write the scenario on how to mismanage a nation's economy, a look at Venezuela would serve as good source material. During the past decade, Venezuela has squandered two petroleum-based windfalls - and now finds itself behind the financial eight ball with billions in foreign debt that it cannot pay.

Only now is it beginning to come to grips with the problem, but the measures adopted in recent months are unlikely to be enough to lift Venezuela out of its economic traumas.

Those traumas began with two reckless spending sprees. Grandiose public works and lavish new industrial facilities were built, first under former President Carlos Andres Perez in the mid-1970s and more recently under President Luis Herrera Campins. The two sprees were based on bonanza-like oil revenues and large-scale foreign borrowing, and were compounded by graft and mismanagement.

Then the bottom fell out. Oil prices dropped; oil demand slumped; and income fell off sharply. All that spending and borrowing together mortgaged Venezuela's future.

''We're reeling from just about the worst sort of mismanagement you can imagine,'' says banker Carlos Hector Ramirez. ''We're all to blame. We went berserk with huge projects. We borrowed heavily. We all thought oil was the El Dorado that would keep us on easy street forever and pay off whatever debt we incurred. Now we know different. If we had been more prudent, we wouldn't be in such bad shape.''

A measure of how poorly the Venezuelan economy is doing can be seen in its foreign debt - totaling an estimated $34 billion. Nearly half is due this year and next. But the precise total is a subject of controversy due, at least in part, to poor government accounting.

Whatever the exact total, there can be no minimizing the seriousness of the nation's economic plight. Suddenly staggered by the debt, the Herrera Campins government is desperately searching for solutions. In recent weeks, it has:

* Reduced proposed 1984 budget outlays by 10.2 percent and is contemplating even further reductions.

* Sought to reschedule much of its $34 billion foreign debt, some $13.7 billion of which falls due this year.

* Introduced exchange controls for the first time in 18 years.

* Cut back on the foreign aid (in the form of cheap oil) that Venezuela gives to Central American and Caribbean countries.

* Put on hold a mammoth $8 billion project to develop crude oil from the Orinoco tar belt in eastern Venezuela.

All this comes in an election year, when governments are traditionally reluctant to take drastic measures. But Herrera Campins' advisers are telling him he cannot wait.

Ironically, Herrera Campins talked about such measures when he took office in 1979. The outgoing Perez government had spawned a spending spree, based on $12 -a-barrel oil, racking up huge budget deficits. In comparison with today's problems, however, those deficits look minuscule.

Had Herrera Campins implemented a broad-based austerity program at the time, he might have put the country into the black. But he did little except denounce his predecessor's administration.

Then with the price of oil soaring (to $34 a barrel), the Herrera Campins government launched its own spending spree, borrowing billions for short terms at high interest rates. Prudence went by the board and spending soared. The result is today's huge debt burden.