Monday, May 11, 2009

Ominous overtones III...

I'm loathe to push Liz down the page but life goes on...

Petróleos de Venezuela S.A. (PDVSA) has always been the hen laying the golden eggs for Venezuela. Today it is technically bankrupt; they lost their heritage, their good name, with serious cash flow problems, production problems, problems paying the bills: the government will only recognize about 60% of the outstanding debt (I doubt even this will be paid)

The once grand company now has a multiple role: petty cash cow for the government, part Treasury, part leading provider of foreign exchange bypassing Central Bank, a provider of funds for clandestine operations [las maletas] plus national and international leverage parallel to the Ministry of Finance and the Central Bank. All this without considering that Venezuela is the only OPEC member country that does not display any plan of investment for its oil industry, which obviously has an indelible impact on their production of crude oil and derivatives, as well as the working life of their wells and deposits.

To make matters worse the inefficiency of other institutions of the Venezuelan state has led PDVSA to become a bureaucratic entity with nearly one hundred thousand workers, responsible for funding 11 social missions created by the government in areas of food distribution, education, training, literacy and employment, among others, thus encompassing powers normally covered by several ministries. This clear operational and financial deterioration has made a pauper of what was the highest paid sector of the economy; what is worse, these workers - as has happened with all public employees - are now political puppets shouting pro Chavez slogans; even managers and boards of directors were suddenly shouting slogans and marching with red shirts to political demonstrations.

All PDVSA's transport and buildings are covered with this pseudo advertising, including the most striking expression "homeland, Socialism or death". [Owsblog] Now all the goods and services related to the oil industry that provide equipment, transport, servicing, logistics, maintenance and operations to PDVSA (some of these contacting companies unpaid for 12 months) are being taken over by the state. Basically, the government has taken measures to seize anything it needs for the daily operations of the oilfields, this deep within the financial crisis, and which largely it can't pay for. (The same mechanism as applied to Radio Caracas Television when closed in May 2007 to take over their transmission facilities without compensation)

Meanwhile, Chavez celebrated the "liberation" of 8,000 workers belonging to these service companies and contractors whom will no longer be "oppressed" by the oligarchy and by capitalism (they will be absorbed by PDVSA...more costs.) Populism at its most cheap and farcical: the truth is that the hen that lays the golden eggs is being killed and the eggs broken; Venezuela is living one of the most difficult moments of its history.

The above edited and adapted from José Luís Méndez La Fuente's Petróleos de Venezuela, casi en quiebra in today's La Vanguardia.

To understand more and read a great opinion and blog about Venezuela: The Devil's Excrement, who, on the same subject says: "Chavez accelerates the pace of destruction of Venezuela, taking over oil service companies, "To me this is simply further evidence that Venezuela’s Dictator is simply out of control by now: In the face of the problem of the debt of the service companies, Chavez took the autocratic, expedient and simplistic solution of taking them over."

"This is just like a little kid playing a game that kicks the board because he is losing. Except that the debts do not go away like the game on the little kid’s board, PDVSA can’t handle this new responsibility and the drop in oil production will not only continue to go down, but is likely to accelerate with these measures. And the debt itself does not go away either"

The piece ends on an interesting point almost reminiscent of the UK's problems: "one way or the other, with or without Hugo Chavez, it is Venezuelans that will one day have to pay for all of these decisions."

The Devil remarks in another post that "while taking over farmlands is no longer news in Venezuela, this week the Government decided that sugar cane lands in Aragua and Carabobo states are too fertile for sugar cane and have to be taken over and/or planted with different crops. This includes some of the best rum producing areas." Now, this is of major concern, both as a ex resident of those states, with family still there and being a 'great' Venezuelan rum drinker...I fear the worst!

"Of course, nobody has given it any thought in the Government as to what to do with the sugar processing plants nearby, the workers that are there and what happens to them if the crops are changed."

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