Venezuela: Private property or public wealth?

FRFI 178 April / May 2004

In March the Electoral Panel of the Venezuelan Supreme Court demanded that the National Electoral Council stop its investigation into the suspected mass falsification of signatures on petitions calling for a referendum on President Chavez’s government. Shortly after, the Institutional Chamber of the same court contradicted the demand. Appeals will now follow. Thus the long campaign by the rich, sections of the middle class and other dupes reaches another impasse. ALVARO MICHAELS reports.

This campaign has been accompanied by the usual hysterical abuse against the government in the Venezuelan millionaire media. Kerry, challenger to US President Bush, has attacked President Chavez dubbing him ‘detrimental to our interests’, a supporter of ‘narco-terrorists’ and, in the usual US establishment McCarthyite ‘red conspiracy’ style, an ally of – God forbid! – Castro. The stakes are high and precisely how high can be seen from Venezuelan government investigations into the way the ‘opposition’ stole wholesale from the national oil corporation PDVSA when in power.

On 27 Febuary the opposition ‘Democratic Co-ordination’ held a demonstration against the National Electoral Council’s decision to review 1.48 million of the 3.4 million signatures claimed by the opposition, and if rejected would reduce the total to below the 2.43 million necessary for a vote. 1.8 million signatures have been certified so far. If the decision is upheld the government would retain its position until 2006. The demonstrators tried to force their way into a meeting of the G-15, leaders of the developing countries. Two demonstrators were killed and 21 injured, including six soldiers. Two armed attackers were arrested. President Chavez called this meeting a ‘Seattle in reverse’.

Defeating privatisation
Minister of Energy and Mines Rafael Ramirez recently explained the damage done to the country by Chavez’s predecessors’ oil privatisation policy. Ramirez said ‘the management that was in control of PDVSA was ...aligned with the interests of transnational oil companies which have always been in conflict with our national interests.’ PDVSA devised a policy of directing wealth away from the state. Those who disapproved were pushed aside.

The priority was volume over price, selling oil below cost in order to subsidise Citgo, (a petrol station chain owned by PDVSA in the US), thereby subsidising the US economy. President Guisti was already privatising PDVSA piecemeal, through ‘outsourcing’. The entire data processing system was turned over to Intensa, a joint-venture of US company SAIC, whose top executives are former CIA officials, ex-generals and ex-admirals. They controlled information about PDVSA deposits, production and capacity: information of great strategic value. Taken to extremes, in order to fill a tanker at the port one had to push a key on a computer in Caracas. They took all the passwords and codes and software, and copied them to Houston. The process of defeating the lock-out by oil executives and managers at the turn of 2003, intended to oust President Chavez, was made exceptionally difficult by this control of key systems. That shut down is estimated to have cost $10 billion!

The planned full privatisation even included turning over port wharfs. This was stopped when Chavez’s government came to power, just before the tanker fleet and the gas compression systems were to be handed over to private interests.

PDVSA managers systematically transferred overseas over $10 billion in investments, through the purchase of or participation in refineries. Yet only 50% of these refineries use Venezuelan crude oil. The PDVSA was turned into a purchaser of crude, a trader, drawing off more money from Venezuela. Purchases made to maintain these refineries came to $17 billion per year. On top of this the refineries long-term contracts were ‘profitable’ only due to the discounts in the oil billing. Long term discounts of between $2, $4 and $6 per barrel. The whole financial structure was designed to bleed the country of its own oil revenues! The government of President Chavez asked for this information but the PDVSA always refused. The company was not even audited in the country. This has been stopped and the trader offices in Houston are to be closed.

World’s largest oil reserves
Venezuela possesses proven oil reserves of 77 billion barrels. But in the Orinoco Oil Belt it has 1.2 trillion barrels of [extra heavy crude] oil. With the technology that currently exists, it could declare 275 billion barrels of oil. That places it as the country with the largest reserves in the world!

The previous PDVSA management established control over Venezuela’s resources by creating Strategic Associations wherein the PDVSA was a minority shareholder. Huge tax avoidance schemes were created and contracts that agreed royalty payments to the state of only 1% for up to 10 years, instead of the then 16.66%, now increased to 30%. They originally wanted 0%, but had to put it at 1% because the law did not permit it! These contracts are still in place and mean that heavy crude sold for $6.80 per barrel provides the government with $0.15 per barrel. This is unsustainable for Venezuela. Of 3m barrels per day, 500,000 are produced via associations paying 1% in royalties. No more oil is to be produced under these conditions.

So we see the immense wealth in question in Venezuela, the means previously taken to steal from the country and the significance of the steps President Chavez has taken to stop this robbery. No wonder the plunderers hate his government!


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