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I received a very interesting report from a Venezuelan friend about Venezuela's oil industry today, which is very much opens one's eyes, and shows the neo-fascist tendencies of the Chavez government.
The Chavez regime has evolved the oil industry commercial apparatus to one where the oil operations are carried out by corporations, in which the state owns a majority share, but large multinational corporations (BP, Total, Chevron, Statoil, ENI, and others) own the minority share and also have unique voting rights, such that when there are major decisions to be made, the corporation or joint venture can not act unless the foreign multinational is in full agreement. Thus the operations are carried out with profit in mind, and they are guided by these multinationals - at least in theory.
What has been happening is very interesting, these joint venture corporations are not investing as much as they were expected to invest, because the foreigners are holding their approval votes to make sure the profits are high. They require these high profits because they consider Venezuela a very risky country, due to the erratic nature of the autocrat Chavez. The country's high risk perception is noted in the high interest rate paid by Venezuela's and the state oil company's debt, which ranges between 14 and 17 percent. Therefore the foreigners who are entering into these joint ventures are expressing the need to receive at least a 15 % profit, and PDVSA has agreed this is the profit level they should get.
But the plans prepared by PDVSA at the central office do not allow these profits to be achieved, and this means investment is not taking place. Therefore Venezuela's oil sector GDP growth is negative, and oil production, according to the OPEC figures, is much lower now than before. According to the figures released by PDVSA itself, these projects in the Faja del Orinoco require enormous amounts of capital, which they lack. Therefore they need the foreigners' participation and loans. But the foreigners are extracting, or waiting to extract, usurious terms, including the 15 % return rate.
Therefore Venezuela, with all of this oil in the ground, is unable to extract it, because the terms the foreign multinationals demand are so high. This is one reason why the government of Venezuela is borrowing so much money, the GDP is falling, inflation is very high, and other problems are becoming more and more evident, they sit on a mountain of oil, but the system they created is a neo-fascist system, which requires they form alliances with these multinational corporations and give them enormous profits, and a rate of return which is unthinkable in the first world. This is not truly a socialist system, the oil is not really being produced, and the investments do not take place as projected. They have a lot of propaganda, and of course they have their Goebbels to write glowing articles about Venezuela's oil, but reality is very ugly, they are either going to give the power to the multinationals, and enormous profits, or their oil industry will collapse.
There are of course other options, but these guys running Venezuela's economy are, in the end, a bunch of very stupid corrupt fascists, more interested in propaganda and creation of the cult of personality of Mr Chavez, rather than the benefit of the Venezuelan people.
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