Cargando Video
Monday, February 05, 2007
Guest Columnists

Venezuela Oil: Wiped Out!

Venezuela’s passage towards communism has sent out messages that are crystal clear. To investors it says: "We don’t want you in Venezuela."
The decision by the Venezuelan government to take a controlling stake in the four companies currently upgrading crude in the Orinoco Oil Belt (Petrozuata, Cerro Negro, Sincor and Hamaca)  is arbitrary and illegal, argues VenEconomy. (Photo: PDVSA)


With Chavez re-elected what will happen to Venezuela's private sector? Results / Other Polls


On January 8, President Hugo Chávez announced that he would put the four companies currently upgrading crude in the Orinoco Oil Belt (Petrozuata, Cerro Negro, Sincor and Hamaca) totally under the control of the Bolivarian government. With this unilateral and untimely announcement, the President trashed long months of negotiations aimed at turning the upgraders into mixed enterprises in which the State would have the majority shareholding. But things did not end there.

One day later, on January 9, the Ministry of Energy and Oil ordered the four upgraders to cut their production by 195,000 barrels a day, that is 30% of their total production. And it so happens that this is the same number of barrels by which the members of OPEC agreed to cut their production at the meetings held last October and November.

That means that the Executive is forcing the upgraders to absorb the entire cut agreed at the OPEC meeting, when it would only be fair to share out those 195,000 barrels among all the country’s oil companies, including, naturally, the state-owned PDVSA. If the cut were equally distributed, they would only have to reduce their production by 36,000 b/d. However, it’s common knowledge that the government is not known for being precisely even-handed or fair.

This order has been interpreted by many observers as an intolerable maneuver to bring pressure to bear to force the foreign partners to cooperate in the arbitrary and illegal take-over of a controlling interest in their companies by the government and to do away with their right to protest.

So it comes as no surprise that, after these freakish orders by the government, Fitch Ratings downgraded the upgraders’ debt classification from B+ to CCC. In the not too distant past, these companies were ranked by the risk rating firms as being “suitable for investment.” Last year, when the Chávez administration announced that it would change the upgraders over to mixed enterprises, Fitch Ratings classified the debts of these oil companies as “speculative.” Now, in view of the government’s decision to nationalize them, it has downgraded them to CCC. That means that those liabilities are now considered to be “high risk owing to possible default on payment”; put another way, it practically rates them as junk bonds.

But Venezuela’s passage towards communism is not only affecting the debt ratings of these companies by the risk rating firms. To cut a long story short, this decision by the government has sent out messages that are crystal clear. To investors it says, “We don’t want you in Venezuela”! and to lenders it announces, “We don’t need you!"

This column is based on an editorial in VenEconomy. Republished with permission.

Post Your Comments
You can write a comment on this article by clicking here.

From: Orlando

Go to YouTube and watch "confessions of an economic hit man" and see how the US steals from the third world. This propaganda you are trying to sell is to benefit the rich and corrupted transnationals. Read Perkins book and find out the truth!

From: Wayne

San Diego, California
When nearly 80% of the Venezuelan population supports that president you must understand it is a movement for and BY the people. The country is no longer in the hands of the decendants of the conquering spanish that controlled the wealth.

From: Don

This is like the government taking your car and telling you to walk. The poor would have more of a right to your car than you do because they are poor. It doesn't make any difference that you worked your butt off to get the car.

From: JC Cueto

Under Chavez the richer have gotten richer. As a matter of fact, there is now more corruption and less efficiency than before the Chavez regime took over. Just look at the oil out put in Venezuela before Chavez and after Chavez. This notion that his path to Communism is for the poor is [wrong. It's] just another failed regime that is on the path to self-destruction. If Communism would have worked, the Soviet Union right now would be the only World Super Power. I feel for the people there.

From: jess kinser

Yeah Cuba, North Korea--and now, Venezuela! What fools you are! haha You should learn by mistakes!! jess

From: Malito

I love reading comments of people that do not live in South America and do not have a clue of the reality. Blame the evil North Americans for everything. As far as Venezuela goes, time will prove that they are headed for a major crash and burn. Knowing first hand how things are being run there, it is not the utopia that some believe. Shortage of foods, confiscation of property, loss of rights if you don't vote for the right person (wonder who that could be) and religious freedom going down the tubes.

From: NJ

I used to live in Cuba, I was born after Fidel took the power, so I didn't knew anything but comunism. I lived there for 35 years, now I live in Miami and I have a message for all of you leftists living in developed capitalist countries: You don't know anything about how life is in a communist country! The communist goverments have a very sophisticated and efficient demagogy machine to lure you looking for international support. Believe me, they don't care about their own people, they only care about themselves.

From: Disgusted

Quito, Ecuador
A message for anyone living in a free and democratic country (e.g., Canada or the U.S.) who thinks Chavez and his 21st Century Socialism is a good thing) - how about you guys move to Venezuela and see how the reality of life there coincides with your perception of a government for and by the people. You will be in for a reality check. Do you actually even know anyone who lives there? Or has even been there?

Write your comment

Latin Business Chronicle welcomes your comments. We reserve the right to edit and will not publish any illegal, obscene, defamatory or discriminatory commentaries.

- Your name

- Location    

- Comment:
Maximum 700 characters

Please, do not write in capital letters.

* Your comment will be validated befor apearing public.

  Other articles in : Guest Columnists