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Oil production directly tied to Chavez’s longevity
Posted by: mcq on Wednesday, January 30, 2008

Or so you would think, given it is the oil money that is financing his ability to hold power by subsidizing all his socialist schemes. The question is, even in this era of high oil pricing, can he continue to finance his hold on power in the future? PowerLine has an interesting article about PDVSA, the state oil company and what has happened since it was taken over by Chavez:
Since Chavez took office in 1999 Venezuela's oil production has dropped by 28 percent and PDVSA's debt has risen significantly. Meanwhile, some major foreign oil producers have left the country and taken their cutting edge technology with them.

The Venezuelan government claims that between 2006 and 2012 it will reinvest $76 billion of its earnings to increase production, but analysts canvassed by the three reporters who wrote the story think that the figure comes closer to between $2 and $5 billion a year—a drastic short-fall. Moreover, many of PDVSA's activities are now unrelated to oil—it has hatched subsidiaries to distribute powdered milk, or to mill corn, or even to build boats. (Anyone who knows Venezuela can imagine the lush opportunities this offers for illicit enrichment by the agency officials or the military who work with them.) Meanwhile, as oil production falters, the state company has decided to take on more employees. When Chavez took office PDVSA had 48,000 workers. It now has nearly 75,000, and the president-dictator has announced plans to hire an additional 30,000 by the end of next year. (One cannot help recalling the case of the Argentine YPF, which was the only oil company in the world that lost money in the go-go 1970s!)
Of course, since Chavez has nationalized many industries, foreign investment has dried up. And the foreign expertise, once available there, is gone. He's left with what he has, and, as the numbers show, that's not doing well. Is PDVSA headed for the same fate as YPF? And, can Chavez survive if it does?
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Previous Comments to this Post 

The apparant silent boycott of Citgo doesn’t help him much, either.

Let him rot
Written By: Joel C.
URL: http://
This is seemingly typical of non-market economies...Iran’s infrastructure is in the same boat, as was Saddam’s Iraq...the ruling cabal is too interested in the money TODAY to invest for the future, and I thought it was greedy and short-sighted capitalists that suffered from this defect of character.
Written By: Joe
URL: http://
As we said when he started down this road - he’s fine until his infrastructure collapses around him, then it will get interesting.
Written By: looker
URL: http://
Of course, the corrosive effects of corruption and inefficiency within PDVSA have been seriously muffled by the stratospheric climb in energy prices. As long as the money keeps flowing enough folks will keep quiet to enable the status quo.

If we were serious about handling Chavez (and the Mad Mullahs, Sudan, etc.) we would be treating the high cost of energy as a key strategic challenge and its reduction an ultimate objective. As long as we keep filling up at $100/bbl, with the usual piss-and-moan and shrug of shoulders, then expect the current absurdity to continue.
Written By: D
URL: http://

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