The Devil's Excrement

Scott from burtonterrace sends in and comments in his site on this link from the Christian Science Monitor about the “revolution” in the Venezuelan oil industry. Given what the article says I definitely have to comment on it:

“Nine-to-fivers have come to think of themselves as patriots. Senior managers now eat at the same cafeteria tables as secretaries.”

This is not accurate. First of all, most PDVSA workers do not work nine to five but much longer hours. Second, senior managers have always eaten in the cafeteria.

“What was widely regarded as a world-class energy company before the strike has a new philosophy: to help the poor”

This is a stupid philosophy and has never worked anywhere in the world. Oil revenues in Venezuela are less than $3 per day per inhabitant; oil income is around $1 per day per inhabitant. PDVSA should be run to maximize profit so that that income can drive the economy. Guayana companies under the umbrella of a company called CVG were always run “to help the poor”, they always lost money. In the end, the steel company was privatized and is almost bankrupt, the aluminum companies nobody ever even bid for them. (Chavez stopped the privatization when he was a candidate because the price was too low; nobody wants these companies even for free today). The petrochemical industry was in the hands of the Government for years, it never made money. It was handed over to PDVSA and it became profitable.

“The old culture is dead, and a new one is developing,” says Omar Enrique Perez, a compensation analyst with 15 years at the firm, who is working to slash salaries across the board – including his own.”

Imagine cutting salaries that are already low by international standards. High level managers at PDVSA make less than $50,000 a year. This is inconsistent and incompatible with the planned oil opening in which foreign companies will be sold tracts for exploration and productions. The Exxon’s and Shell’s of the world will come in and hire the best talent away from PDVSA and the 18,000 people fired from it. This does not benefit Venezuela or PDVSA. This already happened at the Government level where salaries were held back and no professional worth his while was willing to work for the Government. What will happen is that politics and corruption will rule at PDVSA. Moreover, the PDVSA culture was without doubt its most (and the country’s!) valuable asset. There was no political cronyism and corruption was very low. Over many years the number of corruption cases in PDVSA were orders of magnitude below the Government or the military.

“But Rodriguez has signed on with the government game plan – to divert some revenue to federal coffers that would otherwise be reinvested in PDVSA.”

This was already happening, in the last two years PDVSA was paying the Government more dividends that the company was actually earning in income (Weird concept, no?). I would like someone to convince me that this is not the sure path for bankruptcy for any company. Of course, in the case of PDVSA the end will be simply the privatization of the company.

“The new PDVSA management says much of that money was wasted, and points to operating costs that are three times higher than other oil majors as proof”

This argument is hilarious. The only reason operating costs at PDVSA were higher was that the Chavez administration held the currency constant for so long that it was overvalued. With inflation running at 15-20% and the currency being held constant, salaries were increased so that part of the purchasing power was maintained. Ordinary field workers at PDVSA, before February last year when the currency was devalued, were making $40,000 a year. With the devaluation this effect has disappeared.

“Previously, PDVSA’s management used its considerable degree of autonomy to aggressively explore for oil, develop new technologies, and acquire overseas assets”

This should be the bread and butter for PDVSA: Explore for oil to increase production, develop new technologies to be able to exploit the huge heavy oil reserves Venezuela has and acquire assets overseas to be able to place products in markets. This strategy not only worked, but is the same used for example, by the successful Malaysian oil company Petronas, which operates in a country which produces 20% of Venezuela’s daily production but operates in over twenty countries. Moreover, the Minister of Energy and Mines just announced that they intend to do exactly the same, exploring to produce 5 million barrels of oil a day. This statement is so cynical coming form the people who objected to the oil opening of the Caldera administration which was done to expand oil production without using PDVSA’s resources.

Finally, the article has some active and former military speaking on how they will change PDVSA and move on. Well, so far in the last four years, the military (from both sides) have shown to be mostly incompetent and overrated, making Venezuelans question even the need for them. Chavez’ has surrounded himself with military at all levels and very few of them have shown any management capabilities. Why should PDVSA be any different for them?

According to the National Institute for Statistics, unemployemnt has increased by 75% in the four years of the Chavez Government. (El Nacional page B-1). This despite the fact that oil income in the first four years of the Chavez Government was 41% higher than in the previous four years in US dollars. I wonder who Chavez will blame for this? The strike? The opposition? The US? The Colombians? Maybe he can just shutdown the Institute……

Upon my return I find that U.S.A. Secretary of State Powell made a very simple statement “Chavez can show his democratic vocation with the recall referendum”. To me, a very bland and true statement. To the Venezuelan Government, a violent reaction such as an MVR Deputy saying “Powell is not well informed”. But I am truly amazed at our Foreign Minister who said: ” The truth is being hidden from Powell, the recall referendum is in the Constitution and was put in there by the Government.”

This is true, but the opposition, through a violation of the previous Constitution only has four seats out of a hundred in the Constitutional Assembly, despite obtaining 33% of the vote. This violated the right to minority representation guaranteed by the previous Constitution. Now, as far as I remember these four people did not object to the recall referendum, so what is Mr. Chaderton saying? Moreover, the consultative referendum is also in the Constitution and despite the fact that the opposition fullfilled all the requirements for it, it was not held. Finally. Hugo Chavez himself, using a very vulgar expression, told the opposition that there would not be a referendum and appointed himself to a job that is not his, when he said that the signatures already collected for the recall referendum were “chimbas”. Chimba is local slang for something which is fake through dirty means. So perhaps Mr. Powell is better informed than Mr. Chaderton would like him to be.

With the other 99% of Venezuelans I will be dissapearing the next four days. Thursday and Friday are holidays here, so we get religious and head for the beach. Whatever one thing has to do with the other.

I love the spasmodic democracy of the Chavez administration. After finally reaching an agreement in the negotition table, Vice-President Rangel said today tha before they can sign it they have to consult with the forces that bach Chavez’ Government. Well, for one, there are no “forces’ that back Chavez they have become mostly weaknesses like the fact that the only parties left backing Chavez from the once mighty Polo Patriotico are PPT, which got all of less than 2% in the last election and the Communist party with less than 1%. Apparently the agreement includes November 19th. as the last possible date for holding the recall referendum, which we understand Chavez opposes as he wants no deadline on a date. This appears to be the origin of this new “democratic spirit” in the part of the Government. Not a single member of Chavez’ MVR has ever been elected to a party position by the base, they have all been appointed by the boss himself. So much for democary.

In a country where justice is dispensed at a snail’s pace, the murderer of Altamira Joao de Gouveia was sentenced to 29 years in prison only four months and nine days after killing 3 people in that Square. Why do I complain? Easy, consider the following:

– The killer used a Glock and killed three people and injured 27. De Gouveia was a sometime waiter, turned cabdriver through the generoristy of the Chavez Government. He received large money transfers in US dollars in the year prior to the murder, but this was never investigated fully. Where did he learn to shoot like that?

-There is a TV clip made two days earlier and shown then repeatedly in which the Mayor of Libertador, a close Chavez supporter, district helps unload weapons at PDVSA headquarters right before it was surrounded by Chavez’ Bolivarian circles. A man resembling the assasin of Altamira is shown to be there very close to the Mayor. This was never investigated or me,ntioned again.

-Chavez himself defended him two days after the murders. Imagine, the man who insults everyine, called the assasin “This, gentleman” and despite the man’s confession Chavez said he had to be found guilty first. Chavez also showed that day DE gouveia’s passport saying the man had arrived from Portugal only two days earlier and thus could not ahve been in the country earlier in the week.

– Bullets different than those by the assasin were used in the shootings and recovered from the bodies of the injured. (All of those killed had bullets from the Glock). The bullets were said to be rifle bullets by both the Mayor of Chacao Municipality and the Head of the investigative police. Nobody ever said much about this second (or third?) shooter.

Thus, it seems to convenient to bring the man to trial so unusually fast. Now he will be sent to jail. Will he escape? Be killed? Just dissapear without a trace? We shall see….