Archive for April 30th, 2005

PDVSA-Cuba office: It makes perfect sense

April 30, 2005

Photo above:Castro and Chavez in business suits in Havana. Is it one of Chavez’ Brioni or a Lanvin? Hard to tell he has over ne hundred of them.

The opening of the office of PDVSA Cuba makes perfect sense. It is clearly one of those management decisions that has been studied and analyzed and the financial models have spoken: We need to open an office in Cuba, it makes perfect sense! Let’s look at the facts:

-Cuba has no oil, it produces no oil, all of the exploration wells that have been drilled in the Guld of Mexico have turned out out dry. Repsol, Petrobras and YPF have even withdrawn from exploration activities in that island, so what better opportunity for a revolution that believes that anything is possible!

-Cuba is the Caribbean island island furthest away from Venezuela, so that from a logistic point of view it makes perfect sense to use the Matanzas storage facilty as a distribution point for all of the Caribbean. That way oil has to travel the furthest in order to send it back to the Caribbean. It is even a better strategic location if you consider that no ship can travel to the US from Matanzas, without touching port in another country first. Thisalso makes perfect sense since the US is Venezuela’s largest export market.

-Venezuela wants to run the Cienfuegos Refinery. Since the CITGO refineries are not profitable and Venezuela has no money to invest in oil facilities in Venezuela, it makes perfect sense to invest in one in Cuba and sell the CITGO ones. Moreover, using the same techniques and experience learned at CITGO will guarantee that the Cienfuegos refinery will never make money so that that facility will be in tune with both the Cuban and Bolivarian revolution.After all, profit is bad, sacrifice is good. The Cienfuegos refinery is of very modern design and was began by the Soviets and abandonded in its first stages of construction when the Soviet Union fell. .

-Banco Industrial de Venezuela. The Government Bank will open an office in Cuba in the PDVSA office to channel the lending to Cuba that the Venezuelan Government wants to funnel to promote more trade with that island. This is very good for Venezuela’s worst run bank, which has been capitalized twice in the last four years and whose main problem is its high expenses. But hey, Venezuelans love subsidies so that this office is in perfect resonance with the country.

-There are other benefits to having an office there. It will make the flow of subsidized and unpaid oil to Cuba more efficient, allowing that country to reexport efficiently that oil which has helped to revalue the Cuban currency while the Venezuelan one has been devalued. That office will keep track of the oil shipped to that island so that there is no record of it in Venezuela and nobody can ever investigate it. Payment by Cuba, if one is ever made, will be directly to that office, guaranteeing that the funds will never reach Venezuela.

All in all, a wonderful step in consolidating the incoherent oil policy of PDVSA and Venezuela of the last two years: It simply makes too much sense!