Blame it on Chavez!

08 November 2005 |

This is an article that was published by the Financial Times... It goes on to say how Hugo Chavez is throwing away the Oil windfall, when he should have been painting the streets of Caracas in gold. Chavez is being accused of spending all the cash on popular public spending.... Well how good can a president be when he wastes the good fortune on the poor people of his country? Maybe he should have been sharing the unprecedented oil wealth with the rich and powerful of this world. That is what the FT article tries to do.

Venezuela is living on oil – but precariously

For much of Venezuela's modern history, its economic fortunes have closely followed the ups and downs of oil. Happily for president Hugo Chávez, his nearly seven years in office have coincided with a steady rise in the price of crude. This year oil export income is expected to reach an all-time high of $34bn, one-third more than the $26bn of last year.

This boom has allowed Mr Chávez to step up public spending – according to the central bank, the government's operational spending in August rose 45 per cent in nominal terms, year-on-year, or about 30 per cent in real terms. It has allowed him to underpin his popularity by diverting billions of dollars into programmes, called misiones, that deliver everything from free healthcare in the barrios to literacy classes for grandmothers.

Mr Chávez says the country is on the cusp of a new golden age, as officials of Petróleos de Venezuela (PDVSA), the state oil company, hire consultants and geologists to recalculate the size of the reserves.

Venezuela has the largest hydrocarbon deposits in the Americas. But if its extra-heavy oil deposits are properly measured and included, the government insists, Venezuela would be sitting on the world's largest oil reserves, in theory allowing it to negotiate a larger output quota with the Organisation of Petroleum Exporting Countries.

Such a calculation would mask some fundamental problems. Roger Tissot, Latin America analyst at PFC Energy, a consultancy based in Washington, says Venezuela is far from being able to supply more oil, regardless of the true size of its reserves. "In reality it doesn't matter if Venezuela says it has the biggest reserves in the world,'' says Mr Tissot. "It's irrelevant because they are already working at capacity.''

Government officials claim that the country is producing 3.4m barrels per day, but experts – and Opec itself – put the figure at around 2.6m b/d. The victim of political battles and mismanagement, oil output from PDVSA has sunk in the past three years. As punishment for a strike in late 2002, Mr Chávez fired almost 20,000 employees, with an average 15 years' experience. Their replacements have been unable adequately to manage the oil wells and facilities.

Rarely a month goes by without news of a production shutdown at a refinery due to an accident or fire. "You can't ditch overnight an accumulated 300,000 years of experience and replace it with personnel, many appointed for political reasons, without encountering problems,'' says José Toro Hardy, an industry consultant and former PDVSA director.

But, remarkably, budgetary constraints are adding to the production problems. Through the use of opaque ad hoc funds, Mr Chávez is diverting money that would otherwise be used for maintenance to fund the misiones. PDVSA funnelled $4.4bn into "social spending'' last year – more than the $3bn it invested in maintaining wells and other assets, according to its filing with the US Securities and Exchange Commission. Critics say it ought to be investing much more in its oil wells in order to prevent declines in their productivity.

In addition, despite the price boom, the tax revenue generated by PDVSA seems to be declining as a percentage of the total. In next year's budget it is expected that the much weaker non-oil sector will generate the majority of fiscal proceeds.

The problem is that much of PDVSA's surplus is controlled by the president himself. The next budget is based on a price of just $26 a barrel for Venezuela's basket of heavy oils. Although it trades at about $10 below West Texas Intermediate reference crude, economists say the estimate is low for one main reason: the greater the underestimation of the price, the wider the margin that remains for discretional spending. Toby Bottome, editor of the Veneconomy newsletter, says: "The budget figures bear no relationship to reality.''

While PDVSA's own output is declining, the volume produced by foreign private oil companies is increasing. However, that may be in danger. As the oil price has risen, the government has sought a greater share of the revenue. In the past year Mr Chávez has decreed increases in royalty and tax rates applicable to foreign oil operations. Now, the government is going a stage further.

It is demanding that multinationals convert their operating contracts, which were established in the mid-1990s, into joint ventures in which the state has a majority stake. Rafael Ramirez, the energy minister, said recently that the state may assume as much as an 80 per cent stake in 32 projects that are currently operating agreements with PDVSA but must be converted into joint ventures by 2006.

The operations produce about 500,000 b/d. Companies such as ChevronTexaco, ConocoPhilips and TotalFinaElf could see their credit ratings affected if their operations are converted into joint ventures. Orlando Ochoa, an economist in Caracas, says the constantly shifting legal framework, Mr Chávez's volatile politics and administrative chaos conspire against Venezuela being able fully to exploit its energy riches. "The climate generated by Chávez's experiment in 21st-century socialism is not conducive to the level of investment you need.''

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On August 16, 2004 - Greg Palast wrote in his column:

"Chavez sits atop a reserve of crude that rivals Iraq's. And it's not his presidency of Venezuela that drives the White House bananas, it was his presidency of the Organization of Petroleum Exporting Countries, OPEC. While in control of the OPEC secretariat, Chavez cut a deal with our maximum leader of the time, Bill Clinton, on the price of oil. It was a 'Goldilocks' plan. The price would not be too low, not too high; just right, kept between $20 and $30 a barrel.

Chavez had his Congress pass another oil law, the "Law of Hydrocarbons," which changes the split. Right now, the oil majors - like PhillipsConoco - keep 84% of the proceeds of the sale of Venezuela oil; the nation gets only 16%.

Chavez wanted to double his Treasury's take to 30%. And for good reason. Landless, hungry peasants have, over decades, drifted into Caracas and other cities, building million-person ghettos of cardboard shacks and open sewers. Chavez promised to do something about that.


Sixteen F*cking Percent was what Venezuela was paid by the big oil companies. Chavez made them pay 30% to Venezuela!

I can now understand why people, specifically the rich, like to hate Chavez.

I have added FT too to the list of those rich 6astards.



Dick Cheney, Hugo Chavez and Bill Clinton's Band
Why Venezuela has Voted Again for Their 'Negro e Indio' President

by Greg Palast

There's so much BS and baloney thrown around about Venezuela that I may be violating some rule of US journalism by providing some facts. Let's begin with this: 77% of Venezuela's farmland is owned by 3% of the population, the 'hacendados.'

I met one of these farmlords in Caracas at an anti-Chavez protest march. Oddest demonstration I've ever seen: frosted blondes in high heels clutching designer bags, screeching, "Chavez - dic-ta-dor!" The plantation owner griped about the "socialismo" of Chavez, then jumped into his Jaguar convertible.

That week, Chavez himself handed me a copy of the "socialist" manifesto that so rattled the man in the Jag. It was a new law passed by Venezuela's Congress which gave land to the landless. The Chavez law transferred only fields from the giant haciendas which had been left unused and abandoned.

This land reform, by the way, was promoted to Venezuela in the 1960s by that Lefty radical, John F. Kennedy. Venezuela's dictator of the time agreed to hand out land, but forgot to give peasants title to their property.

But Chavez won't forget, because the mirror reminds him. What the affable president sees in his reflection, beyond the ribbons of office, is a "negro e indio" -- a "Black and Indian" man, dark as a cola nut, same as the landless and, until now, the hopeless. For the first time in Venezuela's history, the 80% Black-Indian population elected a man with skin darker than the man in the Jaguar.

So why, with a huge majority of the electorate behind him, twice in elections and today in a referendum, is Hugo Chavez in hot water with our democracy-promoting White House?

Maybe it's the oil. Lots of it. Chavez sits atop a reserve of crude that rivals Iraq's. And it's not his presidency of Venezuela that drives the White House bananas, it was his presidency of the Organization of Petroleum Exporting Countries, OPEC. While in control of the OPEC secretariat, Chavez cut a deal with our maximum leader of the time, Bill Clinton, on the price of oil. It was a 'Goldilocks' plan. The price would not be too low, not too high; just right, kept between $20 and $30 a barrel.

But Dick Cheney does not like Clinton nor Chavez nor their band. To him, the oil industry's (and Saudi Arabia's) freedom to set oil prices is as sacred as freedom of speech is to the ACLU. I got this info, by the way, from three top oil industry lobbyists.

Why should Chavez worry about what Dick thinks? Because, said one of the oil men, the Veep in his bunker, not the pretzel-chewer in the White House, "runs energy policy in the United States."

And what seems to have gotten our Veep's knickers in a twist is not the price of oil, but who keeps the loot from the current band-busting spurt in prices. Chavez had his Congress pass another oil law, the "Law of Hydrocarbons," which changes the split. Right now, the oil majors - like PhillipsConoco - keep 84% of the proceeds of the sale of Venezuela oil; the nation gets only 16%.

Chavez wanted to double his Treasury's take to 30%. And for good reason. Landless, hungry peasants have, over decades, drifted into Caracas and other cities, building million-person ghettos of cardboard shacks and open sewers. Chavez promised to do something about that.

And he did. "Chavez gives them bread and bricks," one Venezuelan TV reporter told me. The blonde TV newscaster, in the middle of a publicity shoot, said the words "pan y ladrillos" with disdain, making it clear that she never touched bricks and certainly never waited in a bread line.

But to feed and house the darker folk in those bread and brick lines, Chavez would need funds, and the 16% slice of the oil pie wouldn't do it. So the President of Venezuela demanded 30%, leaving Big Oil only 70%. Suddenly, Bill Clinton's ally in Caracas became Mr. Cheney's -- and therefore, Mr. Bush's -- enemy.

So began the Bush-Cheney campaign to "Floridate" the will of the Venezuela electorate. It didn't matter that Chavez had twice won election. Winning most of the votes, said a White House spokesman, did not make Chavez' government "legitimate." Hmmm. Secret contracts were awarded by our Homeland Security spooks to steal official Venezuela voter lists. Cash passed discreetly from the US taxpayer, via the so-called 'Endowment for Democracy,' to the Chavez-haters running today's "recall" election.

A brilliant campaign of placing stories about Chavez' supposed unpopularity and "dictatorial" manner seized US news and op-ed pages, ranging from the San Francisco Chronicle to the New York Times.

But some facts just can't be smothered in propaganda ink. While George Bush can appoint the government of Iraq and call it "sovereign," the government of Venezuela is appointed by its people. And the fact is that most people in this slum-choked land don't drive Jaguars or have their hair tinted in Miami. Most look in the mirror and see someone "negro e indio," as dark as their President Hugo.

The official CIA handbook on Venezuela says that half the nation's farmers own only 1% of the land. They are the lucky ones, as more peasants owned nothing. That is, until their man Chavez took office. Even under Chavez, land redistribution remains more a promise than an accomplishment. But today, the landless and homeless voted their hopes, knowing that their man may not, against the armed axis of local oligarchs and Dick Cheney, succeed for them. But they are convinced he will never forget them.

And that's a fact.


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