June 28th., 2006

HOW MUCH OIL DOES VENEZUELA HAVE?

ABSTRACT:

• The Brazilian Chancellery only cares about the speech capacity of our Governor.

• Kirchner becomes Chavez´ countersignature. 

•  Both attitudes have an explanation: The oil check book of the Lieutenant Colonel works.

•  In Panama he failed.  He offered to build a refinery to treat 150,000 daily barrels of Venezuela oil and Panama preferred a 300,000 Mexican one.

• How much oil does Venezuela have?  This is the question being made by Andres Oppenheimer and the South Commando.

•  The Minister of Energy, is, at the same time, the President of PDVSA.  As such, he called on a Shareholders´ Meeting of PDVSA and presented the performance report, approved by himself, as Minister and representing its sole shareholder.

•  In the figures presented before the SEC, of the year 2004, the operational costs increased in 43.3%, and the social expenses reached $1,242 Million.  In 2006, an electoral year, they will rise to $8,200 Million.

•  The Central Bank is technically broke.  The circulating money is $38,000 Million and the reserves are in $31,000 Million.

•  For the closing of 2006, the monetary liquidity will surpass $51,000 Million.

• The situation of PDVSA and the Central Bank may trouble Chavez geopolitical project.  It also opens gloomy perspectives for Venezuela.

•  Will there be elections in 2006?  The question is being made by the Rector of the Universidad Católica, Luis Ugalde, who points out that 2006 may be an electoral year without elections.

• The messages from the regime leave no doubts:  They have absolute control over the National Electoral Counsel and do not accept independent audits of the electoral registry or minimum reliability conditions.

• MERCOSUR must remember the democratic clause.  Moderation is not enough.

HOW MUCH OIL DOES VENEZUELA HAVE?

“Oil Geopolitics” is the term that has ended up imposing as a denomination for Chavez´ project to be known as the leader of revolutionary neo populism.  The last blessing was granted by Brazilian Chancellor Celso Amorin, who declared to the El País Uruguayan newspaper that the presence of Venezuela in the MERCOSUR was going to “tone down” the Lieutenant Colonel’s discourse.  The most important Latin American Chancellery is only concerned about our Governor’s speech capacity.  A good testimony of achievements with the governments that benefit from Chavez generous oil check book.  The purchase invoice to Brazil, in the last two years, surpasses the $6,000 Million, including weapons, planes, ships, the Pernambuco refinery, apart from the billionaire contracts granted without due biddings to major Brazilian companies. 

To the Argentinean President, nostalgic of Peron’s oratory, not even Chavez´ discourse concerns him.  In his recent travel to Spain he assumed no regrets as his function of countersignature.  A different conduct can not to be expected towards he who bought from Argentina $4,500 Million of public debt and he who has granted juicy contracts for the repair and construction of vessels.  The Oil Geopolitics has also promoted friction with different governments that have denounced intromissions in their internal affairs.  Apart from the conflicts with Mexico and Peru, two cases have been presented to the OAS:  Nicaragua denounced the delivery of cheap fuel to the Mayor’s Offices controlled by the Sandinistas, and El Salvador has denounced similar agreements with the Mayor’s Offices controlled by the Farabundo Martí Front.

Construction of a refinery to treat 150,000 barrels, per day, of Venezuelan oil and providing natural gas to Panama, were the offers from Chavez to President Torrijos in their encounter on Thursday, June 22.  For the first time, the original screenplay did not work, in spite of the many praises for “my General Omar Torrijos”.  The Panamanians long for a refinery of 300,000 barrels with Mexican oils, and in the press conference, a journalist asked how the natural gas was going to be offered, since Venezuela has to import such gas from Colombia in order to satisfy the domestic demand.  It was not a happy day for Chavez, since that same day Andres Oppenheimer, in the column he writes for El Nuevo Herald of Miami, he questioned the following: How much oil does Venezuela have? An internal report from the South Command of the US Armed Forces questioned the energetic aid capacity that the Lieutenant Colonel has constituted as an angular stone in this diplomatic strategy.  On June 22, Venezuelan newspapers covered the opinion of Senator Richard Lugar, President of the Foreign Relations Committee, in a hearing regarding energy safety in the context of US relations with Latin America.  The Senator, as reported by AP, advanced the contents of the report, upon his own request to a specialized office from Congress (GAO), according to which there is a severe deterioration in the Venezuelan oil industry capacity to comply with its own production goals in the immediate future.

PDVSA AND THE CENTRAL BANK COLLAPSE

The South Command and Senator Lugar have been critics of Chavez, but Oppenheimer´s question is in force upon analyzing the performance report approved on Tuesday, June 20, by the Shareholders Meeting of PDVSA and circumstance declarations offered by the Minister Rafael Ramirez.  The term Shareholders´ Meeting was used by the Minister, who is simultaneously the President of the company.  The unusual duality constitutes the first significant indication regarding the reality of the oil company.  The report was presented by Ramirez, as President of PDVSA, before himself, who, as Minister, represents the sole shareholder.  Another indication is that the report refers to the year 2004, in order to comply with a delay of one year, to the Securities Exchange Commission (SEC). 

The Minister declared that the state company will not present the report for 2005, since once the 2004 report is received, it will formally retire due to sovereignty reasons.   In August, PDVSA will present figures of the Siembra Petrolera business plan, and it will be the opportunity, according to the Minister, to make the corporations indicators public.

In the figures presented (2004) the operational expenses rose to 43.3% and the social expenses went up to $1,242 Million, not including the direct transfers to the Rotational Fund created for that year, independent from the national budget, with oil income that did not go by the Central Bank, destined to finance the Missions and similar programs.  The only official information regarding the amount was obtained in one Hello President wherein Chavez gave instructions to maintain an available level of $4,000 Million.  These figures are a beauty, said Ramirez, because the priority of the company is the social expense.  This year (2006), he added, the social contribution will sum $ 8,200 Million.  Since the expenses for exploration and production are foreseen in $5,000 Million, it is evident the shift in the nature and objectives of the company.  It ceases to have commercial ends and it develops into a direct executor of the government’s beneficence.

The announcement that the industry will issue bonuses for $3,500 Million for the local market is explicable. According to Alberto Quiros Corradi, ex president of two PDVSA affiliates, the debt is a consequence of cash flow problems, adding that PDVSA is replacing the Central Bank as the issuer of public debt, since the Central Bank is technically broke.  This appreciation seems to be corroborated by the Institution’s weekly report:  Until June 22, circulating money in the economy added $ 38,000 Million, and the international reserves deposited in the Bank averaged $ 31,000 Million.  As such, there are more than $ 7,000 Million that do not count with monetary back up in the emitting entity. To the former we need to add the increase of monetary liquidity for electoral reasons.  Serious financial analysis firms foresee that for the closing of 2006, the monetary liquidity will surpass the $ 51,000 Million.  Hence, Chavez is not concerned with the high oil prices; he affirms that these will be maintained for the next 30 years.  According to Quiros Corradi, there are no oil prices that can maintain, for a long time, the feasibility of a company that confronts a considerable increase amount in production costs, operational inefficiency, as a result of having let go 20,000 workers on account of political reasons that represented 30 thousand years of accumulated experience, a change in the nature and (main) objectives of a company, a constant deficit in the cash flow and debts that will affect their future credit lines.

ELECTORAL YEAR WITHOUT ELECTIONS?

PDVSA´s and the Central Bank’s situation may trouble Chavez geopolitical project, but it opens gloomy perspectives for Venezuela.  The President affirms not having concerns since his conviction is that the high oil prices and the growing oil demand are irreversible tendencies until the middle of the century.  Even if the idea is a shared one, the country faces a dilemma:  trust the transnational companies the key responsibilities of the energy business or transit a special period, following the Cuban model at the time Soviet aid ceased to reach them.  If we analyze what Chavez construes as the XXI Century Socialism, there is no doubt that his option is a new period starting 2007.  The asymmetric war makes sense, the arms race, the new Army scheme, the National Police, as well as other measures wherein the regime aspires to preserve its stability by controlling a society subdued to an unmasked authoritarianism.

The reasons for Chavez attitude towards a Presidential election appear with clarity.  Will there really be elections?  The question was made by Luis Ugalde, Rector of the Andres Bello Catholic University, who has stood up as a vigilant conscience of what occurs in Venezuela. 

Ugalde responded with the same questioning:  the year 2006 may be, regrettably, an electoral year without elections.  Why?  The messages from the Official Party are diaphanous and persistent:  on December 3, Chavez will be re elected with an outstanding victory over his enemies.  The goal announced is 10 Million votes, and the objective is a state issue that allows no concessions.  In a strict electoral perspective, the regime assumed control of the National Electoral Counsel, radically negating an independent audit of the Electoral Registry, and rejection of the minimum reliability conditions in the automotive systems requested by representatives of the Opposition and the civil society.  In Internet one can evidence the system designed to pressure the vote of the public workers, of the ones benefiting from the Missions, of the ones called upon to be part of the military reserves, and of all those who have to access a service or relation with the State.  Any journalist that visits Venezuela with a will of objective observation will have to be impressed by the media bombing with which the regime subdues the population, using its imposing network and forcing the private media to integrate in the broadcasting of the government’s propaganda.  

Chavez´ distrust of the people explains the psychological war that he develops to stimulate collective fear, depression and anguish.  The hegemonic pretension, the intent of controlling all public and private institutions is reaching a paradox:  subdue the universities, non government organizations, the media that maintains an independent line.  The intent to control is extended to culture and sports, pretending to subdue them to the political toll.  The international community would have to aspire to something more than that aspired by the Brazilian Chancellor.  For the Venezuelan Case moderation in Chavez speech is not enough.  A minimum would be that MERCOSUR remember the democratic clause that was once supposedly important, when Brazil, Paraguay and Argentina still carried scars of the military dictatorships they once suffered.