18 November 2015 - 09:34 AM
PDVSA's Role in the Geopolitics of Latin America
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PDVSA is Venezuela´s state-owned oil company and the fifth largest oil company in the world in the world. PDVSA is also the main enterprise in the South American country and provides most of the income for the Venezuelan state, while administering the the largest oil reserves in the world: 297 billion certified barrels.

After being elected in 1998, Hugo Chavez began reversing the privatization of PDVSA.

Venezuela is a founding member of the Organization of the Petroleum Exporting Countries (OPEC), along with Angola, Saudi Arabia, Algeria, Ecuador, United Arab Emirates, Iraq, Nigeria, Qatar, Iran and Libya. These countries are responsible for producing 40 percent of the oil consumed in the world and account for 80 percent of the world’s oil reserves.

Since 2014, oil prices have declined more than 50 percent, affecting the market balance as well as relations among oil-producing countries and energy-consuming countries. One of the main reasons is due to a dramatic increase of oil production by the United States, thanks, especially, to fracking.

PDVSA Under Siege

Despite the fact that international oil prices has abruptly declined, the Venezuela government has continued investing in different areas of the economy and social projects that benefit the Venezuela population – unlike, for example, Mexico and Colombia.

Since 2011, more than US$76 billion have been invested in the Gran Mision Vivienda – Venezuela housing project. The President of Venezuela, Nicolas Maduro has committed to building the 1,000,000th house before the end of 2015.

PDVSA is almost entirely responsible for financing Venezuela's national budget, directing more than 60 percent of those funds towards social investmen. It is vital not only for Venezuelans, but also for people from countries that have social benefit arrangements with the Venezuelan state and its oil company.

Over the last few years, Venezuelan officials have argued the state oil company has been under attack from local and international mainstream media.

ANALYSIS: The Long War: Venezuela and ExxonMobil

Venezuela's Ambassador to the United Nations and former PDVSA President, Rafael Ramirez, said in late October that the U.S. investigation regarding allegations of PDVSA “mismanagement” is part of a smear campaign against Venezuela and the Bolivarian Revolution.

“Those who truly know Venezuela are aware that one of the most important milestones of the Bolivarian Revolution was to recover our oil company, expel from Venezuela the transnational companies that looted our country for a century; due to this, we now have a number of enemies, powerful ones, who are constantly attacking us”, he claimed.

PDVSA is also still recovering from the huge losses caused by the oil strike of 2002-2003, which aimed to overthrow President Hugo Chavez. The strike froze the production of aviation fuel, gasoline, and transportation from the production and refining centers to the commercial supply centers.

ANALYSIS: The US Role in the Failed Attempt to Overthrow Hugo Chavez

Andres Maldonado, in an article for the newspaper Correo del Orinoco, claims that “historically all the coups in Venezuela have been sponsored by the United States, moved by its thirst to control our production and oil reserves, which the empire considers a key and strategic resource for its national security and to finance and sustain its enormous military power and consumption.“

The United States consumes 25 percent of the world’s energy despite having just 5 percent of the world's population.

What Privatization Would Do

The de facto government of Pedro Carmona Estanga, which briefly overthrew Chavez in 2002, only lasted a few hours. However, it was enough to abrogate the Hydrocarbons Law that had been recently passed under Chavez and terminate the bilateral oil agreement between Cuba and Venezuela.

The Venezuelan Government, through PDVSA, has agreements with other states, mainly in Latin America and the Caribbean, to sell discounted oil. For instance, Petrocaribe provides oil to its members in the Caribbean under a non-market scheme which provides oil at a lower rate and allows for some payment in goods and services.

IN DEPTH: Petrocaribe Summit

The impact of privatizing PDVSA would bring many negative consequences, deepening the infrastructure problems in Latin America. The economic and markets integration, which has brought benefits for those countries less privileged in Venezuela and the Caribbean, would be lost. The vision of the economy, which has been focusing on the social investments, would revert back to one focused on profits and nothing else.

In terms of the impact of the oil prices on the economy, PDVSA maintains that oil-producing countries must set the prices, through the alliance among the members of OPEC and non-OPEC.

Venezuela is suggesting a mechanism to progressively cut down oil production in order to control prices. The idea is to set a US$70 bottom per barrel and a ceiling of US$100. In this way, the oil-producing countries could fight back against fracking, which is causing a huge impact on the environment and the world’s oil market.

Fracking is overflowing the oil market by pumping into it millions of barrels that are being extracted aggressively and in an environmentally destructive manner. This is causing a drop on the prices which affects directly Russia and Venezuela as well as other oil-producing countries.
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