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Opinion and Analysis: Economy | Oil and Gas

New PDVSA Gives Precedence to Social Investment and Integration

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One of the great challenges faced by the Bolivarian Government, since it took power in 1998, has been to recover the oil industry for the nation, especially in 2002, when the right-wing sectors in Venezuela attempted to force a coup by sabotaging the activities of the oil sector.

However, the people’s support offset the internal attack from entrenched economic castes within the industry and, together with workers, the state has managed to shift the structure of PDVSA.

True nationalization

In 2004, a new oil policy is adopted driving and the phase of “full oil sovereignty” starts. This new phase includes the review, and compliance to the law, of bad deals that took place within the framework of the so-called Oil Opening in the 90s, including operating agreements, strategic partnerships, and the Internationalization of PDVSA, which were aimed at the privatization of the Venezuelan oil industry and meant big losses for the country and therefore for the Venezuelan people.

Towards the end of April 2007, on the occasion of the closure of the Summit of Heads of State and Government of the Bolivarian Alternative for the Peoples of Our Americas (ALBA, Spanish acronym) and the Trade Treaty of the Peoples (TCP, Spanish acronym), President Hugo Chavez said, “We will take over oil fields that are still in the hands of transnational corporations.”

This strong statement followed: “The oil fields that are going to be moved now to Venezuelan hands will definitely close the historical chapter of what was called the Oil Opening, which was nothing but to give our oil to the empire through these companies,” Chavez said.

Oil and national security

For decades, transnational corporations implemented strategies in order to gain more benefits, arguing that their projects generate more costs and low yields. Pedro León, director of the Venezuelan Oil Corporation (CVP,Spanish acronym), points out that multinational companies used oil workers and also took away the country’s oil for decades.

Venezuela is the fifth largest oil exporting country and holds the largest amount of extra heavy crude in the world, called the “Magna Reserva”. In the past, very little was known about the oil management as well as its place in everyday life; it has always been the main economic source of the country, though. But now, after the redistribution of oil revenues led by President Chavez, the people enjoy what belongs to them. Most social programs undertaken by the Venezuelan government are run thanks to oil surpluses.

On the other hand, social justice was done by recognizing and covering 10-year-old labor debts and liabilities of PDVSA subsidiaries’ workers. According to León, this debt amounted to more than $ 150 million in all joint ventures in the Orinoco Oil Belt.

Social investment

In the last decade, Venezuela’s millionaire sums of money from oil revenues were spent on social investment, whose distribution has greatly benefited the population, mainly the most vulnerable.

According to the Energy and Oil Minister and President of Petróleos de Venezuela, SA, Rafael Ramirez, contributions to the social development of the industry and the income from the sale of crude oil/oil by-products have totalled US$ 125.3 billion since 2001.

In this sense, social investment rose from over US $ 21 billion in the 2011 Budget to over US $ 26 billion in 2012, thus achieving an increase of 27 percent.

Before the Bolivarian Revolution, oil royalties that should be paid by corporations was only one percent with a tiny share of PDVSA in the projects. However, the Venezuelan government currently implements 33.3 percent royalties, 50 percent income tax and a PDVSA participation of at least 60 percent.

Socialist integration

Once Venezuela’s oil sovereignty was recovered, the Bolivarian government diversified investment in the oil fields. Previously, those who invested in the Orinoco Oil Belt were the great American transnational that used neoliberal mechanisms applied and did not leave any social or economic contribution for the country.

Currently, Petrosur has made it possible to establish mechanisms for cooperation and integration on the basis of complementarity through a fair and democratic use of energy resources for the socioeconomic progress of nations.

This initiative recognizes the importance of promoting cooperation and strategic alliances between state-run oil companies from Brazil, Argentina, Uruguay and Venezuela.

Thus, Petróleos Brasileiros (Petrobras), Energía Argentina S.A. (Enarsa); Administración Nacional de Combustibles, Alcohol y Portland (ANCAP) and Petróleos de Venezuela S.A. (PDVSA) join forces to comprehensively develop business in all the hydrocarbon chain.

Likewise, Petroamerica was created with the firm intention of establishing mechanisms for cooperation and integration in the Latin American continent by using the energy resources of the Caribbean, Central and South America, as a basis for socio-economic improvement of the people.

Today, PDVSA is working with the people, not just by funding - 60% of their cost structure is allocated to social investment -, but also by organizing communal fronts, providing technical support to the energy tables and bringing the oil industry information to communities, schools and the general public.

In the Bolivarian revolution, the people have been able to take over the industry. Today’s PDVSA gave buildings for education - two PDVSA headquarters in Caracas host now universities-, and it also supplies the Food Producer and Distributor (PDVAL), which sells food at fair prices, and the Petrocasa program, which gives the people decent housing at affordable prices, among other policies aimed at social inclusion.

The recovery of the Venezuelan oil sovereignty has made it possible to break with the politics of plunder and waste of the precious mineral that prevailed for over 60 years in Venezuela.

Now, Venezuela has a more just policy with a social vision, where each project is carried out to benefit the population. Investments in the oil field deepen the integration of Latin America and the world. Long gone are those businesses which gave precedence to mercantilism, and Venezuela makes way for economic relations on an equal footing to seek the comprehensive benefit of the region.

Translation by the Venezuelan Ministry for Communication (MINCI)

Source: Venezuela International - MINCI