Archive for April 16th, 2010

We despise you and dislike you, but please gringos send some dollars, the arepa project ain’t working well

April 16, 2010

It was a remarkable strategy, as Hugo spewed his usual vile against the imperialists and the Empire, Minister of Energy and Oil and President of PDVSA was in Washington, looking for US investment in Venezuela’s oil industry. Ramirez said the US “can’t miss this opportunity”, as if everything was normal in the relations between the two countries.

But wait, the US has no Government oil companies and most oil companies whether US based or not, simply were not that interested in what PDVSA and Ramirez had to offer. In fact, the Carabobo oil field only managed to sell two of the three projects, for reasons that go from high royalties, to high taxes, to PDVSA cpntrol, to no international arbitration to quationable financing.

So while the deranged leader spewed out his best stuff here, Ramirez was in DC, asking and lobbying for a meeting with the US Secretary of Energy in a clear sign that the Government of Venezuela or someone in it knows that that there is a serious financing problem going forward. So serious that we let Chevron get a piece of Carabobo and if Obama asked nicely, we may give an oil company of his choice the field that nobody wanted.

A truly amazing spectacle and turn around. What’s next? Alvarez Paz as Chavez’ VP?

But the truth is that to undo what Chavez has so carefully worked on in the last eleven years will not be easy. Both US and European oil companies distrust PDVSA and Venezuela and have better places to invest their money than in the overall uncertainty of a Venezuela with law. order, money and electricity.

At this time, it looks very difficult for these projects to ever be completed unless oil soars to $150-$200. PDVSA simply has no money. In fact, it is my personal opinion that the economic puzzle of how come if oil is up, the swap rate is also up, CADIVI outflows are down and international reserves are also dropping (even if Fonden money is ignored) has a simple answer: PDVSA has not been handing over enough foreign currency to the Central Bank because of its own cash flow problems.

So, Ramitez comes to Washington with his hat in hand, reversing Giordani’s ten year old promise that he would need to use his hat to get rid of all of the investors trying to get in Venezuela.

But I doubt he will accomplish much. The changes made are simply to vast to make Venezuela interesting at this time.

Somehow, even the simplest projects are not working. To begin with, any PDVSA controlled project implies a limit of Bs. 12,000 per month to the highest ranked engineers, while independent contractors offer four to six times more. Ad to that that the company is supposed to be everything to everyone and the whole thing is simplynon-sensical.

Meanwhile at the other end of the spectrum, the “Arepera Socialista” that started operations barely three and half months ago, is already in trouble: The “solidarity” price of Bs. 5 per arepa, had to be increased by 50% to Bs. 7.5, as the reality of such silly things like markets, inventories and costs hit the project. I guess Saman is no longer a volunteer, and cheese went up, and they paid a penalty for too much electric consumption or did not open often enough. Of course, if the idealists increase prices by 50% it is not speculation, it is good management and nobody goes after them. It is the oligarchs that can’t increase prices.

So, please my good gringo friends, we have always admired you in our revolutionary Government, we just had to express hate and dislike because we only care about getting elected and being anti-US is very popular. So, please send us some dollars, we really don’s care if oil projects are not working well, but when our incompetence affects serious stuff like eating arepas on the cheap, it is time to invite you back.

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