Da: "Nello Margiotta" <animarg@tin.it>
A: <latina@peacelink.it>
Oggetto: Venezuela's Fight for Control of the National Wealth Oil Politics 
Data: mercoledì 17 luglio 2002 1.18


http://www.zmag.org/venezuela_watch.htm

By Bernardo Alvarez And Susana Santos



In an interview in Caracas with Susana Santos, of Hour of the People (Hora
do Povo, Sao Paulo, Brasil), Bernardo Alvarez, Vice-Minister of Mines and
Energy of Venezuela, spoke of the challenge to the State and society to
consolidate control of its main source of wealth and detailed the Bolivarian
Revolution's policies to develop Venezuela, starting from the development of
the petroleum industry in a sovereign manner. Translation of the Hora do
Povo dispatch follows. Following are the main passages of the interview.

Interview of Hora do Povo with Bernardo Alvarez, Vice-Minister of Energy and
Mines, Venezuela

Hora do Pove: Why did sectors linked to the petroleum industry take part in
the failed coup?

Bernardo Alvarez: The history of Venezuela is intimately linked with its
development of petroleum. Petroleum is absolutely determinant for the
country, remembeer that for many years we were the primary oil producers of
the world. The sectors which reject the government of President Chavez, who
do not want to accept that we now have a State which defends the national
interest. When we came to govern, we had a weak State which did not control
the major wealth of the country. Sectors which did not want to accept the
new Law of Hydrocarbons, who wanted to initiate a wall between the State and
the public enterprise of Petroleums of Venezuela, Incorporated, PVDSA .
People who held an anti-national view. The policy of the enterprise, as a
matter of fact, was anti-national.

The PVDSA functioned at the margin of the State. Its financial contribution
had fallen drastically. It had a policy which gave priority to the increase
of production of barrels of petroleum, clashing with the orientation of the
OPEC (Oil Producing and Exporting Countries), making a game of saturating
the market, which led to the collapse of the price of crude oil. At the
beginning of the government of Chavez, the price per barrel was $7. There
had been an absurd increase in the cosst of operations. Investment abroad
was prioritized. In the most recent years all investment of refineries was
made outside the country in a strong process of internationalization of
activities, where those who benefited were foreigners. They applied the
model of a country which extracts petroleum and lives off the income. In the
public enterprise of petroleum, 100% Venezuelan, an "autonomous"
dictatorship was established, where a directorate of the "meritocracy",
(executives who occupied their posts from a supposed criterion of time and
"merits" at the function), imposed a wall which impeded control by the State
and government of their activities. There cannot be a barrier which prevents
seeing what is being done.

There began to prevail in the PVDSA a neoliberal view which was leading to
its privatization. The government has done much in that situation. To begin
with, the Bolivarian Constitution defines that selling the PVDSA is not
possible. Petroleum is strategic for Venezuela. It is its backbone. Whatever
social, political, economic Venezuelan national project proceeds by the
reformulation of petroleum policy. The new petroleum policy of President
Chavez reinforces the OPEC, promotes national development, determines that
the refining from now on must be concentrated in Venezuela, and estimates
the installations which exist in the exterior which must be invested in the
industrialization of hydrocarbons, establishes that the role of the PVDSA is
to operate on the policy which is defined by the State, through the Ministry
of Energy and Mines. Finally it created the mechanisms of the State to
control the enterprise which belongs to all Venezuelans, and is what the
country's future depends on.

HP: Could you detail a little more the new Law of Hydrocarbons which is
beginning to be applied?

Bernardo Alvarez: On this I would like to emphasize that the present law has
substituted for one which was in effect since 1943, a time in which we did
not have any national enterprise - neither state or private - and the
Venezuelan petroleum was explored by foreign enterprises. At that time, that
1943 law was a great national event because it began to establish important
rights and controls on the part of the Venezuelan State. Since then, the
great political challenge has been, how the Venezuelan State and society
should act to have control of its principal natural resource.

 We must not forget that the great international corporations were poweful
not only from the economic point of view. Above all they had behind them
"gunboat diplomacy", as the saying was at that time. An error committed at
the time was that they nationalized, but did not formulate another policy
for petroleum, continuing to use the law of 1943. Then, the present Law of
Hydrocarbons was inserted in this historic process of national advancement
in the sense of controlling the principal wealth of the country. Therefore,
the general line of our new petroleum policy is:

 1.) Strengthening of the Organization of Petroleum Exporting Counttries,
(OPEC). There exists tension between the State, which defends just prices
for petroleum and coordination between the producing countries, and the
enterprise, which defends more business and more production. It has not been
easy to establish the principle of State policy, but it was done. As I
already said, we set the price of petroleum at $7 a barrel. Then, either we
voluntarily reduce production, or the facts will crush us. At that price we
don't have conditions to produce. Fortunately the OPEC was ideal in the
scenario to defend our interests, not the prices of oil alone, but the
stabiolization of the market. The OPEC today has a wide agenda. It is having
a dialog with consumers; a defense of stabilization of the market; joint
projects of state enterprises of different countries; the creation of
industries of petroleum services based on the experiencess of the countries
of the OPEC; joint projects in the gas sector, among other initiatives. The
range of prices of the OPEC, between $22 and $28, is a demonstration that we
do not want a control of production beyond the sustainable, not to affect
the poorest countries. The return of Venezuela to the OPEC was fundamental,
so much that our role of articulators of these questions carried the present
president of the PDVSA, Ali Rodriguez, to election as secretary-general of
the OPEC. The entity is seen as an entity which defends the interests of the
producing countries, all countries in development, which practices a policy
of negotiation where the interests, the future, of the countries which are
producers of raw materials in the case of petroleum, will be respected in
the international markets.

 2) We are taking measures to reverse the dramatic fall of the fiscal
contribution of the petroleum activities. We intend to recuperate a minimum
fiscal base coming from petroleum. After nationalization, for lack of
control , for expensive policies, for excessive production, the fiscal
contribution has been falling. At that time it was 70% of a barrel of
petroleum. Now it is 30%. And with our intervention, it was less. There were
some structural explanations, they had some investments. But what took place
was a sharp increase in the costs of operation of the enterprise. The PVDSA
transformed itself into a "fat" enterprise. The cost of production per
barrel rose. Our policy was to implant a fiscal scheme which would function
easily and for this we had nothing easier than royalties, because a royalty
is something you pay as a cost of entry, for production. What was needed to
control the prices of bulk volume. We defined the royalty as 30%. The idea
was to have a stable floor of fiscal contribution, above all we wanted to
maintain also a stabilization of prices. Logically, with all the policies
which rule in our consumer countries and in various sectors of our country,
this raised the price like mad. They said that private investment would not
be stimulated, that the State was financially drying up PVDSA. Petroleum and
Industrialization.

 3) To develop a petroleum policy which is nationalist and oriented toward
development.: By law we established that refining must be done inside the
country. To our last year which had purchased refineries abroad, our period
had a steady process of internationalization. The idea was to have control
of the market for Venezuelan petroleum. Then, installing the refineries in
the exterior, production was committed for them, and we had access to that
market. Venezuelan crude is very heavy. It was necessary, according to that
view - to adapt the refineries in the consuming markets - in the United
Ststes, some in Europe. The problem is that it is an investment where those
who benefit are foreigners. The view that is conveyed is of a country which
extracts petroleum, exports it, and lives off the income. It is what has
functioned up to now in this country. We want another, completely different
model. We have to maintain a fiscal floor, but we should guide the petroleum
activities inside the country. We want to evaluate the situation of each one
of those refineries and build a new capacity of refining inside our country,
because this means more sources of employment, larger investments here, and
in addition, we can sell products instead of selling crude. They are better
prices. The price of accomplishment of our basket increases,. The key point
is the internalization of petroleum. Instead of being only an extracting,
exporting activity it should be an activity which permits the development of
the country. For example, we have a Venezuelan refinery in the United States
where 16% of production is going to industrialization. It is more than
gasoline and diesel oil, it consists of specialties which are going to
industry. In the sector of refining which functions in Venezuela, only 1%
goes to industry End Uncontrolled Petroleum Policy

4.) The role of the PVDSA: The role of the PVDSA, Petroleums of Venezuela,
should be that of a company which concentrates on the core activity, the
petroleum, for which it was created, not to be the administrator of natural
resources. As a consequence of confusion on this point, it began to grant
oil concessions to all the international companies that came,. The
administration of the earth, which is the State's, was carried out by the
PVDSA. In the end it had stopped being an operational company, to transform
itself into a commercial corporation. The PVDSA should not carry out the
role of the State. It should be an arm to execute the policy of the State
and an efficient producer of petroleum: to end the "decontrol". There was an
enoprmous increase in the number of employees, more than 40,000. It was
contracted workers, temporary employees and other categories. The cost of
production is $3 a barrel, including technical support, financial, etc..
When you verify the cost as it leaves the main office, it is $12, $13. No
go!

HP: Factually, what does this increase in operational costs mean?

Bernardo Alvarez: Sophisticated mechanisms were used. For instance they
began to build refineries in the exterior. Then, they gave discounts that
reduced the fiscal contribution by $2 or $3. Originating here, from this
ministry, there were many plots.

HP: After the accomplished modification, does the PVDSA have working
conditions integrated?

Bernardo Alvarez: The conflict in which PVDSA was involved demonstrates that
there are differencies. Part of the personnel which participated in the
movement against the government was frightened - it was under pressure. We
don't underestimate the role of the media against the government policies.
Another part was not in agreement with the new Law. Some were directly
involved in the conspiracy. What is good in all of it is that the positions
explain themselves.. There are many people in the PVDSA who have a national
vision, of defense of the country's interests. The transformations are
taking place. We have a new Law. Deep changes do not take place without the
participation of the workers of the company.

**************************************************
Nello

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