Chavez and Venezuela from Joe Duarte Market IQ letter this am
Today’s Analysis: Venezuela: Chavez Statement About Production Raises Red Flags
Venezuela’s oil output is falling by 100,000 per day, and President Hugo Chavez is not ruling out sabotage as a cause. Chavez reportedly is wondering why over 1 million barrels per day are not being fully produced in the western part of the country.
But, a closer look at the circumstances surrounding the announcement, and the timing, suggest that this is a fully cognizant and well planned move in the scope of a much bigger strategy.
According to an AP wire report on 5-3, Venezuela’s state owned oil company, PDVSA has begun to work on the problem with the goal of restoring production.
Chavez added some interesting comments as contributing factors, citing “management errors,” and “poor well maintenance,” while adding that they have recovered 100,000 barrels of production in the last several months, but still remain behind in meeting “the production estimate in the budget.”
None of that is news, given the fact that since the failed coup in 2001, PDVSA has lost key personnel, and its well maintenance has reportedly been shoddy at best, given the fact that a good number of experienced oil workers, especially at the upper levels of management either left the country, were demoted due to their partciipation in the strike that led to the coup, or have presumably disappeared for one reason or another.
What is news is that Chavez is saying anything at all about being behind on production, something that most international analysts and intelligence services have been saying since the oil strike and the failed coup several years ago.
That means that he’s up to something. The easy assumption is that he’s trying to talk oil prices back up. However, more than likely, this announcement is yet another well choreographed step in the implementation of his grand strategy, the complete nationalization of Venezuela’s economy, and the eventual attempt to take his revolution internationally.
The timing of the announcement, itself, is rather interesting for several reasons. First, it was a day when U.S. interest rates rose for the eight consecutive time, courtesy of the Federal Reserve. Second, crude oil fell over $1 in New York, and closed well below $50. And third, Chavez needs oil money to make his plan work. If oil prices fall, his whole scheme will be seriously impaired, although most likely it will only delay its implementation.
Here is where the link to Chavez’ grand plan is evident. According to AP, Chavez’ comments came “as union leaders said the state oil company, Petroleos de Venezuela S.A., or PDVSA, was halting agreements with contracted companies employing about 8,000 workers in the same region. Playing down the contract issue, Oil Minister Rafael Ramirez said Tuesday ["it only has to do with the expiration of labor contracts."] He said 40 managers and employees of PDVSA's western division had been suspended for suspected irregularities.”
Indeed, the announcement seems to be part of a larger strategy by Chavez to take further control of PDVSA as he said “the state oil company is working to step up production. He also said he urged PDVSA to handle more of the actual pumping and transport work on its own without relying on private contractors. PDVSA's work force includes about 15,000 full employees and 29,000 contracted workers.”
In the last few days, Chavez has leveraged the expansion of his ideologically based economic doctrines to Cuba, to the tune of some $400 million dollars. By continuing to nationalize private lands, and private companies, either openly or by squeezing them out of government contracts, Chavez’ government is setting itself up as the complete owner/operator of the Venezuelan economy.
Ironically, Chavez is moving completely against the grain, and is completely ignoring the fact that his policies are grinding down what used to be a fairly prosperous South American country. As China is finding out, and as Russia painfully found out in the late 20th Century, state run economies don’t work. By squeezing the market out of the Venezuelan economy, Chavez is dooming his country to a fate worse than Communism, perpetual poverty and strife, not just for the majority, or for a large subsection of the population, but for all except the five or ten families that form his inner circle.
The sad truth about Communism, or its euphemistic synonym, “Socialism,” commonly used by Chavez as a buzzword now, is that everyone is indeed equal. The problem is that equal mostly refers to the level of misery, not prosperity.
Conclusion
Venezuela has now crossed the critical point of no return. Chavez’ Bolivarian revolution is no longer stoppable by the United States. The only hope that the U.S. has is to keep it from spreading. And even that is no longer assured.
Here is a thought though. If oil continues to fall, Chavez, and his Bolivarian revolution are in deep trouble, at least in the short term. And that of course brings us back to Mr. Chavez’ interestingly timed announcement about oil production in Venezuela. |
