Conservative economists seem concerned about the changes taking place within Venezuela’s state-run oil company, PDVSA. They argue that Venezuela’s decreased oil production is proof of its inefficient and wasteful practices. They say that oil companies should do what they do best — find and produce oil; that government involvement only leads to nepotism, patronage and bureaucracy; that political loyalists are in charge rather than experts; and that PDVSA’s contributions to social projects, like the education, health care and food “missions” set up by the Chavez administration, should be redirected into maintaining current wells, drilling new ones, and developing technology to increase production.
For example, the scribes at the Wall Street Journal (WSJ) recently wrote: “Since Mr. Chavez took power in 1999, he has become PDVSA’s de facto CEO, steering the oil company into political, economic and philanthropic ventures that have distracted it from its core business of finding and producing more oil.” As a result, they say, “output has fallen to an estimated 1.6 million barrels a day from nearly 3 million barrels in 1998.”
However, by claiming that “political, economic and philanthropic ventures” somehow distract PDVSA from its “core” business, and that this distraction has caused the oil giant’s output to fall, the WSJ misrepresents reality, at least Venezuela’s socialist reality.
Let’s look at these assumptions and see if they hold up. First, if PDVSA were in a capitalist country its “core” business would be “finding and producing more oil” as a means of increasing profits. However, since it is in Venezuela, where the “core” business is building 21st century socialism, PDVSA’s priorities are different from those of its capitalist counterparts. This is where part of the WSJ’s concern comes from.
In socialism, maximizing profits isn’t the priority. Investing in human capital is, which is why PDVSA is funding education, health care and food “missions.”
In fact, with government guidance, PDVSA spends at least 10 percent of its annual investment budget on social programs worth about $1 billion a year. It also subsidizes construction projects, including building and repairing roads, and gives other types of economic aid to the society as a whole. This totaled about $8 billion last year alone.
While PDVSA’s investment in social missions and infrastructure building can’t be measured by traditional profit margins, that doesn’t mean that PDVSA isn’t profitable in the traditional sense. In fact, from 2004 to 2005 it increased profits by over 50 percent and earned $10.1 billion, up from $6.7 billion. The WSJ doesn’t have a problem with PDVSA’s profitability. But it has a major problem with how PDVSA’s profits are distributed. Instead of distracting PDVSA from its “core” business, Venezuela’s president has redefined PDVSA’s priorities within the boundaries of a new social reality, the building of socialism. This is what really concerns the WSJ.
The second assumption made by the WSJ is a little complicated. They claim that output has fallen by almost half to 1.6 million barrels a day (MBD) since Chavez was elected president. PDVSA’s social spending “gives the company less time and money to devote to its oil business,” the WSJ complains. “It spent just $60 million on exploration in 2004, compared with $174 million in 2001.” So according to the WSJ, PDVSA is spending less on investment, maintenance and repair, and this is why production has decreased.
PDVSA, on the other hand, puts its actual daily output at 2.2 MBD, with 1.5 MBD going to the U.S. So Venezuela’s oil production has declined some, but not as much as the WSJ would have us believe.
PDVSA is the world’s third largest oil company, and oversees the extraction of the biggest oil reserve outside of the Middle East. It says that production has remained steady since 2004. It says production will reach 4 MBD by 2012. However, it says, increased production has to be connected to social welfare.
According to the WSJ, PDVSA’s “ ambivalence about boosting oil production is seen in the shallow waters of the remote Gulf of Paria,” where the U.S. oil giant Conoco Phillips discovered the Corocoro oil field. As Conoco was about to transport a U.S.-made drilling platform to the area in 2004, PDVSA refused and insisted that the company use a Venezuelan platform. “Nowhere else in the world do you have a field with 500 million barrels that just sits there,” said the WSJ.
But that’s the point. National sovereignty and the development of Venezuela’s infrastructure isn’t in Conoco Phillips’ or the WSJ’s interests, nor the class that they represent. While the Venezuelan people are willing to sacrifice some short-term gains (by using Venezuelan-made platforms, for example) for long-term self-sufficiency, that has nothing to do with the amount of money PDVSA spends on the social missions. So while the WSJ may be concerned, it’s not for the reasons they indicate. And, while production is down, that also isn’t for the reasons they indicate.
Venezuela is moving along the path of socialism. This path is the path of national sovereignty, not imperialist dependency. The Venezuelan government should not be criticized for building its infrastructure. Building socialism while remaining dependent on imperialism is a contradiction. But the WSJ isn’t one to highlight such contradictions.
Tony Pecinovsky (tonypec@cpusa.org) is the district staff person for the Communist Party in Missouri and Kansas.
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