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Editorial Commentary
Gustavo Coronel: PDVSA
to finance Chavez’s madness
Recently Petroleos de Venezuela has had to borrow significant amounts of money for the use of Hugo Chavez. In addition to its immense oil income the company was ordered some months ago to issue bonds for about $5 billion. More recently the company has been used in an illegal arrangement with China to borrow $4 billion and it is trying to borrow one more billion through Citgo in the international financial markets. These operations add up to some $10 billion, a great amount of money that no one really knows how is being, or will be, utilized.
The borrowing operation with China is particularly perverse. According to our information the Development Bank of China gives BANDES, a Chavez’s bank, $4 billion for purposes only known to Chavez. To pay back this money PDVSA signed two contracts of oil supply to China. One is for the delivery of 100,000 barrels per day of IFO 389 fuel oil and the other for the delivery of 100,000 barrels pr day of Boscan or Merey type crude oil. Both contracts are for a period of three years. The contracts specify that they are part of something called a “facility agreement” not mentioned in the sales documents but, obviously, the $4 billion loan to Chavez. The price of sale includes a component defined as a “special adjustment” that will serve to make the price ‘suitable” to the China market. All this means is that there will be a discount in each barrel supplied to China that will serve to pay China back for the loan. Two dispatches by Reuters in November 6 and 9, 2007, signed by Brian Ellsworth, give us some indications of what is being done.
What is being done? Chavez needs money desperately to distribute among his Latin American friends, mostly Argentina, Bolivia and Nicaragua. In special Argentina needs about $6 billion to settle a debt currently in default with the Club of Paris. It is not unlikely that Kirchner could have tried to milk Chavez for this money. Some of the new Venezuelan debt could be destined for anyone of those countries or all of them. The money is evidently needed urgently, in spite of the gigantic amounts of oil income flooding into Chavez’s pockets.
Some of the money could also be needed to buy back debt PDVSA had incurred in connection with the Orinoco area strategic associations. If this were the case the Citgo loan would be just a case of falling into new debt to pay old debt. Even if this is true, the use of the bulk of the money is not known.
There seems to be little doubt that PDVSA is being used to borrow money that Chavez mostly uses to give away to his friends in the region, so that he can buy their political support. This is large-scale bribery. The money for this bribery would come from the liquidation of our national resources, as the debt with China would be paid with illegal discounts. This would constitute a major crime against the nation, one more to be added to the Cuban supply agreement and to the liberal use Chavez has been doing of our oil to give away to Evo Morales, Daniel Ortega and to subsidize the “poor” of the U.S.A., a propaganda strategy designed to create allies against the Bush government. This would not only be a case of poor, irresponsible management by PDVSA but also a clear case of abuse of political power.
This would be a good case for the Venezuelan Moral Power to investigate and act upon, wouldn’t it? I am sure that Clodosbaldo, Luisa and Gabriela, the three members of this efficient body are eager to get started!
Gustavo Coronel is a 28 years oil industry veteran, a member of the first board of directors (1975-1979) of Petroleos de Venezuela (PDVSA), author of several books. At the present Coronel is Petroleumworld associate editor and advisor on the opinion and editorial content of the site. Pedro M. Burelli is a former Executive Board Member of PDVSA.Prior to that, he was Head of JPMorgan Capital Corporation – Latin America . Petroleumworld does not necessarily share these views.Editor's note: All comments posted and published on Petroleumworld, do not reflect either for or against the opinion expressed in the comment as an endorsement of Petroleumworld. All comments expressed are private comments and do not necessary reflect the view of this website. All comments are posted and published without liability to Petroleumworld.
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Petroleumworld News 12/20/07
Copyright© 2007 Gustavo Coronel. All rights reserved.
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