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Commentary on Venezuela's current developments

By Pedro Mario Burelli

20.05.05 | Ever since he beat off efforts to recall him, many have predicted that Hugo Chavez will get into trouble only if, and when, oil prices fall from their lofty levels. My response has always been: “Hugo Chavez will get into trouble no matter what, because that is his preferred state of being, and because our oil & prosperity equation is somewhat more complex than: x ≥ y = 25,000,000 flourishing citizens, where x = price per barrel and y, an unknown variable”.

Current developments have proven that facts are more powerful than the wishful thoughts of those who still believe that we are dealing with a rational and secure leader just because he: 1) won, or stole, a few elections, and 2) has an asphyxiating stranglehold on the core institutions of our society.

Over the last few months, numerous reports have appeared in the mainstream and specialized media about the state of affairs of Venezuela’s once mighty Petróleos de Venezuela and its once envied US affiliate CITGO. The Op-Ed in today’s WSJ mocks the Government’s response to this grave crisis. The Chávez government has chosen to accuse the “traitorous opposition”, “the CIA” and those it recklessly fired after the 2002-2003 national strike for problems that are solely the responsibility of those “revolutionaries” who have been calling (missing?) the shots for the past six years in the country, and particularly in its oil ministry and PdVSA.

If credit is due for “19,000,000 interventions (sic) by Cuban doctors”, and “2,000,000 people alphabetized in just 18 months (sic)”, they – Chávez & Co. - should also be prepared to accept responsibility for destroying 70 to 90 billion dollars in value in PdVSA over six years in which oil prices have rocketed.

While it is difficult, if not impossible, to value PdVSA today (due among others to the fact that it has not prepared or presented financial statements since 2002), it is clear that you would have to compare any value presented today with the 100 to 150 billion dollars range that resulted from the 1997 valuations commissioned to Morgan Stanley and Goldman Sachs by the Board Of PdVSA. Had Venezuela followed the path of; the UK, Spain, France, Italy, Brazil and China, and floated a small percentage of PdVSA non-voting shares in the local and global equity markets, we would have had an objective indicator of the rate at which value was being destroyed (just as we saw in the Yukos meltdown) and might have even avoided the triumph of criminal whim and neglect over rational professionalism.

Finally, Chávez and Co. seem to understand that they have to get ready for the day in which their “bought” popular support can no longer be “purchased” nor kept placidly in the barrios. Fear of popular discontent in the event oil prices head downwards, or PdVSA simple putters out, might be the reason behind Hugo Chavez’s current and risky military maneuvers. If hoodwinked people take to the street, he will need a more loyal, more unswerving, clash force, and that means he has to replace – as soon as feasible - the current command structure in the military (groomed under NATO Military Doctrine) with militia officers better “equipped” psychologically to defend the revolution (trained in and out of Cuba using Cuban, North Vietnamese and North Korean tactics).

If all above is indeed correct, the abrupt end of the oil boom might not spell the end of Chavez, but it will likely put an end to peace and democracy as we came to know it in Venezuela. PMB



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