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Petroleos de Venezuela's financial formula: I+LT=C

By Gustavo Coronel

11.04.07 | I= Ineptness, LT= Lack of Transparency, C= Corruption. Gone are the days in which Petroleos de Venezuela rendered clear account of its financial situation. Today no one knows what is going on in that black box. The elimination of Financial Statements to the Security Exchange Commission of the U.S. and the inability of the company to publish consistent numbers in Venezuela have promoted total confusion among those who would like to know what is going on inside that company.

Last March 15 the Caracas newspaper “Reporte Diario de la Economia” published the headline: “Petroleos de Venezuela presents false financial statements”, adding below that the company had reported losses for almost $3 billion for 2006. Inside this issue, in page 4, there was an extensive report signed by Leocenis Garcia, in which three 2006 financial statements for Petroleos de Venezuela are shown. All three contain different figures. Hugo Chavez presented one of the statements to the National Assembly January 13, 2007. The Minister of Mines and Petroleum, who is also the President of the Company, presented a second statement January 15, 2007. Still the Vice-president of the republic presented a third statement to the national Assembly in February 27, 2007.

However, this was not the end of the story. A fourth set of financial figures, also non – audited, were published by the Petroleos de Venezuela on March 23, 2007, in connection with an emission of bonds for some $5 billion. This last set of figures is completely different to the other three. This situation calls either for financial experts or psychiatrists, probably both, to make sense of the differences.

The first three statements report a PDVSA income for 2006 of about $55.5 billion, although the exact numbers are different in the three statements. The fourth statement reports a PDVSA income of $101.8 billion, almost twice as large. This is totally unexplainable, that the president of Venezuela, the president of the company and the vice-president of the country would have three different sets of figures, none of which is identical to the one presented in the publication accompanying the emission of bonds by the company. The question we ask is: what was the true income of Petroleos de Venezuela in 2006?

The first three sets of figures mention an investment of $5.9 billion and operational expenses of $8 billion for 2006. The fourth set of figures speaks of operational expenses of $15.2 billion and do not specify investment totals. Again we ask: What are the true operational costs of the company?

The first three sets of figures report social contributions of the company for $9.9 billion while the fourth set of figures report $13.2 billion in social contributions. This is an enormous, totally unacceptable difference. This social contribution is a highly irregular, criminal, action on the part of the Chavez government since this money is not subject to normal budgeting procedures and is used by Chavez without accountability or transparency. The sad reality is that enormous amounts of money that belong to the nation are being pilfered by the regime.

The first three sets of financial statements report losses for about $3 billion for 2006 while the fourth set claim a net profit of $4.7 billion. How can this be?

Even if we assume that the fourth set of financial figures is correct, we would have to ask why the profits are only $4.7 billion with a total income of $101.8 billion when in 2001 the profits were essentially the same with a total income of only $46.2 billion. How can this be possible, unless something dramatically wrong taking place within the company or unless the money is being taken away from the company?

These enormous differences would be enough for the shareholders of any company to fire the Board and top management. In Venezuela this is not possible because the Chavez regime controls all political and administrative organisms in the country. I am a shareholder of the company, all Venezuelans are, but we do not receive information on how the company is doing nor can we ask for the removal of its inept management.

What is worst of all is that the funds being diverted away from Petroleos de Venezuela are being used without any accountability since they are not subject to scrutiny by the National Assembly or by the public at large. Venezuelans simply do not know how these enormous amounts of money are being spent, although we are aware that Chavez is giving or promising significant handouts to friendly foreign governments, such as the ones in Cuba, Nicaragua and Bolivia, as well as sending billions of dollars in the acquisition of weapons.

As a result of this disastrous utilization of petroleum income Petroleos de Venezuela is being under maintained and investments are not nearly enough to keep the required production levels. The company is no longer a reliable outfit. In parallel the foreign oil companies are being harassed and threatened with takeovers in case they do not bend to the desire of the regime to grab control without proper indemnity.

Even the logo of the company, which used to be blue, is now scarlet red, the color of the socialist revolution, the color used by the worst totalitarian states of the last 100 years.

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