Venezuela’s Oil Companies Cornered by Chávez’s Demands
By Ludmila Vinogradoff | ABC | ECONOMÍA
Caracas, 9 June 2005 | State-owned oil company Petróleos de Venezuela (PDVSA) has been suffering a crisis of disintegration and dismantlement ever since the Government took absolute control of the industry three years ago, stemming from the strike that caused the massive dismissal of 20,000 of its workers. One of the factors to the crisis is the changing official position pertaining to the private oil companies—one of which is the Spanish oil company Repsol YPF—, which generates legal insecurity and uncertainty within the sector.
President Hugo Chávez has ordered an increase in the royalty tax (the amount the companies pay the State for permits to explore and drill for deposits) from 1% to 16% and in the income tax from 36% to 50% for the 32 private operating companies.
The multinationals contribute 40% of the national oil production, but they are not amused by the threats of expulsion coming from the president and by his decision to modify contracts by establishing payment in bolivars and not in foreign exchange currency and to make it retroactive, whereby he intends to collect more than $2 billion.
The fact is that the president is squeezing the very last drop out of the hydrocarbon products and is looking everywhere for resources that, according to him, are for financing social programs. PDVSA must be having liquidity problems, because for the last two months it has not been paying its suppliers and subcontractors, according to what the companies are saying.
Translaton by W.K.
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