Venezuela's President Hugo Chávez announced the expropriation of the Constructora Nacional de Valvulas (CNV) in a ceremony at the Presidential Palace in the capital Caracas, yesterday. CNV makes valves used in the oil industry and was a long-time associate of the state oil company PDVSA until it closed in 2003.  Labor minister Maria Christina Iglesias and a group of former-CNV workers were also present at the announcement, where Chávez signed a decree expropriating CNV. The National Assembly had previously declared it to be of ‘public utility,’ a legal prerequisite to expropriation.

CNV is only the second company to be expropriated by the Venezuelan government and is to be run under a system of shared worker-state co-management.  Venezuela’s first expropriation, last January,—of the paper factory Venepal—was announced as part of a nation-wide endogenous development campaign called “made in Venezuela.”  The campaign seeks to promote national industrial and agricultural development in an attempt at diversifying Venezuela’s oil-dominated exports, and reducing dependency on imports.

In December 2002, the then main labor federation, the Confederation of Venezuelan Workers (CTV) and chamber of commerce federation Fedecamaras jointly declared a nation-wide “general strike” aimed at ousting President Chávez.  The most destructive aspect was the near-total shutdown of the oil industry, accompanied by sabotage resulting in billions of dollars in damage and losses.  In many cases, including both Venepal and CNV, employers locked workers out and shut down production for the entire 2 month strike.

As reported by Jorge Martin, writing for the Hands Off Venezuela campaign, the closure of CNV for the duration of the strike left over 100 workers without income.  With the end of the strike/lock-out CNV owner Andrés Sosa Pietri refused pay promised back-wages to workers, provoking a group of workers to begin agitating for radical change at the factory.  In May 2003 workers decided to occupy the entrance to the factory in an attempt to prevent Pietri from moving machinery out and closing down the factory.  The occupation was declared illegal by the Venezuelan courts, and workers were eventually convinced to abandon the occupation.

But the expropriation of Venepal—now the Endogenous Paper Industry of Venezuela (Invepal)—earlier this year inspired workers around the country to renew their efforts at their own factories in the hope that they would be the next Invepal.  On February 17, 2005, 63 former-CNV workers re-occupied CNV, this time taking over the entire factory, rather than just the entrance.

Back in January, at the signing of the decree to expropriate Venepal, Chávez sent a warning to the Venezuelan land-owning class: “Today’s expropriation of Venezuela is an exception, not a political measure.  We aren’t going to steal your land; if it’s yours, it’s yours.  But to the factories that are closed, and abandoned—we’re coming for you. For all of you. For the rescue of the industrial fabric.”

Speaking to workers at yesterday’s expropriation of CNV—now the Endogenous Valve Industry of Venezuela (Inveval)—Chávez reiterated this statement, warning that other companies that abandon their factories should be taken over and turned into “Inve-no-se-que-cosa” (Inve-whatever).

Pioneering Venezuelan Co-Management

The expropriation of Venepal and CNV, and the advancement of co-management in state run enterprises such as the electrical company Cadafe and the Aluminum factory Alcasa are not only a product of the government’s ‘Made in Venezuela’ strategy—they also represent hard-fought battles by workers all over the country.  But the business of worker-management is complex, and as a Venezuelan trailblazer, the pressure on Invepal to feed the hopes of workers at factories throughout the country is high.  While it remains unclear exactly what is going on at Invepal, recent developments suggest a deviation from workers’ earlier goals.

At a recent forum on co-management, a former member of the executive of Venepal’s now defunct union and current member of the directorate of Invepal, Alexix Ornevo, noted that since they no longer had any bosses, they longer needed a union, as workers were now grouped into a cooperative (Covimpa) to run the company.  And as a cooperative, Ornevo was quick to point out, they got several benefits including Constitutional relief from paying taxes.  Also thanks to the 1999 Bolivarian Constitution, Covimpa—currently owners of a 49 percent share in Invepal—were legally entitled to increase that share up to 95 percent.

Ornevo’s presentation caused serious concern among many in the audience, who worried that the model of co-management and worker agency in the country was setting the stage to become a model for capitalist cooperatives.  “As we saw in [the] presentation on Invepal,” said Federation of Electrical Workers (Fetraelec) president Angel Navas in an interview, “they are having some serious problems, they seem to be thinking as managers.”  “Eight-hundred workers will be sole owners of the company.  And if it becomes profitable, are these workers are going to get rich?  This is a company that is supposed to belong to the entire country; my company can’t only belong to the workers, if we make profits they belong to the entire population. This is a responsibility that we all have,” said Navas.

Read more ...

On the eve of Condoleeza Rice's tour of Latin America, an extremely provocative article appeared yesterday in The New York Times. Under the title of "U.S. Considers Toughening Stance Toward Venezuela" and signed by Juan Forero, the article quotes a number of unnamed "American officials" basically saying that "the Bush administration is weighing a tougher approach, including funnelling more money to foundations and business and political groups opposed to his leftist government".

Forero claims in his article that a "multiagency task force in Washington has been working on shaping a new approach, one that high-ranking American policy makers say would most likely veer toward a harder line". The article quotes another unnamed American official as saying: "The conclusion that is increasingly being drawn in Washington is that a realistic, pragmatic relationship, in which we can agree to disagree on some issues but make progress on others, does not seem to be in the cards (...) We offered them a more pragmatic relationship, but obviously if they do not want it, we can move to a more confrontational approach."

Another "high-ranking Republican aide on Capitol Hill who works on Latin America policy" (also unnamed) explains: "What's happening here is they realize this thing is deteriorating rapidly and it's going to require some more attention (...) The current look-the-other-way policy is not working."

The truth of the matter, however, is that the US administration has always had a "tough" stance towards Venezuela. High-ranking United States officials met with Venezuelan opposition leaders in the weeks and days before the military coup that ousted Chavez for 47 hours on April 11, 2002. There is now hard evidence that the CIA knew that the coup was being plotted, and Washington was the first capital in the world to recognise the illegitimate government of Pedro Carmona which was installed by the coup.

The Bush administration supplied funds to opposition groups that organised the coup in 2002. It also funded the sabotage of the oil industry in December 2002 and January 2003, which cost the country's economy some 10,000 million dollars. It financed the attempt to remove Chavez through a recall referendum. It is difficult to see how Washington's stance towards the democratically elected government of Venezuela could actually get "tougher" - short of direct military intervention.

Since the beginning of this year the barrage of accusations against the Venezuelan government by US officials has certainly increased in volume and intensity. The US has actively tried to stop the sale of weapons to Venezuela by Spain, Brazil and Russia (after the US itself refused to supply spare parts for Venezuela's ageing fleet of F16s), and has accused Venezuela of being a "negative force in the region" (Condoleeza Rice). The US administration and media have stepped up a belligerent campaign against Venezuela.

The democratically elected government of Hugo Chavez has been accused of everything from linking up with North Korea, supplying arms to the Colombian FARC guerrillas and funding the "subversive" MAS in Bolivia, to forming an axis of evil with Cuba's Castro, starting an arms race in Latin America, and harbouring Al-Qaeda terrorists. A recent article in the National Review (which appeared on April 11, the day of the third anniversary of the coup in Venezuela), carried the title "Fidel Castro and Hugo Chavez constitute an axis of evil". In this extremely belligerent article, Otto Reich, until recently Assistant Secretary of State for Western Hemisphere Affairs, openly advocated a policy of "confronting" the "emerging axis of subversion".

There is no substance to any of these accusations, for which not the slightest shred of proof is offered. They are just meant to create an impression – the kind of impression that can be used to justify an act of aggression. As we learned long ago from Josef Goebbels, even the most blatant lie, if it is repeated often enough, is taken to be the truth. In the same way, the lie that Saddam Hussein possessed weapons of mass destruction was used as an excuse for the criminal invasion of Iraq. Everybody now knows that it was a lie, but at the time enough people believed it to permit a naked act of aggression to be presented as an act of national self-defence. Now history is being repeated.

When pressed for more details on the allegations about "Venezuelan shortcomings with respect to the counter narcotics issue", Adam Ereli, Deputy Spokesman for the US Department of State, on March 30th, could not think of anything coherent to say. He merely mumbled: "Not really. I'll look and see what we've said on the past, but off the top of my head I can't give you a detailed answer." On such flimsy “evidence” is the case for armed aggression against Venezuela being constructed in Washington.

There is no doubt that all these newspaper articles and statements do not appear just by chance. One has the feeling that they are part of an orchestrated propaganda campaign aimed not only at isolating Venezuela, but also at preparing US public opinion for more direct forms of intervention against the Bolivarian Revolution. The self-same methods were used in the past to justify US interventions against the Cuban Revolution, the Arbenz government in Guatemala, the government of Salvador Allende in Chile, and more recently in Nicaragua, El Salvador, Grenada and Haiti. The hired press pours out a stream of abuse and calumnies in order to soften up public opinion. Then the heavy squad moves in. In some circles, this is known as the “freedom of the press”.

Otto Reich would know about this. In the 1980s he was at the head of the State Department’s Office of Public Diplomacy for Latin America and the Caribbean (OPD). This was nothing less than a propaganda outfit, which amongst other tasks coordinated the planting of editorial articles in newspapers openly backing the Contras and attacking those who criticised Washington's support for the murderous cut-throat gangs of thugs of the Contras in Nicaragua. The Iran-Contra investigation found that Reich, a Cuban exile, had carried out "prohibited, covert propaganda” on behalf of the Contras (the full declassified record of Otto Reich while involved in the OPD can be found at http://www.gwu.edu/~nsarchiv/NSAEBB/NSAEBB40/).

But let's go back to Juan Forero's article. The only "sources" he gives for this toughening of US policy towards Venezuela are all "unnamed officials". The day after the article was published in The New York Times, Washington issued a denial of its contents, but in fact it was a “denial” that denied nothing. He said "“those are not reports that reflect any reality in terms of decisions by the United States to change its policy.” So, in fact what he means is that there is no change in the US policy, which was already very confrontational before Forero was briefed by his famous “unnamed officials".

Forero's journalistic record in relation to Venezuela is at best shaky. On the day after the military coup in Venezuela he wrote an article for The New York Times which did not mention the word "coup" once and had the amazing headline "Venezuela Chief Forced to Resign; Civilian Installed". This sounds like a well-rehearsed pantomime and it works like this: Washington leaks some disinformation it would like published to a friendly journalist. The material is published but no sources are quoted. Once the "news" is already in the public domain and has been picked up by the major news agencies and outlets, then the State Department issues a "denial" which is not reported anywhere. The damage has already been done.

It is clear that the US administration is increasingly hostile towards the Bolivarian revolution, which is standing firm against US imperialism. George Bush is frustrated because all the attempts to smash it have failed. But the strategy of isolating Venezuela from other Latin American governments has also failed so far. Donald Rumsfeld's recent tour of the region was not at all successful in this respect. But these failures do not mean that Washington will abandon its aggressive stance towards Venezuela. On the contrary, it means that its aggression will be stepped up and acquire dangerous proportions if it is not halted by a massive movement of protest from below.

This renewed campaign against the Venezuelan revolution represents a serious threat, which the world labour movement will neglect at its peril. In all previous occasions in which this kind of language has been used, it has always been the preparation for military intervention. Such interventions do not necessarily take the form of an actual invasion. The fact that the US army is bogged down in an unwinnable war in Iraq makes this a problematical option at this stage. But the examples of Chile and Nicaragua indicate that there are other options: a dirty war of terrorism and subversion, the assassination of President Chavez, provocations leading to war with Colombia, which the Pentagon has already turned into an armed camp. These and many other weapons are at the disposal of Bush, Rumsfeld and Rice.

All the warnings are present. The only force that can defeat the planned aggression against the Venezuelan Revolution is the international Labour Movement and the workers and the youth of the United States. It is time to sound the alarm! Venezuela is in danger! It is imperative that the workers, trade unionists, youth and students, intellectuals and artists, black and white, should unite to organize a protest movement so powerful that George Bush and the right wing gang in the White House are compelled to think again.

Let us not wait until it is too late. Let us act now to forestall this act of naked aggression of a powerful imperialist state against a South American country that is fighting for its most elementary rights: the right to national self-determination, the right to live its life in peace and to determine its own future without foreign interference, the right to build a society based on the principles of freedom, justice and equality.

This is the real reason why the most reactionary circles in the USA wish to destroy the Venezuelan Revolution: because it sets an example to the millions of poor and exploited people in the whole of Latin America. Furthermore, this is the path that the Venezuelan people have democratically chosen. Chavez and his policies have been ratified in more than 7 electoral contests and referenda since he was first elected in 1998. This example is dangerous, not to the ordinary citizens of the United States, the workers and the poor, but to Wall Street, to the banks, the big corporations and the oil barons who are the real constituents of George W. Bush.

This right wing administration, which is trying to depict Venezuela as a “danger to peace” because it is purchasing some rifles from Russia, is spending a staggering $500,000 million on arms every year. It is spending at least $6,000 million every month on the occupation of Iraq while slashing public expenditure on pensions and Medicare.

Let us act now! Reproduce this article, translate it and pass it on to as many people as possible. Pass resolutions of protest in your local trade union branch. Organize pickets, lobbies, rallies and demonstrations. The Hands Off Venezuela Campaign is preparing a major initiative for the First of May. Contact us now and join our fight against these criminal actions of the imperialists.

Read more ...

After two long years of struggle at long last the expropriation of the CNV was put into practice. The CNV had been taken over by the workers throughout this time.

The Constructora Nacional de Valvulas is a factory which was owned by the coup plotter Andres Sosa Pietri, a former president of PDVSA. After the coup he refused to restart the operations and the workers decided to take over the installations.

Jorge Paredes, one of the main leaders of the factory said: "this is a new experience for the workers, a new model of development which will be at the service of the workers and the community. This process of co-management that we now start must be taken to other companies and other workers."

The company at one point supplied 22% of the national market for valves. It is calculated that this year PDVSA has to invest 148 million Bolivars in valves.

The workers estimate that in three months they will have the company ready to start producing. 

See also:

• Workers of the Constructora Nacional de Valvulas continue their struggle!
• The struggle of the workers at the CNV - a new Venepal?
• Support the Workers of the CNV in Venezuela

Read more ...

After two long years of struggle at long last the expropriation of the CNV was put into practice. The CNV had been taken over by the workers throughout this time.

The Constructora Nacional de Valvulas is a factory which was owned by the coup plotter Andres Sosa Pietri, a former president of PDVSA. After the coup he refused to restart the operations and the workers decided to take over the installations.

Jorge Paredes, one of the main leaders of the factory said: "this is a new experience for the workers, a new model of development which will be at the service of the workers and the community. This process of co-management that we now start must be taken to other companies and other workers."

The company at one point supplied 22% of the national market for valves. It is calculated that this year PDVSA has to invest 148 million Bolivars in valves.

The workers estimate that in three months they will have the company ready to start producing. 

See also:

• Workers of the Constructora Nacional de Valvulas continue their struggle!
• The struggle of the workers at the CNV - a new Venepal?
• Support the Workers of the CNV in Venezuela

Read more ...

We publish a translation of a leaflet produced by the CNV workers in Venezuela calling for a rally today in support of public ownership of the company.

We, the workers of the CNV, have not received a single Bolivar for two years and four months from the coup plotter employer Andres Sosa Pietri, member of the famous “Democratic Coordination”, who has his own party supporting neoliberal doctrine, forerunner of the privatisation of PDVSA, who collaborated in the financing of the failed coup on April 11, exploiter of the workers for more than 20 years in our country, and one time president of PDVSA. This is the curriculum vitae of the said director, who studied in the best US universities.

This employer left more than 120 workers on the streets on December 2002, during the oil stoppage. We, the 62 workers who did not want him to get away with it, kept the struggle going against Andres Sosa Pietri. We knew who we were facing, a big oligarch with a prestigious family name who has been trampling the Venezuelans underfoot. We knew that he was the “Goliath” of Venezuela, but as always, history remains and one learns from that history for the different struggles one is faced with in life.

The workers united and created a big “David” who is going to defeat this “Big Goliath”.

Throughout this period (2 years and 4 months, plus the current year so far) we have always been clear that our aim was to save our jobs, with the difference that we do not want to be exploited by anybody!!!! We are prepared to die, if necessary, to achieve our aim which is to restart production of valves under workers’ control, without being exploited from anyone, with social justice towards our comrades, communities and Venezuela in general. We want to restart not just for the common well-being of 62 workers, but for the well-being of the Country, to build a socialist Venezuela. We are conscious that we are currently trapped under a capitalist system. But it is not impossible to overthrow it if the working class of our country unites. It is important to stress that we the workers as a whole are the source, the engine which propels the country forward. If we unite, we become the great David that Venezuela longs for. Please, wake up, so that we can deepen the workers’ revolution!

We invite all workers and all the people of Venezuela to support our struggle which is the struggle of everybody, to join us in the rally to the National Assembly to give the President of the Assembly a document asking for the company to be declared of Public Interest, since the problem is a social one.

Let’s gather on Tuesday, April 26, 2005, at 8 am at the CNE building, and from there we will march united to the National Assembly!

We expect your valuable support!!!!!

Yes, for the building of a fair and socialist Venezuela!!!!!!!!

Read more ...

During his weekly Alo Presidente broadcast Venezuelan President Hugo Chavez gave an explanation of the reasons for the suspension of the bilateral military exchange programme with the United States. According to Chavez, US military advisors "were carrying out their own campaign within the military institution and this cannot be allowed". He added that they were "talking ill of the [Venezuelan] president to our boys", which is something that goes against the country's stability and sovereignty.

Hugo Chavez argued that this measure was also taken in order to protect the physical integrity of US military personnel. He reminded the audience that in the build up to the US invasion of Panama, a number of US military personnel were attacked in the streets. It was later found out that these attacks had been carried out by the US intelligence services in order to prepare a "justification" for the invasion.

Last year, Venezuela had also suspended the military mission that the US had kept within Fuerte Tiuna, the main military garrison in the capital. Chavez accused the US officers of being CIA agents and there is suspicion that they participated in the failed military coup against Chavez on April 11, 2002. The first place Chavez was taken after being deposed by reactionary military officers was precisely the Fuerte Tiuna barracks.

In the same programme Chavez explained that the desperation of the US in relation to Venezuela is because of its oil. The "United States want to continue to get hold of that oil, but it is now ours (...) and it is being used for the welfare of all Venezuelans, and not of a privileged minority" he added.

A video of the US organised Bay of Pigs invasion in Cuba in 1961 was shown during the weekly programme. President Chavez said that a similar strategy had been planned in relation to the 100 Colombian paramilitaries arrested on a ranch in El Hatillo, near the capital Caracas, in May 2004. Chavez also announced that a US military officer had been found taking pictures of the Command of the Armoured Army Brigade in Maracay, and a number of US citizens, who later identified themselves as journalists, had been found taking pictures of the El Palito refinery in Moron. He warned that "if any officer of the US military repeats these kind of activities again, they are going to be arrested and tried in Venezuela."

To combat these threats, Chavez argued, it is necessary to organise the reserve forces of the army, which he wants to increase to 2 million people, and to "strengthen the mobilisation of the people ... to defend the country in any circumstance"

Since the beginning of the year, the US administration and media have stepped up a belligerent campaign against Venezuela. The democratically elected government of Hugo Chavez has been accused of everything from linking up with North Korea, supplying arms to the Colombian FARC guerrillas, funding the "subversive" MAS in Bolivia, forming an axis of evil with Cuba's Castro, starting an arms race in Latin America, to harbouring Al-Qaeda terrorists.

On March 13, an article in the Financial Times quoted US Deputy Assistant Secretary for the Western Hemisphere, Roger Pardo-Maurer, who accused Chavez of "picking on the countries whose social fabric is the weakest. In some cases, it’s downright subversion." This is in fact the key to the belligerent attitude of the US. Translated into plain English, what Roger Pardo-Maurer is saying is that the Venezuelan revolution is seen as an example by the workers and peasants throughout Latin America. The policies of privatisation, de-regulation, the opening up of markets, and the free trade agreements pursued by Washington in the whole of Latin America for the last two decades have plunged these countries into deep economic crises. The number of poor and unemployed have gone up, while multinational companies have plundered these countries' natural resources.

The policies of the Chavez government of opposing privatization, using large amounts of the country's oil revenues, his stance against the policies of US imperialism and the Free Trade Area of the Americas, are obviously seen as an alternative. Furthermore the Bolivarian revolution in Venezuela has proven that the diktats of Washington can be defied and that the attempts of the oligarchy and imperialism to put an end to this defiance can be overcome through mass mobilisation. Venezuela is indeed a very "dangerous" example from the point of view of the White House. For them, anything that threatens the rule of big business is "downright subversion".

Many in the current US administration know a lot about “subversion”. Rogelio “Roger” Pardo-Maurer himself was the political officer in the Washington office of the Nicaraguan contras from 1986 to 1989. Other prominent figures in the US administration are also well versed in “subversion”, having been involved in the counter-insurgency operations in Central America in the 1980s (Elliot Abrams, Otto Reich, John Negroponte, Roger Noriega, etc). Several of them also met the Venezuelan April 2002 coup organizers in Washington in the weeks prior to the “subversive” ousting of Chavez. As for “picking on weak countries” Roger Pardo-Maurer, Otto Reich, and other US officials, intervened directly in El Salvador last year to prevent a victory of the left-wing FMLN in the elections. They hinted that this would put at risk the remittances of Salvadorian immigrants in the US (one of the country’s main sources of income). The FMLN lost the election by a very small margin.

President Chavez and the Bolivarian revolutionary movement are right to take measures to defend themselves from the threat of intervention by the US. To act in any other way, taking into account the long history of US participating in the crushing of revolutionary movements in Latin America, would be downright irresponsible.

Read more ...

During the workshop on "Workers' participation in the management of companies" at the 3rd International Gathering in Solidarity with the Bolivarian Revolution, which took place in Valencia (Carabobo state), Alan Woods interviewed Orlando Chirinos, National Coordinator of the Venezuelan trade union confederation, UNT (National Workers Union).

Alan Woods: In a very short space of time the UNT has become the most important trade union confederation in Venezuela, completely pushing the old bureaucratic CTV to one side. How many members do you have right now?

Orlando Chirinos: There are some 600,000 members, though I do not have the latest figures and we are still growing. In any case, this figure does not give a precise picture of the strength of the UNT within the Venezuelan working class. There are millions of workers who think they are part of the UNT, though they are not formally registered as such.

Alan Woods, Orlando Chirinos and Ricardo Galindez

AW: And the CTV?

OCh: We have documents that show that the CTV does not even have 300,000 members right now. In an attempt to justify their collapse they say that President Chavez has smashed them. But this is not the case. They are the victims of their own behaviour and their inability to represent the interests of the working class.

AW: Some of their leaders even supported the coup three years ago.

OCh: That is true. What we have to realise is that in Venezuela there is a process of change and this has its reflection in the trade union movement. There is a real trade union revolution, a revolution from below, and the clearest expression of this is the UNT. Here is a significant fact: here in Carabobo [one of the main industrial and workers' centres of the country] there were 27 referenda on collective bargaining agreements, and the UNT won 22 of them.

AW: However, the CTV still has a certain base. How do you explain that?

OCh: They count above all on the support of the CIOSL [ICFTU]. They receive funds from the US. The imperialists, who are continually harassing the Venezuelan revolution, want at all costs and by any means necessary to stop the UNT. This explains their support for the CTV, despite the demonstrable fact that they no longer represent the working class of this country.

AW: Obviously. There is an incredible international campaign to isolate and harass the Venezuelan revolution. We know that there are strong pressures in the US trade unions and also the right wing of the European trade unions to deny international recognition of the UNT. Through the "Hands off Venezuela" Campaign we are doing all we can to explain the real situation to the labour and trade union movement in Britain and throughout Europe. The main problem is the lack of information. Once European trade unionists have real and truthful information, the reception is very good.

OCh: This is very important. The UNT is an internationalist organisation. The working class is a world class. We should not be limited by narrow national horizons. Our motto is, "Workers of the world, unite!"

AW: We are in the workshop about workers' co-management. I personally prefer to talk about workers' control. What do you think?

OCh: Our strategic struggle is not co-management. At this particular time we are passing through this phase. But we must put into question capitalist production relationships and advance towards socialism. There are concrete facts: for instance the nationalisation of Venepal (now Invepal) and tomorrow there will also be the nationalisation of the Constructora Nacional de Valvulas (CNV). There are elements of workers' control like we see in ALCASA (in Bolivar state), where the process has gone further.

AW: Finally, what do you think of the "Hands Off Venezuela" Campaign"?

OCh: The "Hands Off Venezuela" campaign is an extraordinary initiative. It is the only significant campaign that is taking place internationally. Unfortunately, until now we have not paid enough attention to this campaign, but its support has been very valuable to us. The truth is that no one else has done what you have done. I consider the links between the UNT and the "Hands Off Venezuela" Campaign very important. I promise to raise this question at the next meeting of the National Coordination [National Executive Committee]. You can rest assured that we will continue to deepen the relationship with the Campaign.

Read more ...

Minister of Energy and Petroleum and PdVSA President Rafael Ramirez Credit: ABN

According to Venezuela’s minister of Energy and Petroleum, Rafael Ramirez, the operating agreements that exist between the state oil company PDVSA and various transnational oil companies caused $260 million of losses for PDVSA and will thus be revised. During a press conference yesterday, Ramirez said that the goal would be to change the operating agreements into joint ventures with PDVSA, where PDVSA would have a majority stake.

Ramirez, who also serves as president PDVSA, explained that there are 32 operating agreements with companies such as ChevronTexaco, Royal Dutch Shell, France’s Total, and Spain’s Repsol, which produce about 500,000 barrels of oil per day, mostly from marginal oil fields. The contracts were signed in the between 1992 and 1997, when the price of oil was very low and the government at the time was interested in opening up the country’s oil industry to foreign investors.

The operating agreements are service agreements, in which the Venezuelan state pays a fee for the production of the oil. According to Ramirez, in many cases the fees the state paid for this extraction service cost more than could be earned by the sale of the oil, thus leading to losses in many cases for the state-owned oil company. Ramirez says that it costs $14 per barrel to extract oil under the service agreements, while in other oil fields the PDVSA operates it costs only $4 per barrel.

The Energy Ministry’s new requirement is to have all operating agreements changed into joint ventures in the next six months, under which they would pay 30% royalties, as well as taxes of 50%. A royalty is the percentage of the extracted oil’s market value that an oil company must pay directly to the government, before it subtracts any of its expenses. The taxes are then applied to the profits that the oil company makes on the sale of the remaining oil (i.e., after subtracting its expenses).

According to the new law on hydrocarbons, which went into effect in late 2001, international investment project in the oil sector would take the form of joint ventures, with PDVSA maintaining a 51% stake in these ventures. The new law also raised royalties from 16.6% to 30% and lowered taxes from 67% to 50%.

A day earlier, on Wednesday, President Chavez had said during a speech that many of these oil companies declared losses in Venezuela and were thus not paying any taxes at all. Chavez announced that the state’s tax collection agency, SENIAT, would investigate these companies. “In some cases, and we already have the proof, that there are transnational companies that have not paid the taxes that they should have paid, so we will charge them,” said Chavez. “A country cannot allow itself to be looted in this way,” he added. Ramirez said that the back taxes could amount to as much as $2 billion.

The oil companies affected by this move have yet to comment on it. Industry analysts, however, say that it is unlikely that the companies will challenge the changes, since the oil price is expected to remain high and profits can still be made.

Last year, in a surprise announcement, the Chavez government had increased royalties that extra-heavy crude production projects pay in the Orinoco oil belt, from 1% to 16.6%. These extra-heavy crude production projects contribute another 500,000 barrels per day to Venezuela’s overall output. The extraction of extra-heavy crude is particularly difficult because the oil is so thick and thus needs to be processed with lighter forms of crude so it can be transported. The royalty rate for these projects was kept so low because when the contracts were signed, the price of oil was very low. However, the Chavez government says that the oil companies can afford to pay more, now that the price has reached new highs.

When the announcement of the royalty increase in the extra-heavy crude projects was made, all companies except for ExxonMobil accepted the change. ExxonMobil is currently engaging in negotiations over the increased royalties.

Read more ...