Girish Gupta



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Chávez Steals Limelight as Venezuela Expropriates Even More Private Companies
Sept. 30, 2011

Published by Minyanville

Despite a manic week for Venezuela’s economy -- expropriations, confusion over a multi-billion dollar ExxonMobil (XOM) compensation claim and a major oil meeting in Puerto La Cruz -- it's President Hugo Chávez that has once again taken center-stage in this country’s affairs this past week. The maverick leader’s theatrical return to the limelight on Thursday was in the wake of an El Nuevo Herald story that had claimed the previous night that the president had been urgently rushed to hospital for kidney failure.

“Those who don't love me and wish me ill, well bad luck!” he said defiantly the next morning, speaking to state television. Hours later journalists were summoned to the presidential palace to see him walk out, clad in his trademark red tracksuit, with baseball glove, ball and bat in hand, eager to show the world that he was fit and well. The president described the speculation on his health as “morbid and inhumane.”

The two-hour proof-of-life address that followed was a return to a theatrical style that has been lacking the past few months as Chávez underwent four rounds of chemotherapy. He also has a return to Cuba planned for what he hopes will be a final checkup.

In a note to investors, Barclays Capital Chief Economist Alejandro Grisanti said that they should expect more of the same over the coming year. “Investors will need to get used to this type of speculation and the volatility that it may cause in Venezuelan assets, given the scarcity of information regarding Chávez's health status from the government,” he wrote.

Grisanti expects that even if Chávez is unable to govern, next October’s presidential election is unlikely to be derailed. “[We] would expect succession to follow as established under the constitution, with the vice president assuming the presidency until elections are held as scheduled,” he wrote.

The constant reminders -- true or not -- of Chávez’s immortality will remind Venezuelans that one day they face a future without Chávez, who has been the face of government for the past 12 years, always on television, radio and in the public mindset.

Meanwhile, a major oil meeting in the coast city of Puerto La Cruz this week revealed that state oil firm Petróleos de Venezuela (PDVSA) is looking to reach oil output of 4 million barrels per day by 2014, with the 2012 target set at 3.24 million barrels per day. This beats August’s claimed output of 3 million barrels per day, however, figures from PDVSA are rarely to be believed.

Over the next five years, the company will invest $43 billion in new equipment, according to Energy Minister and head of the oil firm Rafael Ramírez. However, he insisted that oil production would only increase in coordination with OPEC.

China is the new target for oil sales, with around 460,000 barrels per day heading to the Asian giant this year. With its consumption up 7.5% this year, China is a good bet for Venezuela’s government, which is looking to minimize dependence on the United States -- as demonstrated by Chávez’s shifting of gold and cash reserves in recent months (Venezuela Shifts Cash Reserves, Nationalizes Gold in Anti-US Move.)

“We have been producing and exporting oil for more than 100 years but they have been years of dependence on the United States,” Chávez said. “Now we are free and we make our resources available to the great country of China.” China’s investment in Venezuela is currently around $28 billion, according to the Council on Hemispheric Affairs.

US oil giant ExxonMobil is one of Venezuelan authorities’ biggest expropriations and the company is demanding around $7 billion in compensation. However, Chávez’s government last week offered just $1 billion, with Ramírez denying press reports of any separate negotiation with the company outside an ongoing formal arbitration process in New York.

“Our proposal is $1 billion for its assets,” Ramírez told Reuters. “We are not in negotiations with ExxonMobil, nor has it crossed our minds to approach them.”

ConocoPhilips (COP) was also stripped of assets in 2007 as the government took over heavy crude projects in the country’s Orinoco Belt -- one of the world’s biggest oil deposits.

Ramírez added in Puerto La Cruz this week that Oklahoma-based Helmerich & Payne’s (HP) lawsuit against the government -- after 11 drilling rigs were seized last year -- was “frivolous” adding: “This is not a cowardly government ... We have to shield ourselves against any possible aggression. We will not accept to make to be made an example of and punished by any country.”

More than 400 companies have been expropriated in Venezuela this year alone. The latest was local ferry company Conferry, which connects the mainland to the beach resort of Margarita.


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© Girish Gupta