Oil Wars

Various "non-governmental organizations" and think tanks have over the years set up surveys to rank various countries on things such as "economic freedom", "political freedom", "human rights", "competativeness" and in one instance at least "failed states". These surveys are generally carried out by very conservative organizations and rather predictably point to the U.S., western Europe, and the Asian Tigers as good and most everyone else as bad.

Given that these surveys are highly subjective and don't fully reveal how they arrive at their rankings they are of dubious reliability and are probably best ignored. Yet the media often trumpets their findings as though they were some sort of objective truth and certain governments are praised while others are attacked. Most likely that is their express purpose.

One organization that releases a famous ranking is Transparency International and their ranking is on corruption. They list most all countries from what they consider to be the most transparent all the way down to what they consider to be the most corrupt. Predictably, being low on this ranking is taken as concrete evidence of out of control corruption so countries such as Venezuela, which have a very low ranking, are taken as being in fact very corrupt, never mind that no actual evidence is ever presented.

Of course, it impossible to rebut the ranking of Tranparency International because they don't say how exactly the ranking is arrived at nor do they give any of their actual field work or raw data. In other words, T.I.'s assertions can't be be critiqued because Transparency International itself isn't very, well, transparent.

However, an interesting thing happened recently. Transparency International released a major report on the international petroleum industry where in the ranked over 40 major oil companies:



Of course they grouped the oil companies into those who had "High" levels of transparency and those that had "Low" levels of transparency. The Venezuelan national oil company, Petroleos de Venezuela SA (PDVSA), was one of the companies ranked and as you can see from the listing they have a "Low" level of transparency according to T.I.:



I found that to be rather curious as I follow PDVSA quite closely and I have always found them to be highly transparent. Every year they publish a full financial statement that is audited by an outside auditing firm and which gives hundreds of pages of financial and operational data.

But this time it turned out to be possible to actually review what T.I. did. In an interesting twist with this report, Transparency International published a full and very detailed explanation of their methodology and gave the raw data that they used to compute the rankings. Being curious as to how their determination could differ so much from my own perception of PDVSA I decided to review it.

As their main interest was transparency what they did was determine what information they thought oil companies should make public and then looked at these oil companies web-sites and public documents to see how much of that information each company was in fact making public. The more of the information you make public the higher your transparency rating and the less you make public the lower your rating. Further note, T.I. explicitly stated they made no effort to determine the accuracy of the information that the oil companies provided, only that they were making the information public.

Here are two of the listings of information they were looking for:






Note they are looking for very basic things. For example they ask:

Are payments from the NOC [National Oil Company - ow]publically disclosed and are they broken down into...

N36 ...royalties (cash or kind)?

N37 ... dividends ?

N38 ... profit taxes?

Does the company publically disclose...

N51 ... its revenue?

N52 ... its production costs?

N53 ... its development and exploration costs or capital expenditures?

N54 ... its profit before tax?

N55 ... does the NOC produce accounts in accordance with internationally accepted accounting standards.

N56 ... Are the NOC accounts subject to an independent external audit in accordance with internationally accepted accounting standards?

These things that T.I. is looking for from each company are certainly very basic and indeed any company that aims for transparency should make them public.

So lets see how PDVSA did according to Transparency International. The following charts give the scores for all the above questions. Note the scoring is simply a "1", meaning the company makes the information public, or a "0" meaing the company does not make that information public.







PDVSA appears on the bottom of these tables where you should be able to easily note that according to Transparency Internationl PDVSA does not make public any of the information that I detailed above!! Look in the boxes for the above listed numbers and you will see all zeros indicating that according to T.I. that information was not in the public domain.

That is right - according to Transparency International PDVSA does not say how much it pays in royalties, taxes, what its revenues are, what its production costs are, does not have audited financial statements, etc., etc.

It is simply stunning that Transparency International would have that as its finding for PDVSA because in point of fact PDVSA makes all that information and more public.

Just go to their web-site, click on "Informes Financieros" (on the right hand side of the page), and you will all their audited financial statements from 2007 back to 2000. Open any of those financial statements and you will find for that year ALL of the information that Transparency International claims PDSVSA doesn't make public. Just for the hell of it I opened the 2007 audit report and looked how it compared to T.I.'s claims:

T.I. claims PDVSA does not disclose what it pays in royalties.

Really? On page 127 of its financial statement it says it paid $21.9 billion in 2007

T.I claims PDVSA does not disclose what taxes it pays to the government.

Really? On page 127 it says it $5.017 billion in ISLR taxes.

T.I. claims PDVSA does not disclose what its revenues are.

Really? On page 127 its says that revenues were $96.242 billion in 2007 (and they even break it down by external and internal sales if the idiots at T.I cared to know).

T.I claims PDVSA doesn't disclose its production costs.

Really? On page 127 it says they had $14.9 billion in operational costs in 2007.


T.I. claims PDVSA doesn't disclose its development and exploration costs.

Really? They are on page 35 and for 2007 came to over $11 billion.

T.I. claims that PDVSA doesn't have its accounts done in accordance with international accounting standards.

Really? On page 148 the auditors say the financial statement was prepared in accordance with "international accounting standards".

T.I. claims that PDVSA doesn't have an audit done by external auditors in accordance with international standards.

Really? On page 148 we see that the financial statements were audited by Alcaraz, Cabrera, and Vazquez, the Venezuelan affiliate of the U.S. accounting firm KPMG and they clearly state that the audit was performed in accordance within "international auditing standards".

I could go on and on with this but I think the point should be abundantly clear.

Transparency International said that PDVSA has a "Low" level of transparency based on claims that information is not made public when in fact that very information is very easily found in a couple of minutes on PDVSA's web-site.

Clearly this report by Transparency International is fatally flawed and its conclusions cannot be taken as valid because they are based on data which is wrong.

If Transparency Internional was a serious and honest organization they would retract this report, redo it, make sure they got their underlying data right, and then release a new ranking. Then, and only then, might this ranking be worth something.

How could they have messed this up so badly? Two things are worth noting.

First, for some unknown reason Transparency International farmed out the actual data collection to consultants. From page 34 of the Tranparency International report:

The data were gathered by consultants. The data-gathering process did not include interviews with any of the executives or staff of the companies, but was based on desk-research of publically available company documentation.

Maybe that explains it - without actually speaking to any PDVSA staff the consultants couldn't figure out that to get financial information they should click on the "Informes Financieros" button on the web-page!!

[As a side note, this use of un-named and un-accountable "consultants" bears an striking similarity to the bogus exit polls during the Venezuelan recall referendum carried under the name of a prominent U.S. polling firm but which turned out to have actually been done by the an stridently anti-Chavez NGO called SUMATE. Maybe T.I. like to be able to say "oops, not our fault, the consultants messed up"]

Second, look at the table of what information used to compile this report:



Note that for other companies they used not only the company web-site but their financial reports, other government web-sites, SEC filings, etc.

Yet for PDVSA they only used the company web-site!! They didn't reference PDVSA's audited financial statements even though it has published them every year, they didn't reference the U.S. SEC web-site where PDVSA was filing its audit reports until recently, they didn't reference any of Venezuela's major newspapers where it publishes all of this data every year, nor did they reference any Venezuelan government web-site which often carry things like the year end "Memoria y Cuenta" which publish all of this information and more.

The bottom line is Transparency International is clearly either terribly inept or patently dishonest. Any reputable organization would immediately rescind such a flawed report. Yet to date it is still on the Tranparency International web-site and serves as the basis for bogus reporting like this.

Further, such flawed analysis cannot help but call into question all of the other reports and rankings which Transparency International carries out. Until they show they can own up to their mistakes and fix them Transparency International simply can't be taken as a source of accurate and reliable information.

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This sort of makes me wonder:

“I think in Venezuela you can't speak of democracy because all branches of government are controlled by one single branch,” he said in an interview with The Associated Press. “It's growing dangerously close to a totalitarian regime.”

If I said some equally stupid and silly thing about the United States government would the Cato Institute give me a half-million dollars?
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It has been the wet dream of the U.S. elite, big business, the U.S. Chamber of Commerce, and the National Association of Manufacturers for decades to destroy the U.S. trade union movement and radically decrease the wages paid to American workers.

In the late 1980s they were quite open about their desire to run the U.S. working class into the ground:

For the first time, American manufacturers are talking openly about a new and startling wage goal: They want to greatly narrow the gap between what they pay their factory workers and the earnings of workers in South Korea, Brazil and a handful of other third world countries.

That does not mean that businessmen want wages to plunge from the $13.09 an hour that is the average total compensation of the United States factory worker. ''Wages overseas will come up, but one way or another, the gap will have to close,'' said Robert E. Mercer, chairman of the Goodyear Tire and Rubber Company. Walter Joelson, chief economist at General Electric, added: ''Let's talk about the differences in living standards rather than wages. What in the Bible says we should have a better living standard than others? We have to give back a bit of it.'' [Note: Where in the Bible does it say that corporate executives should earn twenty gazzilion times more than regular workers? I guess economists at General Electric don't get paid to ask those types of questions though - O.W.]

However the case is put, a common view is emerging. ''Many manufacturers now feel that we are not going to be able to afford the wage difference,'' said Jerry Jasinowski, chief economist at the National Association of Manufacturers. Their concern is directed mostly at six countries whose modern, high-tech factories turn out products often competitive with ours. The six are South Korea, Brazil, Mexico, Hong Kong, Taiwan and Singapore - and each has an average factory wage of less than $3 an hour.

And of course, helped by "free trade" agreements which essentially serve to destroy unions and give corporations easy and secure access to highly exploitable labor (in addition to helping them to exploit U.S. workers more), the above has gone a long ways towards being converted into reality.

For example, for many decades the automobile industry has been viewed as the industrial backbone of any developed country and automobile workers the "aristocracy" of the industrial workforce which often made it to "middle class" status in countries like the United States. But as workers at huge auto parts manufacturers such as Delphi, Dana, and American Axel know, they are now facing huge wage cuts (40 to 50%) and no longer need consider themselves part of the middle class.

In fact, the war against the American worker has been so successful that the share of U.S. GDP going to wages is the lowest it has ever been since records were first kept in 1947 while corporate profits are now have a higher share of GDP than they have had since the 1960s.

In short, all these trade deals have screwed American workers. Truth be told though, we knew that all along.

But the paid apologists for "free trade" long ago came up with a sophisticated arguement that was supposed to make people feel better about U.S. workers getting the shaft.

"Free trade is what will lift the third world out of poverty" they say as they also added "why should we defend the interests of rich American workers at the expense of poor third world workers".

I.e, they make the argument that progressives should back free trade as it will help the "truly poor" as opposed to "greedy" and "overpaid" American workers.

Specifically with regard to NAFTA it was sold as something that would develop Mexico, improve the lot of Mexican workers, and stop mass migration of Mexicans to the United States. So even if U.S. workers didn't fare well at least SOME workers were going to be better off!

Sounds compelling doesn't it?

Thing is, it is also false. It turns out, for example, that workers in Mexico saw their wages go DOWN after the North American Free Trade Agreement was implemented. In fact, read this study by the Carnegie Endowment and you will see that in addition to wages going down, almost no new jobs have been created in Mexico, wages and productivity have been de-linked (ie, workers make more but get paid the same or less the difference going to corporate profits) and income inequality has increased significantly in Mexico (gee, same as the U.S.!)

In sum, workers in both Mexico and the U.S. have been made worse off since the implementation of NAFTA. But corporate profits and the income of the elite are way up in both countries.

How much you want to bet they don't bring those facts up the next time they try ram a free trade agreement through?
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It is well known that the U.S. has spent hundreds of billions of dollars fighting its little war in Iraq (well, little for the U.S. - not for the millions of Iraqis having their lives destroyed courtesy the U.S. taxpayer and military). A famous economist has even asserted that the war will ultimately cost the United States several trillion dollars.

Some observers might think the U.S. is rich and can easily afford it. And if they were thinking of the United States government they might be right.

But if they were thinking of the American people they most definitely would not be correct in that assertion. For those who don't live in the United States, you might benefit by reading the following to get an inkling of the humiliation, degradation and inhumane treatment many millions of Americans have to put up with while their government pisses away their country's riches in the Fertile Crescent:

Cash before chemo: Hospitals get tough

By BARBARA MARTINEZ, The Wall Street Journal

LAKE JACKSON, Texas — When Lisa Kelly learned she had leukemia in late 2006, her doctor advised her to seek urgent care at M.D. Anderson Cancer Center in Houston. But the nonprofit hospital refused to accept Mrs. Kelly's limited insurance. It asked for $105,000 in cash before it would admit her.

Sitting in the hospital's business office, Mrs. Kelly says she told M.D. Anderson's representatives that she had some money to pay for treatment, but couldn't get all the cash they asked for that day. "Are they going to send me home?" she recalls thinking. "Am I going to die?"

Hospitals are adopting a policy to improve their finances: making medical care contingent on upfront payments. Typically, hospitals have billed people after they receive care. But now, pointing to their burgeoning bad-debt and charity-care costs, hospitals are asking patients for money before they get treated.

..................................................................

M.D. Anderson says it provides assistance or free care to poor patients who can't afford treatment. It says it acted appropriately in Mrs. Kelly's case because she wasn't indigent, but underinsured. The hospital says it wouldn't accept her insurance because the payout, a maximum of $37,000 a year, would be less than 30 percent of the estimated costs of her care.

...................................................................

M.D. Anderson, which is part of the University of Texas, is a nonprofit institution exempt from taxes. (Please see article below.) In 2007, it recorded net income of $310 million, bringing its cash, investments and endowment to nearly $1.9 billion

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Nataline Sarkisyan, a 17-year-old cancer patient who died in December waiting for a liver transplant, drew national attention when former presidential candidate John Edwards lambasted her health insurer for refusing to pay for the operation. But what went largely unnoticed is that Ms. Sarkisyan's hospital, UCLA Medical Center, a nonprofit hospital that is part of the University of California system, refused to do the procedure after the insurance denial unless the family paid it $75,000 upfront, according to the family's lawyer, Tamar Arminak.

The family got that money together, but then the hospital demanded $300,000 to cover costs of caring for Nataline after surgery, Ms. Arminak says.

Federal law requires hospitals to treat emergencies, such as heart attacks or injuries from accidents. But the law doesn't cover conditions that aren't immediately life-threatening

..................................................................

Mrs. Kelly's ordeal began in 2006, when she started bruising easily and was often tired. Her husband, Sam, nagged her to see a doctor.

A specialist in Lake Jackson, a town 50 miles from Houston, diagnosed Mrs. Kelly with acute leukemia, a cancer of the blood that can quickly turn fatal. The small cancer center in Lake Jackson refers acute leukemia patients to M.D. Anderson.

When Mrs. Kelly called M.D. Anderson to make an appointment, the hospital told her it wouldn't accept her insurance, a type called limited-benefit.

"When an insurer is going to pay the small amounts, we don't feel financially able to assume the risk," says M.D. Anderson's Mr. Tietjen.

An estimated one million Americans have limited-benefit plans. Usually less expensive than traditional plans, such insurance is popular among people like Mrs. Kelly who don't have health insurance through an employer.

Mrs. Kelly, 52, signed up for AARP's Medical Advantage plan, underwritten by UnitedHealth Group Inc., three years ago after she quit her job as a school-bus driver to help care for her mother. Her husband was retired after a career as a heavy-equipment operator. She says that at the time, she hardly ever went to the doctor. "I just thought I needed some kind of insurance policy because you never know what's going to happen," says Mrs. Kelly. She paid premiums of $185 a month.

A spokeswoman for UnitedHealth, one of the country's largest marketers of limited-benefit plans, says the plan is "meant to be a bridge or a gap filler." She says UnitedHealth has reimbursed Mrs. Kelly $38,478.36 for her medical costs. Because the hospital wouldn't accept her insurance, Mrs. Kelly paid bills herself, and submitted them to her insurer to get reimbursed.

M.D. Anderson viewed Mrs. Kelly as uninsured and told her she could get an appointment only if she brought a certified check for $45,000. The Kellys live comfortably, but didn't have that kind of cash on hand. They own an apartment building and a rental house that generate about $11,000 a month before taxes and maintenance costs. They also earn interest income of about $35,000 a year from two retirement accounts funded by inheritances left by Mrs. Kelly's mother and Mr. Kelly's father.

Mr. Kelly arranged to borrow the money from his father's trust, which was in probate proceedings. Mrs. Kelly says she told the hospital she had money for treatment, but didn't realize how high her medical costs would get.

The Kellys arrived at M.D. Anderson with a check for $45,000 on Dec. 6, 2006. After having blood drawn and a bone-marrow biopsy, the hospital oncologist wanted to admit Mrs. Kelly right away.

But the hospital demanded an additional $60,000 on the spot. It told her the $45,000 had paid for the lab tests, and it needed the additional cash as a down payment for her actual treatment.

In the hospital business office, Mrs. Kelly says she was crying, exhausted and confused.

The hospital eventually lowered its demand to $30,000. Mr. Kelly lost his cool. "What part don't you understand?" he recalls saying. "We don't have any more money today. Are you going to admit her or not?" The hospital says it was trying to work with Mrs. Kelly, to find an amount she could pay.

Mrs. Kelly was granted an "override" and admitted at 7 p.m.

After eight days, she emerged from the hospital. Chemotherapy would continue for more than a year, as would requests for upfront payments. At times, she arrived at the hospital and learned her appointment was "blocked." That meant she needed to go to the business office first and make a payment.

One day, Mrs. Kelly says, nurses wouldn't change the chemotherapy bag in her pump until her husband made a new payment. She says she sat for an hour hooked up to a pump that beeped that it was out of medicine, until he returned with proof of payment.

A hospital spokesperson says "it is very difficult to imagine that a nursing staff would allow a patient to sit with a beeping pump until a receipt is presented." The hospital regrets if patients are inconvenienced by blocked appointments, she says, but it "is a necessary process to keep patients informed of their mounting bills and to continue dialog about financial obligations." She says appointments aren't blocked for patients who require urgent care.

Once, Mrs. Kelly says she was on an exam table awaiting her doctor, when he walked in with a representative from the business office. After arguing about money, she says the representative suggested moving her to another facility.

But the cancer center in Lake Jackson wouldn't take her back because it didn't have a blood bank or an infectious-disease specialist. "It risks a person's life by doing that (type of chemotherapy) at a small institution," says Emerardo Falcon Jr., of the Brazosport Cancer Center in Lake Jackson.

Ron Walters, an M.D. Anderson physician who gets involved in financial decisions about patients, says Mrs. Kelly's subsequent chemotherapy could have been handled locally. He says he is sorry if she was offended that the payment representative accompanied the doctor into the exam room, but it was an example of "a coordinated teamwork approach."

On TV one night, Mrs. Kelly saw a news segment about people who try to get patients' bills reduced. She contacted Holly Wallack, who is part of a group that works on contingency to reduce patients' bills; she keeps one-third of what she saves clients.

Ms. Wallack began firing off complaints to M.D. Anderson. She said Mrs. Kelly had been billed more than $360 for blood tests that most insurers pay $20 or less for, and up to $120 for saline pouches that cost less than $2 at retail.

On one bill, Mrs. Kelly was charged $20 for a pair of latex gloves. On another itemized bill, Ms. Wallack found this: CTH SIL 2M 7FX 25CM CLAMP A4356, for $314. It turned out to be a penis clamp, used to control incontinence.

M.D. Anderson's prices are reasonable compared with other hospitals, Mr. Tietjen says. The $20 price for the latex gloves, for example, takes into account the costs of acquiring and storing gloves, ones that are ripped and not used and ones used for patients who don't pay at all, he says. The charge for the penis clamp was a "clerical error" he says; a different type of catheter was used, but the hospital waived the charge. The hospital didn't reduce or waive other charges on Mrs. Kelly's bills.

Mrs. Kelly is continuing her treatment at M.D. Anderson. In February, a new, more comprehensive insurance plan from Blue Cross Blue Shield that she has switched to started paying most of her new M.D. Anderson bills. But she is still personally responsible for $145,155.65 in bills incurred before February. She is paying $2,000 a month toward those. Last week, she learned that after being in remission for more than a year, her leukemia has returned.

M.D. Anderson is giving Blue Cross Blue Shield a 25 percent discount on the new bills. This month, the hospital offered Mrs. Kelly a 10 percent discount on her balance, but only if she pays $130,640.08 by this Wednesday, April 30. She is still hoping to get a bigger discount, though numerous requests have been denied. The hospital says it gives commercial insurers a bigger discount because they bring volume and they are less risky than people who pay on their own.

The hospital has urged Mrs. Kelly to sell assets. But she worries about losing her family's income and retirement savings. Mrs. Kelly says she wants to pay, but, suspicious of the charges she's seen, she says, "I want to pay what's fair."

Understandably, Mrs. Kelly must feel bad. But maybe she can take comfort from the knowledge that while millions like her may lose everything or simply die from lack of access to health care at least the United States Army will have all the bombs, rockets, and bullets it needs to keep those uppity Iraqis in their place.
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There was something to be said about the nature of our society, not only is electricity undeniably vital, but in Caracas it is so compounded that even an outage that occurs in the afternoon will affect society well into the night.

I left from work at around 4 o clock after the outage hit, some incredibly boneheaded decisions later led me to be stuck in traffic for 4 hours and half, what I observed (when I stopped beating myself up for some really boneheaded ideas borne out of desperation to get home) was both positive and negative.

Positive
-There was no regrettable chaos, no looting, no rioting. That said I am thankful the lights were back on before dusk.
-People were pouring through the streets in a calm fashion, the Subway moves half the city's population every single day.
-Hospitals were operating on emergency power (something that did not exist 2 years ago).

Negative
-That we depend way too much on hydroelectric power coming from one region, leading to single supply lines
-There were not enough transit officials to maintain order, people got really desperate last night to get home (myself included) and the hellish traffic jams were caused by cars blocking other cars at intersections, nobody obeyed the stop lights, the Libertador and Miranda Ave were like parking lots.
-We are not prepared for an apocalyptic emergency (but then again no city is).

Suffice to say the opposition is having a field day, despite the fact that the originating problem may have been their fault to begin with (that is overeliance on the Caroni hydropower). Whether it was a fire or system failure the result is the same, it was not the nationalization of EDC that caused it (the big hint is that it was nationwide and not just citywide) but a decision over reasonable risk (cheap power over logistical problems)
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Who says no-one ever got rich fighting against Hugo Chavez?

Some 23 year olds sure have:

CARACAS, Venezuela (AP) — A U.S.-based think tank has awarded a $500,000 prize to the leader of a student protest movement that has posed a potent challenge to Venezuelan President Hugo Chavez.

University student Yon Goicoechea became a household name in Venezuela last year after he led protests that were widely seen as a key factor in the defeat of sweeping constitutional changes proposed by Chavez.

The Washington-based Cato Institute said it would announce the 23-year-old as winner of the Milton Friedman Prize for Advancing Liberty on Thursday.

Of course, given that his fame results from his being given an open microphone on national TV in front of the National Assembly (even if he did have nothing to say) the honorable thing to do would be to share the money with Celia Flores who invited him there.

Lets see if that happens.

Anyways, it would appear it is a lot more lucrative to be a right winger on campus than a left winger.
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In what has become a tragicomedy of sorts the opposition is splintering again, this time in the usual pathetic fashion, their electoral unity contract was thrown into the trash bin in such dramatic fashion that it borders on the bizarre.

Manuel Rosales has been for two years the de facto leader of the opposition, a term-limited governor of Zulia that wants to see his regional party grow to become the next silver medalist in the election olympics. Of course they want the silver medal, they are content with it, and in order to guarantee it they will sabotage the bronze medalist as the gold has multiple lap advantage.

So what did Manuel Rosales do? did he anounce he was running in another state? did he throw his hat for the national assembly and later the presidency? nope he decided to go back to his roots and become the next MAYOR of Maracaibo. I shit you not. He quite literally slowed down in order to push second runner up (Primero de Justicia) out of the race...

Of course the drama was not lost in the alternative
media, (the manistream opo media hardly touches it)

So why would the de facto leader of the opposition move back to his old home? rather than move up (or even laterally) in the food chain? Evidently because they presume there is not enough food to go around in the first place. The opposition is not challenging swing states/local governments. They are fighting amongst themselves for the sure things, as if it were the only spots they know they can win.

Take Baruta municipality as another example, this rich residential area of Caracas has a term limited Primero de Justicia mayor. Every single party has a candidate, and are campaigning hard to win this seat, PJ and Copei each has their candidate (both nobodies I think) and late comer UNT has brought in a media heavyweight Geraldo Blyde (former member of PJ who along Leopoldo Lopez defected to UNT). So why does UNT send their "stars" to safe candidacies yet throws Stalin Gonzales (student "leader") to the wolves den (Libertador municipality)? The answer would be obvious by now.

PS the only drama is in Chavismo's side with Luis Tascon pulling a Lieberman.
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