Monday, May 16, 2005

Rumours of PDVSA's demise have been greatly exagerated. 

If you stay up with your opposition propoganda then you know the “crisis” of the day is that the Venezuela state oil company PDVSA is supposedly collapsing. Actually though, this is not a new issue; this “crisis” has now been talked about for years.

This goes back now more than two years to when in the opposition lead strike of 2002/2003 the then managers and bureaucrats in PDSVA thought that they could bring down the Chavez government by shutting down the oil industry. Of course even most oil workers did not support them, the strike collapsed (after doing billions of dollars of damage) and the striking managers were fired.

Oil production quickly recovered which in turn helped lead to the economic boom which Venezuela currently enjoys. The strikers – who formed a organization called Gente de Petroleo – People of Oil or as I call them, Oily People- seeing that all they had accomplished was to get themselves fired, quickly backpedaled and sought to get their jobs back. To do this they came out with a very slick little power point presentation to show how vital it was for the country's future that they be hired back. Lets have a look at some of it:

The beginning of Oily Peoples predictions. The bottom of the slide says "without rehiring the 12,500 fired". In other words this is where they will show how dire things will be without them.

In this interesting slide we see two columns – one of what PDVSA will be able to produce without rehiring the strikers under “Status Quo” in comparison to what it produced before under “PDVSA” Note that the Oily People thought that the Chavez government wouldn’t be able to get production to more than 2.1 million barrels per day. Off course, during 2003 production reached either 2.6 million to over 3 million barrels per day depending on who you listen to. So much for Oily Peoples predictions. But the best is yet to come.

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In this graph the Oily People show what they claim the countries cash flow will be. This graph shows in red what the cash flow will be without re-hiring the strikers and in blue what it will be if they are rehired. As you can see they show the cash flow going sharply negative . And the key point in the line down the middle with a label that hardly needs translation – “Economic Collapse”. That’s right, the opposition, in all seriousness predicted that with PDVSA under Chavez’s management and without the “meritocracy” of the old management the country would go bankrupt. In fact, the title to the slide says – “Even using the special reserve fund the collapse will occur in the second trimester of 2003”

Well, here we are more than 24 months later and what is the reality – international reserves of $28 billion, 17% growth last year, 11% growth so far this year, and no end in sight to the boom. The bottom line is that these Oily People couldn’t have been more wrong. Rather than collapsing PDVSA and Venezuela have thrived without them. If this is how clueless they are with regard to the oil industry they should have been fired much sooner!!

So the next time you read the latest drivel by Oily People, Gustavo Coronel, or any of the other anti-Chavez malcontents you might want to remember what the track record of their predictions and analysis is.

And the bottom line regarding PDVSAs future is if you are waiting for it to collapse, don’t hold your breath.

Update: A number of readers have inquired as to where the document posted here came from and where the full version could be found. I originally recieved this in an e-mail directly from the Oily People. However, I have found a copy of it on the internet here.


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