Venezuela Moves to Nationalize its Oil Industry
Latin America's shift from the Western sphere of influence and toward an independent path is a major current of the recent years. Venezuela, the world's fifth largest oil producer, has spearheaded this change by exploiting soaring global oil prices in order to pursue a "Bolivarian" economic model detached from the Washington Consensus. [See: "Venezuela's Hugo Chavez Makes His Bid for a Bolivarian Revolution"]
Venezuelan President Hugo Chavez's power and vision for a united South America depends on oil, which accounts for half of state revenues and about one-third of G.D.P. Caracas, however, has attempted to balance any potential liability by shrewdly positioning itself as a pivotal player in the global energy market. Increasing revenues have translated into political influence that allows Chavez to undermine decades of Western-mandated neoliberal reforms and begin to effectively nationalize the Venezuelan oil industry.
The State Assumes Control
Last month, Chavez ordered a state takeover of several major oil operations that had been controlled by foreign-owned corporations. France's Total SA and Italy's Eni SpA refused to cooperate with contractual changes mandated by Chavez. Sixteen firms, however, including Royal Dutch Shell, Chevron Corp., and Spain's Repsol YPF, all agreed to the terms of a reworked contract with Venezuela that grants the state greatly increased revenue shares and operational control.
Under the new contracts, income tax rates on windfall profits for oil companies will increase from 34 percent to 50 percent. Venezuelan Oil Minister Rafael Ramirez, who is also president of state-owned Petroleos de Venezuela SA (PDVSA), expects an additional US$1.2 billion in revenue from the tax. Chavez has also indicated that PDVSA, which currently holds between 30 and 49 percent of heavy oil ventures, would assume "at least 60 percent" of the reworked operations that will be chartered for 20 years. "Venezuela has control of its natural resources," Chavez stated prior to a summit in Vienna with leaders from the E.U., Latin America and the Caribbean.
In keeping with Chavez's use of strong nationalist language, Venezuelan Deputy Rodrigo Cabezas -- who heads a special National Assembly commission on oil contracts -- said that the increased tax revenue is "money that we are demanding…for all Venezuelans."
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