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The decline and fall of Venezuela’s oil industry essentially begins with its nationalization in 1976, a time of booming crude prices and rising resource nationalism. President Carlos Andrés Pérez sought a much greater role for the state over the economy and especially wanted to use the country’s fast-growing oil wealth to turbocharge development. That year, to gain full national control over the oil fields, Caracas banished foreign oil firms and created a new, state-run oil monopoly called Petróleos de Venezuela (PDVSA). The moves marked the capstone to Pérez Alfonso’s decades-long dream of Venezuela grabbing full control of its destiny. It was also the logical outcome of the widely held belief that the country’s oil, discovered in 1922 on the shores of Lake Maracaibo, was national patrimony.
Giusti, alarmed by Chavez's plans for the oil company, resigned just as he took office in early 1999; he was then replaced by a revolving cast of political appointees. The departure of Giusti, who’d spent three decades in the Venezuelan oil business and had won international plaudits for overhauling and modernizing the state-run firm since taking over in 1994, would prove to be bad news for PDVSA’s fortunes.
In 2002, Chávez took two more steps to turn the once-proud PDVSA into his private preserve. First, he installed a new president, Gastón Parra Luzardo, a leftist economics professor who was a fierce opponent of opening the industry to more private investment. Then, in April, he went on live television to humiliate and fire a handful of PDVSA managers, replacing them with political hacks. Together, the the moves sparked violent public protests, which turned into a coup attempt against Chávez.
Using legally questionable methods, he started siphoning off billions of dollars in PDVSA revenue to pay for his social programs, including housing, education, clinics, and school lunches. While this strategy may have paid off politically in the short term, it was extremely dangerous: for the more cash the government took out of PDVSA, the less money the oil company had to invest in maintaining production or finding new resources. Since oil fields gradually produce less oil over time as they get tapped out, countries constantly need to dig new wells and rejuvenate shrinking reservoirs with injections of water or gas. Thanks to their geology, Venezuela’s oil fields have enormous decline rates, meaning the country needs to spend more heavily than other petrostates just to keep production steady. But as Chávez channeled more income into other areas, PDVSA was forced to mortgage the future to pay for the political present
originally posted by: Involutionist
Please elaborate on how their economy functions and how they lacked maintaining infrastructure. Thank you.
The state-run oil company, Petroleos de Venezuela (PDVSA), is struggling to stem a production decline that has accelerated this year as a result of payment delays to suppliers, lack of investment in equipment, and poor planning in the country’s vast oil fields.
"PDVSA is broken for lack of investment, lack of maintenance in all its processes, for years. Now, the crisis is deepening every day," said José Bodas, a union leader at a PDVSA refinery on the northern coast in Puerto La Cruz.
originally posted by: SpartanStoic
a reply to: DigginFoTroof
Vice did a piece recently which clearly showed how the inept gov't replaced 5000 workers in the state owned oil company with their "people".
Now they cannot refine any oil to meet the quality of their export contracts... this is why they have the entire problem.
The US companies refuse to buy oil that doesn't meet the contracted quality requirements.
originally posted by: ketsuko
Socialism didn't fail! They just didn't have the right people running it!
originally posted by: Isurrender73
a reply to: Lumenari
Still using the word Socialism incorrectly? The people had no ownership or say in production which is not Socialism.
What really happened.
Another Fascist Dictatorship selling their brand of Facism as Socialism failed because the leadership are morons.
originally posted by: OccamsRazor04
a reply to: xBWOMPx
It isn't. What's weird is you think it is. And I am not for establishing Democracies, they just tend to turn out better. The goal should be to give the power to the people in whatever form that takes.
originally posted by: OccamsRazor04
a reply to: grey580
Last I checked Chavez won elections. Fair and free elections. So how was he a dictator from day 1?