Nicolas Maduro has so far managed to mostly avoid the showy expropriations of which his predecessor Hugo Chavez was so very fond in times of political need, but the rapidly deteriorating social and economic situation in Venezuela is moving toward a desperate-times, desperate-measures scenario for the new Venezuelan leader. The socialist country relies on oil for almost all of its exports and about half of its government revenue, but their lately dwindling production capacity is a reflection — not of dwindling supply (indeed, they some of the world’s largest proven reserves) — but rather of dwindling investment in their shady business environment. Exhibit A, via the AP:
Venezuela has quietly seized control of two oil rigs owned by a unit of Houston-based Superior Energy Services after the company shut them down because the state oil monopoly was months behind on payments.
The seizure took place Thursday after a judge in the state of Anzoategui, accompanied by four members of the local police and national guard, entered a Superior depot and ordered it to hand over control of two specialized rigs to an affiliate of PDVSA, the state-owned oil producer.
PDVSA justified the equipment’s expropriation, calling it essential to the South American nation’s development and welfare, according to a court order obtained by The Associated Press. Company workers were instructed to load the rigs, known as snubbing units and used to repair damaged casing, onto trucks to be deployed at “critical wells” elsewhere, according to the document.
“It was like a thief breaking into your house, asking for the keys to the safe and then expecting you to help carry it away,” Jesus Centeno, local operations manager for Superior in the city of Anaco, said by phone. “Their argument was that we were practically sabotaging national production.”
Oil companies are getting pretty sick of working with PDVSA, which has racked up huge debts to the service contractors on which Venezuela depends to keep their oil-based economy running — and hey, seizing other people’s assets is definitely going to help spur the type of business “investment” Maduro claims he wants, right? Uncertainty, for the win! …Or something.
Though Venezuela still has plenty of oil, the haul of petrodollars can hardly keep pace with capital flight, as middle-class and rich Venezuelans hurry to take their savings abroad ahead of what they assume will be an imminent crash. No wonder the greenback has spiked on the black market, now fetching on the streets a record six times the official exchange rate.
It’s no mystery what Venezuela must do to reverse the crisis. Economists say the government must devalue the enfeebled currency— ironically called the bolivar fuerte (the strong bolivar)—and lift the Soviet-style market controls that are emptying supermarket shelves and chasing away investors. Without predictable rules for doing business, there will be even fewer takers for Venezuela’s high-risk government bonds.