I realize we wind up asking this question far too often lately, but just how bad are things in Venezuela? Aside from the starvation and sickness of the rank and file citizens, the unrest in that country is hitting major foreign investors. Amazingly, Chevron has still been doing business with the country’s oil production sector (PDVSA is the government-run oil company). But now, they’ve evacuated some of their workers after two of them were imprisoned over a dispute with the government of Nicolas Maduro. Given that Maduro generally arrests anyone who disagrees with him this probably shouldn’t come as too much of surprise, but the audacity of the move is still alarming. (Reuters)
U.S. oil major Chevron Corp (CVX.N) has evacuated executives from Venezuela after two of its workers were imprisoned over a contract dispute with state-owned oil company PDVSA, according to four sources familiar with the matter.
Chevron asked other employees to avoid the facilities of its joint venture with the OPEC nation’s oil firm, the sources said.
The arrests, in a raid by national intelligence officers, were the first at a foreign oil firm since Venezuela’s government launched a purge last fall that has resulted in detentions of more than 80 executives at PDVSA and business partners.
The Chevron workers may be facing charges of treason according to the report. So what could they have done to undermine the government? As it turns out, the “treasonous” activity in question was refusing to sign a contract with PDVSA to purchase some manufacturing parts. There was apparently no competitive bidding for the sale and the price was outrageously high. Rather than sending the dispute to arbitration, the Venezuelan government simply arrested them and tossed them into a cell.
Sadly, Chevron’s options in this situation are limited. They have a lot of assets in the country, but they readily admit that they couldn’t possibly sell them at anywhere near market value if they wanted to close up shop in Venezuela entirely. But at the same time, if they stick around they may find themselves in the same situation which engulfed Exxon and ConocoPhillips back in 2007 when they got into a similar dispute with Maduro’s predecessor, Hugo Chavez. After failing to meet his demands, Chavez simply seized all of their assets and turned them over to PDVSA.
Venezuela’s social and economic meltdown is still continuing. Maduro has enough friends in Russia and China to keep him afloat and has no reason to bow to other international pressure. Meanwhile, businesses continue to collapse and his people are forced to forage for scraps of food in the trash or hunt rabbits and cats just to survive. Welcome to socialism in its rawest form. And sadly, pretty much all the rest of the world can do is watch.