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Venezuelan Petro State Thesis Remi Lehmann

Venezuelan Petro State Thesis Remi Lehmann

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Published by: Remi Lehmann on Jun 01, 2012
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05/25/2015

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The winner of the 1994 presidential elections, Rafael Caldera, had opposed Pérez’ neoliberal
policies and campaigned on a centre-left platform. During the first 18 months of his term he
pursued an economic policy that promoted state intervention in the economy. However, the
results of this policy were disappointing (for example, real wages declined fast), and he was
confronted with the collapse of the privatized banking sector. 1996 saw the introduction of
the Agenda Venezuela, a package of neoliberal reforms, granting access to IMF loans. The
state’s telephone and steel companies were privatized, demands on foreign capital were
relaxed and the 1997 reform of the Labor Law opened the door to privatization of the health
and retirement branches of the social security system (Ellner, 2008, pp. 99-102).

Caldera’s oil policy however, had been more neoliberal oriented from the start, also allowing
for strategic associations with PDVSA minority shares. National Congress was only able to
stiffen the terms, but could not prevent the privatization process nor start a public debate
on the issue (Ellner, 2008, pp. 102-103). PDVSA’s new plans consisted of increasing
production while allowing for foreign investment in the sector, thus bridging the gap that
had existed during the previous administration. The government backed these plans by

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approving various oil production contracts involving foreign capital, also for non-heavy oil. It
did mean defying the OPEC-production quota, but PDVSA returned the favor by publicly
backing all government decisions, creating a strong political alliance with key power groups
in the government and society. The opening had mixed results: on the one hand, the
increased sales income by PDVSA facilitated investments by the company and resulted in
increased tax revenues which reduced the effect of the collapse of the Venezuelan banking
system and boosted the local economy somewhat (Philip, 1999, pp. 370-372). On the other
hand, the legislation and decision-making procedures had been rather dubious, negatively
affecting the legitimacy of the privatization process. Furthermore, some of the joint ventures
were highly unprofitable for PDVSA under low oil prices while guaranteeing profits for their
foreign counterparts (Buxton, 2009, pp. 61-62). Finally, creative accounting by PDVSA meant
that although the company contributions in tax revenues were significant in absolute terms,
PDVSA contributed less and less in relative terms.14

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