Ricardo P. Becerra
Let's use pdvsa
he national oil holding company (Petróleos de
Venezuela -PDVSA-) has launched us on an ambitious investment plan, with the
purpose of increasing oil production from 2.5 million b/d to about 6 million by the year
two thousand.
Between 1992-95, PDVSA invested about US$ 16 billion which was financed
mainly with its cash flow. To increase this cash flow, a new tax law was passed by
Congress in 1992 to reduce the oil export tax from twenty percent, to four percent in
1995 and to zero by 1996. During the period this article is focusing on, fiscal oil revenue
dropped from 12.4% of GDP in 1992 to 7.9% in 1995, in spite of an increase in oil
exports of 17%. The government expected that non-oil fiscal revenues would fill the gap
left by the drop in the export tax; however, Central Government deficit dropped from
3.64% of GDP in 1992 to 5.92% in 1995.
It could be argued that the drop in oil fiscal revenues was temporary, and that
once the investments yield their expected return, the lost revenues would be more than
recovered. However, the fundamental question should be: how have we financed this
temporary drop in oil fiscal revenue?
Under normal circumstances, Venezuela could have financed its fiscal deficit by
accessing the international capital markets that were busy looking for investment
opportunities in Latin America. The future oil revenues could then be used to service
the new debt, and living standards would not have been sacrificed.
During this period, however, the delicate political situation that Venezuela was
going through 1 diverted capital inflows. This situation forced
the government to rely on domestic debt (in a country characterized by low private
savings and a small financial market), to finance PDVSA's expansion plan, complicating
further the situation of the economy.
During the last four years, Venezuela, in spite of a recessive economy, has
increased it's non oil fiscal revenues by 4% of GDP. This effort is impressive when
compared to Peru which increased total revenue by the same amount during 1991-95,
propelled by strong economic growth. On the expenditure side, non-interest expenses
as a percentage of GDP remained relatively constant and gross capital formation was
at its lowest level in the last twenty-five years. This situation can not continue for much
longer. All Venezuelans suffer the chronic lack of water, the low quality of education
at all levels, and the rest of the fourth world plagues that are again finding fertile ground
in Venezuela.
We should be working on a coherent adjustment plan with a long-term horizon,
and should attempt to avoid past mistakes. It is imperative that the Government and
PDVSA work together in a coordinated manner in order that the sector's investment
plans are not undertaken at the expense of the population, and that in the short term,
increases in oil fiscal revenue affect the growth potential of the oil industry as little as
possible.
The economic adjustment plan that Venezuela is undertaking would be politically
more feasible with higher and more stable fiscal revenues. The government could then
channel more resources to social and infrastructure spending.
An alternative to consider is to open PDVSA's investment plan to new partners.
This would provide an increase in the cash flow and reciprocally a short term increase
in fiscal revenue without affecting the investment plan. Moreover, this would be an
opportunity for PDVSA to issue shares and increase the transparency in the
PDVSA-State relationship.
Venezuela is like a Country Club family that doesn't have enough to eat, but will
not sell the house for sentimental reasons. By selling the house, the family will be able
to pay its debts, buy a good apartment and provide better nourishment and education
to their children, increasing the standard of living and welfare of the family.
The social security and labor liabilities, the external and internal debt, the
abandonment of physical infrastructure and of human capital development, are
problems that require more than a short term adjustment plan. Like a bankrupt
company, Venezuela must restructure its balance sheet.
Let's use PDVSA to cancel our liabilities. We will not loose our net worth or
sovereignty as many argue. By paying out our debt, we will have the funds and flexibility
needed to restructure the state. Transforming the State into an efficient service
(education, justice, health and security) enterprise with clear rules will spur economic
growth and transform Venezuela into a country that generates wealth, increasing our
net worth.
Venezuela's problem is structural, and whoever doubts it should analyze the
evolution (or better still involution) of private and public investment, of exports, the
quality of education, and GDP per capita of the last twenty five years. We are a poor
country, with a rich country complex that allows us to walk naked, like the king in the
children tale, believing we are dressed with the finest apparel. Using PDVSA will help
us start to get dressed.
1 .- two coup-d'etat attempts and President Carlos Andrés
Pérezs forced resignation
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