- The Washington Times - Tuesday, May 12, 2009

SANTA CRUZ, Bolivia — Venezuelan President Hugo Chavez has launched a new round of nationalizations as his nation faces skyrocketing debt in its state-owned oil industry - a potential threat to social programs and regional aid projects, government officials say.

Venezuela, a leading member of the Organization of the Petroleum Exporting Countries (OPEC), relies on oil for 93 percent of its revenues, which have declined drastically owing to the plunge in world oil prices.

The price of Venezuelan crude has shrunk by 55 percent during the past year, and the debt accumulated by government-run oil enterprise PDVSA has grown by 146 percent.

“The oil price is very low; about half the price we budgeted. That is hard and difficult for Venezuela,” said Mr. Chavez.

The National Assembly passed a law Friday allowing the government to take over oil-service contractors, including several American and British firms that are owed up to a year in back fees.

In recent years, Venezuela had taken control of oil projects from such energy giants as British Petroleum, Exxon Mobil and Phillips Conoco.

Mr. Chavez recently has been trying to woo back foreign investors to shore up his ailing oil industry, which is also plagued by inefficiency and mismanagement.

The measures announced last week threaten to undermine the task, said Nestor Borjas, who heads the business chamber, Fedecamaras, in Venezuela’s oil-producing state of Zulia.

“Companies are very afraid,” he said. He also warned that the new law could discourage foreign investors, whom Venezuela is trying to attract to bid on new exploration projects.

The latest nationalizations also run counter to recent speculation about improved ties with the administration of President Obama.

Mr. Chavez refrained from his usually harsh anti-American rhetoric at last month’s summit of hemispheric leaders in Trinidad, where he shook hands with Mr. Obama and gave him a book about purported past U.S. misdeeds in Latin America.

A columnist for the Caracas newspaper El Universal, Nelson Bocaranda, has reported that Venezuelan officials were speaking to the U.S. State Department about encouraging American car manufacturers and food companies to set up factories and assembly plants in Venezuela.

According to El Universal, PDVSA is so strapped for cash that it has been unable to make its annual allotments to Venezuela’s National Development Fund, which subsidizes health, education, housing and food programs for Venezuela’s poor.

Oil industry analyst Francisco Toro said the government’s heavy borrowing has created a $40 billion shortfall and that the “worldwide credit crunch makes it harder and harder to borrow the difference.”

A recent study by the Washington-based Heritage Foundation concluded that “the recent drop in oil prices could eventually lead to social upheaval in Venezuela and the end of the Chavez era.”

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