Before we get started with this week’s Venezuela :Down The Rabbit Hole, Chapter 3/ Killing The Goose That Laid The Golden Eggs, we have a couple of related articles.

 Telesur (government media) reports there was a pipeline explosion in Venezuela. Apparently, the pipeline was perforated by people trying to extract fuel and it caused an explosion. They must have been tired of those lines at the gas station. As soon as I saw it I expected the usual blaming of the incident on right wing saboteurs backed by Colombia and the US trying to bring down the “glorious Revolution” but there was nothing like that in the article.

 Well, that didn’t take long. I guess the Chavistas realized they were missing an opportunity. Now Telesur is reporting that a spokesman for CPARA (Presedential Commission,although for what we’re not sure) says the pipeline explosion was part of a permanent war by the US backed far right. OK, so what is it?

 Then we have the Washington Post reporting that Iran,Venezuela,Sudan, and 5 others have lost their voting rights at the UN for nonpayment of dues. Iran was suspended earlier this year but was given special permission so they could vote on the security council…funny how that works…anyway…Various counties owe various amounts but Venezuela has the biggest tab at $40 million. Looks like they’ll have to forego a weapons purchase or two if the want to regain their voting rights. Notice, I didn’t say ‘ if they want to feed their people’ because we know that’s not a priority.

 We also have Havana Times reporting that the Venezuela oil production numbers published by OPEC for November were 625,000 bpd (barrels per day) which is quite a bit lower than the  876,000 bpd earlier reported by the Chavistas. Let’s see what gets reported for December.

 And IRC reports that in Ecuador Venezuelans are working for $5.15 a day. This is quite a bit lower than Ecuador’s minimum wage of $20 a day but nowhere near Venezuela’s lowly rate of under $2 A MONTH!!

 We also have OPS Group reporting that since the FAA issued it’s warning regarding flight operations in Venezuela a couple of years ago there has been no change in their status. Libya and Syria were rated the worst followed by Iraq,Pakistan,North Korea, and then Venezuela…not very good company. They mentioned the large number of MANPADs in Venezuela. I guess surface to air missiles make airline people nervous. Venezuela is still rated “NO GO” although there isn’t much news from the international airline community because basically nobody goes there.

 Then we have DW telling us that there were at least 23 dead in Colombia / Venezuela border clashes this week between the ELN and FARC dissidents.There are thought to be 5,000 FARC dissidents  and 2,500 ELN guerillas in the border areas. The ELN move freely across the border, hiding out in Venezuela, with the knowledge of the Venezuelan government. The conflict is over drugs,trafficking routes, and illegal mining and the civilians are caught in the middle.

 And in some good news, baseball is still alive in Venezuela which is the only South American country where baseball is the number one sport.With tickets at $10 it’s a little too much for most Venezuelans to afford and the press box in Maracaibo, equipped for 35 journalists, had only 5 reporters at a recent game…but it’s still alive.

 Now let’s go Down The Rabbit Hole for one of my personal favorites as the Chavistas managed to accomplish the seemingly impossible and not in a good way…

 Chapter 3/ Killing The Goose That Laid The Golden Eggs

 Venezuela’s government owned oil company,PDVSA, was once the envy of the entire oil producing world.They were a founding member of OPEC (Oil Producing and Exporting Countries), the cartel that controls production and therefore pricing for much of the world’s oil.Through years of savvy business administration,not to mention sitting atop the world’s largest proven oil reserves, PDVSA became an economic powerhouse.The government was smart enough to more or less allow them a free hand and just sat back and taxed the profits which,as you might expect, were substantial.

 The government nationalized PDVSA in 1976, however, they were astute enough to allow the company to operate relatively autonomously and continue their partnerships and special associations with a group of large multinational oil companies.

 I liken the situation to that of Hong Kong when it was still under British control. When the Governor of Hong Kong,a Scotsman, was asked what his greatest fear was for the economy of one of the world’s most prolific financial hot spots he said “I can only hope the powers that be,back in London, won’t try to fix it.”

 In 1998 PDVSA was the largest company in Latin America and the 10th most profitable company in the world.It was the world’s 5th largest oil exporter with a workforce of approximately 40,000.It had a healthy contingent of experienced engineers, financial professionals, and outstanding operational support. All that would soon be put to the test.

 In December of 1998 Hugo Chavez was elected President of Venezuela. The former paratrooper was a man without much formal education,training,or experience in politics,business,or pretty much anything else but he was extremely charismatic.He swept in on a populist wave promising to lift the everyday people of Venezuela out of poverty and allow them to benefit from the oil riches as did the country’s elite. His “Bolivarian Socialism” was heralded as “the New Socialism For The Twenty First Century”. It was going to right the wrongs of the past and correct all the inequities and, truth be told, there were many of them.I won’t say he promised free everything for everybody,as you hear today to a degree, but he was definitely leaning that way. The Noam Chomskys and Sean Penns of the world led the parade of academics, celebrities,politicians,economists,and revolutionary wannabes fawning over how great this was going to be.

 The situation for the ordinary Venezuelan in 1998 definitely needed improvement as is obvious when the poverty rate is in the 50% range.The news was not all bad though.We will get into a then versus now conversation later regarding society as a whole but it’s important to note that Venezuela had a growing middle class and the minimum wage was about $200 a month.That’s not much by our standards and admittedly it’s simply not that much but it did allow the average Venezuelan to provide for the essentials and afford a few luxury items. PDVSA employees fared much better. They had houses,cars, and took vacations.The higher up the food chain you got in PDVSA the better the lifestyle as is true in any company or developed economy. Keep that $200 a month minimum wage number in the back of your mind as it will come into play, not just in the overall societal conversation but, in the PDVSA story.

 More tomorrow….