Venezuela

[HenryTo]

Look for Hugo Chavez to continue to make headlines with regards to the crude markets in the coming weeks, as he essentially has no choice:

http://www.bloomberg.com/apps/news?pid=20601109&sid=aTbIhOtky4CI&refer=home

[arley@itspage]

People in political power seem to make the same mistakes repeatedly. Ever growing government, increasing governmental control and socialist leanings have never worked. Didn't work in the USSR, hasn't worked in China, isn't working in Cuba, didn't work in England, and won't work in Venezuela.

What works is the freedom within limits for people to do what they see fit to improve their lot in life.

"Today is the tomorrow you worried about yesterday" may well be coming true. Along with ballooning national debt, and government taking control of enterprises, we have the State of California on the verge of becoming bankrupt.

Right now I have no interest at all in the stocks or bonds of any company or industry that might attract the interest of the Obama government.

[rffrydr]

Any signs of the cuban barter economy e.g. doctors?
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Today is the Tomorrow you worried about Yesterday!

[arley@itspage]

I suppose we shouldn't hammer Hugo Chavez overly much about how he views and deals with his (and I do mean HIS) country and its finances; after all he's a paratrooper by training; and, I suspect Venezuelan paratroopers don't get much education in large scale economic management.

To give you an idea about this, when I was there two years ago he decided to cut imports and have in-country producers produce more. The trouble being that they are all small producers and can't ramp up at a moments notice. At the same time he forced prices down so that producers lose money on every item they produce. All that makes a fair share of the population happy, but it can't work in the long haul.

Interestingly, (sadly) we see the same thing happening right now in this country with the Obama government nationalizing what were once private businesses. That's likely to be a major mistake because it isn't increased government that made this country work, it was lots of people free to pursue their dreams and a better life for their family.

Ahhhh, welll.

[HenryTo]

The desperation in Venezuela is ratcheting up a notch:
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Venezuela's Chavez seizes oil service companies
Fri May 8, 2009 4:27pm EDT

* Venezuela seizes big oil project from U.S. company
* Sends troops to take boatyards in oil heartland
* Opens door to takeovers of major oil contractors (Recasts, adds Williams response, details on Wood Group contract, protesters wounded)

By Daniela Garcia

CIUDAD OJEDA, Venezuela, May 8 (Reuters) - Venezuelan President Hugo Chavez sent troops to seize oil service companies on Friday, tightening his grip on the oil industry as low crude prices pinch the OPEC nation's finances.

Chavez is a socialist and former soldier who has already nationalized large chunks of the OPEC nation's economy, including most of the energy sector and telecommunications companies.

Williams Companies (WMB.N) said the government seized two natural gas facilities in eastern Venezuela after building up millions of dollars in debts for services, adding it could demand payment through international arbitration.

Military vehicles rolled through the streets of Ciudad Ojeda, on the shores of oil heartland Lake Maracaibo, where the government seized hundreds of boats and shipyards after Chavez signed a law to nationalize a group of oil service companies.

"We have started to nationalize all these activities connected to oil exploitation," Chavez said from a confiscated boat sailing across the lake. "This is a revolutionary offensive."

Williams said the government took over the El Furrial and PIGAP II gas compression facilities, which are crucial for boosting the production of fields that produce Venezuela's most valuable crude.

Flush with cash amid an oil boom, the president in 2007 nationalized oil projects worth billions of dollars, leading oil giants Exxon Mobil (XOM.N) and ConocoPhillips (COP.N) to quit the nation and sue for compensation.

Crude revenues have fallen in recent months and Chavez is now moving against smaller service companies the government has struggled to pay. The new law gives the government the option to pay compensation in bonds rather than cash.

NEW TAKEOVERS

The move could lead to further declines in oil production by risking slowdowns in key services following years of underinvestment by state-owned oil company PDVSA, which bankrolls the social programs that keep Chavez popular after a decade in office.

The law makes it easier for the government to later seize assets owned by service giants such as Halliburton (HAL.N) and Schlumberger (SLB.N) as PDVSA builds up billions of dollars in debts with contractors.

It appears to be targeted at specific service companies that have been hampered by severe cash flow problems due to lack of payment by PDVSA, which as of last year owed at least $8 billion to contractors and providers.

Chavez told hundreds of oil workers dressed in the red shirts that identify his supporters that the takeovers included a water injection project part-owned by British company John Wood Group (WG.L).
Six people demonstrating near Maracaibo, across the lake from Chavez's rally, suffered gunshot wounds when an unidentified gunmen fired on them, the investigative police in Maracaibo said.

Wood Group (WG.L) said on Friday it was in a strong position to extract compensation for the loss of its 49.5 percent interest in a 16-year, $800 million contract in Lake Maracaibo.

According to Williams' filings with the U.S. Securities and Exchange Commission, it has three gas compressor facilities in Venezuela with a net book value of $324 million.

Oil Minister Rafael Ramirez said the facilities help PDVSA pump 500,000 barrels of crude per day from Venezuela's best quality fields in the eastern state of Monagas.

Other oil service companies in Venezuela include Baker Hughes (BHI.N) and BJ Services (BJS.N).

[rffrydr]

For all you Bugs out there thinking you're trading outside the bitter politics of nationalization and the banks--the action is turning to hard assets:


http://www.reuters.com/article/rbssIndustryMaterialsUtilitiesNews/idUSLA72395220090310
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Today is the Tomorrow you worried about Yesterday!

[rffrydr]

Nationalize it:

Chavez orders expropriation of Cargill rice plant
By CHRISTOPHER TOOTHAKER
Associated Press Writer
CARACAS, Venezuela (AP) -- President Hugo Chavez has ordered the expropriation
of a rice-processing plant in Venezuela owned by American food giant Cargill
Inc. because the company allegedly was not distributing rice at prices imposed
by the government.
The socialist leader also threatened on Wednesday to nationalize Venezuela's
largest food producer, Empresas Polar, amid rising tension between his
government and privately owned food producers that authorities accuse of
sidestepping price controls aimed at stemming high inflation.
Chavez said Cargill's plant in Portuguesa state violated local laws by
distributing rice without printing the regulated price on its packages. He
instructed Agriculture Minister Elias Jaua to "begin the expropriation process."
"Prepare the decree and we'll expropriate Cargill," he said.
Cargill's rice-processing plant in Portuguesa is one of 13 food-processing
plants the Minneapolis, Minnesota-based company operates in Venezuela. Mark Klein, a Cargill spokesman in Minneapolis, said the company is respectful
of the Venezuelan government's decision and expects an opportunity to clarify
the situation.
"Cargill is committed to the production of food in Venezuela that complies with
all laws and regulations. The rice mill was designed exclusively to manufacture
Parboiled rice, which the company has done at this site for the last 7 years
and elsewhere in the country for 13 years," he wrote in a statement e-mailed to
The Associated Press.
Earlier in the day, Empresas Polar said it had asked Venezuela's Supreme Court
to block the government from occupying one of its rice-processing plants for a
lengthy inspection. The company's Alimentos Polar subsidiary argued it was
"unconstitutional, illegal and arbitrary" for authorities to occupy the rice
plant for a 90-day inspection.
The government says the price controls need to be respected to control
inflation and keep the prices of basic foods affordable, while businesses say
the controls could drive them into bankruptcy.
"These private companies can continue functioning as long as they remain within
the scope of the law and the constitution," Chavez said Wednesday.
Venezuela's inflation is running at 31 percent, Latin America's highest,
despite price controls imposed in 2003 on items such as rice, chicken, sugar
and other products.
The government imposed new rules this week to try to prevent producers from
cutting output of price-regulated products or from modifying products to
circumvent price controls, such as selling paella-flavored rice that does not
fall under the controls.
Companies must ensure that 70 percent to 95 percent of their products are the
types that fall under the price controls.
Over the past year, Chavez has nationalized Venezuela's largest telephone,
electricity and cement companies. His government also is negotiating
compensation for the takeover of the country's biggest steel maker, Sidor.
Critics of the measures argue the government is sidelining private enterprise
by significantly expanding the state's role in the economy. The
nationalizations, they warn, are dangerous because the government could be
forced to lay off workers if the price of oil continues its downward spiral.
Venezuela, which relies on oil for 94 percent of exports and nearly half the
government's budget, has seen prices plunge from last year's record high of
more than $147 a barrel. Benchmark crude for April delivery traded Wednesday at
$45.38 on the New York Mercantile Exchange.
7:51 Early Calls from the Floor
Wheat 3-
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Today is the Tomorrow you worried about Yesterday!

[rffrydr]

Chavez's grand experiment in social justice was as noble as it was doomed. And it was all done before in S. America. The fluke was "peak oil"and an embargoed Cuba allowed this bloated good fairy to strut and primp his way across the stage for a good fifteen minutes of modern-day preludditism. The sad part is that, other than the doctor exchange with Cuba, even with $140 crude, the pillaging of foreign companies and absolute power the poor came away with very little.

China, not Che, was the model-- if you needed a revolution.
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Today is the Tomorrow you worried about Yesterday!

[diesel]

I have no doubt the US has lots of innovative scientific talent, most of the 20th century's great inventions came from there and I am thankful for them.

The US does have its weaknesses though and I think it is wise to acknowledge them:

1. Infrastructure - a disaster, trillions need to be spent here, we cant have more bridges collapsing under us can we.
2. Financial system - a disaster, elites run and game the system for there personal benefit. SEC is inept.
3. Government - a disaster, cant balance a budget, corrupted by lobby groups, forgot about the principles embedded in the constitution long ago.
4. Trade - have outsourced almost entire manufacturing base to Japan and China.
5. Savings - we don't need them do we?
6. Military - overextended and sucking up capital much needed elsewhere. Fighting wars they cant win.
7. Health care - available only if you have money.

At the very heart of this matter is the simple fact that no banking system can exist without savers. Zimbabwe is trying this and showing the folly of such a system. Since no one cares if Zimbabwe’s trade collapses, no one is stopping hyperinflation by holding trillions of Zimbabwean dollars. This is a dangerous thing for the US. The US will be Zimbabwe if it doesn't encourage trade rivals to suck down all the dollars it is creating out of thin air.
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All cats are gray in the dark.

[HenryTo]

We have capital - lots of it, in the form of both physical and more importantly, human capital. All the oil reserves in the world cannot match the human ingenuity here in the US. That giant sucking sound is the good ol' US of A sucking all the productive talent from other countries. The best way to accelerate this process is to grant a "green card" for every foreign student that completes his/her PhD degree at an accredited institution. For Venezuela to be manufacturing steel at this point is laughable, especially with China having an excess annual capacity of 150 million tons.

[diesel]

At least he attempts to balance the books. The crooks in Washington just lend to themselves so they can lend to the banks so they can lend to each other, this massive pass the buck and keep the money bags Ponzi scheme is doomed to collapse. Everyone can't lend to each other! Someone in the system must have CAPITAL and have reserves.
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All cats are gray in the dark.

[rffrydr]

It hurts so bad:

http://www.nytimes.com/2009/01/15/world/americas/15venez.html?_r=1&hp
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Today is the Tomorrow you worried about Yesterday!