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Corruption at PdVSA

By Mery Mogollón | Descifrado

19.04.05 | Posted 18 April 2005 | The recent denunciations published in El Nuevo Herald in the city of Miami concerning the presence of middlemen in the sale of Venezuelan petroleum again has placed on the front page the subject of corruption at Petróleos de Venezuela. It is a topic which certainly has been very neglected by the political administration during the last six years. One must remember that the political parties of the fourth republic were the authors of the phrases "the State within the State” and the “Black Box”, used repeatedly for attacking the different administrations of the state firm. For these political parties all this information was not enough, information which PdVSA furnished through the extended chain of financial, operational and administrative controls which were created to prevent the repetition of the bad practices of the transnational companies.

Before the oil nationalization in 1975, the most repudiated actions of the transnationals were the lack of investments in the operating infrastructure, the depletion of reserves and the absence of any transparency in the marketing of oil. This last point was of vital importance because the taxes which the transnationals paid were calculated on the export value of the oil and the political leadership always suspected that the foreign firms were not declaring the real price to the detriment of the revenues the country should have been receiving. For this reason an additional tax was created, a tax called Valor Fiscal de Exportación (Fiscal Export Value), which allowed the country to protect itself from such practices. This tax was inherited by PdVSA and collected during almost two decades until the previous National Congress, by a clear majority, eliminated it in order to restore the financial resources which the company needed for investment and growth.

During the 1998 campaign, in the midst of a fierce attack on the traditional political parties, the current President of the Republic exploited these concepts of “the State within the State” and “Black Box”, which were also useful for attacking PdVSA and obtaining greater press coverage. But the hope of gaining absolute control of PdVSA was not just Chávez’s alone. On the contrary, it was and has been the desire of all of the political parties. Otherwise, there is no explanation for that approbatory silence all these years, during which all controls have disappeared, controls which the public sector used to have over PdVSA.

What PdVSA embarked on doing, beginning with its creation, until it began to be dismantled, was recover, modernize and augment all the production and refining infrastructure, increase the reserves, establish mechanisms for internal audits and controls and set up a highly professional marketing and supplies team for guaranteeing transparency and greater national benefit en the sale of petroleum.

These four strengths placed PdVSA among the top corporations at world-level. These strengths do not exist today. Oil production is on the decline for lack of investments. Amuay, the largest refinery in Venezuela, shut down because of an electric power failure. There is no exploratory activity and, therefore, there are no new discoveries. The marketing and delivery organization were destroyed. There is no internal control, a requirement which is mandatory for all corporations if they are to comply with accounting standards in use throughout the world.

Today only the Presidential Palace of Miraflores knows what happens inside Petróleos de Venezuela. It has been three years since the company last rendered any accounts concerning operating and financial management; since it last reported on what the so-called “assembly of stockholders” decides which, in passing, no one knows when or where it is held; since it last presented the reports from the commissioner or the independent auditors.

For this reason one has to examine carefully the recent denunciations, because from them has been omitted important information and diverse elements are introduced which add to the confusion rather than clarify the situation. There is no doubt that corruption is a bad thing which might grow to grand proportions within the weakened PdVSA, but in this case, the scandal is ammunition for those who want to bolster their participation in the lucrative business of exporting petroleum. Someone very powerful and having access to confidential information released these documents, which have no seals or signatures certifying their authenticity, evidently with an aim more prosaic than merely informing the public opinion about corruption at PdVSA.

This seems to be a matter concerning internal groups who are fighting over the remains of the enterprise. Within PdVSA there are powerful elements with specific interests: government, the PTT [Patria Para Todos, political party to which Ali Rodriguez, Rafael Ramirez and Bernardo Alvarez Herrera belong] and members of the military who are fighting to the death for the sake of gaining titled positions. Only they could have leaked that information, carefully fragmented, to the communications media and to certain parliamentary members of the opposition.

Unfortunately, many people do not stop to ask what interests are being served by these words. Last week we saw how many politicians were hoping to find oxygen in the denunciations of El Nuevo Herald and have it come out in the newspapers and on television, under the headlines "Corruption at PdVSA". But their great ignorance about the matter is much too evident, a matter which goes beyond what they have read and adapted to their own interests.

Nevertheless, the issue of the middlemen is a grand opportunity for the political parties to dig a little deeper in the PdVSA garbage dump, because this is not an individual or isolated case. On the contrary, there are many things to investigate. For example, one would have to ask, not just the current president of PdVSA, but all previous presidents, for a rendition of detailed accounts in this grievous matter to the commissioners, because it does not seem to be an activity of recent date. At least they should try to denounce the mafias who supposedly are behind the oil sales. One would have to discover who stands behind the middlemen. One would have to know the mechanisms through which PdVSA has been marketing petroleum since December 2002. One would have to unmask certain deputies of the opposition who allegedly have approached certain traders for purposes of assigning petroleum allocations previously assigned to certain members of the military. This is not a matter for personal advancement, but rather a responsibility of the political parties who, in the National Assembly, purportedly represent a large portion of the Venezuelan people.

One would have to require an updating of financial and operational reports. One would have to require an accounting of the delivery of petroleum to Cuba and its strange method of payment. One would have to look into the real state of the infrastructure, because the shutdown at Amuay is much too serious an event to be swept under the rug. One would have to investigate and get to the bottom of things concerning the smuggling of gasoline, its real consequences for PdVSA's finances, establish responsibilities and generate solutions. One would have to summon, before the National Assembly, national and international firms who have operational agreements for purposes of having them reveal why they do not pay any taxes. One would have to actively participate and approve the sale of PdVSA assets held abroad and watch over national interests.

Of course, all this information will not come on a silver platter. Restoring controls over PdVSA is a job requiring the sum of wills and an intense political task. It resembles an impossible task for political parties which only think of surviving the next elections. It will not suffice just to be in agreement with the distorted version of the executive, unless they aspire to someday inherit absolute control over PdVSA, also without rendering accounts of any kind.

The credibility of these parliamentarians is sparse, parliamentarians who dedicate themselves to dusting off supposed documents over the television screens, with a menacing, defiant and personalized attitude, without the presence of a truly political platform which would allow them to have direct access to the PdVSA “Black Box”. The most grievous matter of this is the silence and inertia of most of the political parties concerning the management of the corporation which is the backbone of the national economy. Ignoring what is happening in PdVSA is not just a behavior of complicity and approbation, but also one of the most perverted forms of corruption.

Translation by W.K.

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