Figure 1.-- |
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The decelopment of Venezuela oil resource began in the Maracaibo Basin of western Venezuela. It is one of the the world's most important oil fields. Geoloists estimate that the Vasin has a production potential of more than 35 billion barrels of oil. The geology of the vasin has created beds of excellent quality, thick reservoirs with high porosity and permeability, and a series of sealing shales, faults, and unconformities, which result in a vast field of recoveravle hydrocarbons. [Stauffer and Croft] The Maracaibo Basin, however, is just the inintial field that the country developed and not the largest by far. Unlike the Maracaibo Bain, oil was discovered north if the Orionoco River despite the fact that there was no surface seepage. The first well was drilled 25 miles north-northwest of Ciudad Bolivar (1936). This was in the Miocene tar sands. and the oil was extremely viscose heavy crude. Current production is centered in an area about the size of Massachusetts. It is beieved to be the largest oil deposit in the world. [Talwani] The fiekd is known as the Faja Petrolifera del Orinoco (Heavy Oil Belt of the Orionnoco. It is belived to contain some 270 billion barrels of recoverable oil. This natches the oil reserves of Saudi Arabia. Advanced technology and higher oil prices could sigbifucantly increase the size of the forld anf thus the reserves. Some geolgists are talking about an amazing 1.3 trillion barrels of oil 'in place'. And some estimates are much higher if the technoklogy can be developed to access the full exrent if the basin which is much larger than is currentky being exploited. Unlike Saudi oil it is not merely a matter of drilling a hole and oil gushes out. Profitable exploitation requires a much higer price than at which Saudi oil is profitable. In effect price determines the area of the field which actually encompases a large part of northeastern Venezuela--north of the OrionicoRiver extendung into the Caribbean.
Oil was not discovered om Benezuela by the Soanish or modern Venezuelans. It was well known by Amer-Indian people for millenia. (Of course modern geologists duscoveredwehere to drill.) Ancient people around the world have encounterd naruarlly occuring pools of oil and found various uses for the substances they encountered on the surface. The use varied as to the level of technology pf the various civilization. The same was true for Amer-Indian people in both North and South America. They were limited to natuarlly occuring seepages. Many Amer-Indian people thus had no access to such substances. But the areas of modern Venezuela with its huge natural resource meant that the native population encountered substantial naturally occuring seepages and pools of oil. Abdtgis included oil of variying vicosity. They referred to the hydrocarbons they encountered as 'mene'. And like other ancient people they found all kinds of uses for that mene. Some of which was exrenely viscous, essentially asphalt. There was no great Native American civilization in the area of modern Venezuela. These in South America were found in the Andes further west and south. So the uses for what they found were the same as noted for other primitive peoples around the world. The use varied depending on the vicosity. And the Spamish explorers who encountered Amer-Insians along the coast report the oil being used for medical purposes, body paint, illumination, and for the caulking of the native canoes. [Martinez].
The first Spanish colony in the New World was Santo Domingo (1493). Spanish conquistadores went on to Cuba and then the mainland, beginuning in Mexico, attracted by the rich Aztec Empire. There was some ecoloration of waht is npw the Venezuelan coast. This occurred at a very eraly period (1499). Spanish settlers on Santo Domingo enslaved the Amer-Indian population. The Amer-Indians began dying off vecause od mistrearmenr abd even more imortantly exposure to European duseases. Santo Domingo settlers began organizing slave raiding expedutions. On these slave raiding expecitions, they noted the natural occurrences of oil in Venezuela. And they learned from Indians some of the usas (medicinal purposes and illimination). And lole the natives they found the sunstances useful for caulking their ships as well as lubricating their netal weapons. Caulking ships was especially imporant as the wooden sailing vessls of the era were in need of constant repair. Impregnating sails was also useful. An early written record described the seepages '“the nectar from Cubagua' (1535). [Fernandez] The author describef the eepages as useful in treating gout and other diseases. A year later, Queen Joanna instructed royal officials in Nueva Cadiz (Cubagua Island), to send as much 'oil petroleum' as possible. (Cubagua was a small island south of Margarita Iskand and can be considered one of the erlest earliest South American/Venezuelan colonial settlments.) The result was the first documented shipment of petroleum from the New World, in this case to Spain. It was sent aboard the Santa Cruz (1536). The purpose was to treat Emperor Charles V who was suffering from gout.
Unlike Mexico there was no rich Amer-Indian civilization in Veneziela. Eventually the Spanish began settling Venezuela. Gaspar de Párraga and Rodrigo de Argüelles report oil seep near Nueva Zamora City (Maracaibo) and other seepage areas near the city (1579). They descrines how it could be used. as well as four more on the outside, and they also describe the uses of the substance. Spanish conquer Alonso de Ojeda mentions the use of the mene by Amer-Indians around Lake Maracaibo (1600).
Spanish law reserved subsoil natural resorces to the Crown It was, however, not until late in the Spamish colonial era and after the huge silver deposits at Potosí in Bolivia had largely been plaued out that the Crown issued a conprehensive mining ordunance. King Charles III of Spain propmulgated the Mining Ordinances for New Spain (1783). He decakred mines the property of the Crown. It allowed for the granting of mining concessions, but the the resiurce and any mines remained the possessions of the Crown. And the Ordinance specified that this included 'any other fossils, be they perfect or semi-minerals, bitumens, or juices of the earth.'
Famed explorer Alejandro von Humboldt describes was the first to describe the asphalt deposits
in a scintific manner (1799). He described the use of tar and asphalt by the loval populatiom and prepares the first list of asphalt and thermal sources natural deposits occuring along the morthern coast Trinidad west to Maracaibo.
The revolution liberating northern South America from Spanish colonial ruke began in Venezuela. After a decade of conflict led by Simon Bolívar, Venezueka won its indeoencebve (1821). There were continued reports of oil and other petro-chemical seepages. Some limured efforts were made to utilize the deposits economically. Local entrepreneurs sent light oil samples from a seep found Escuque and Betijoque (near Lake Maracaibo) Britain, France, and the United Sates (1825). They named the product 'Colombio'. It was also commercially distributed in the region.
Bolívar was initialkly attempring to build Gran Colombia, not a separate Venezuelan narion. He issued his famous Decree in Quito (Ecuador), strengthening and guaranteeing state ownership over 'any type of mines' (October 29, 1829). This would include the hydrocarbon resource. It would establishing the legal basis that would allow Venezuela to establish sovereignty over its subsoil resources. This principle has been the cornerstone of the state pwnership over hydrocarbons and other natural resources. It was in keeping with Spoanish which vested owneship of mines in the Crown and radically different from English law which formed the basis of law in North America, both the United States and Canada.
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The local population of El Moján (Zulia state) explorimg the Socuy River in Perija Sierra encountered a natural gas seep that had been worrying the the people in the town (1830). There was real comcern that it was a volcao. At mid-century approached, Western ecomomies were changing indstrial development created demand for fuels and lubricants. José María Vargas was the first Venezuelan to begin to see significant ecomonic value in the countrt's petro-chemical resource (1839). He analized samples from Betijoque (Trujillo state) and Pedernales (Sucre state). He wrote, "... the discovery of mineral coal and asphalt mines in Venezuela is, according to its current circumstances, more precious and congratulation worthy for Venezuelans and their liberal Government than the discovery of silver and gold." German geologist, Hermann Karstwen, compiled the first summary of Venezuelan geology and published it in the German Geological Society Bulletin (1850). He then began writing about oil seeps around Lake Maracaibo and Barranquilla in neighboring Colombia. A series of aithors in the second half of the century
began describing the oil deposits in inceasing detail, invluding Arístides Rojas, Adolfo Ernst, Miguel Tejera, Wenceslao Briceño Méndez, Wilhelm Sievers, Charles Bullman, E. Fortín, H. Eggers and Clifford Richardson. The Ministry of Public Works began studying the resource and its possible use. At the time Europe was beginning to use oil in a limited way, at first mostly as a lighting sourse (kerosene) and for luibricants, The main fuek source was still coal. The first Venezuealan industrail
oil company was the National Mining Company Petrolia del Táchira (1878). The comaomy not only extracted the oil, byr refuned it. With the decline of whaling, kerosene became the major home lighting fuel. Production was only enough to supply the nearby cities. The New York and Bermúdez Company (NY&BC) was organized to develop Venezuelan petroleum resources, especially asphalt (1885). Coal fueled the 19th century Industrial Revolution im Europe and the United States. Developments at the turn of the century would turn Venezueala' oil into black gold. But Venezuela did not have the technological or finacial capability to develop the resiurces in its own. At the same time chaotic politics were dustrupting several Latin American countries. After an extended civil war, José Cipriano Castro Ruiz seized control of the country (1899). He was the first of five military strongmen from the Andean state of Táchira to brutally rule the country over the next 46 years. Castro and several other corrupt Latin American leaders had the tendency to arange loans from foreign banks, pocket a good share of it and than refuse to oaty back the loans. They would send gun boats to collect the debts and the United States would protest citing the Monroe Doctrine. A serious dispute between Americans Britain over Venezuela had only recently been settled relatively easily, setting the stage for increasing cooperative Anglo-American relations and more Amerivan intervention in the Americas (1895). Also brewing at the time was growing interest aning American and European investors in Venezuela's petroleum deposit. One foreign grouo began assisting revolutionaries. And if all of this was not complicated enough, anti-Semetic riots broke out causing the Netherlands to send gun boats to protect the Jews because many had roots in Curaçao.
The internal combustion engine and the naval arms race exapanded the realtively small demand for oil into a major commodity. And unlike coal, there was almost no oil Europe. The United States had oil reserves, but not Europe. This inbalance would play a major role in both World War I and II. Even before World War I there were efforts to find oil reserves outside the United States. Geologists scoured the earth for oil deposits going into some of the most remote and inhospitable areas of the plannet. But it was well known since the earliest days of Spanish colonization (15th century) that there were important petroleum reserves in what is now Venezuela. Venezuela had achieved independence from Spain (1820s), but was largely govenered by a series of dictators until 1958. It was during the Spanish colonial era and early independence era a poor backwater. Oil began to be developed as an important resource in the United States and Europe (mid-19th century). Venezuelans made minor efforts to develop their oil resourceem but lacked financing and technology (late-19th century). Venezuela's future was fundamentally changed by oil. The charting of massive oil deposits in western Venezuela (Lake Maracaibo) during World War I would prove central to the country's future. Long term Dictator-Presudent Juan Vicente Gómez launched a major effort to develop that resource, bringing in foreign technology and capital (1900s). As a result, Venezuela after World War I became the world's second largest oil producer and largest exporter (1920s). The oil revenue began to fundamentally change the country's society. And Venezuela while officially neutral became a key cog in the Allied war effort. It is said that the Allies flated to vuctiry on a flood of oil. After the War Venezuela steadily increased its oil prosuction. Revenue skyrocketed after Venezueka helped form OPEC and the Arab launched an oil boycott. Oil made Venezuela the richest country in Latin America. As is often the case of oil-rich Third World countries, the oil while benefiting many Vnezuelans at least temporatily, actually retarded the country's economic development or address the needs of many poor Venezuelans. he country's economy in the 20th century has thus been dominated by the oil industry. The Governnent natioanalized the oil indusrry forming PDVSA (1960s). Use of the oil revenue failed to create a productive economy both because of corruption and the socialist orientation of the country's leaders. Instead of building a productive capitalist economy, huge sums were spent on large state enterptises that neither created wealth or productive jobs and had to be subsidized. And even after the end of ductarorial rule, graft abd corruption continued, although PDVSA achieved recognized levels of professional competence. The oil money turned Venezuela from a poor South American backwater into a wealthy country, but one with stareking social inequities. The major problem was the failure to build a productive capitalist ecomomy lkee that of the Asian Tigers which could create decent paying jobs for working-class people. As a result, the Venezuelan people made the fateful decision to turm to Higo Chavez's 21st Cebtury Socialism at the end of the century.
Manuel Antonio Matos organized the Revolución Libertadora (Liberating Revolution) to overthrow Presidebt Cipriano Castro’s dictatirship (December 1901). The revolution became more of a civil war. Matos was hugely rich and a major force in the Liberalismo Amarillo (Yellow Liberalism) political movement. The New York and Bermúdez Company (NY&BC) developig Venezuekan petroleum resources, especially asphalt, help finance the revolution against Casreo. European (Britain, Geramny, and Italy) naval forces blockade Venezuekan oirts,m orimarily La Guira, the port of Caracas (December 1902-February 1903). The United States intervened diplomatically, citing the Monroe Doctrine. There was increasing interest in oil at the time, but it was not yet a major factor in world power politics. The issue for the Europeans was the repayment of loans contracted by the Venezuelan Government. The Europeans complained that President Castro was not honoring his 'international commitments'. Castro for his part turned the matter into a nationalistic issue to garner support against on the developing civil war. Castro damously proclaims "Venezuela, the insolent foreign plant has profaned the holy soil of our homeland." Venezuela at the time was a poor agricutural country with few natural resources. Hydrocarbons were a rare exception, but the value of that resource and the strategic importance was only beginning to dawn on the world. Presidennt Castro oversaw the enactment of a Mining Law which provided the legal basis for granting petroleum oil concessions. It provided for granting concessions and rights transfer for oil exploitation during 50 years, with a tax benefit for the Venezuela state of Bs 2 per concession surface acre. Here both nationalist issues were involved as well as generating state revenue which could be pilfered by corupt leaders like Castro and his Táchira clique sucessors. It also provided a mechanism for undermining the economic power of his enemies. Outside of Venezuela, a series of developmenbts technological would transform the world economy and the stratehic situation turning Venezuelan petroleum intoo a resource of some value into an emnensely valuavle and critical natural resoirce. The Wright brothers invented the air plane and navies began acquiring submarines. These new inventions coild not be powered by coal, they would require oil. The British Royal Navy decided that oil was preferable to coal for its vessels and began to convert as did the United States. Ans then Henry Ford came our with the Model T Ford, the famous Tin Lizzie, which changed cars from a rich mman's toy into a centerpiece of transportation. Trucks would follow. All of this generated a rapidly increasing demand for oil. And Europe had virtually no oil. The United States was the principal producer. This set off a world-wide search for oil, but the Vemezuelan oil resource was already well known. Enter General Juan Vicente Gómez. He has been a close assiciate of President Cipriano Castro, vital to putting him in power and maintaining him there. He replaced Castro (1908). Gómez would become one of the strongest dictators in Latin Americam history, only superceeded ny the Commumnist dictators of modern times (Castro, Chavez, and Maduro). He maintainrd power for thre decadeds. It was Gómez who launched the Venrzuelan oil industry. He opened the door to foreign interests whivh had the finacing and technology to make a real impact. He granted a vomcession to John Allen Tregelles, trpresenting a British company. The concession included rights to explore 12 of the 20 Venezuelan states. Tregelles founded a the Venezuelan Oilfield Exploration Company which leased 27 million hectares.
The 1910s would be dominated by World War I during which oil would rise to become a vital straregic resoiurce, one which the Allies had access to and the Central Powers had very limpted access. The United States at the turn of the 20th centuty had energed as the world's greatest industrial power, but Ford's Model-T launched a whole new industry which propelled America far beyond the European powers and used the internal combustion engine requiring petroleim fuel. And has the number of cars and trucks increased, greatly expanded volumes of oil. Also before the War, the British and Americans had begin to shift their fleets from coal to oil. The Germans with limited access to did not. The British also did not have oil, but the Royal Navy's control of the sea made it possible to import all the oil they needed. Germany could not. President Gómez continued to focus on the oil industry. He revoked the British concession because of sisappointung revenues and royalties. Gomez ptovided virtually the same concession to Rafael Valladares who formed the Caribbean Petroleum Company. This company made millions of dollars exploring prospective oil and asphalt diekds around Lake of Maracaibo. The concession was transferred again to a joint British-Dutch vomapny--the Royal Dutch-Shell Oil Company (1913). All this foreign activity finally began to pay off.
Venezuela's first oil field vuerually erupted -- Guanoco in the Lake Mariacibo Basin (1913). The first succesful well was Barbui 1. The Caribbean Petroleum Company (CPC), majority owned by NY&BC and Royal Dutch Shell, launched an intensive exploration of the Lale Maricaibo area. CPC succeded on the eastern side of Lake Maraciabo--Venezuela Zumaque I (1914). The initial production of around 200 barrels per day (bd) which led to the discovery of the first Venezuelan oil field of world importance: the Mene Grande field. This was the first major field found outside the United States, although geologists were hard at work in the Middle East and Russian Cauacauses. It is one reason the Germans were interested in a Berlin to Baghdad railway. (What is now Iraq was at the time a province of the Ottoman Empire--a German ally.) Throughout the War, however, the United States was the majpt source of oil. And perroleum driven British/French tanks and American trucks would play an important role in the Allied victory. Venezuela was neutral during World War I. Presudent Gómez seemns to have a predelection toward Germany. It did not nake a big difference because thevcountry was nit yet exporing any sufbifivant quantuty of oil. President Gómez issued the First Regulatory Decree on Coal, Oil and Similar Substances (1918). It fixeed royalties ontge cincessiins he had beennissuing at 8-15 percent . It also established, for the first time, the princiole that at at the end of the concession, mines includung oil facilities would revert to the Nation – including all facilities, machinerym and related equipment. This was to occur without any cost to the Goverment.
World War I became the trigger providing the impetus for Venezuela's massive entry into the world oil market. After 1919, the investment and the exportation of Venezuelan oil increased exponentially. The country inder President Gómez enacted its First Hydrocarbons Law. The law fixed a minimum royalty fee at 15 prcent. It also established the idea of national reserves, a concept according to which, once the initial exploration period was over, half of the explored surface had revert to the nation. In addition, concession areas was reduced and the oil fields state property was clearly defined. These measures were criticized by foreign oil companies because it affected the value of the convessions. Thr companies through the domestiv concessions traders, lobbied the Gomez Govennment and Minister Torres. Lrft wing authors are extenely critical, but any assessment of this vontoversy should comaore the successes in Vnezyeal ato the poort performance og the nationalizrd Mexican oil industry--Petroleros Mexicanos (PEMEX). The roaring 20s was a time of dizzing ecomomic growth, especially in the United States. And much of that growth was based on the rxpanding automobile industry. Unlike Europe, the average worker coukd aford to purchase a car. More and larger cars strasily increased the demand for oil. Europeans also expanded automobile production, albeit not on the same scale ascthe the United States. But Europe also required ever increasing quantities of oil and fir Europe this mneant importing oil. The major European fiekds were develpoed by the Soviet Union in the Caucauses. A smaller field was develped in Romania ar Ploesti, But the major wirkd siurce of oil was the United States. All of the future Axis powes (Germany, Itaky, and Japan) were dependent on American oil. Britain was as well, but working hard on develioping fields in the Middle East, especiallu Iraq which was now an independent lingdom inflienced by Britain. As a result, developments in Venezueala were of great iunterest to the major powers. Venezuela's oil potential was further confirmned when Barroso 2 blew. It vlew out some 100,000 bd in an uncontrolled manner during a mere 9 days (1922). National producrion at the time was about imately 6,000 b/d--limited but no longer miniscule. This would significantly change during the decade. In the last year before the onset of the Great Depression. Venezuela produced more than 290,000 bd, and exported some 275,000 bd. This ranked rge country as the world’s second largest oil producer (behind the United States). Venezueal was the world's leading oil exporter--because so much of Anerica's oil exports were consumed domestically. Bast wealth flowed into Venezuela as a result of the export earmings. Cenezuela was the fiest develioing country to experience the oil wealth, but not the first to expeienvce an export boom. For a poot country like Venezuela it was a huge shock. No one at the time was comnsidering the impact of the new-found wealth on the ecommy as a whole or the mind-set of the Venezuelan people.
The 1930s was dominated by thevGreat Depression, just as the 1910s were dominated by World War I. The Great Depression followed on from the United States Wall Streer Crash (1929). For many this was the result of the failure of capitalism. Not understood at the time was the role of government in turning an ordinary market decline into the Great Deoression. Venezueka like other Latin American countries were adversely affected by falling commodity prices which included oil prices. Even so, the country continued to be the second major oil producer and major exporter. The Depression was nit the only major decelopment during the 1930s. Government had come to power in the 1920s opposed to the existing world order (the Soviet Union, Fascisr Italy, and militarist Japan). These governments were set on expansion. They did not, hoerver, have the militrary power to launch major aggressive canpaigns. This changed when Adoof Hitler and the NAZIs seized control of Germany (1933). This fundamentally changed the world ballance of power. And all of these powers were hungary for oil, having no oil significant resource of their own. They were importing oil from America and Venezuela. And Venezuela not only continued to be a huge exporter, but discovered its oil resource was much larger than had been thought. The Orinoco Heavy Oil Belt wass discovered with the drilling of La Canoa 1, located 50 km north of the Orionoco River in Monagas state (1936). We note that as all of this was going on that Venezuela's Communist Government propagandists in 2020 only historical comment was, "December 14th, 1936: An oil strike begins in the oil areas of Cumarebo (Falcón state) and Cabimas (Zulia state). Several cities in the country support the strike against imperialism, oil transnational companies and their Creole agents." Of course this ravid Marxist rhetoric poing as history ignores all kinds of facts. First oil workers were far better paid than other Venezuelan workers. Second, there would be no Venezuelan oil industry without foreign capitalist investment and technology. Third, the only fotce protecting the Venezulan oil industry from seizue by oil hungary Germany, Italy, and Japan was the Anerican and British navies. Such a seizure is just what happened in Romania (1941) the Dutch East Indies (1942) after Pearl Harbor. Fourth, taxing oil revenue was the principal soirce of income for the Venezuelan Government. Another development only partially understood at the time is how mamy of the new weapons that would play a major role in World War II needed oil: airctaft, submarines, aircraft carriers, tanks, trucks, etc. Oil in short was necessary to waging modern war. And Venezueala and America was at the epicenter of the world supply of oil.
As with other countries, the decade was dominated by World War II. Venezuela was a neutral nation. The country was, however, the major world oil exporter and as result attracted the 'intense interest' of both the Allies and Axis. [Leonard and Bratzel] Before the War, Venezuela was exporting oil to Germany. This ended when Hitler launched the War and the British instituded a naval blockade. Given the critical importance of oil in World War II, no other non-beliggerant was more important. And all that was important was where the oil went. Venexuela's principal strategic goal was to protect its vital oil industry from being seized by either the Axis or Allies. In this case given the Allied control of the seas, Venezuela was safe from the Axis. And the Allies had no interest in seixing the oil industry as long as the oil flowed to the Allied war economies and not to the Axis. A secondary goal was was the need to market oil, which was the country principal economic assett. The ideal sutuation would have been to sell to both the Axis and Allies. This was not allowed by the Allies, but then the Allies purchased all the oil Venezuela produced. As a result, the loss of the German market was not consequential. The primary focus Venezuelan diplomacy during the War became to levrage the crisis to increase oil earnings. Protected by the Allies from any danger of Axis invasion, the Venezulans pursued largly commercial interests with cinsiderable success. And Venezuela was an important beneficiary of the American Lend-Lease Program. The oil revenue and Americam economic assistance meant that Venezuela was one of the few Latin American countries that was able to finance modernization efforts during the post-War era. In addirion, effective diplomacy, enabled the country to gain territory, increase its revenue share from foreign oil profits, and reduce its reliance on those foreign oil companies. Venezuela was officially neutral until the last months of the War (Februaey 1945), but in effect supported the Allies. Venezuelan oil was a major assett to the Allies throughout the War.
Venezuela joined with fiur Middle Easrern countries to found the Organization of the Petroleum Exporting Countries (OPEC) in Baghdad, Iraq (1960). The founding countries were Iran, Iraq, Kuwait, Saudi Arabia and Venezuela. Eight other countries joined the organization: Qatar (1961); Indonesia (1962); Socialist Peoples Libyan Arab Jamahiriya (1962); United Arab Emirates (1967); Algeria (1969); Nigeria (1971); Ecuador (1973-1992) and Gabon (1975-1994). The founding document decalred “OPEC’s objective is to co-ordinate and unify petroleum policies among member countries, in order to secure fair and stable prices for petroleum producers; an efficient, economic and regular supply of petroleum to consuming nations; and a fair return on capital to those investing in the industry." Arab countries armed to the teeth by the Soviet Union attempted to invade Israel, but suffered a staggering defeat in the Six Days War (1967). They responded with an Oil Bycott believing that the United States was resonsible for their inglorious defeat. The result was a tripling of the oil price. Oil exporting governebts achieved huge increases in oil revenue. Less well publicized is what hapened with all that monery and the impact pn the countries involved. In Venezuela there was an unorecedented tidal wave of government spending. Immigrants poured in from the rest of Latin America, attrcted by imnvreases in wages. Venezuelans connected wih the Goverment and oil industry benefitted hugely. Here bith corruption and high wages were involved. There was waste of unprecented dimensiins. As a result, the oil money financed increased imports of food and luxury items that thise benefitting coukd afford. I was right in the middle of that when I visited Maragrira Island which was a free trade zone. I have never seen such consumer excess. Actual Venezuelan enterprises suffered, unable to compete with foreign imports. Venezuelan consumers flush with cash wanted high-quality foreign products. Farmers in particular suffered. Venezuela significantly increased food imports. A country which was formerly self sifficent in food production found itself with a substantial portion of food consumption became based on foreigm imports. The oil revenue created a privileged economic elite, but did not either develop a productive economy, in fact the oil minet actually impaired production. Not was the oil recenue spreead equitably among the population. A substantial portion of the population remained poor. And because the oil revenue did not exapnd the productive economy, it did mot create decent paying jobs for working-class Venezuelans.
Although OPEC has been created in 1960, it was not until 1973 when OPEC began to flex its mussle and started setting oil prices with huge increases. Members begam taking control of their domestic petroleum industries. This allpw OPEC members to
control price of oil exports. Venezuela implemented a nre policy of offering no more concessions. This was the first step in nationalosing the oil industry. Thus was oart of the overall oikicy of the new Presudent--Carlos Andrés Pérez. He and his Action Democratica (Democratic Action Pary--AD) which who the elections (1973). He nationalized the iron ore moming industry (1975) and the oil industry the following year (1976). As part of nationalising the oil industry, Pérez created a bationalmoil company--Petroleos de Venezuela S.A. (PDVSA). The Government was now in charge of planning, coordinating and supervising the ciuntry's oil industry. During its first year, PDVSA initiated operations with hree affiliates: Lagoven, Maraven and Corpoven. PDVSA produced 2.3 million bd of oil< It aonly ibcreased investments four times. This was all done under the widespread belef throughout Latin America that state ownership would increase the benefits from the develppment of natural resources to the people. Like other sovialist ideas it sounds logical. Only the reality is that this has not proven how economics actually work. European scocilists have vfound that socialism does not work, so the Eyropeans have core capitalist economies. They have gpind that capitalist ecomomoes are necessart to fund the welfare state. The British were the first to learn this lesson. Agtervthe British Lanour )socialist) Party won the 1945 Geberal Elrction, Britain fell beind the other European countries, even Geramy which had been reduced to rubble. Even Communist China came to that conclusion which is why they inriduced market reforms meaning capitalism (1970s). There are may reasoms for this. Breaurcrats are not very good entreprenurs. And Government ownership opens up endless opportuities for graft. The Brazilain oil company (PETROBRAS) being a case in point.
PDVSA became a reliable oil supplier. It was widely consolidated as one of the most eddective state oil company, of mot the most professionally operated. PDVSA began buying refineries in Europe, United States and the Caribbean (mid-1980s). It started operations in Ruhr Oel (Germany), Nynas (Sweden and Belgium) and Curacao Island. PDVSA alsi bought Citgo, in Tulsa, Ollahoma (1986). It became an effective way of selling Venbezuekan oil in the important Anericn market. Citgo came to operate more than a thousand gas stations and had some 20 percent of the Amerivan gasoline market.
The disparities in Venezuelan society was was a factor in the rise of Col. Hugo Chavez abd Chavismo. Like many poorly educated South Americans, he accepted as a article of faith that socialism would cure Venezuela's economonic problems and aid the poor. Heviffered the country 21st Century Socialism. And many programs initited by President Chavez did aid the poor, financed by the oil wealth. The problem is that in doing so, Chavismo began to destroyed the country's productive economy, both agriculture and industry, and step by step has largely achived just that in his march toward Communism and a Soviet-style command economy. He believed that a state-directed economy could increase production. The result as anyone who has studied histoty and economics was a decline in production. More and more food and basic necesities had to be imported. The oil wealth is such that it could support a great deal, but combined with destroying the ecomomy, mismanagement, and incomportance has result it huge waist. Venezuela has huge untapped oil resources. And despite the need to increase income. PDVSA under Chavismo had been unable to even maintain production levels, let lone increase production. Oil production has been declining. Graft and corruption is also proving costly. And the huge drop in oil prices (2014-15) has drastically reduced oil income. Maduro's response has been to blame it all on the United States and Venezuelan businessmen and proceeding with not only more nationlizations, but the arrest of anyone who criticizes him. Mean while Venezuela suffers from a high inflation rate and shortages of food and baic necesities, a unbelievable sitiation for a country with one of the largest oil resource in the world. President Chavez is seeking to build a socialist society and is intent leveling out incomes, but as in Cuba the primary impact has been to generally reduce the overall standard of living. Socialists can argue that they are seeking to achieve social justice. What is undeniablw is that Chavevez's policies has damged the economy. Food and industrial output has declined. This has not caused President Maduro to reassess Chavez's socialist policies, but to double down on them, blame the problems on the United states, and arrest political opponents.
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Leonard, Thomas M. and John F. Bratzel (2007). Latin America during World War II.( Rowman & Littlefield: 2007).
Martinez, Anibal. Chronology of Venezuelan Oil (Purnell and Sons LTD.: 1969).
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Talwani, Manik. "The Orinoco Heavy Oil Belt in Venezueal (Or hravy oil to the rescue?)" Energy Study: Latin Anerica (The James A. Baker III Institute for Public Policy: Rice University, September 2002).
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