Chavez's expropriation of oil firms could spark labor unrest

CIUDAD OJEDA, Venezuela — Despite the recent sharp rise in oil prices, Venezuelan President Hugo Chavez last month expropriated 70 oil service companies in western Venezuela, putting some 10,000 Venezuelans out of work, turning local unions against him and forcing production cuts at important oilfields.

The action has drawn little international attention because Chavez stopped short of nationalizing big U.S.-based multinationals such as Halliburton or Schlumberger that carry out technical and highly skilled work in producing oil. Nor have the owners of the 70 Venezuelan firms — in addition to four foreign- owned firms — protested publicly, fearing that doing so might jeopardize settlement negotiations with the government.

Analysts said Chavez seized the private companies, which provide support services such as cleaning and transport across giant Lake Maracaibo, where the oil is located, to save money for PDVSA, the state oil company. It currently owes $5 billion to its creditors. There's a political narrative to the action as well, however.

The companies the government has seized are concentrated in Zulia state, which consistently has opposed Chavez during his 10 years in power.

Now the stage is being set for a confrontation between Chavez and the local power structure, including unions, management and local government, with PDVSA's oil production activities caught in the middle. Oil production, which has fallen 25 per cent during Chavez's time in office, could slide still further and weaken the national economy.

Political unrest could be around the corner. PDVSA has promised to hire 8,000 of the workers laid off from the private companies. But PDVSA is moving at a snail's pace, apparently in part because, according to workers, it's conducting background checks to ensure that they don't have a demonstrated record of opposing Chavez.

The governor, Pablo Perez, charged that Chavez's expropriations have led to a "job massacre." Perez is under pressure from Chavez, with government prosecutors investigating corruption charges against him that he called groundless. It's only two months since Manuel Rosales, Zulia's most prominent politician and Perez's predecessor, fled into exile to avoid similar charges.

Meanwhile, Chavez supporters are accusing Diario La Verdad, the Zulia newspaper that doesn't follow the government's line, of engaging in "media terrorism."

However, it's the prospect of losing their jobs that worries tens of thousands of workers in the oil-dependent towns along the eastern shore of Lake Maracaibo. They ferry workers to the oil rigs, man the docks, work as janitors and the like.

"It could blow up in a month, a month and a half," said German Cortez, who heads a local union. "If people are hungry, they'll hit the streets."

Chavez promised a better day when he came to Ciudad Ojeda on May 8 to celebrate the expropriation.

"To God what is God's, and to Caesar what is Caesar's," a Bible-quoting Chavez told roaring supporters. "Today we also say: to the people what is the people's."

He cast his decision to expropriate the companies as the logical next step for Venezuela under his "21st Century Socialism." But it's turned out to be a re-run of 20th century socialism, with the same inefficiencies that eventually weakened the Soviet communist empire during the Cold War.

During Chavez's decade as president, PDVSA's workforce has ballooned, with the company now performing such non-oil related activities as providing subsidized food to the poor.

Standard & Poor's Rating Services announced Friday that it's lowered its credit rating on PDVSA in part because of uncertainty over whether the company will pay its creditors.

The expropriation was consistent with Chavez's philosophy to seize important sectors of the economy to try to direct more of the country's wealth to the poor, said Jose Luis Acosta, a Zulia state lawmaker for Chavez's political party.

"The private companies didn't have the interests of the state at heart," Acosta said. "They exploited the workers and used the income to finance the activities of the opposition."

Not many analysts share that view.

"PDVSA has cash problems, and Chavez thinks the state can do the work better than the private sector," said Roger Tissot, an energy consultant who closely follows Venezuela for Brazil Energia Latin America. "I think that's a mistake. The quality of service is going to decline, and production is going to suffer."

Lake Maracaibo accounts for about a third of the oil produced in Venezuela.

One of the biggest consequences of Chavez's actions was to turn union officials who'd pledged their fealty to him into outspoken critics.

Union leader Cortez said the private companies did pay well and provided good benefits. "When we had a problem with them, we could get it solved right away," Cortez said. "Chavez wants to control everything."

The men and women who worked for the oil field companies are getting a taste of PDVSA's priorities today.

Adriana Aqui was a strategic planner for Tricomar, one of the 74 companies seized by the government. Aqui, 40, said that in the days immediately after the May 8 expropriation, she overheard PDVSA officials tell workers in her office that they had to join Chavez's United Socialist Party of Venezuela if they wanted to keep their positions with the state company.

Aqui said PDVSA officials also told her three times that the company wouldn't keep her on the job if she'd signed a petition in 2002 calling for a national vote to recall Chavez.

Aqui had signed the petition.

"On May 25, I came to the office and was told that I couldn't work there anymore," Aqui said at her apartment in Maracaibo, Zulia's capital. "I was told it was because of a PDVSA management decision. I feel like my rights have been violated."

Edward Mota feels the same way.

Government security agents twice raided his house last week, said Mota, who worked for a company that ferried oil workers out to the rigs on Lake Maracaibo. "I'll keep fighting until we achieve our goals." A brother is giving him money to feed his family.

As the workers' income has fallen, so have tax revenues. Ciudad Ojeda's tax revenue is down by 40 percent, said budget director Marcos Urbina. City officials have halted a third of their public works projects and are drawing up contingency layoff plans.

Sales at the SM Minimarket on the four-lane avenue that cuts through Ciudad Ojeda have plummeted by 60 percent in the past month, said manager Israel Cordero.

"We practically have to give away vehicles now in order to rent cars," said Renier Linares, manager of a Thrifty car rental branch across the broad avenue.


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