As if Venezuela didn't have enough loss-making state owned companies of its own…

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…now it’s taking on Uruguay’s, as well.

Sigh…you’d think one thing we wouldn’t need to import is public sector money pits.

[Hat tip: Setty, who else?]

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1 COMMENT

  1. What would you do If you were a bank representative and you were told by the company you are about to give a loan that they fired 20,000 of their most skilled workers, that they are spending close to $50 million a day in fuel subsidies, that they have hired thousands of employees than know nothing about oil operations or the petroleum business and are working in PDVAL giving away food and appliances or working for some PDVSA department in charge of building houses for the poor. On top of all that, they tell you that they are selling refineries in the US (http://venezuelanalysis.com/news/1890) while investing in rundown facilities in Cuba (http://www.granma.cubaweb.cu/secciones/petrocaribe/de-la-iv-cumbre/art19.html) and that they just bought a bunch of money-losing gas stations in Uruguay. To put the icing on the cake, they tell you that their CEO is Rafael Ramirez and his boss is Hugo Chavez. What would you do?
    Of course PDVSA is sitting on billions of barrels of oil that are going nowhere for now, and they are a solid guarantee for pretty much any size of loan you can think of (in theory the Venezuelan credit capacity is much higher than the current national debt, although this is more related to the GDP than the oil reserves) but the real question is how quickly they can convert those barrels of oil into cash. It’s the simple principle of the time value of money. For the banks this uncertainty translates into risk (which translates into high interest rates) as it is foreseeable that Venezuela will face very serious cash flow problems in the near future (as a matter of fact they are already experiencing them) because they are basically acquiring new debt to pay old debt.

  2. One version of CC had a “permanent” link to a video of a Uruguayan TV show spoofing Chavez.. But this version of CC doesn’t have it.

  3. Think of it as a services export, as they are providing a set of “skilled” laborers. Their “skill”? Running loss-making SOEs, of course. Venezuela is practically peerless in that area. I have no idea why anyone would go searching for such “help,” but if that’s what they wanted, they came to the right place.

    On a slightly related note, I was in BsAs for a while not long ago, and drove many times past one of what was supposedly only a few PDV (not PDVSA there) gas stations in the country. (I wasn’t aware of the expansion before reading Setty’s piece.) There was hardly ever a car actually getting gasoline there, as opposed to the Shell station a couple blocks away that typically had lines, or at least multiple cars. Maybe some genius in the PDVSA HQ thought they weren’t losing money fast enough – ahem, supporting/subsidizing their southern brethren sufficiently. He had to increase his losses to “keep up” with his co-revolutionaries.

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