PDVSA’s Self-Inflicted Wound

The new Oil Minister and PDVSA CEO, General Manuel Quevedo has no experience in the oil industry. His appointment is a tantalizing peek at what's happening behind chavismo’s closed doors.

What do you do when you run a state-owned oil company whose finances are a wreck, is billions of dollars in debt, with sharply declining oil production and in technical default, with lots of billionaires who are nervously tracking your every move and contemplating suing your ass? If you roll like chavismo, you fire the last few minimally competent people left in the company and appoint a non-entity with no experience as their replacement, of course!

Maduro just appointed National Guard general Manuel Quevedo as new PDVSA CEO and Oil Minister, replacing both Nelson Martínez and Eulogio del Pino in one single stroke. It amounts to a military takeover of the company. Martínez and Del Pino were among the last few people left with any knowledge of the oil industry in the company, who gave some assurance to PDVSA’s partners and creditors that the inmates hadn’t completely taken over the asylum. It remains to be seen what will happen with the powerful Simón Zerpa, who, as PDVSA’s CFO, was rumored to be the real power behind the throne.

Several media outlets have erroneously reported that Quevedo is an OFAC sanctionée, but although he was on a list prepared by US senator Marco Rubio, he hasn’t made the cut yet and that’s probably the best thing that can be said about him.

It remains to be seen what will happen with the powerful Simón Zerpa, who, as PDVSA’s CFO, was rumored to be the real power behind the throne.

Until his appointment, Quevedo was Housing Ministry and is a relatively obscure figure within chavismo. His experience in the oil business is non-existent; the guy who will be leading PDVSA in the middle of a default and a staggering output decline probably cannot distinguish upstream for downstream and doesn’t know what an indenture is. And we can now count on the fact that as the drop in oil production continues, corruption will escalate because Quevedo and the cronies he’s bringing along with him don’t know how or don’t want to fix any of this, they just want to get richer.

Yet the move is not as completely deranged as it sounds. Maduro’s hold on power depends on keeping a delicate equilibrium among chavismo’s many cliques including, of course, the military, who are probably demanding more power and money as the situation becomes more dire. Maduro was probably forced to appoint Quevedo and others to PDVSA, to keep the military faction happy.

The predicament is that other pressing goals like a coherent restructuring of the country’s external debt, ending hyperinflation and keeping PDVSA minimally functional are not workable if every top level policy decision is made exclusively to placate one faction or another. As long as Maduro keeps prioritizing his commitments to power cliques over sane policy-making, things will only get worse.

Maduro acts as though he has to choose between either holding onto power or avoiding an economic cataclysm, and his instinct is to always go with the former. That’s a tragedy, but not for chavismo; it’s a tragedy for the thirty million people who have become their hostages.