Strategic ally has bright prospects
RESOURCE-RICH AND WELL PLACED FOR ACCESS TO U.S. MARKETS VENEZUELA WANTS TO CAPITALIZE ON THESE ADVANTAGES AND HAS SPREAD ITS NET WIDE TO ATTRACT FOREIGN PARTICIPATION IN INDUSTRIES RANGING FROM GAS PRODUCTION TO AUTOMOTIVE MANUFACTURING

STATE-OWNED oil giant PDVSA has forged partnerships with a number of international companies, including Royal Dutch/Shell and Mitsubishi, in order to develop a new LNG fuel terminal at Mariscal Sucre

Venezuela has had its share of negative publicity in the U.S. over the past three years, partly because some of the political rhetoric of a government committed to the redistribution of national wealth strikes many Americans as dangerously leftist.

But Venezuelan ministers who have traveled to Washington have been keen to point out that not only does their country have great potential for the future, it is also an important strategic ally for the U.S., as one of this country’s top oil suppliers.

Indeed, when Alan Larson, the Under-Secretary of State for Economic Affairs, was in Caracas in September, he met with the President of the giant, state-owned oil company PDVSA, Alí Rodríguez Araque, and government officials to hammer out an agreement that would guarantee Venezuelan oil exports to the U.S. for the next 20 years. At a time when an air of uncertainty hangs over much of the Middle East, this is a timely deal.

Oil has been the bedrock of the Venezuelan economy for many years, and will continue to be so for some time yet. However, a top priority of the government in Caracas is to reduce that dependency by boosting other sectors, including natural gas and minerals. There is no doubt that Venezuela is resource-rich. The challenge ahead is how to capitalize on this, ideally with the help of foreign investment.

“Our strategy for attracting investment is based on an opening-up, through a system of concessions in fields such as gas, electricity, tourism and large scale public works – from freeways and railroads to prisons,” says Finance Minister Tobias Nobrega. “This program has already started and has been widely accepted by international investors.”
The Minister is well aware that foreign investors hesitate to get involved in a country that has known recent political turmoil, and whose economy is officially predicted to shrink by about five percent this year, compared with the 2.8 percent growth it enjoyed in 2001. But he believes the dip is temporary and that figures will be much more positive in 2003, especially if oil prices remain buoyant.

At the same time, the government has been bringing in a sweeping series of reforms which it hopes will both strengthen fiscal discipline and improve the life of ordinary Venezuelans. “Our economic plan, ‘Consensus Proposals’, is above all aimed at restructuring public finance, stabilizing fiscal accounts, generating rapid economic growth by stimulating productive sectors and improving the quality of people’s lives,” says Mr. Nobrega.
The government is seeking a debt roll-over, which would alleviate some of the budgetary pressure it is currently experiencing against a difficult background of regional economic setbacks.

MASSIVE construction projects are being promoted by the state

However, compared with several other major Latin American economies, Venezuela has been weathering the storm fairly well. “Among the emerging markets of Latin America, Venezuela is the country with the greatest potential and the brightest prospects for growth,” Mr. Nobrega comments.

Recently, Mr. Nobrega was in the Arabian Gulf state of Qatar, which is planning to take a stake in the Mariscal Sucre project for the development of natural gas fields, located offshore north of the Paria Peninsula. This will involve the construction of a liquefied natural gas terminal expected to handle nearly five million tons a year from an off-shore deposit. Royal Dutch/Shell and Mitsubishi are also slated to be partners in this development with PDVSA, illustrating the way Venezuela has successfully spread its net wide in bringing in foreign participation.

Inland, it is not hard to find evidence of the massive construction projects being promoted by the government to upgrade the country’s physical infrastructure and integrate poor and marginalized sections of the population into the economic mainstream. That social mission is still at the heart of government policy, despite the recent economic downturn. “Equitable social well-being is an objective that can never be given up,” says Mr. Nobrega.
Politically, this is crucial if the government is to maintain popular support. As the Organization of American States has acknowledged, the key to success will be achieving unity in the interest of growth and prosperity.