[Marxism] For Venezuela, as Distaste for U.S. Grows, So Does Trade

Yoshie Furuhashi critical.montages at gmail.com
Fri Aug 18 02:12:52 MDT 2006

Diversifying trade partners is not easy. -- Yoshie

August 16, 2006
For Venezuela, as Distaste for U.S. Grows, So Does Trade

CARACAS, Venezuela, Aug. 15 — "Capitalism will lead to the destruction
of humanity," President Hugo Chávez said this month in a speech in
Vietnam, during an overseas tour that included stops in Iran and
Belarus. The United States, he added, "is the devil that represents

Yet even as the talk from Caracas and Washington grows more hostile
and the countries seem to be growing ever farther apart, trade between
Venezuela and the United States is surging.

Venezuela's oil exports, of course, account for the bulk of that
trade, as the country remains the fourth largest oil supplier to the
United States. Pulled largely by those rising oil revenues, trade
climbed 36 percent in 2005, to $40.4 billion, the fastest growth in
cargo value among America's top 20 trading partners, according to
WorldCity, a Miami company that closely tracks American trade.

But American companies are also benefiting, as Venezuela's thirst for
American products like cars, construction machinery and computers has
steadily grown, rising to $6.4 billion last year, from $4.8 billion a
year earlier.

The new growth comes even as Mr. Chávez has done his best to try to
redirect his nation's trade toward what he considers more likeminded
nations. He has formed a new socialist trade agreement with Cuba and
Bolivia. A few Chinese cars can now be glimpsed in showrooms here.
Iranian tractors are rolling off a new assembly line. And a Russian
company plans to open a Kalashnikov rifle factory soon.

Washington has moved to halt American weapons sales to Venezuela, for
what it says is a lack of cooperation in combating terrorism, as Mr.
Chávez deepens ties with countries like Iran.

But while the leaders in Washington and Caracas may regard each other
with distaste, there is little getting around the fact that the
appetite for trade in both nations belies those differences.
Especially when it comes to oil, the economies remain mutually

Some say the ties have left the two nations entangled to a degree that
political or ideological disputes would have a hard time undoing. "The
U.S. has been Venezuela's principal trading partner for a century,"
said Robert Bottome, editor and publisher of Veneconomía, the
country's leading business newsletter. "It's not easy to dismantle
such a relationship, though that is probably Chávez's ultimate

Venezuela moved in that direction on Tuesday, with its national oil
company saying it had agreed to sell its stake in a Houston refinery
for more than $1.3 billion in cash.

Still, the trade numbers illustrate a widening gulf between Mr.
Chávez's increasingly anti-American speeches, aimed at revving his
political base, and the needs of Venezuela's otherwise freewheeling

For instance, non-oil exports to the United States climbed 116 percent
in the first three months of the year, according to the National
Statistics Institute. Venezuela also maintains close ties to Wall
Street banks, with Morgan Stanley and Credit Suisse advising the
governments of Venezuela and Argentina on their coming sale of $2
billion of bonds.

The growth in economic ties has touched several sectors, even if
political tensions have left American companies generally hesitant to
call attention to their good fortune or to offer detailed comments on
their operations.

Regulatory filings show that Venezuela's economy, which grew 9.6
percent in the first half of the year, is lifting profits for many
American companies.

Most delicately, oil services companies like Halliburton, an emblem of
the Venezuelan government's distaste with American foreign policy, are
at the forefront of the deepening interdependence.

"There's rhetoric and there's business," said an official with the
United States Commerce Department who closely follows trade with
Venezuela, and asked not to be identified because of the sensitivity
of relations between the countries. "The Venezuelans can't produce
their oil without our equipment. It's as simple as that."

With 10 offices and 1,000 employees in Venezuela, Halliburton recently
won a contract to assist Petrozuata, a venture between Venezuela's
national oil company and ConocoPhillips, in extracting oil from fields
in eastern Venezuela.

Melissa Norcross, a Halliburton spokeswoman in Houston, declined to
comment specifically on activities in Venezuela, but noted that the
company had operated in the country for more than 50 years.

In its July filing with the Securities and Exchange Commission,
Halliburton reported that its energy services group, which helps
companies drill for oil, hit double-digit sales growth in Venezuela in
the first six months of 2006, offsetting a decline in Mexico.

At the same time, Venezuela's government often speaks out against the
strength of American multinationals, and recently has exerted greater
control over the oil industry, with the largest American oil company,
Exxon Mobil, publicly chafing at its treatment.

Chevron, the second-largest American oil company, said last month that
Venezuela's reorganization of its oil industry would cut Chevron's
output by 90,000 barrels a day later this year.

Mr. Chávez has also been critical of American software companies like
Microsoft, and has issued a decree ordering the country's government
offices to move toward open-source alternatives like Linux.
Government-financed cooperatives in urban barrios and the countryside,
meanwhile, churn out everything from shoes to organic cocoa.

Still, demand for American products remains strong. General Motors,
Ford and other car manufacturers are trying to meet soaring demand,
with sales up 28 percent in July from last year. G.M., Venezuela's
largest car manufacturer, said this month that it would invest $20
million to expand output by 30 percent, adding 600 new workers.

. . . . . . . . . . . . . . . . . . . .

Some government policies have unexpectedly benefited American
companies. For instance, after Venezuela restricted access to foreign
currency for trips abroad to prevent capital flight during a sharp
downturn in the economy in 2003, MasterCard profited because travelers
were still allowed to spend up to $2,500 on their credit cards outside

Though MasterCard has recently stopped breaking out figures for
Venezuela, it credited the exchange controls with helping to raise its
gross dollar volume in the country by 82 percent, to $460 million, in
the third quarter of 2005.

"We're going to have to pass on this one," Janet Rivera, a MasterCard
spokeswoman, replied when asked about operations in Venezuela.

Other American companies continue betting on Venezuela, even as
Washington looks at tightening trade ties. Susan Schwab, the United
States trade representative, placed Venezuela last week on a list of
11 developing countries with relatively high income levels that could
lose preferential trade benefits, a move that drew criticism in Brazil
and Argentina but barely a shrug here.

The agricultural giant Cargill spent $10 million in July to acquire a
Venezuelan flour-milling concern, though it has also expressed concern
over delays in being able to send dividends to its Minnesota owners.

The AES Corporation of Arlington, Va., owner of the utility that
provides electricity to Caracas, is enjoying growth of 5 percent a
year here, said Andrés Gluski, a Venezuelan who heads AES's operations
in the region. "There is no question that the stronger economic system
in Venezuela has helped our business," Mr. Gluski said.

But the biggest beneficiary of Venezuela's commercially robust
relationship with the United States is, paradoxically, the government
itself, which directly controls the oil producer Petróleos de

Despite persistent criticism of Mr. Chávez's economic policies from
his political opponents, Venezuela enjoyed a $27.6 billion trade
surplus last year with the United States, by far the largest market
for its oil.

"I'm reticent to attract much attention to this subject," said Edmond
Saade, president of the Venezuelan American Chamber of Commerce and
Industry, with 1,200 members. "But really, we'd like to leave well
enough alone."


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