Venezuela

Jeff C. Chang

Venezuela

Statistics Recent political development Social programs Trade unions Effect on Nationalization on FDI Hero or Villian

Venezuela

Statistics (as of end of 2005)

Population: 26.5 million GDP: $140.2 billion 80% of export revenue and 25% of GDP comes from

crude oil 67.6% of exports goes to U.S. and 32% of imports

from U.S.

Venezuela

Corporate Tax rate

34% for non-oil companies and 50% for oil companies 30% of oil royalty rate for oil extraction 14% taxes on goods and services

Venezuela

Recent political development

Minimum 51% state own entity on all oil extraction joint venture (Petroleos de Venezuela SA)

Raised royalties and taxes on the joint venture Reduce drilling acreage Seize oil field for those FDI companies that didn’t

comply Total, and Eni SpA

Venezuela

Recent political development (cont.)

Selling of F-16 to Iran Plan purchase of Russian jet fighters to replace F-16

Just agreed to spend 2.7 billion on arms and additional funds to purchase replacement fighter jets

Voted twice to support Iran’s nuclear ambitions Threaten to stop supplying U.S. with oil Rewrote new documents to enable President Chavez

to gain control of all branches of government and allow re-election more than two terms of six years.

Venezuela

Recent political development (cont.)

Tightening international relationship with Bolivia Encourage nationalization of Bolivia’s natural resources

Bolivia have South America’s second-biggest natural gas reserves

Pledge to provide 200,000 barrel of crude oil a month Purchase 200,000 tons of soybean a year 5,000 scholarships and 1,000 advanced intern ships to

Bolivians to study in Venezuela Help to develop a new iron-ore deposit in El Mutun

Venezuela

Social Programs National healthcare

14 million now have access to national healthcare*

Education/Literacy program 1 million children in poorest area of Venezuela received

free education* 1.2 million illiterate adults learns to read and write* 250,000 children received secondary schooling – was

excluded before due to social-economic condition**Ambassador Bernardo Alvarez Herrera, Envoy to the U.S.washingtonpost.com January 18, 2006 Wednesday 12:00 PM

Venezuela

Trade Unions

Union of South American Nations (Unasur)

Minersur A joint Bolivian-Venezuelan mining venture

South Atlantic Treaty Organization To rival NATO

Venezuela

Effect of Nationalization of Industries on FDI

Surprisingly most foreign companies stayed Discovery of Orinoco tar belt with potential of 270 billion

barrels of reserves

Firms that didn’t stay ExxonMobil – will be compensated for their investments

Venezuela Hero or Villian?

Hugo Chura, a Bolivian Official “Previous governments here never cared about you,

but the new President does. And he has friends like Fidel Castro and the Venezuelans who cares about you, too.”*

Election is in early July Where President Morales’s approval rating is over 80%.

Where he wants to elect new assembly to rewrite the constitution.*

*Wall Street Journal, May 25th 2006 by Jose De Cordoba and David Luhnow

Venezuela Conclusion/Questions