(Bloomberg) -- Oil joint ventures that account for about 40 percent of Venezuela's output are being thrown into question by the man advising President Nicolas Maduro in rewriting the constitution.
“We're going to change it,” Hermann Escarra, a constitutional lawyer who participated in the crafting of the country's current charter and is advising Maduro on attempts to rewrite it, said on July 4 in a speech to workers at Petroleos de Venezuela SA to widespread applause, referring to article 303 that allows private ownership of some oil resources through minority stakes in joint ventures with the state producer.
He read a proposed edit to the article that would mandate that the state hold ownership of 100 percent of PDVSA's assets, including any affiliates or associations created in the past or to be created in the future. A PDVSA official declined to comment when asked about the speech and its significance.
Tensions and uncertainty are rising in Venezuela as Maduro pushes forward with the plans for a new constitution, with an election to select delegates for the convention scheduled for July 30. The opposition has said that it won't participate in what it's called an illegitimate process. Critics worry the move could help Maduro consolidate power and push the country, already famous for seizing assets of oil majors in 2007, closer toward Cuban-style authoritarianism.
Escarra spent the past weeks giving talks in favor of the process at government ministries and is also a staunch defender of the country's Supreme Court as it's sought to restrict the powers of the opposition-controlled National Assembly.
Chavez's Nationalization
Hugo Chavez, the late president who preceded and mentored Maduro, in 2007 forced foreign oil companies that operated in Venezuela, including Chevron Corp, Repsol SA and Statoil ASA, to transfer assets into joint ventures controlled by PDVSA. Exxon Mobil Corp. and ConocoPhillips declined and began lengthy arbitration cases against the government after their assets were nationalized.
The country's oil production has since declined even as the country forged expanded oil ties with China and Russia.
“It would be suicide,” Francisco Monaldi, a fellow in Latin American energy policy at the Baker Institute for Public Policy at Rice University, said in an interview, adding that two other candidates for delegates have said similar things over the past weeks. “It would have an enormous cost given that production has fallen so much and that about half of the country's current output comes from these joint ventures with foreign companies.”
To contact the reporter on this story: Fabiola Zerpa in Caracas Office at fzerpa@bloomberg.net.
To contact the editors responsible for this story: Nathan Crooks at ncrooks@bloomberg.net, Carlos Caminada
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