Venezuela: PDVSA Debt Increases to dangerous levels

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Venezuela's Minister of Energy and Petroleum, and President of Pdvsa, Rafael Ramírez­, reveal an estimate of $145 billion USD, and a debt of $70 billion USD. The figures also revealed PDVSA's debt increased by $9,6 billion USD in 2009. The way debt is increasing isn't sustainable, given the ongoing decline of Venezuela's oil fields and the lack of progress in carrying out new development projects. PDVSA has signed a flurry of agreements in recent months, but the projects the Joint Ventures will carry out require enormous investments, and PDVSA has elected to keep a 60 % participation (even though existing law allows PDVSA to hold 50 % +1 share).

The foreign multinationals acquiring interests in these new projects have committed to finance a small portion of PDVSA's share of the project, but this money will not be actually disbursed until an official development plan is filed and approved. And this could take years. Once the plan is approved, the construction period begins, and PDVSA will have to borrow huge sums of money. But it's doubtful this money will be available, given the high level of debt PDVSA is carrying. Where will this money come from? Will PDVSA continue borrowing huge sums of money from China, something which amounts to selling the country's future cash flows to the Chinese? Will this turn Venezuela into the jewel of an emerging Chinese colonial empire?

The high level of debt, and the government's erratic behavior, including constant talk of war, high spending on weapons, and the declared intention to turn Venezuela into a communist country will likely lead to less national income, higher debt, and an eventual economic crisis, which we could call "the economic crisis of 21st Century Socialism".

http://www.el-nacional.com/www/site/p_contenido.php?q=nodo/133572/Economía/Deudas-y-cuentas-por-pagar-de-Pdvsa-se-incrementaron-a-$-70-millardos