k o No. 2 • July 2013 o l Latin American Energy Monopolies: t Boom or Bust? u

By Roger F. Noriega and Felipe Trigos O

At a time when several Latin American economies should be “firing on all cylinders” to sustain growth n and development, their critical petroleum sectors are underperforming. Despite hopeful projections, the biggest energy companies in Latin America are controlled by the state and are hampered by government a

interference and short-term political agendas. Although these companies should be the engines of growth c for their national economies, resource nationalism and popular gasoline subsidies limit these companies’ i

abilities to evolve into more efficient, competitive, and profitable enterprises. Brazil’s Petrobras, Mexico’s r Petróleos Mexicanos (Pemex), and Venezuela’s Petróleos de Venezuela S.A. (PDVSA) are energy e giants that are being consumed by mismanagement, corruption, and political agendas. For these compa - nies to maximize their productivity and competitiveness and thereby deliver greater benefits to their coun -

tries, they should pursue professional management, transparency, and free competition with private m companies and should open themselves to foreign capital and technology.

Every energy company in Latin America is every economic ill in the region. However, these A adversely impacted in some degree by government political arguments have fallen flat as state-run oil

regulation, taxation, or interference. However, companies have failed to deliver bonanzas for their n

state-owned petroleum companies are particularly people despite historically high oil prices and the i

vulnerable to intervention, mismanagement, and t corruption. If Western Hemisphere countries wish a to achieve energy interdependence, it is important Key points in this Outlook :

to judge whether state oil companies as they are L • Energy monopolies in Latin America have managed today are the most effective means to proven highly susceptible to politicization, mis - achieving this important goal. management, and corruption. Throughout Latin America’s history, oil and its byproducts have been valued as sovereign patri - • Three energy companies in particular—Brazil’s Petrobras, Mexico’s Petróleos Mexicanos mony. The involvement of foreign companies and (Pemex), and Venezuela’s Petróleos de investors in the resources industry has stirred sig - Venezuela S.A. (PDVSA)—are instructive nificant nationalistic debate over many decades. examples of how government intervention Populist governments have likewise blamed for - can render oil companies uncompetitive and unsustainable. eign investment and capitalism in general for • Professional management, transparency, free Roger F. Noriega ([email protected]), a former senior US Department of State official, is a visiting fellow at competition with private companies, and AEI and managing director of Vision Americas LLC, openness to foreign capital and technology which represents foreign and domestic clients. Felipe can help state-owned energy companies max - Trigos ([email protected]) is a research analyst imize their potential and deliver optimal long- at Vision Americas LLC and a contributor to term dividends for their nations. interamericansecuritywatch.com.

1150 Seventee nth Street, N. W., Wa s hi ngt on, D.C. 20036 20 2.862.5800 www.aei.org - 2- discovery of staggering oil deposits. It is clearer than ever When the Brazilian government took the dramatic that government interference and barriers to foreign capi - step in 1997 to allow private companies to begin compet - tal and technology have inhibited the growth of a strate - ing with Petrobras, the prospects of a free oil market gic industry. In short, government policies based on looked very promising. This historic step, coupled with nationalism rather than on free market principles are a the discovery of vast oil wealth in pre-salt deposits in recipe for failure. Brazil’s territorial waters, contributed to Brazil’s surge as a Even “innovative” hybrid solutions—in which some global economic power. private capital, companies, and competition are welcomed alongside a state-run enterprise—have fallen short of the Government policies based on nationalism goal of producing a dynamic, healthy industry. As long as the state has a direct stake in a “national oil company,” rather than-free market principles are clientelism, over-taxation, politicization, union influence, a recipe for failure. and corruption will hamstring the companies’ ability to compete. And government regulators and politicians would rather adopt policies that restrict the petroleum Although Brazilian authorities were willing to open sector as a whole than see a state-run enterprise fall the country’s energy industry to the private sector, they behind private (or, worse yet, foreign) competition. never intended to liberalize the market in a way that Brazil’s Petrobras, Mexico’s Petróleos Mexicanos would challenge Petrobras’s preeminence. Indeed, policy - (Pemex), and Venezuela’s Petróleos de Venezuela S.A. makers have adopted measures to protect Petrobras’s posi - (PDVSA) are instructive examples of how government tion in the market to ensure sufficient revenue to the intervention can render oil companies uncompetitive and government treasury. In return for these advantages, unsustainable. Petrobras has been considered a paradigm politicians imposed “domestic content” laws to favor of a state-run energy company: a government-owned Brazilian suppliers in the industry and meddled in the entity coexisting with private investment and competi - company’s dealings with powerful unions. Ironically, gov - tion. However, Petrobras’s production and profitability are ernment decisions to preserve Petrobras’s competitiveness falling far short of expectations. Ironically, Mexico’s state- have made it less able to compete with the world’s private owned petroleum company PEMEX is now looking to oil companies. This favoritism has in turn stiff-armed emulate Petrobras’s hybrid model just as that model has competitors and stunted the growth of the lucrative oil proven to be an inefficient means of obtaining investment sector as a whole. and technology. Finally, Venezuela’s state-owned oil com - Recent reports about falling production, exchange- pany PDVSA has become a cautionary tale of how such a rate losses, and excessive government intervention have firm can be consumed by a government’s political agenda, triggered a lack of confidence from investors who once mismanagement, and corruption. believed that Petrobras had the potential to become one of the most profitable oil companies in the world. Petrobras These optimistic investors had forgotten the most important lesson from government intervention in Petrobras, the South American oil giant, has been making Latin America: politicians use the companies they con - headlines for years as a model of how to effectively manage trol to advance their short-term political agendas and a state-run petroleum company. Not long ago, news articles survivability, rather than to benefit the companies, their reported Petrobras’s “exponential” growth and touted its investors, or even national well-being. According to hybrid model of government and private collaboration in Adriano Pires, a renowned Brazilian energy consultant, the oil industry. Unfortunately, the company has fallen “Petrobras is now a tool for short-term economic policy, short of expectations and may face a risky future. used to protect domestic industry from competition, and From 1954 to 1997, the Brazilian government man - to fight inflation. This disastrous process will intensify if aged the oil company as a monopoly and had absolute it is not reversed.” 1 control over its oil exploration and production activities. After discovering pre-salt deposits in 2007, Petrobras Since its creation, Petrobras has been used as a significant started one of the largest corporate capital expenditure source of revenue to fund social programs and to help bal - programs in the world (approximately $237 billion). 2 This ance Brazil’s government budget. ambitious expenditure was fueled by the populist agenda - 3- of former Brazilian president Luiz Inácio “Lula” da Silva, has to import 271,000 barrels of gasoline a day to cover its who viewed Petrobras as primarily a trust fund for social internal consumption; this new demand should have been programs. Although such spending was in fact successful anticipated given that Brazil’s burgeoning middle class at reducing poverty in the short term, it undermined the now accounts for a third of its population. 6 long-term health of one of the most important sources of Four years ago, Petrobras was a net exporter of oil and revenue for the Brazilian government. fuel; it now loses money buying gasoline at international Lula da Silva doubled down on the exploration and prices and selling it domestically at subsidized prices. exploitation of pre-salt deposits, which require expensive Compounding this problem is the fact that only one of and complicated methods to develop. For the most part, the four planned refineries to be built in Brazil is on track Petrobras’s exploration and extraction efforts have cen - for completion. tered on these very-difficult-to-reach deposits. Lula da Sil - These gasoline subsidies, which are meant to contain va’s media propaganda in favor of Petrobras not only gave inflation and placate voters, are sapping Petrobras’s investors a false impression of the financial status of the finances. Ironically, when the Brazilian government tried company. It also misled the Brazilian people into thinking to ameliorate this problem by allowing Petrobras to that oil wealth could sustain excessive government spend - increase the price of gasoline by 6.5 percent, the Brazilian ing indefinitely. government also decided to subsidize electricity (and cut its price by 11 percent). As a result of yet another political Despite the hype, Petrobras’s shares have lost miscalculation, the shares in Brazil’s biggest electricity provider, Electrobras, have dropped 62 percent in the last 50 percent of their value in the last three three years. 7 Petrobras enjoyed high profit margins for several years, and there is no sign of improvement. years. 8 Some deem the recent decline a result of specula - tion. But perhaps the abrupt decline in profit margins Petrobras will never be able to maximize its profitabil - and in the value of Petrobras’s stock is the result and ity as long as it has to deal with the Brazilian governmen - accumulation of several years of inefficiencies and mis - t’s intervention. For example, government policymakers management that was masked by the government’s polit - have imposed “a nationalistic mandate to buy oil plat - ical cheerleading about unrealistic and costly projects. forms and other equipment from Brazilian companies The inescapable fact is that, despite the hype, Petro - which has triggered a soaring debt, major project delays, bras’s shares have lost 50 percent of their value in the last and fields that are yielding less oil.” 3 This mandate was three years, and there is no sign of improvement. 9 In supposed to create jobs and bolster the country’s indus - mid- May 2013, Petrobras—betting on bonds rather than trial capacity. As a result, Petrobras is required to favor stocks—sold $11 billion in bonds in an attempt to attract domestic suppliers despite doubts about their ability to lost confidence from investors. Moody’s Investors Service produce goods and services in accordance with deadlines warned investors that the company has a negative outlook and strict industry standards. and that investing in it continues to be risky. 10 According to the Petroleum Economist , “the govern - One might expect that any professional management ment requires around two-thirds of all goods and services team would move swiftly and boldly to address the slump provided to the oil industry to be produced in Brazil.” 4 To affecting Petrobras. Unfortunately, managers who ulti - function efficiently and to meet its ambitious production mately answer to government ministers are less account - targets, Petrobras should have been able to tap the best able because they can blame politicians and bureaucrats suppliers, even foreign companies. The CEO of Petrobras, for the company’s woes. Time will tell whether the indus - Graça Foster, was recently forced to admit that “all pro - try that once seemed to be the solution to most of Brazil’s duction targets set by Petrobras have been reduced. . . . economic challenges will recover from this crisis if it [T]he previous forecasts were unrealistic.” 5 remains under government management. New challenges for Petrobras began to surface several years ago, and managers who are insulated from responsi - Pemex bility because of government interference have not stepped up to solve those challenges. Domestic fuel The management of Pemex, Mexico’s state-owned demand has increased significantly and Brazil currently national petroleum company, might be an example of - 4- how not to run an oil company. Since Mexico’s national - technology, investment, exploration, refinery upgrading ization of its oil industry in 1938, the state has held com - and so forth constitutes an imperative for long term plete control over its subsurface resources and byproducts. devel opment.” 15 Twenty years later, the scenario has not Unfortunately for Mexico, nationalistic orthodoxy and changed, and Mexico continues to debate if it needs assis - political intrusion have done extensive and avoidable tance from the private sector to try to recover lost ground damage to one of the nation’s biggest sources of revenue. and revive a company that is every day becoming less pro - Seven percent of Mexico’s gross domestic product is ductive, more corrupt, and less efficient. generated by Pemex, which has its profits diverted to sup - From the beginning of his administration in 2006, port government spending. Compensating for an anti - for mer Mexican president Felipe Calderón from the quated and inefficient system of tax collection, the National Action Party (PAN) recognized the need for national budget is balanced only by siphoning off 70 per - urgent measures to save Pemex from significant declines cent of Pemex’s revenues. This diversion of revenue leaves in its production and an uncertain future. In 2008, the oil company without resources to improve its infra - Calderón proposed an amendment to the Mexican consti - structure or to invest in exploration and extraction. tution to reform Pemex by giving it the tools to increase Pemex’s performance after the company is taxed is its production and competitiveness and to make it trans - abysmal. Before 70 percent of Pemex’s revenue is taken parent and profitable. Ironically, at the time, Calderón’s by the government, the company is one of the most goal was to emulate Petrobras’s business model to allow competitive in the world; after it is taxed, however, private investments and the use of deep-drilling-technology Mexico’s oil company is ranked 86th in the world in to exploit new wells. terms of productivity. 11 Calderón may have been mistaken to emulate the It is no surprise, then, that Pemex is currently suffering Petrobras model, but with a Mexican congress controlled from a significant decline in its production. The compa - by the opposition Institutional Revolutionary Party (PRI) ny’s problems are compounded by insufficient refining and the Party of the Democratic Revolution (PRD), his capacity to satisfy internal consumption and the imposi - chances of reforming the constitution were miniscule. tions of a politically powerful and notoriously corrupt Interestingly, the PRI’s unwillingness to allow private Sindicato de Trabajadores Petroleros de la República companies to be involved with the sovereign resource of Mex icana union. Ironically, while production has dropped the Mexican people changed abruptly after the PRI 6.6 percent in five years, Pemex’s workforce has increased returned to power. by 5 percent. There is not a single productive energy com - Calderón’s proposed reforms were thwarted by corrupt pany in the world that increases its workforce when its interests and the nationalistic zeal of opposition parties. production is declining. Pemex’s union, however, ensures What remained of the original draft of the reform was so that while revenue is low, Pemex affiliates receive more diluted that after congressional debate, it has had an benefits and the company hires more employees. 12 insignificant impact on the long-term health of Pemex. Indeed, what was once Mexico’s money tree is now an Mexico’s current president, Enrique Peña Nieto of the underperforming company in serious need of capital and PRI, promised during his campaign to reform Pemex and technology from private companies to unlock the poten - model the company after Petrobras, just as his predecessor tial of Mexico’s shale gas deposits and pre-salt oil wells. had intended. The opposition (primarily the PAN) seems Statistics on Pemex’s performance corroborate this willing to consider allowing private investment in explo - predicament. In March of this year, production reached its ration and extraction of natural resources. However, thus lowest level since March 2011, while exports dropped 10 far, the reforms are unclear, the language has not been percent in comparison to last year. 13 In the last 10 years, drafted, and the way forward has not been defined. Fur - because of the resources that the government drains from thermore, the economic and political power of Pemex’s Pemex, the company has only been able to invest 9.6 per - union undermines the prospects for a reformed or more cent of its revenue to fund all of its essential exploratory transparent Pemex. and production activities. 14 The Peña Nieto administration has suggested that the In 1993, Luis Rubio, a renowned Mexican political energy reform would look to open exploration, refine - analyst, wrote that “Oil, a product in which Mexico has ment, and storage to private investors, but production the greatest competitive advantage, is today one of its would remain under state control. The government greatest hindrances to further development. The need for expects to use this sort of arrangement in the exploration - 5- and production of oil and in the construction of three reforms to avoid confrontations, such concessions could new refineries over the next 12 years. Another specific have dangerous long-term consequences for Mexico’s proposal suggests adding 4 independent directors to the economy and governability. current 11, giving greater budgetary autonomy, and Today, Mexico is the third largest source of foreign oil improving transparency. Pemex would also issue bonds for the United States. If Pemex is not allowed to modern - whose performance would be linked to earnings and sold ize through private or foreign involvement, some predict only to Mexican citizens; these bonds, however, could that Mexico will become a net importer of oil by 2020. 16 eventually enter the public market. Pemex’s tax system would gradually be adjusted to introduce varying rates for PDVSA different activities in the areas of oil and gas. El Pacto por Mexico (the Pact for Mexico)—a consen - PDVSA, which has been abused and debilitated by the sus agreement reached among the leaders of the PRI, state for political ends, represents the worst-case scenario PAN, PRD, and the presidency—includes a commitment of a state-run oil company. Although it was considered a to reform Mexico’s fiscal system and energy sector. If the relatively stable and productive institution before the Mexican congress passes these reforms, it might make election of populist firebrand Hugo Chávez in 1998, the the government less dependent on Pemex’s revenue and company has been decimated by its political masters. increase productivity. However, it will not insulate Pemex Rather than being able to maximize revenues for the from the political agenda of the PRI or the interests of Venezuelan people at a time of record oil prices, PDVSA Pemex’s union. is struggling to maintain even a modest cash flow today. Venezuela has been producing oil for a century, but If Pemex is not allowed to modernize the industry began to flourish in the mid-1940s. It was nationalized in 1974, with PDVSA serving as the state’s through private or foreign involvement, umbrella company and coexisting, cooperating, or com - peting with private companies. PDVSA thrived under some predict that Mexico will become this arrangement, which afforded access to foreign capi - a net importer of oil by 2020. tal and world-class technology. The company leveraged these assets in the effective exploration and production of heavy crude oil as well as the development of a Andrés Manuel López Obrador, former presidential domestic petrochemical industry. It also competed suc - candidate and founder of the populist National Regenera - cessfully in the international market, with holdings in tion Movement, has threatened the Peña Nieto adminis - refineries in Europe and the United States and with oil tration and called for mobilizations throughout the country representing 95 percent of Venezuela’s exports at the in September to oppose the reform or any attempt to time of Chávez’s election. 17 allow private investments in Pemex. In 1996, López After taking power, Chávez set out to tame the power - Obrador led 40,000 workers and took over 500 installa - ful corporation—which was the nation’s economic tions of Pemex (wells, reservoirs, offices) to wage a politi - engine—by bringing the company under the control of cal protest. Pemex’s oil production was paralyzed and its political loyalists. He then used this management team to revenues decreased considerably. capture PDVSA’s revenues to fund (and, in some cases, When President Peña Nieto took the oath of office on manage) his ambitious domestic spending and grandiose December 1, 2012, López Obrador was behind violent international agenda. A PDVSA employee strike in 2002 mobilizations that caused unrest and the destruction of forced a showdown with the regime and Chávez used several establishments in Mexico City. In an attempt to the crisis to purge the company of 20,000 highly skilled appease the radical left, neither the local authorities nor technicians and managers whose experience, professional - the federal government upheld the rule of law or punished ism, and independence were the key ingredients to the the perpetrators. company’s success. It remains to be seen if the Peña Nieto administration Today, PDVSA is more than the traditional cash-cow and the mainstream opposition will allow this sort of for the state. Its various entities have become thoroughly blackmail to derail one of the most transcendent reforms politicized on behalf of the Chavista regime. For example, in Mexico’s modern history. If Peña Nieto waters down PDVSA entities run a government food distribution - 6- net work, take over expropriated properties, assume debts Coronel also mentioned that “[PDVSA’s] refineries are at with proceeds going to political slush funds, and even about 60% of capacity, and its debt has grown from $2 bil - carry out suspicious transactions on behalf of foreign gov - lion in 1998 to $85 billion now.” 22 ernments and criminal organizations. Though production has decreased and the company is According to PDVSA veteran manager Antonio de la unable to pay its bills, PDVSA has doubled its workforce Cruz, the company has been the cornerstone of Chávez’s since 2003 to 110,000 employees. 23 According to the international aid program that he has used to mobilize annual report for fiscal year 2012, presented by Venezue - political support for his government throughout the la’s ministry of petroleum and mining, PDVSA’s accounts Americas. Productive and lucrative ventures by a host of payable to suppliers soared to 41 percent last year. 24 US and European oil companies were either expropriated outright or halted when these private firms rejected new Where To Go from Here? terms imposed by the government in 2006. For example, US companies ExxonMobil and ConocoPhillips had their PDVSA’s future is shackled to the corrupt regime headed fields nationalized. 18 by Chávez successor Nicolás Maduro, who seems ill- In contrast, PDVSA has formed extensive partner - equipped to manage the broad economic crisis brought on ships with companies controlled by China, Russia, and by 14 years of mismanagement. It is unlikely that Maduro Iran—partnerships that have given these allies a toehold will consider any significant reforms to salvage PDVSA, in Venezuela’s rich oil and gas fields. In the case of particularly in light of the fact that he has reappointed China, PDVSA borrowed approximately $32 billion company leaders that have conspired to politicize and loot under oil-for-loan contracts in the 18 months leading up the company. But this unwise course of action makes it to Chávez’s October 2012 reelection, with much of the virtually inevitable that Maduro will fall under the weight money paid into a discretionary fund managed by of his own corruption and incompetence. At that time, Chávez’s cronies to further his electoral prospects. the reconstruction of PDVSA will have to be the singular Although new reserves of heavy crude oil have been priority of any successor. If this is done in a way that is discovered that would make Venezuela one of the world’s open to private and foreign cooperation, Venezuela may top three oil producers, the country is losing ground be able to recover in a relatively short period of time from because of policies that have discouraged international its current woeful condition. investment in its oil sector. 19 As a result, contrary to Fortunately, Brazil’s Petrobras seems to recognize the official numbers, Venezuela’s actual oil production is problems affecting its ambitious agenda. Under the leader - 2.4 million barrels per day, far below the pre-Chávez ship of its new CEO, the company now seems more will - peak of 3.3 million. According to the US Energy Infor - ing to make tough decisions and focus on realistic and mation Administration, overall production levels have viable projects. To that end, government demand for oil declined by roughly one-quarter since 2001; in that same revenue and protectionist measures must be tempered period, net oil exports have also declined. 20 with a view to the long term. Sweetheart deals with China, Russia, and Iran and In Mexico, the road ahead for Pemex is more uncer - giveaways to Cuba and other client states in the Caribbean tain given the political constraints attached to possible and Central America have bled PDVSA dry. Because of reforms that would allow for private investment, technol - this gross mismanagement, there are reports that Venezuela ogy, and transparency. The 1930s nationalization of the is actually importing gasoline to satisfy domestic demand. indus try continues to be viewed positively by the Mexi - In short, Chávez politicized the state-run oil company and can peo ple and political elite. Still, the political parties treated its revenue as his petty cash fund; now the com - must overcome short-term political rivalries or narrow pany is ruined and the till is empty. nationalist sentiments on behalf of a reform agenda that PDVSA’s condition is very dire today. Gustavo Coro - allows the introduction of private investment and tech - nel, former chief operations officer and former member of nology from other countries and companies to boost the the PDVSA’s board of directors, recently stated: “This long-term productivity of Pemex. company cannot be saved; I think it’s very deeply dam - For Petrobras, Pemex, and PDVSA to become more aged. It’s not going to be politically easy because Venezue - productive and competitive and thereby deliver greater lans are very much in favor of state ownership and will benefits for their countries, government leaders must fight tooth and nail to keep a national oil company.” 21 remove the burden imposed on these companies by state - 7- intervention. Although privatization of this sector as a 11, 2013, www.petroleoenergia.com/index.php/26-articulos whole is unimaginable for the foreseeable future, profes - /articulos2/1393-los-dilemas-de-pemex. sional management, transparency, free competition with 12. Alejandro Lopez, “Baja en PEMEX Productividad” [Pro - private companies, and openness to foreign capital and ductivity in Pemex Goes Down], Reforma , June 11, 2013, www technology are required to allow state-owned companies .negociosreforma.com/aplicaciones/articulo/default.aspx?id=127217 to maximize their potential and deliver optimal long- &v=4&urlredirect=http%3A%2F%2Fwww.negociosreforma term dividends for their nations. This transition will not .com%2Faplicaciones%2Farticulo%2Fdefault.aspx%3Fid. be easy, but is a necessary measure to ensure the long- 13. “Producción de Pemex Cae a Mínimo en 18 Meses” term prosperity of the most powerful energy companies in [Production in Pemex at Its Lowest in Last 18 Months], Latin America. El Financiero, April 26, 2013, www.elfinanciero.com.mx/ component/content/article/44-economia/12852-produccion- Notes de-pemex-cae-a-minimo-en-18-meses.html. 14. “Los Dilemas de Pemex.” 1. Simon Romero, “Petrobras, Once Symbol of Brazil’s Oil 15. Luis Rubio, “Mexico’s Economic Reform: Energy and the Hopes, Strives to Regain lost Swagger,” New York Times , March Constitution,” Energy Journal 14, no. 3 (1993). 26, 2013. 16. Rice University, “Baker Institute Researchers Conclude 2. Joe Leahy, “Brazil: The Creaking Champions,” Financial Mexico Could Become Oil Importer by 2020 without New Times , April 21, 2013. Investment,” April 29, 2011, http://news.rice.edu/2011/04 3. Ibid. /29/baker-institute-researchers-conclude-mexico-could-become- 4. “Brazil’s Reality Check,” Petroleum Economist, July 6, oil-importer-by-2020-without-new-investment/. 2012, www.petroleum-economist.com/Article/3057072/Brazils- 17. “The History of PDVSA and Venezuela,” Energy Tribune, reality-check.html. January 17, 2007, www.energytribune.com/647/the-history-of- 5. Carlos Alberto Sardenberg, “The ‘Lula Cost’: Petrobras pdvsa-and-venezuela#sthash.XD2KWT03.dpbs. Underperforms Due To Ex-President Lula’s Intervention and 18. Anatoly Kurmanaev, “Chavez Oil Decline Leaves Populism,” Brazilian Bubble, July 6, 2012, http://brazilianbubble Prospects for Biggest Reserves,” Bloomberg News, March 6, .com/the-lula-cost-petrobras-underperforms-due-to-ex-president- 2013, www.bloomberg.com/news/2013-03-06/chavez-oil-decline- lulas-intervention-and-populism/. leaves-prospects-for-biggest-reserves.html. 6. “In Brazil, an Emergent Middle Class Takes Off,” World 19. Clifford Krauss, “Dwindling Production Has Led to Lesser Bank, November 13, 2012, www.worldbank.org/en/news/feature/ Role for Venezuela as Major Oil Power,” New York Times , 2012/11/13/middle-class-in-Brazil-Latin-America-report. March 8, 2013. 7. Evaldo Albuquerque, “Obama Could Learn a Few Things 20. US Energy Information Administration, Venezuela from Petrobras,” Sovereign Investor, February 19, 2013, (October 3, 2012), www.eia.gov/countries/analysisbriefs http://sovereign-investor.com/2013/02/19/obama-could-learn-a- /Venezuela/venezuela.pdf. few-things-from-petrobras/. 21. Nick Snow, “Badly Damaged PDVSA Should Be 8. See Seeking Alpha, “A History of Profit in Petroleo Replaced, Founding Board Member Says,” Oil & Gas Journal , Brasileiro Petrobras,” September 3, 2012, http://seekingalpha March 13, 2013, www.ogj.com/articles/2013/03/badly-damaged- .com/article/843111-a-history-of-profit-in-petroleo-brasileiro- pdvsa-should-be-replaced—founding-board-member-sa.html. petrobras. 22. Ibid. 9. Kenneth Rapoza, “For Barclays, Petrobras Still Not 23. Christopher Helman, “What Does Chavez’s Death Mean Great,” Forbes , April 30, 2013, www.forbes.com/sites/ For Venezuelan Oil Giant Pdvsa?,” Forbes , March 5, 2013, www kenrapoza/2013/04/30/for-barclays-petrobras-still-not-great/. .forbes.com/sites/christopherhelman/2013/03/05/what-does- 10. Ben Levinson, “It’s Still Bonds over Stocks,” Barron’s , chavez-death-mean-for-venezuelan-oil-giant-pdvsa/. May 18, 2013, http://online.barrons.com/article/ 24. Ernesto J. Tovar, “Venezuelan Oil Firm Pdvsa’s Debt to SB50001424052748704253204578471032916540550.html. Suppliers Jumps 41% in a Year,” El Universal, March 22, 2013, 11. Carlos Huerta Durán and Fluvio Ruíz Alarcón, “Los Dilemas www.eluniversal.com/economia/130322/venezuelan-oil-firm- de Pemex” [Pemex’s Dilemmas], Petroleo & Energia, January pdvsas-debt-to-suppliers-jumps-41-in-a-year.