The economic policy of the right: Giving away oil to have power (1)

Published at: 28/06/2024 06:00 PM

Oil is the resource that has driven the transformations of Venezuela and continues to have an important presence in the development of the nation, so it is necessary to present a historical account that allows us to review the advances and setbacks that have happened to us and their expression in the political life of the country.

This research aims to show how the Venezuelan oligarchy has been willing to hand over our oil to transnational companies for their benefit and to support it, we use the work of experts in the field of oil, such as Professor Ali Rodríguez Araque who published a book called “The Process of Oil Privatization in Venezuela”, in which he explained that “the practice of Concessions in favor of foreigners date back to the 20th century in Venezuela, when in 1873, the government of Antonio Guzmán Blanco granted Horacio Roberto Hamilton and Jorge A. . Phillips, a concession to exploit the natural asphalt lake known as Guanaco, in Sucre state, with an area of 4 km2 and reserves estimated at 75 million barrels; of which the Venezuelan State received only 2% of profits from that contract.”

Later, Rodríguez A. explained that in 1885 “this concession was transferred to the New York and Bermúdez Company, a transnational company presented by the Caracas oligarchy that would later generate severe conflicts with the government of Cipriano Castro for actively participating in conspiracy movements against his government; so that the intervention of companies in the internal affairs of Venezuela became a daily practice”.

Years later, in 1905, the then President of the Republic, Cipriano Castro, enacted the Mining Act in order to establish the conditions for contracting the exploration and exploitation of crude oil by foreign oil companies. These companies were able to grant concessions for 50 years. For their part, they had to pay an annual tax of sixty cents per hectare and a royalty of $1.20 per ton of oil extracted. In the investigations, oil expert Rodríguez A. said that “the first major concessions were granted to Venezuelans who transferred them to foreign companies. Such concessions were temporarily suspended during Venezuela's conflict with several European powers and then with the United States.”

To contextualize, the professor at the Universidad de los Andes, Lorena Martínez, explained in her article called “Oil concessions during the government of Juan Vicente Gómez”, published in the Digital Journal History of Education in 2020, that “behind the overthrow of President Cipriano Castro on the part of Juan Vicente Gómez, the action of the concession companies and their respective government, interested in oil exploration and exploitation, was present, a situation with which Castro did not agree. These intentions were underpinned by the interest of establishing in the government someone who would favor such concession companies in a docile and comprehensive way in favor of them.”

Faced with this scenario, since the dictatorship of Juan Vicente Gómez was established in 1908, negotiations were facilitated with large international oil consortiums, which obtained extraordinary advantages, and the conditions were created for oil companies to assume complete control of operations.

Later, in the same article, Professor Martínez explained that “between 1917 and 1931, Gómez appointed Dr. Gumersindo Torres as Minister of Public Works, thus assuming control over hydrocarbons and decreed a reform of the Law of Minas, in addition to proposing the cancellation of the concessions granted to the Caribbean Oil Company and the Venezuelan Oil Concession; such actions were not welcomed by the oil companies that lobbied and succeeded in removing the minister.”

Then, in 1943, taking advantage of the circumstances of the First World War, President Isaías Medina Angarita enacted two laws that were decisive in increasing Venezuelan participation in oil revenues: the Hydrocarbons Act and the Income Tax Act .

In addition, researcher Peter R. Odell, in his book “Oil and World Power” published in 1977, explained with regard to the decree of these laws that “with the first, he manages to unify all the royalties that until then averaged 9%, increasing it, as clearly stated in his Explanatory Memorandum, to a minimum of 16.2/3 %, which is the same as 1/6; so that out of every six barrels extracted, one had to be delivered to the national treasury in kind or in cash, system that was maintained until the signing of the different forms of contracts that materialized in the so-called oil opening. The Medina Angarita reform also imposed other types of contributions and unified the duration of the different concessions by forty years.”

These decisions produced the first confrontations between the Government and oil companies, which were aimed at retaining at least part of the differential income represented by the high productivity of Venezuelan fields compared to North American fields.

Researcher Odell also commented that, in general terms, “between the periods from the overthrow of Medina Angarita to the nationalization of oil on January 1, 1976, the same oil policy was essentially maintained, with some variants deriving both from the international market and from domestic political circumstances, the most notorious fact that could What should be noted was the decision of the transitional government headed by Edgard Sanabria, after the fall of the Marcos Pérez Jiménez dictatorship in 1958, then shortly after the electoral triumph of Rómulo Betancourt, before handing over the command Edgar Sanabria, who served as head of state for the transition, introduced a Reform of the Income Tax Act”.

Odell also explained in his research that according to this reform “a maximum rate of 47.5% was established, an appreciable increase considering that the maximum rate existing up to that time was 28.5%. With a royalty of 16.2/ 3%, on average benefits for the State rose to at least 60%. This broke the formula of the famous fifty-fifty, introduced by Rómulo Betancourt since 1945”.

It seems then that the culture of negotiating the sale of oil in favor of transnational corporations, putting their interests above those of the Fatherland, as well as their participation in the overthrow of those presidents who demand better conditions for the country in the negotiation, has been a recurring practice since the beginning of the exploitation of this resource in Venezuela.

AMELYREN BASABE/Mazo News Team