President Hugo Chavez got the legislative rubber stamp Thursday he needs to complete his effective nationalization of Venezuela's fuel industry. Under the newly passed bill wholesale distributors will have 60 days to sell their businesses to the state oil company, Petroleos de Venezuela SA (PDVSA), or face expropriation. This move effectively puts the Venezuelan government in a similar position to that of the Brazilian government and Petrobras.
But how will the Venezuelan government spend the cash from its oil revenues?
Venezuela is the world's fifth-largest oil exporter and oil accounts for 90% of its exports by value. Chavez wants to maximize the government's take in order to fund what he calls "21st century socialism" (Lula's government in Brazil will try to do the same following recent major oil discoveries - see "Nationalistic Tendency" post below).Venezuela's President has also nationalized the largest telephone, electricity, steel and cement companies. Chavez's main reason for this latest measure is that is is needed to stop intermediary firms from profiting from high oil prices. The government has also said the measure will help stop the illegal smuggling of the country's highly subsidized gasoline to Colombia and Brazil. Venezuela's pump prices are currently some of the lowest in the world at £0.09 a gallon for premium fuel.
In a world increasingly dominated by economic liberalisation, I sometimes wonder whether monopoilising is an efficient solution to social problems.