Skip to: Content
Skip to: Site Navigation
Skip to: Search

Brazil, Venezuela, and Mexico: three ways to nationalize oil

Argentina's renationalization of its biggest oil company, YPF, recently caused an outcry. But the cases of oil nationalization in Brazil, Mexico, and Venezuela show that outcomes can vary widely.

(Page 3 of 3)

Petróleos de Venezuela S.A. (PDVSA), the state-owned oil company, was nationalized in 1976 at a time when many countries in the Southern Hemisphere were asserting sovereignty over their natural resources.

Skip to next paragraph

It was hailed as a national victory, but by the 1990s, oil prices were down and Venezuela was in deep economic trouble. Though the country sits on an estimated 900 billion to 1,300 billion barrels of oil in the Orinoco Oil Belt, Venezuela – like many countries that nationalize – lacked the technology, capital, and know-how to monetize the oil underfoot, says Jorge Piñon, a fellow at the Center for International Energy and Environmental Policy at the University of Texas in Austin.

As a result, the country began opening its oil sector to foreign investors. The idea was to attract private international companies with the means to undertake exploration and extraction in exchange for shared profits, says Dan Hellinger of Webster University in St. Louis.

Mr. Chávez won 1998 elections (see chart) on a populist ticket that promised to use the country's vast oil wealth for the benefit of the poor. Though criticized for using oil money to fund his programs, he was not the first Venezuelan leader to use the revenues for political ends.

His presidency set the stage for a new wave of renationalizations, with countries like Bolivia and Ecuador following suit. None of these countries closed the door on international investment, but they raised rents and changed fiscal agreements in their favor.

At home, Chávez lost large swaths of technical know-how when he fired nearly half of PDVSA employees in 2002 during an opposition strike. It took years to regain this lost capacity.

In 2007 (see chart), when Chávez expropriated oil assets in the Orinoco, commanding at least 60 percent ownership in existing international oil partnerships, production fell by nearly a quarter, and he furthered an international perception of Venezuela as a pariah.

"There is a fear on the part of most foreign investors because the Venezuelan ground rules are not the traditional ground rules," says Miguel Tinker Salas, a Latin America professor at Pomona College.

Nevertheless, with the second-largest proven oil reserves in the world, Venezuela has no shortage of nations courting oil investment opportunities. Recent partnerships include China, Vietnam, and Belarus. But Mr. Piñon warns that what these countries can provide in capital is not necessarily matched by the required technological expertise.

Get daily or weekly updates from delivered to your inbox. Sign up today.


Read Comments

View reader comments | Comment on this story

  • Weekly review of global news and ideas
  • Balanced, insightful and trustworthy
  • Subscribe in print or digital

Special Offer


Doing Good


What happens when ordinary people decide to pay it forward? Extraordinary change...

Danny Bent poses at the starting line of the Boston Marathon in Hopkinton, Mass.

After the Boston Marathon bombings, Danny Bent took on a cross-country challenge

The athlete-adventurer co-founded a relay run called One Run for Boston that started in Los Angeles and ended at the marathon finish line to raise funds for victims.

Become a fan! Follow us! Google+ YouTube See our feeds!