internal reform cp

neg

1ncThe Bolivarian Republic of Venezuela should:

- Make necessary reforms to PDVSA to encourage foreign investment and asset security

- Upgrade refining infrastructure- Create an Oil Ministry, independent Energy Council, and National

Petroleum Agency with new managerial models to encourage contractual agreements

- Introduce economic reforms including an export price norm, ending currency, price, and wage controls, separating fiscal and monetary policy, and changing ownership and tax laws

- Enact national police training standards, payroll and equipment reform, internal review procedures, and incarceration reform

Counterplan solves internal stability and relations – it’s a prerequisiteMetzker 6/17/13 studies American Foreign Policy at the Johns Hopkins School of Advanced International Studies, correspondent for the Inter Press Service and The Atlantic (Jared Metzker, 17 June 2013, “Analysts Say Oil Could Help Mend U.S.-Venezuela Relations,” IPS, http://www.ipsnews.net/2013/06/analysts-say-oil-could-help-mend-u-s-venezuela-relations/)//KP

Over half of Venezuela’s federal budget revenues come from its oil industry, which also accounts for 95 percent of the country’s exports. Estimated at 77 billion barrels, its proven reserves of black

gold are the largest of any nation in the world. Despite a troubled political relationship, its principal customer is the United States, which imports nearly a million barrels a day from

Venezuela. Venezuela’s oil industry has been officially nationalised since the 1970s, and, as president, Chavez further tightened government control over its production. His

government took a greater chunk of revenues and imposed quotas that ensured a certain percentage would always go directly towards aiding Venezuelans via social spending and fuel subsidies. While these measures may

be popular with Venezuelans, who pay the lowest price for gasoline in the world, critics argue such policies hampered growth and led to mismanagement of Petroleos de Venezuela, S.A.

(PdVSA), the main state-run oil company. The same critics also point to increasing debt levels, slowdowns in productions and accidents stemming from faulty

infrastructure . In order to boost production, PdVSA agreed in May to accept a

number of major loans . This includes one from Chevron, one of the largest U.S. oil companies, which will work with Venezuelans to develop new extraction sites. “The oil sector is in deep trouble in Venezuela – production is down and the economic situation is deteriorating,” explained

Shifter. “They know they need foreign investment to increase production, and this is in part what has motivated Maduro to reach out.” If its economy continues to falter, Venezuela may be further tempted to embrace the United States, which has the largest, most sophisticated fossil fuel industry in the world. Kerry’s recent words suggest that the administration of President Barack Obama would be waiting with open

arms. “ Venezuela cannot confront its economic crisis and the United States

at the same time ,” Diana Villiers Negroponte, a senior fellow at the Brookings Institute, a Washington

think tank, told IPS, “and we are a pragmatic country which will deal with Maduro if it is in our interests.” Indeed, Negroponte said she was “optimistic” about the possibility of rapprochement between the two countries within

the next six months. She notes a “troika” of issues on which the United States is looking for Venezuelan cooperation: counter-terrorism, counter-narcotics and assistance in ridding Colombia of its FARC rebels. Nonetheless, major actions remain to be

taken if normalisation is to even begin, such as the exchange of

ambassadors and official U.S. recognition of the Maduro government. Shifter (who regards the Kerry-Jaua

meeting as “a small step”) was not optimistic that these larger requirements will be completed in the short term.

“I don’t think Washington is going to push hard to send an ambassador to Caracas,” he said. “It will probably take more time to observe the new government and see where it is going.”

Economic reforms reverse inflation and enables economic recovery Christensen 3/9/13 Chief Analyst, Head of Emerging Markets Research and Cross Asset Allocation at Danske Bank (Lars Christensen, 9 March 2013, “A modest proposal for post-Chavez monetary reform in Venezuela,” http://marketmonetarist.com/2013/03/09/a-modest-proposal-for-post-chavez-monetary-reform-in-venezuela/)//KPLet’s just say it as it is – I was very positively surprised by the massive response to my post on the economic legacy of Hugo Chavez. However, as somebody who primarily wants to blog about monetary policy it is a bit frustrating that I attract a lot more readers when I write about dead authoritarian presidents rather than about my favourite topic – monetary policy. So I guess I have to combine the two themes – dead presidents and monetary policy. Therefore this post on my modest proposal for post-Chavez monetary reform in Venezuela. It is very clear

that a key problem in Venezuela is the high level of inflation, which clearly has very significant negative economic and social implications. Furthermore, the high level of inflation combined with insane price controls have led to massive food and energy shortages in Venezuela in recent years. Obviously the high level of inflation in Venezuela is due to excessive money supply growth and there any monetary reform should have the purpose of bringing money supply growth under control. A

Export Price Norm will bring nominal stability to Venezuela Market Monetarists

generally speaking favour nominal GDP targeting or what we also could call nominal demand targeting. For large

economies like the US that generally implies targeting the level of NGDP. However, for a commodity exporting economy like Venezuela we can achieve nominal stability by stabilizing the price of the main export good – in the case of Venezuela that is the price of oil measured in

Venezuelan bolivar. The reason for this is that aggregate demand in the economy is highly correlated with export revenues and hence with the price of oil. I have therefore at

numerous occasions suggested that commodity exporting countries implement what I have called an Export Price Norm (EPN) and what Jeff Frankel has called a Peg-the Export-Price (PEP) policy. The idea with EPN is

basically that the central bank should peg the country’s currency to the price of the main export good. In the case of Venezuela that obviously would be the price of oil. However, it is not given that an one-to-one relationship between the bolivar and the oil price will ensure nominal stability. My

suggestion is therefore that the bolivar should be pegged to basket of 75% US dollars and 25% oil price. That in my view would view would ensure a considerable degree of nominal stability in Venezuela. So in periods of stable oil prices the Venezuelan bolivar would be more or less “fixed” against the US dollar and that likely would lead to nominal GDP growth in Venezuela that would be slightly higher than in the US

(due to catching up effects in Venezuelan productivity), but in periods of rising oil prices the bolivar would strengthen against the dollar, but keep nominal GDP growth fairly stable. EPN is preferable to a purely fixed exchange rate regime My friend Steve Hanke has suggested that Venezuela implements a currency board against the dollar and permanently peg the Venezuelan bolivar to the dollar. However, that in my view could have a rather destabilizing impact on the economy. Imagine a situation where oil prices increase by 30% in a year (that is not usual given what we have seen over the past decade). In that scenario the appreciation pressures on the bolivar would be significant, but as the central bank was pegging the exchange rate money supply growth would increase significantly to curb the strengthening of the currency. That would undoubtedly be inflationary and could potentially lead to a bubble tendencies and an increase the risk of a boom-bust in the economy. If on the other hand the bolivar had been pegged to 75-25% basket of US dollars and oil then an 30% increase in the oil prices would lead to an appreciation of the bolivar by 7.5% (25% of 30%).

That would counteract the inflationary tendencies from the rise in oil prices. Similar in the case of a sharp drop in oil prices then the bolivar would “automatically” weaken as if the bolivar was freely floating and that would offset the negative demand effects of falling oil prices – contrary to what happened in Venezuela in 2008-9 where the authorities tried to keep the bolivar overly strong given the sharp drop in oil prices. This in my view is one of the main cause for the slump in Venezuelan economic activity in 2008-9. That would have been avoided had the Venezuelan central bank operated EPN style monetary regime. I should stress

that I have not done detailed work on what would be the “optimal” mixed between the US dollar and the oil price in a potential bolivar basket. However, that is not the important thing with my proposal. The important thing is

that such a policy would provide the Venezuelan economy with an stable nominal anchor while at the time reduce the risk of boom-bust in the Venezuelan economy –

contrary to what have been the case in the Chavez years. Time to get rid of currency and

price controls The massively unsustainable fiscal and monetary policy since 1999

have “forced” the Venezuelan government and central bank to implement draconian measures to control prices and the exchange rate. The currency controls have

lead to a large black market for foreign currency in Venezuela and at the same time the price controls have led to massive energy and food shortages in Venezuela. Obviously one cannot fight inflation and currency depreciation with interventionist policies. Therefore, this policies will have to be abandoned sooner rather than later as the cost of these policies are massive. Furthermore, it is obvious that the arguments for these policies will disappear once monetary policy ensures nominal stability.

End monetary funding of public finances A key reason for the high level of inflation

in Venezuela since 1999 undoubtedly has to be explained by the fact that there is considerable monetary financing of public finances in Venezuela. To end high-inflation it is therefore necessary to stop the central bank funding of fiscal policy. That obviously requires to bring the fiscal house in order. I will not touch a lot more on that issue here, but obviously there is a

lot of work to be undertaken here. A place to start would obviously be to initiate a large scale (re)privatization program. A modest proposal for monetary reform We can therefore sum up my proposal for monetary reform in Venezuela in the following four points: 1) Introduce an Export Price Norm – peg the Bolivar to a basket of 75% US dollars and 25% oil prices 2) Liberalize

capital and currency controls completely 3) Get rid of all price and wage

controls 4) Separate fiscal policy and monetary policy – stop monetary funding of the

public budget I doubt that this post will be popular as my latest post on Venezuela, but I think that this post is significantly more important for the future well-being of the Venezuelan economy and a post-Chavez regime

should move as fast as possible to implement monetary reform because without monetary reform the Venezuelan economy is unlikely to fully recover from its present crisis.

2nc solvency -- economic stability

PDSVA reform solves Venezuela’s economic crisis Tissot 12 Independent business consultant specializing in South America and founder of Tissot Associates, former Director of Latin America at PFC Energy (Roger Tissot, 1 June 2013, “Why the health of Hugo Chavez matters to Alberta’s oil sands,” Alberta Oil Magazine, http://www.albertaoilmagazine.com/2012/06/hugo-chavez-is-losing-his-hold-on-power-in-venezuela-should-albertas-oil-and-gas-sector-be-worried/)//KP

Oil prices averaged US$12 in 1998. Oil supermajors were investing billions developing the vast resources of the Orinoco belt in central Venezuela, a region with so much heavy oil and bitumen deposits that the U.S. Geological Survey has said the mean recoverable oil resources

there totals 513 billion barrels of crude. Moreover, Chavez did not sound threatening; he initially adopted “orthodox” economic policies. In short, with low oil prices and the Organization of Petroleum Exporting Countries (OPEC) in disarray in the late 1990s, Venezuela didn’t really matter. However,

when a country has as much oil as Venezuela possesses, it always matters. Today, the country stands at a crossroads, both politically and economically. During Chavez’s 13-year reign, the country’s once-proud oil and gas industry has underperformed and grown inefficient – something that has benefitted Alberta and its oil sands sector. He is also waging what some observers suspect is a losing battle against cancer. To make matters worse, a united and organized opposition, led by a charismatic free market presidential candidate in Henrique Capriles, is presenting a serious threat to his

regime. And so, with Chavez fighting – literally and politically – for his life, the question becomes: what would a Venezuela run by someone other than Hugo Chavez look like? It’s a question the people who occupy the office towers in Calgary and Houston are asking themselves. For what happens in this fall’s Venezuela presidential election will have ramifications for the oil and gas industry both in Canada and worldwide.

Chavez, despite his recent troubles, is still a formidable figure. Turn back the clock to 2006 and he had achieved an impressive political record. He had won two elections and a referendum, survived a coup attempt and a disruptive strike from the national oil company, the mighty Petroleos de Venezuela, S.A (PDVSA). He

drastically changed oil contracts and “re-nationalized” the oil industry, directly confronting ExxonMobil and the other commanding highs of the oil industry. He engaged in vast wealth redistribution programs, a massive nationalization spree, expropriating and acquiring any activity deemed “strategic” to the regime. He implemented an oil transfer program to energy dependent Central American and Caribbean countries, allowing

him to gain geopolitical influence. He redirected Venezuelan foreign and petroleum policy, from a U.S.-centric strategy to one aimed at market diversification and strong integration with China, Russia and Latin America. He brought Venezuela back into the OPEC quota system, and became a leader of its price hawks. Finally, he helped to revitalize Cuba’s dying regime by exchanging around 100,000 barrels of oil every day for Cuban doctors, social workers and intelligence experts. With 2006 oil prices having increased five times from 1998 levels, averaging US$58 per barrel, the war in Iraq raging, and with demand from China and India suggesting that oil prices would inexorably move up, Chavez was feeling confident about the future in 2006. He expected that his rule would extend to 2021 or beyond. But the 57-year-old’s political star has faded considerably since the halcyon days of 2006. Although oil prices surpassed US$100 per barrel in 2008, he experienced his first electoral defeat in 2007 when he proposed some amendments

to the constitution, including indefinite re-election for the president. Venezuela experienced a recession in 2009 and 2010 and only by 2011, fueled by recovering oil prices and massive public spending, did the economy improve. However, Venezuela today has

the highest inflation in Latin America, its debt levels are increasing fast, and public services are deteriorating. Citizens live in constant fear due to increasing criminality and insecurity. The country’s deteriorating conditions have soured the electorate, to some degree, on Chavez. The political opposition, characterized by its incompetence and inefficiency in the past, finally launched a clever and well organized primary process in 2011. Venezuelans were exposed to a diversity of options from the candidates seeking the nomination of the “Mesa de la Unidad Democratica” (MUD) party. The chosen leader, 39-year-old Capriles, is a young and charismatic center-left politician who has cleverly focused on issues close to the day-to-day lives of Venezuelans: crime, corruption, declining services, inflation and jobs. He has avoided any direct attack on the president, calling instead for a government of reconciliation and national unity. With a total of three million votes cast during the primary elections in February, the MUD did better than expected, but it is still far below the seven million votes Chavez

achieved in the 2006 elections. Venezuela’s oil production just before Chavez took office was 3.5 million barrels per day (bpd). Since then production has declined below 2.6 million bpd ‚àí although government sources claim current production at around three million barrels daily. During the “old PDVSA” the company’s objective was to produce five million barrels daily by the middle of the last

decade. In 2005 the “new PDVSA” launched a six-year plan called “Siembra Petrolera”. It proposed oil production of 5.8 million bpd by 2012 and an investment of US$239 billion. Not only has the ambitious production goal not been met, but the financial results of

the company have severely deteriorated. Its debt increased from US$2.7 billion in 2005 to near US$33 billion now. The plan also included an expansion of refining capacity, proposing the construction of four new refineries, none of which have been completed. Moreover, existing refineries suffer from constant

accidents and insufficient maintenance . PDVSA’s natural gas objectives have not fared any

better during Chavez’s reign. By now natural gas production should have been around 11 billion cubic feet (bcf) per day, but it has only reached 6.8 bcf. Venezuela was supposed to be a large exporter of liquefied natural gas, and its gas pipeline infrastructure should be connecting the western and the eastern regions of the country.

Instead, Venezuela continues to import gas from Colombia to keep its oil production flowing from the declining Maracaibo fields. The new “Siembra Petrolera” plan for 2011-2015 has more modest goals than its predecessor – reaching daily production of 4.15

million bpd of oil and 13.8 bcf per day of gas by 2015. As production flatlines, PDVSA has been

borrowing money at an incredible speed . From 2008 to 2011, the company’s debt increased by

138 per cent. A large component of that debt comes from China’s oil for debt scheme, perceived by many analysts

as too costly for Venezuela. Moreover, not all the funds from China have been used for capital development, to the increasing consternation of the Chinese lenders. With production stagnating and

domestic demand growing, the cost of subsidising oil consumption in Venezuela is becoming a heavy burden, costing the government around US$15 billion per year. The burden is greater since PDVSA is forced to import more and more oil products because its existing refining capacity has been unable to meet domestic demand. Alberta’s oil sands have been one of the benefactors of the fall from grace of PDVSA and the Venezuelan oil and gas industry during the Chavez presidency. His anti-U.S. rhetoric, plus the threat of nationalization and expropriation, caused some of Big Oil’s players to shift their capital elsewhere, notably to bitumen deposits located in landlocked northern Alberta, which has accelerated development of the resource. But a Chavez defeat

in this fall’s presidential elections, and a return to the Venezuela and PDVSA of the early 1990s, could have the oil and gas industry flocking to Venezuela once again and focusing less on investing in a high-cost resource like the oil sands. While there might not be any threat of expropriation in Alberta, the fact is crude oil from the Orinoco is far cheaper to produce and transport than oil sands crude. What’s more, it only takes five days to move a supertanker from Venezuela to the U.S. Gulf Coast. But whether Venezuela is poised for a regime change is open for much debate. General elections will be held on October 7, 2012. Currently Venezuelans are bombarded by an opinion poll war, but all of them show Chavez ahead. If he is healthy enough to run, he is likely to win the elections. However, his health is a mystery. In 2011 he underwent an operation in Cuba to extract cancer from his pelvic region. Since then he has undergone a series of chemotherapy treatments and a second operation in February. He continues to travel to Cuba for more cancer treatment, but his public appearances are becoming more infrequent and there are rumors he is losing his fight to beat the disease. Currently there is no clear successor within the “Chavista” circles to replace Chavez, but the recent appointment of a Council of State headed by his vice-president, Elias Jaua, could be seen as a plausible transition mechanism. Inevitably some of Chavez’s close advisors are discreetly positioning for such an eventuality. Three possible successors include his brother, Adan Chavez, and Diosdado Cabello – the head of

Venezuela’s National Assembly, as well as Venezuela’s Foreign Minister, Nicolas Maduro. A status quo scenario, where Chavez or a Chavista substitute is in power, would result in a slow but progressive improvement of Venezuela oil output. The ambitious expansion programs may

not be achieved on time, but one can expect a positive trend. Improved governance between PDVSA and its foreign partners is likely to allow for that to occur. If so, new players would be interested in entering this country’s risky oil and gas game again. Capriles’ petroleum policies are harder to discern, but his rare comments on the matter point to favoring a strong national

oil company that would be able, with different management, to achieve high levels of efficiency. What is

required is simply to liberate PDVSA from all that political interference . Capriles

denies any desire to privatize the company, but would like to attract more private investment in the sector. Apparently influenced by the Brazilian model, he likes to think Venezuela could learn from Norway, something Brazil claims to have done. Unfortunately, neither Brazil nor Venezuela is Norway. If Capriles were to be elected, the new administration will face numerous challenges starting with a National Assembly, and other key institutions, such as the armed forces, the electoral authorities and PDVSA, controlled by Chavistas. The new

president would be reluctant to deviate too much from PDVSA’s current strategy. Moreover, current legislation allows the government to increase private sector participation in the oil industry. His focus, therefore, is likely to be on lifting production and improving

earnings . It’s important to point out that any efforts to revive a “technocratic” PDVSA may face some

political realities. Chavez’s meddling in petroleum matters caused many of Venezuela’s best and brightest petroleum minds to leave the country. The expertise lost is now leading an oil boom in Colombia; and one would doubt that after being successful in the private sector, former employees would want to return to a “government

job”. As difficult as the situation is, there are reasons to believe the period of production decline in Venezuela is over. In fact, realizing its huge financial burden and numerous operational

challenges, PDVSA seems willing to assign more resources to capital development. Central to the reversal of production is the US$2-billion “Tri- color” investment plan in the Orinoco belt, aimed at boosting production there to 1.6 million bpd by the end of

the year. Secondly, PDVSA appears to be asking its partners to help finance its share of their joint ventures. Large companies such as Chevron and the China National

Petroleum Corporation seem willing to accept the request in exchange for better governance in the joint ventures. However, the question remains if Capriles, Chavez or a Chavista successor would have the vision and capabilities to further open up the sector, improving contractual terms and offering a concession model that would bring back the capital and competition necessary to finally meet its old goal of doubling current production by the time the next presidential elections take place. If that were the

case, Venezuela, free of ideological hobbles, could focus on regaining market share in its most profitable market, the U.S. Gulf of Mexico – the main target of Alberta oil producers.

Immediate reform to the oil industry attracts foreign investors – solves instability Coronel 12 founding member of the Board of Petroleos de Venezuela and a Fellow in International Affairs from Harvard University (Gustavo Coronel, 8 August 2013, “The Venezuelan Elections: How Can PDVSA Recover?” Journal of Energy Security, http://www.ensec.org/index.php?option=com_content&view=article&id=371:venezuela-chavez-and-pdvsas-oil-woes&catid=128:issue-content&Itemid=402)//KP

A critical financial situation In spite of high oil prices the financial situation of Petroleos de Venezuela can be defined as critical. This is due to the diversion of oil income

to non-oil related government expenditures , the absorption of ancillary services, the significant increase in the number of employees and the potential financial liabilities generated by the numerous legal claims in international arbitration centers related to expropriations (there are more than a dozen such claims against Petroleos de Venezuela in the World Bank). The central government has resorted to using the company as its preferred vehicle to borrow money. The level of debt that stood at some $2 billion in 2000 is now about $50 billion, not including a $22 billion in national debt owed to China, which is being paid with oil produced by the company. This debt, for all practical purposes, can also be said to be on PDVSA’s head. Petroleos de Venezuela is

unable to develop the oil resources of the Orinoco region All of the components mentioned above have led to the basic dilemma faced by the Venezuelan oil industry today, the inability to develop efficiently the important oil resources of the Orinoco Region, where some 120 billion barrels of proven reserves (estimated by using a Recovery factor of 10% of the oil in place)

have remained essentially untapped since the government of Hugo Chavez arrived in power 13 years ago. Prior to Chavez’s arrival several international oil companies such as ExxonMobil, ConocoPhillips, Total and

ChevronTexaco acted as contractors to the state company and had invested some $16 billion in creating a network of facilities, including special refineries to upgrade heavy crude. As the price of oil increased the Chavez government decided to change the rules of the game, increased production royalties and forced a conversion of the existing contracts into joint ventures, in which the state company would have the majority of the shares--

60%--and would exercise operational control. However, investments would be still the sole responsibility of the foreign partners to be compensated with future oil production. ExxonMobil and ConocoPhillips have not agreed to these new terms and have left the country while Repsol, Total and Statoil remained in subordinate roles. Chevron is the only US corporation active in the area. After the change in contractual terms a host of companies from ideologically friendly countries such as Russia, China, Iran, Vietnam, and Cuba, as well as from India, Spain and Japan, have signed contracts with Petroleos de Venezuela ‘to develop’ production in assigned blocks within the region. Four years after the signing of these contracts no additional upgraded production and little new heavy oil production has been generated. The reason seems rather

clear. There is no trust in the Chavez government even among ideologically friendly countries. Foreign companies feel there is a risk that contractual changes could take place after large investments are made. After all, this has happened before. New Vision: a Post Chavez Venezuelan Oil Industry The day after a new government is installed in Venezuela one of its top priority decisions will be how to manage the oil industry. Burdened with non-oil related activities, with four times more employees than required, with a heavy debt and a highly demoralized management team Petroleos de

Venezuela seems to be beyond salvation. However, it might not be politically feasible to eliminate it from day one. There might have to be a transition period, in which the most critical

human, technical, financial and managerial issues should be resolved , before a new management model can be put in place. Such a transition could well last

between 12 and 18 months. Towards a new management model Current organizational aspects Today PDVSA completely controls the Venezuelan oil industry. The predominant legal figure is the joint company in which Petroleos de Venezuela owns at least 60% of the shares. Paradoxically, this system gives foreign partner companies ownership to portions of the oil produced whereas the previous system of service contracts did not. The weak financial situation of Petroleos de Venezuela has forced the company to demand that the foreign partners do all the investing required and be repaid in future

oil production. Petroleos de Venezuela has the monopoly over activities but these activities are of a low quality due to the weak financial and managerial capacity of the company. A Venezuelan saying illustrates this situation: “Ni lavan ni prestan la batea” (“They neither

wash nor do they lend the washing machine”). The government’s regulatory agency is the

Ministry of Energy and Petroleum . For some years now Petroleos de Venezuela

and the ministry have been under one single head , a situation that has generated considerable politicization of the company. There is a deep, almost religious,

belief among Venezuelan politicians that the oil industry is ‘strategic and basic’ and should be totally controlled by the state. This will be one of the paradigms that should be revised if a modern management model is to be installed. Today state ownership of the oil industry is pretty

much set in concrete as part of the current Constitution. An alternative organizational model Upstream activities (exploration and production) should be conducted on the basis of flexible contractual agreements. There is no need to restrict the modalities of association between the nation and private capital to one or a few. They could range from concessions, as in Brazil and many other oil producing countries to service contracts, production sharing contracts or joint companies in which the state could have

variable levels of participation. The underlying objective would be to eliminate the concept of state monopoly in the management of the Venezuelan oil industry. Hydrocarbons in the ground should belong to the nation but hydrocarbons produced could be partially owned and freely marketed by the private sector, as agreed to in contracts. The regulation of the industry could be shared by a Ministry , in charge of formulating energy

policies, an independent Energy Council , which would advise on policies and mechanisms to

operate the industry and a National Petroleum Agency that could represent the nation and

supervise the contracts signed by the nation with the private companies. This Agency would not be operational only supervisory in nature. In this regulatory and supervisory scheme there would be no need to have a state-

owned oil company. The private partner in a concession, joint venture, service contract or production sharing contract will propose an annual program to the National Petroleum Agency within the policy framework and operational guidelines established by the Ministry and the Agency. Upon a commercial discovery the private partner will propose a development plan. The private partner could receive its compensation in oil, if so desired.

Private partners will be selected through bidding. Direct adjudication will not be allowed except in cases of national emergency defined as such by Congress. The selection criteria will include technical, financial

and social and environmental improvement aspects. All contracts will be subject to international arbitration. Few would invest in a country that claims to exercise national sovereignty over contracts with the private sector. Improved revenue stream for the Venezuelan state A reorganized, liberalized oil sector would generate an improved revenue stream for the Venezuelan state. Oil derived revenue would come in multiple forms i.e. in the form of corporate income tax, potential royalties on produced-oil, social contributions by corporate partners paid on employees’ incomes, the

state’s share in any production-sharing agreement, et al. A more independent Venezuelan oil sector could avoid paying derived income into national (non-oil related) social

programs and could retain profits for reinvestment. Further Venezuela should establish a national sovereign-wealth fund to be structured with a portion of oil income similar to the one operating in Norway. In particular a national sovereign-wealth fund could become a formidable source of national income. There are about 37 national funds of this type active today all over the world, with about $10 trillion in assets. The Norwegian Fund has about $350 billion in assets, more than 10 times the current international reserves of Venezuela. A concluding remark Venezuela is a mature oil country. It has an important cadre of solid managers and technical staff that could do an excellent job of

supervision and monitoring of operators and as staff of a National Petroleum Agency. If supervision and regulation is efficient the concession system most probably provides the best combination of optimal national participation and minimum risk to the nation. The insistence in total state control over the oil industry has been a political imperative, one

that has proven to be a failure, due to politicization and corruption. The most successful models of oil industry management exist in countries with moderate or no state operational involvement: US, Great Britain, Norway, Saudi Arabia. Countries in which state involvement is excessive and mostly exhibit failed oil industry management models: Argentina, Bolivia, Mexico, Indonesia and Chavez’s Venezuela.

Internal economic reforms solve economic woes Mufson 3/6/13 energy and financial staff writer for The Washington Post (Steven Mufson, 6 March 2013, “Chavez successors likely to continue to use Venezuela’s oil as political tool,” The Washington Post, http://articles.washingtonpost.com/2013-03-06/business/37482476_1_crude-state-oil-oil-production)//KP

Few analysts expect much change from his vice president and potential successor, Nicolas

Maduro, who would need to bolster his domestic base. The state oil company Petroleos de Venezuela SA

(PDVSA), once regarded as one of the world’s best, has become the government’s - social-spending arm while investment in oil fields has lagged. The year before Chavez became president, Venezuela’s oil production reached 3.5 million barrels a day. Then it slumped so badly that

even after a modest recovery, it averaged only 2.5 million barrels a day last year. Meanwhile PDVSA, even after purging thousands of experienced engineers and managers during a labor dispute,

has grown to about 99,000 employees, according to a report from the Eurasia Group consulting

firm. And half of its staggering $36 billion in debt is held by China. “PDVSA is a shadow of its former self,” said David Goldwyn, a consultant and formerly the State Department’s special

envoy and coordinator for international energy affairs under Hillary Rodham Clinton. “The refineries are

[in] shambles . Fields are in decline. New investment is stagnant .” Chavez also

raised the state oil company’s share in production projects to 60 percent, and while most companies cut new deals, a couple, including Exxon Mobil, went to court. Only historically high crude oil prices of about $100 a barrel have saved the country’s economy from ruin. Revenue stayed high even though the heavily subsidized domestic consumption has jumped 39 percent since 2001 and exports dropped by nearly half to 1.7 million barrels a day.

While condemning the United States and wooing countries such as Russia and Iran, Chavez still relied heavily on U.S. Gulf Coast refineries that were among the few capable of handling Venezuela’s thick, low-quality crude oil. About half of Venezuela’s crude ends up in the United

States. But if the Keystone XL pipeline is built, similar-quality crude from Canada’s oil sands could push out Venezuelan petroleum. “I think Chavez will be remembered for politicizing a once professional national oil company and managing to increase control but decrease production, miss the [liquefied natural gas] boom, and open the U.S. refining sector for Canadian oil,” Goldwyn said. Referring to Canada’s rival oil industry center, Goldwyn said, “He should be a hero in Calgary.” Venezuela was a founding member of the Organization of the Petroleum Exporting Countries, and Chavez pushed for lower production and higher prices. But he wielded little power in the cartel, which is dominated by the Persian Gulf producers. Chavez still used oil as a tool of his foreign

policy. “Venezuela is currently giving away around one third of its oil production at below-market prices, which together account for an estimated $20 billion in lost revenue per year,” said a report by the Eurasia Group, equal to 6.5 percent of gross domestic product. The firm estimated that Venezuela shipped around 200,000 barrels a day to Caribbean and Central American countries in 2012 and 115,000 barrels a day to Cuba. In addition, Venezuela is sending more oil to China — about half a million barrels a day, according to

the Eurasia Group — in part to meet its heavy interest payments on debt held by China. Few analysts expect change in the Chavez oil policies soon. “I doubt that the opening of the petroleum sector is in the cards, especially in the short term,” said Michael Shifter, president of the Inter-American Dialogue. “Maduro will have to tread carefully, and reforming PDVSA could risk support within Chavismo [the name given to

Chavez’s political movement]. On the other hand, if the economic situation becomes completely untenable and Maduro eventually faces the choice of a greater opening or losing political control, he might opt for the former, however reluctantly.” A report by Daniel

Kerner, an analyst at the Eurasia Group, said, “Under a successor government, PDVSA would likely remain a key source of financing for the government’s social programs, infringing on its investment capacity.” “A Maduro administration is unlikely to significantly alter any of these programs,” Kerner added. “In fact, in a context where the president would likely have lower political capital than Chavez and would likely face significant economic challenges, he

would be even more reliant on maintaining such programs for his own political capital.” Added Goldwyn, “It would take years to rebuild if the government were so inclined, but a change in course anytime soon is unlikely.” Bernard Aronson, assistant secretary of state for inter-American affairs under

Presidents George H.W. Bush and Bill Clinton, said: “Venezuela was a country that needed a social revolution. You had a condominium of two highly corrupt political parties that alternated power and

sucked all the wealth out of the country.” But, Aronson added, Chavez did not deliver the sort of social

revolution needed, but instead left Venezuela with high inflation, declining oil output and corruption. “ The economy needs some reform and change . It is not going to get anywhere yoking its future to Iran,” Aronson said. “If Maduro and what’s left of Chavismo want to survive, they will have to make accommodations.”

Foreign investment solves stability Campbell 4/16/13 Editor of Alberta Oil Magazine (Daren Campbell, 16 April 2013, “A new leader could signal change for Venezuela’s troubled oil and gas sector,” Alberta Oil Magazine, http://www.albertaoilmagazine.com/2013/04/a-new-leader-could-signal-change-for-venenzuelas-oil-and-gas-sector/)//KPThat’s because Venezuelan heavy oil is a competitor to the bitumen and heavy oil Alberta produces, and as long as

the Venezuelan oil and gas industry is badly underperforming, some of the investment that

could be going to develop its reserves will flow to the oil sands. But now that Maduro is the new boss in

Venezuela, is he likely to reverse the decline? Devon Energy Big Box To gain some insight into that question, I contacted Roger Tissot – a native of Colombia who is now a British Columbia-based industry consultant who specializes in South America. Last June, Tissot wrote an essay on Chavez and the future of the Venezuela oil and gas industry that appeared in Alberta Oil. Maduro was Chavez’s hand-picked successor, and knowing that,

Tissot says no one should expect a drastic reversal of policies – or a drastic turnaround in the

industry’s fortunes. However, the status quo can’t continue, either. Maduro needs oil and

gas revenue to fund the country’s social programs and keep the country from

falling into chaos. A better run, more free market-leaning oil and gas industry will

help Maduro accomplish this and keep him in power longer. Therefore, Tissot thinks

Maduro has little choice but to shake things up when it comes to oil and gas matters. “One could expect a government more accessible to foreign investments, and foreign

investors concerns ( rule of law, security of payments, stability of contracts .) Although it is too early to say, one should expect the Venezuelan oil sectors – after years of stagnation and mismanagement – to perhaps start showing some signs of life again,” he wrote in an email exchange. “How soon and how deep is something that will depend on how Mr. Maduro’s administration performs.

Reinventing oil industry solves debt and internal stability Gonzalez and Vyas 3/6/13 Houston Bureau Chief at The Wall Street Journal; Venezuela correspondent for The Wall Street Journal (Angel Gonzalez; Kejal Vyas, 6 March 2013, “Revival of Venezuela's Oil Sector on Stand-By,” The Wall Street Journal, http://online.wsj.com/article/SB10001424127887324128504578344612480601482.html)//KP

To reach its full potential, Venezuela´s entire oil industry sector needs to be reinvented ,

something that is unlikely, said Luis Pacheco, a former PDVSA executive fired during the oil strike of 2003 along with 20,000 other employees who opposed Mr. Chávez. In 2000, Mr. Chávez signed its first oil deal with Cuba, providing the communist island with 53,000 barrels a day of cut-rate oil, a sum that has risen to 110,000 barrels now. In return, the Cuban government has sent some 40,000 doctors and experts to support the popular social programs developed by Mr. Chávez. Mr. Jordá, who called those oil deals unsustainable, said that domestic fuel

prices, the world's lowest at around 6 cents a gallon, will also have to rise at some point. The cost to the country of the domestic fuel subsidies has also increased because refinery

accidents forced the government to import growing quantities of gasoline ,

according to the EIA. The Venezuelan government denies it imports fuel. Worsening fiscal

conditions will also prompt Mr. Chávez's successors to improve relations with

foreign investors —and eliminate bottlenecks created by the deceased leader's highly-personal, hands-on management style, said Jim Loftis, a partner with Vinson & Elkins

LLC's international arbitration practice. The country also needs to increase oil production to pay for tens of billions of dollars in Chinese loans it undertook to finance large

social projects and a big boost in election spending last year. "Venezuelans see their relationship with oil

as if the nation's virility is at stake," Mr. Pacheco said. Until that perception changes, the oil industry will "keep dancing in a circle around the fire, waiting for it to rain."

2nc turn -- instability

Even with the plan instability is inevitable – only internal reforms solves debt and inevitable recessionObel 3/7/13 Editor for the International Business Times (Mike Obel, 7 March 2013, “Analysis: What Will It Take To Restore Venezuela's Once Mighty Oil And Gas Business?” International Business Times, http://www.ibtimes.com/analysis-what-will-it-take-restore-venezuelas-once-mighty-oil-gas-business-1114204)//KP

Even if Venezuela 's government opens its economy to the free market, there

are two variables over which it has no control and which could bring the

nation's whole economy to its knees . One is China's willingness to keep

lending to the chavismo regime , said Capital Economic's Rees. “The Chinese government has lent nearly $50 billion to its Venezuelan counterpart in recent years, with the loans

repaid with shipments of crude oil,” said Rees. “Those loans have been a key factor in the government’s ability to maintain an increasingly unsustainable balance of payments position.” The other unknown over which the government has zero control is the market price of crude oil . “Even if Mr. Maduro can secure continued funding from China, we suspect that it is only a matter of time before the flaws in Venezuela’s economic model come to the fore. A hollowing out of local industry through a program of nationalizations has left the economy increasingly reliant upon imports of many goods. But a lack of savings means that the authorities have only been able to sustain the current level of consumption via FX debt and high

oil revenues. As a result, the economy is extremely vulnerable to lower oil prices. We

have already penciled in a recession for this year . But if global oil prices fall below $100

per barrel for a sustained period over the coming years, as we think likely, then there is a risk that Mr.

Maduro’s presidency will culminate in a balance of payments crisis and even a possible debt default.” Taken together -- the factors that Caracas can control and those it can't -- authentic reform appears distant, if not chimerical.

U.S. engagement sparks legal and military challenges – only Maduro can make the reforms peacefully Pagano 3/18/13 contributing writer to the Truman Doctrine (James Pagano, 18 March 2013, “Moving Venezuela to the Center,” Truman National Security Project, http://trumanproject.org/doctrine-blog/moving-venezuela-to-the-center/)//KP

The United States must support the democratic process and engage the likely winner of April’s election, Chavez’s chosen successor, Nicolás Maduro. He will have a real opportunity to put Venezuela back on the path to a free-market democracy. The next

president will face an extremely politicized Supreme Court and military and reforms are likely more

palatable if made by Maduro . Changes to apportionment, food subsidies or tax

rates coming from Enrique Capriles (the opposition candidate) could spark a legal

challenge from the supreme court ; or worse, opposition from the military . What should the U.S. role be? It must work with its Latin American allies in the region,

Chile, Brazil, Colombia and Mexico to gently pressure Maduro into making the types of institutional and economic changes necessary for Venezuela to prosper. Failure to do so could lead to the reemergence of authoritarianism in Latin America, instability in world oil markets and serious regional security repercussions.

2nc solvency – relations

Solves relations – immediate reforms allows effective U.S. engagement Roberts and Daga 4/15/13 Research Fellow for Economic Freedom and Growth in the Center for International Trade and Economics; Visiting Senior Policy Analyst for Economic Freedom in Latin America at The Heritage Foundation (James M. Roberts; Sergio Daga, 15 April 2013, “Venezuela: U.S. Should Push President Maduro Toward Economic Freedom,” The Heritage Foundation, http://www.heritage.org/research/reports/2013/04/venezuela-us-should-push-president-maduro-toward-economic-freedom)//KP

U.S. Policy Toward the New Maduro Government Washington should insist on strict conditionality before sending a new U.S. ambassador to Caracas or assenting to any new

lending to Venezuela by international financial institutions until the new government: Produces a comprehensive plan for reform that reduces the size of the public sector, reverses nationalizations and expropriations of land and enterprises with just compensation to owners, restores the independence of the central bank and judicial institutions, reforms the electoral system, and submits

to an internationally supervised audit of the government’s books during the Chavez years; Takes steps to privatize PDVSA to bring in international equity partners with the expertise and financial capacity to restore PDVSA to the high level of professional operational and managerial expertise for which it was widely respected prior to 1999; Immediately stops all subsidies to Cuba and terminates wasteful and economically destabilizing subsidy programs such as PetroCaribe and ALBA; Ceases cooperation with international state sponsors of terrorism (such as Iran) and joins the international community’s cooperative efforts in the fight against transnational crime, narco-trafficking, and terrorism; and Restores freedom of the press and access to information for all Venezuelans. Use U.S. Leverage The foundations of economic freedom in Venezuela were severely weakened during the 14-year misrule by

Chavez. Although Chavez’s death may aggravate instability and further polarize Venezuela, it need not be that way. Venezuela is in need of immediate and

sweeping reforms , but these changes will take time, effort, determination, and , above all, dedicated reformers in Venezuela. The Obama Administration should step into the breach with active and forward-looking policies to bring Venezuela back into the globalized economic system.

2nc turn -- relations

U.S. action turns relations – the counterplan is a perquisite to effect engagement Spetalnick 3/5/13 staff writer for Reuters (Matt Spetalnick, 5 March 2013, “Despite new hopes, U.S. treads cautiously after death of Venezuela's Chavez,” The Chicago Tribune, http://articles.chicagotribune.com/2013-03-05/news/sns-rt-us-venezuela-chavez-usabre92504a-20130305_1_venezuela-s-chavez-vice-president-nicolas-maduro-venezuelan-leaders)//KP

While the death of Venezuela's stridently anti-American President Hugo Chavez on Tuesday raised hopes in Washington for better U.S.-Venezuela relations, the Obama administration reacted cautiously as it weighed the prospects for a diplomatic thaw. President Barack

Obama quickly reached out to Venezuelans, expressing an interest in a "constructive relationship" in the post-Chavez era. But analysts said it would be hard to

make tangible progress when deep political uncertainty risks destabilizing the South American oil-producing nation. Washington's challenge will be to figure out how far to go in seizing the opening to engage with Venezuelan leaders as well as its political

opposition without giving the impression of U.S. meddling following the socialist

president's death after a two-year battle with cancer. "We're not interested in having a confrontational relationship with Venezuela," a senior U.S. official told Reuters. "We're going to have to see how things evolve. It's a dynamic period." For Washington, a major test will be whether Venezuela follows its own constitution - which has been widely interpreted to require a special election to pick Chavez's successor - and if such a vote is conducted in a free and fair way in "accordance with hemispheric norms," the official said. Washington had accused Chavez and his allies of electoral abuses, such as intimidating foes and misusing state media during his 14-year rule. Chavez had created headaches for successive U.S. administrations with his strong anti-American rhetoric and his alliances with some of Washington's main foes, including Cuba and Iran. The question now is whether his leftist "revolution" and incendiary foreign policy can live on without his dominant personality at the helm. In a normally divided Washington, Chavez's death brought a rare moment of bipartisan agreement, with Republicans and Democrats alike seeing it as a chance to turn a page after a long period of strained U.S.-Venezuelan ties. "Hugo Chavez was a destabilizing force in Latin America, and an obstacle to progress in the region," said Mike Rogers, a Republican from Michigan and chairman of the U.S. House of Representatives intelligence committee. "I hope his death provides an opportunity for a new chapter in

U.S.-Venezuelan relations." "Hopefully there will be a peaceful transition of power in Venezuela with real, meaningful democratic reforms," U.S. Senator Bill Nelson, a Democrat

from Florida, said in a message on Twitter. OBAMA'S NOT-SO-SUBTLE MESSAGE Obama called it a "challenging time" for Venezuela and - in a measured but not-so-subtle message to Vice President Nicolas Maduro, Chavez's preferred successor - said the United States "remains committed to policies that

promote democratic principles, the rule of law and respect for human rights." Taking the chill off the relationship between Washington and Caracas will not be easy. Recent U.S. efforts to improve long-dormant cooperation in areas like drug interdiction and regional security were favorably received at first in Caracas but ultimately failed to yield any real progress, the senior administration official said. And Washington was quick to reject Maduro's accusations, made just hours before his announcement of Chavez's death, that the United States had been engaged in a conspiracy against the president and Venezuela. "Their statements and actions today call into question their interest in having a functional and productive relationship with the United States," the official said. Chavez, who took on Cuban leader Fidel Castro's role as Latin America's most vocal critic of Washington, accused the United States of pursuing imperialist policies in the region as he used Venezuela's oil wealth to bolster leftist allies. As for whether Washington hoped to see Venezuela move away from its alliance with communist-ruled Cuba, the U.S. official said: "That's up to them to determine who their partners are." But the official added that Washington has not hesitated to make known its displeasure when "there were relationships with actors of concern." U.S. officials had contended that Chavez' rule eroded democratic freedoms in Venezuela and he went

too far in concentrating power in his own hands. But any overt U.S. effort to intervene in

Venezuela's politics now would almost certainly backfire , and possibly harm the anti-Chavez opposition. "It is a delicate time. I think the United States needs to be

very patient and not become a factor internally in a way that ... could become

negative, " said Arturo Valenzuela, the U.S. State Department's top official for the Western Hemisphere from 2009 to 2011.

2nc solvency -- foreign investment

Foreign investment increases supply and boosts global economy White and Rowley 3/11/13 mining correspondent for The Telegraph; journalist for The Telegraph (Garry White; Emma Rowley, 11 March 2013, “Death of Hugo Chavez propels Venezuelan oil production into the spotlight,” The Telegraph, http://www.telegraph.co.uk/finance/commodities/9920725/Death-of-Hugo-Chavez-propels-Venezuelan-oil-production-into-the-spotlight.html)//KPThe move by the late firebrand Venezuelan leader also erased from his country the skills required for exploiting the country’s vast oil reserves. He should have let them stay – and taxed the companies heavily. However, oil executives should pause for thought before they book a flight to Caracas following Mr Chavez’s death last week.

Venezuela has the largest known oil reserves in the world, but oil output has slumped by almost a third because of Mr Chavez’s nationalisation of the industry. At the end of 2011, the country held 17.9pc of the world’s known oil reserves, compared with 16.1pc in Saudi Arabia and 11pc in Canada, according to BP’s statistical review of world energy. However, it only represented 3.5pc of global

production compared with 13.2pc in Saudi Arabia. It is likely that oil output could rise, should there be an easing of the country’s antagonism to foreign investors . Some believe

this could lead to a fall in the oil price and a consequent boost to the global

economy . “The death of Hugo Chavez may see oil prices fall as they did during the 2002 coup,” Gerard

Lane, an oil analyst at Shore Capital, said. “With greater foreign investment it is foreseeable that the 30pc fall in Venezuelan oil production could be reversed. Indeed the scale of potential oil output is enough combined with on-going shale oil production growth in the USA, suggesting that oil prices could fall.” However, such a scenario is

unlikely just yet. “Venezuela’s massive oil reserves will not be unleashed on global oil markets anytime soon, while the near-term impact on prices will be limited,” Ole Hansen, head of

commodity strategy at Saxo Bank, noted. “The state oil company PDVSA has increasingly been handing over its income to fund various government programmes, leaving it with negative cash flows for the past five years,” Mr Hansen added. “The result of this has been a lack of investments as old fields matured and new ones were not explored, hence the

drop in output.” Mr Hansen believes reforms and the re-introduction of foreign investment will not happen overnight, possibly not for a few years. “But once it does another source

of increased supply will further help to alleviate some of the worries about

future supply not keeping up with an increase in demand , especially from emerging economies,” Mr Hansen said. Should production eventually rise, which seems likely, the main loser is likely to be Canada. Venezuela positioned its oil industry away from the US to the more “friendly” nationals of China and Russia. Oil exports to the US are about 900,000 barrels of oil equivalent per day (boepd), down from a high of 1.4m boepd in 1998. This has benefited Canada, which has seen exports to the US double. “Venezuela’s oil is of the heavy crude variety, which is also what the Canadians produce around Alberta,” Mr Hansen noted. “Companies operating in Alberta will be able to export their know-how, which is good for the companies. However, this may be less so for the overall economics around Alberta, with Venezuelan heavy crude being much cheaper to extract.” However, the Canadian need not worry that the Venezuelans will get their act together quickly. This seems unlikely to happen for some time. Goldman Sachs managed to sum up the consensus view, saying that Mr Chavez’s death should have “limited impact on the nation’s oil production in the short term”

while a “change of leadership may foster longer-term investment and boost output.” Venezuela needs foreign oil companies to boost this output. Once it accepts this, and invites the oil majors to use their skills, global oil prices should see some relief. However, the

Canadians are probably hoping that this won’t happen for some time yet.

Releasing seized assets allows U.S. firms to drillObel 3/7/13 Editor for the International Business Times (Mike Obel, 7 March 2013, “Analysis: What Will It Take To Restore Venezuela's Once Mighty Oil And Gas Business?” International Business Times, http://www.ibtimes.com/analysis-what-will-it-take-restore-venezuelas-once-mighty-oil-gas-business-1114204)//KP

“What the government may do is ease the conditions of production-sharing agreements to give companies a slightly bigger share, Velasco said. “You might have a deal that calls for a 50-50 split changed to 70-30 but only for the short term. It would be renegotiated after a brief

period. It all depends on how cash-strapped the government feels.” One of the complicating factors is pending arbitration between Venezuela and energy companies whose assets Chavez seized. One of those litigants is ConocoPhillips (NYSE:COP), once the biggest non-Venezuelan energy

companies in the nation. ConocoPhillips could benefit greatly from regaining its

former assets, Fadel Gheit, senior oil analyst at Oppenheimer & Co., told the Christian Science Monitor.

"The book value of assets that were confiscated was $4.5 billion [at the time]. The market value is now $20 billion

to $30 billion. ... ConocoPhillips could eventually see a net gain of $10 billion." ConocoPhillips isn’t holding its breath for a post-Chavez breakthrough. “We don’t expect [his death] to have any influence on our arbitration hearing currently under consideration by the International Centre for the Settlement of Investment Disputes (ICSID),” said ConocoPhillips spokesman Daren Beaudo, who

also declined to “speculate regarding future opportunities in Venezuela.” ExxonMobil also has a

pending arbitration case against Venezuela , said company spokesman David Eglinton. "The

dispute is not over Venezuela's power to expropriate; the dispute is over Venezuela's failure to meet its obligation under applicable international law to pay compensation based on fair market value of the expropriated

investment," Eglinton said. "We have no indication of when the ICSID decision will be given." Once Caracas has trimmed its overseas oil subsidies, invited in state-owned oil companies and resolved disputes with private companies, it could turn to private drilling companies like Parker Drilling Company (NYSE:PDK), NYU's Velasco said.

2nc solvency – law enforcement

Ending subsidies and overhauling law enforcement protocols solves stability Kirk 4/1/13 security analyst at the United States Agency for International Development, graduate student at the Elliott School of International Affairs in the Latin American and Hemispheric Studies program (Jonathan Kirk, 1 April 2013, “The Path Forward in a Post-Chavez Venezuela,” International Affairs Review, http://www.iar-gwu.org/node/480)

Chávez’s revolution came at considerable cost, however. His untenable macroeconomic policies have left the Venezuelan government far too dependent on oil revenues to sustain its social welfare programs, leaving the country vulnerable to the whims of a volatile global marketplace. Chávez’s inability, or unwillingness, to tackle the mounting violence in Venezuela also poses a significant threat to the country’s stability .

Venezuela’s murder rate has tripled in the past decade, reaching approximately 57 per 100,000 homicides in 2009, one of the world’s highest rates. The capital city of Caracas has the sixth greatest homicide rate of any large

city in the world, with 98.7 homicides per 100,000 residents. Corruption has also become a major issue, with Venezuela being ranked one of the most corrupt countries on the Corruption Perceptions Index since Transparency International started the survey in 1995. In 2012, Venezuela was given an index score of 19 out of

100 (0 being highly corrupt). It is imperative that Chávez’s successor, whether it is Nicolás Maduro

Moros or Henrique Capriles, tackles these issues head-on through comprehensive policy

prescriptions . Regarding Venezuela’s economic imbalances, gas and food subsidies

should be gradually reduced , and ideally, eventually eliminated altogether. These subsidies, in particular the gas subsidy, have become increasingly costly for the Venezuelan

government. While cheap gas has boosted Venezuela’s economic growth, it has also increased consumption to such a degree that the country must now import nearly a quarter of the gas it uses. While Venezuelans would certainly feel short-term pain following normalization of gas

prices, in the long-term the country would be better served if government revenues were invested in promising research and development projects instead of these

market-distorting subsidies. With regards to Venezuela's skyrocketing violent crime rate, the next president must make it a priority to continue efforts to strengthen the country’s new national police force. These efforts must include enacting strict national

standards for training and providing adequate funding for payrolls and

equipment purchases . Rampant corruption must also be addressed. The Venezuelan

minister of the interior and justice has estimated that police commit one of every five crimes; a trend, which

continues to negatively impact police credibility. This trend can be reversed by bolstering

internal police review boards and by supporting whistleblowers and human

rights defenders. Venezuela must also overhaul and revamp its notoriously corrupt and

abusive prison system . In June 2011 alone, at least 25 people were killed and over 60 seriously injured,

including prisoners and National Guard members, after clashes between inmates in the El Rodeo prisons near Caracas.

2nc solvency -- management

PDVSA replacement solves management and corruptionSnow 3/13/13 Oil and Gas Journal Washington Editor (Nick Snow, 13 March 2013, “Badly damaged PDVSA should be replaced, founding board member says,” Oil and Gas Journal, http://www.ogj.com/articles/2013/03/badly-damaged-pdvsa-should-be-replaced--founding-board-member-sa.html)//KPVenezuela’s national oil company was so badly damaged during Hugo Chavez’s regime that it will need to be replaced, a founding board member of Petroleos de Venezuela SA (PDVSA)

declared. “ PDVSA is very badly managed , very corrupt , and has deviated into a company that builds houses, manages livestock, and does other activities that have nothing to do with oil and gas,” said Gustavo Coronel, who was elected to Venezuela’s Congress in 1998 and

served there until Chavez dissolved it when he came into office a year later. “My opinion is that this company cannot be saved,” he continued during a Mar. 13 teleconference hosted by the US Energy Security Council.

“I think it’s very deeply damaged. It’s not going to be politically easy because Venezuelans are very

much in favor of state ownership and will fight tooth and nail to keep a national oil company.” Only two multinational oil companies—Chevron Corp. and Repsol SA—have stayed in Venezuela since

Chavez came into power, Coronel said. Any replacement for PDVSA would need to offer terms that would bring ExxonMobil Corp., BP PLC, and Total SA back to attract the investment necessary to meaningfully develop the Orinoco heavy oil deposits, he

indicated. “I think the Brazilian model would be good : an oil regulating agency that controls a mixture of concessions and production sharing contracts through a small, moderately sized Venezuelan national oil company—certainly not the monster we have

now,” Coronel said. Chavez’s handouts He said Chavez based much of his popularity on handouts to the poor, but this has weakened as Venezuela’s oil income dropped. Production has declined about 600,000 b/d since Chavez became president for the first time in 1999, Coronel said. If the government had executed the plan PDVSA inherited from pre-Chavez management, it would have been producing

5 million b/d, he maintained. “PDVSA has about 115,000 employees, up from about 30,000 in 1999; is losing production; and is not investing properly,” Coronel said. “Its refineries are at about 60% of capacity, and its debt has grown from $2 billion in 1998 to $85 billion now. It also heavily depends on the Chinese

for financial support, and the Chinese are becoming disenchanted because PDVSA isn’t able to meet its supply commitments.” He said Chavez’s successor as president, Nicolas

Maduro, “is totally divorced from how an oil company should operate,” adding, “He is totally committed to one that is socialist and favors economic friends. Chavez promised about 16 refineries across the planet, yet did not build one in Venezuela in the 14 years he was in power.” Coronel said opposition leader Henrique Capriles, who is challenging Maduro in an election next month, almost certainly would abandon Chavez’s agenda and begin to institute changes at PDVSA. “He believes in a more commercial and professional approach. He would bring back the big private oil companies—the true professionals in the field that have left the country,” the former PDVSA board member said. “If a democratic government comes to power, the problems will

disappear very slowly,” Coronel said. “A new government with a different approach should bring international oil companies back and mop up development of this heavy oil as soon as possible, particularly with the shale oil and gas boom in the US, Mexico, and Argentina which is making Venezuela less and less relevant.”

2nc solvency -- reserves

Encouraging U.S. investment solves technological issues allows Venezuela to develop oil reserves Landers 3/6/13 Washington Bureau reporter for The Dallas Morning News (Jim Landers, 6 March 2013, “Crumbling Venezuelan oil sector expected to remain hostile to U.S. investment,” The Dallas Morning News, http://www.dallasnews.com/business/energy/20130306-crumbling-venezuelan-oil-sector-expected-to-remain-hostile-to-u.s.-investment.ece)//KP

Hugo Chávez is gone, but his political allies and alliances are not expected to make major changes in the weak development of Venezuela’s enormous oil reserves. Venezuela’s constitution requires presidential elections within 30 days, and the country has been almost evenly divided between Chávez loyalists and opponents. Chávez was re-elected in October although never inaugurated due to illness. For now, his handpicked vice president, Nicolás Maduro, is acting president and the most likely

candidate to lead Chávistas in any election. Oil analysts here for IHS CERAWeek 2013, the energy industry’s

big annual conference, blame Chávez’s socialist policies for a decline in Venezuela’s oil industry over the past 14 years. Despite having more oil reserves than any other country, production peaked in

1997 and is down by a fourth since Chávez took power in 1998. “Venezuela is one of the countries with the largest hydrocarbon [oil and gas] endowments in the world,” said Enrique Sira, IHS’s director of Latin American energy research. “Maybe because of that, it is so hard to understand why today there is electric power rationing in some parts of the country, a deficit of natural gas supply across the whole country, and

a productive oil capacity that is way below the actual potential that the country has.” U.S. refiners import more than 1 million barrels a day of Venezuelan oil, which made the country second only to Canada last year among U.S. foreign oil suppliers. Much of that oil went to Citgo Petroleum Corp., which is owned by PDVSA, Venezuela’s national oil company. Citgo has three U.S. refineries, including one in Corpus Christi, and

more than 6,100 gas stations across the country. Copious reserves Venezuela has more oil reserves than any other country thanks to massive deposits of asphalt-like crude in what’s called the Orinoco oil belt. Development of these deposits is both technology- and capital-intensive. Chávez’s push for more national control over the oil sector in 2007 led Exxon Mobil Corp. and ConocoPhillips Co. to abandon big Orinoco projects. Other international companies stayed, including firms from Russia, China and Vietnam, and the Orinoco now accounts for about 20 percent of Venezuela’s oil production.

Mark McNabb, director of the Emerging Markets Research Center at UTD’s Naveen Jindal School of Management, said in a phone interview that he expects U.S. firms will

remain on the outside looking in. “We’re kind of frozen out for the next three to five years,” he said. Venezuela’s oil sector has been in decline for a decade. In 2002, PDVSA employees went on strike and joined in an anti-Chávez movement that briefly ousted the president. When he regained power,

Chávez fired many of his opponents in the firm and installed thousands of supporters. “ PDVSA’s been

drained of its professionals ,” said Eric Farnsworth, a vice president with the Council of the

Americas. “It’s now a political group that pumps oil.” Venezuela’s Energy Minister Rafael Ramirez said Wednesday that PDVSA workers would remain on the job. “The key to driving the oil industry is in the hands of the 100,000 valiant men and women who have shown their loyalty to Commander Chavez in everything we have been through,” he said, referring to PDVSA’s staff. “That situation will not change.” Venezuela’s exports to the U.S. are under pressure from Canada, which produces a heavy type of crude oil from Alberta’s oil sands that is similar to Venezuela’s thick oil. Many Gulf Coast refineries prefer to use heavy oil because it can mean higher profits for gasoline, diesel and other refined products.

2nc solvency -- tax reform

Ownership and tax law reforms solidifies foreign investmentSanati 3/6/13 Contributor to Fortune Magazine, financial journalist and commentator (Cyrus Sanati, 6 March 2013, “Chavez's death won't spur new Venezuela oil drilling,” http://finance.fortune.cnn.com/2013/03/06/hugo-chavez-death-oil/)//KP

It is difficult to see what, if anything, could change in Venezuela's oil industry in the next few months. The political apparatus Chavez has set up seems fully entrenched. It would probably take a full-

fledged revolution for it to be wiped out at this point. Nevertheless, Venezuela is nearing a breaking point when it comes to oil production. The government cannot continue to

rely on PDVSA to pay its bills. It needs real foreign partners with real experience to come in and help it boost production. That means bringing back companies like ConocoPhilips, which before getting the boot in 2007, was the largest foreign operator in the country. They have the engineers and know-how to help Venezuela quickly get off the ground. Venezuela would be wise to also consult with oil companies like Husky, Suncor (SU),

Syncrude and Nexen, all of which have extensive experience working in Canada's vast Athabasca oil

sands. To lure the right talent, Venezuela needs to make some serious changes

to its ownership and tax laws. Companies must feel safe to make their investments so security and legal protections will need to be ironclad. But even if Venezuela's new leaders give in to all of the oil companies' demands, it will probably be a while before you see any

real drilling. Chavez obliterated the nation's credibility, and it will take some time for Venezuela to earn back that trust. So when Venezuelans go to the polls in a month to choose their new leader, they would be wise to choose someone who knows how to eat a big helping of humble pie.

2nc uniqueness

Uniqueness flows neg – no plans to change oil frameworksParraga 3/8/3 contributor to Reuters (Marianna Parraga, 8 March 2013, “Exclusive: Venezuela to maintain oil industry framework under Maduro,” The Chicago Tribune, http://articles.chicagotribune.com/2013-03-08/business/sns-rt-us-venezuela-oilbre928037-20130308_1_pdvsa-orinoco-extra-heavy-crude-oil-output)//KP

Venezuela will maintain its oil industry tax and legal framework under the leadership of acting President Nicolas Maduro, the OPEC nation's oil minister said on Friday to reassure

foreign investors after the death of President Hugo Chavez. Rafael Ramirez told Reuters that Venezuela would continue to push for a minimum price of $100 per barrel at the next OPEC meeting,

and that he did not expect Chavez's death to push up crude prices. "The tax and legal framework were set out clearly by President Chavez," the oil minister said outside the National Assembly, where Maduro was being inaugurated as acting leader on Friday ahead of a new presidential election due in weeks.

"While our government is here and the people remain in charge, our oil policy

will remain unchanged ." Ramirez said he expected the South American country to increase its oil

output by 500,000 barrels per day (bpd) this year, bringing its total production to 3.5 million bpd. The government says it is pumping 3.0 million bpd, but many industry experts question those figures. Analysts say Venezuela produced just 2.34 million bpd last month. Ramirez said state oil company PDVSA invested $22 billion in 2012, and expected to invest $25 billion this year. He said foreign energy companies working with PDVSA in Venezuela sent condolences following Chavez's death after a two-year battle with cancer, but had expressed no concerns

about the political situation in the country with the world's biggest oil reserves. "Everything is normal in the oil industry. We're guaranteeing fuel supplies," Ramirez said. "We will keep our oil policy the same, internally and in OPEC ... we will defend a minimum price of $100 per barrel (at the next meeting)." The next gathering of the oil producers' cartel is scheduled to take place in Vienna on May 31.

at: long time

PDSVA reform allows quick recovery by maximizing potential Noriega and Trigos 13 former senior US Department of State official, vising fellow at AEI, and managing director of Vision America LLC; research analyst at Vision Americas LLC and a contributor to interamericansecuritywatch.com (Roger F. Noriega; Felipe Trigos, July 2013, “Latin American Energy Monopolies; Booms or Bust?” American Enterprise Institute for Public Policy Research, http://www.aei.org/files/2013/07/30/-

latin-american-energy-monopolies-boom-or-bust_152807142348.pdf)//KP PDVSA’s future is shackled to the corrupt regime headed by Chávez successor Nicolás

Maduro, who seems ill-equipped to manage the broad economic crisis brought on by 14

years of mismanagement. It is unlikely that Maduro will consider any significant reforms

to salvage PDVSA, particularly in light of the fact that he has reappointed company leaders that have conspired to politicize and loot the company. But this unwise course of action makes it

virtually inevitable that Maduro will fall under the weight of his own corruption and incompetence. At that time, the reconstruction of PDVSA will have to be the

singular priority of any successor. If this is done in a way that is open to private

and foreign cooperation, Venezuela may be able to recover in a relatively short

period of time from its current woeful condition. Fortunately, Brazil’s Petrobras seems to recognize the

problems affecting its ambitious agenda. Under the leader-ship of its new CEO, the company now seems more will-ing to make tough decisions and focus on realistic and viable projects. To that end, government demand for oil revenue and protectionist measures must be tempered with a view to the long term. In Mexico, the road ahead for Pemex is more uncer-tain given the political constraints attached to possible reforms that would allow for private investment, technol-ogy, and transparency. The 1930s nationalization of the industry continues to be viewed positively by the Mexi-can people and political elite. Still, the political parties must overcome short-term political rivalries or narrow nationalist sentiments on behalf of a reform agenda that allows the introduction of private investment and teach-nology from other countries and companies to boost the long-term productivity of Pemex.

For Petrobras, Pemex, and PDVSA to become more productive and competitive and thereby

deliver greater benefits for their countries, government leaders must remove the burden imposed on these companies by state intervention. Although privatization of this sector as a whole is unimaginable for the foreseeable future, profess-sional management, transparency, free competition with private companies, and openness to foreign capital and technology are required to allow state-owned companies to maximize

their potential and deliver optimal long-term dividends for their nations. This transition will not be easy, but is a necessary measure to ensure the long-term prosperity of the most powerful energy companies in Latin America.

at: politics perm

The counterplan avoids the link to politics – engagement is unpopular now but Venezuelan reforms provide political momentum IASW 8/1/13 (InterAmerican Security Watch, 1 August 2013, “Bipartisan Group of Senators Introduce Resolution Supporting Democracy in Venezuela, Condemning Violence against Political Opposition,” http://interamericansecuritywatch.com/bipartisan-group-of-senators-introduce-resolution-supporting-democracy-in-venezuela-condemning-violence-against-political-opposition/)//KP

Following Venezuela’s highly contested presidential elections and in response to growing political polarization, sporadic acts of violence against political opposition members,

and an absence of political dialogue, a bipartisan group of senators introduced a resolution today supporting Venezuelan democracy, and condemning violence and intimidation against the country’s political opposition. The resolution was introduced by U.S. Sen. Robert Menendez (D-NJ), Senate Foreign Relations Committee Chairman, and

Sens. Rubio (R-FL), Nelson (D-FL), Kaine (D-VA), Udall (D-NM), McCain (R-AZ) and Kirk (R-IL). Joining Latin American legislatures and international organizations concerned about the political climate in

Venezuela, the senators called for greater dialogue between all political actors in the country. They also appealed to multilateral organizations and democratic leaders in the region to not

abandon commitments made after the elections for a full audit and recount of election results. Since President

Maduro’s razor-thin victory on April 14, Venezuelan democracy has experienced setbacks. Pledges made by Maduro to South American heads of state in Lima, Peru on April 19th to address all claims and questions about the Venezuelan electoral process have gone unfulfilled. And two legal challenges to the election outcome submitted to Venezuela’s Supreme Court by the Unified Democratic Platform (MUD) have

been entirely ignored. “The way forward in Venezuela is through strong adherence to the principles of democratic governance and increased dialogue between all political actors,” said

Menendez. “The Maduro government must recognize the legitimacy of the opposition and its concerns. It must also refrain from tactics of violence and intimidation, and commit to working within the rule of law. Venezuelan democracy cannot afford to take any further steps backward.” “Freedom and democracy in Venezuela were under constant attack under the nation’s last strongman, and things have not gotten any better under his successor,” said Rubio. “The unconstitutional transition of power and an April 14 presidential election plagued by irregularities confirmed this reality, which must not go unchallenged. The U.S. and OAS should stand with the Venezuelan people whose voices have been silenced at the voting booth, in parliament and through violence committed by thugs in the ruling party.”

“Transparency and accountability are the fundamental tenets of a true democracy,” said Nelson. “And the various reports of voter irregularities and intimidation on election day have yet to be satisfactorily explained to the Venezuelan people, who deserve an unbiased account of what happened. It’s the

best way for them to have greater confidence in their government going forward.” “ I’m pleased to

support efforts to normalize relations between the United States and

Venezuela, but the situation in Venezuela is far from normal , ” said Kaine. “The violence directed against members of opposition parties in the Venezuelan National Assembly

and the temporary curtailment of their parliamentary rights raise serious concerns that must be addressed.”

aff answers

solvency deficit -- laundry list

Multiple solvency deficits1) Institutional challenges2) Revenue diversion3) Lack of private sector confident4) Technical and capital intensive projects5) Managerial incompetency Ladislaw and Varrastro 3/6/13 co-director and senior fellow with the Energy and national Security Program at CSIS; senior vice president and James R. Schlesinger Chair for Energy & Geopolitics at CSIS (Sarah O. Ladislaw; Frank A. Verrastro, 6 March 2013, “Post-Chavez Outlook for Venezuelan Oil Production,” Center for Strategic and International Studies, http://csis.org/publication/post-chavez-outlook-venezuelan-oil-production)//KP

Even under the best of circumstances, reform in the energy sector will take a long time to emerge. The damage that has been done to not only PDVSA but to the

institutions of the state and civil society could take years to rehabilitate. A few

key reasons for this include: 1. revenue from the oil and gas sector that is diverted for

political purposes and not reinvested in a way that will drive new production will

be hard to direct back to useful investment in the sector, 2. much of the

private sector has been driven away from investment in Venezuela and may be reluctant to return, or for the companies in country to re-invest in the short-term given their experience in

the 2000s, 3. oil field mismanagement and damage may have likely occurred over the last

decade and it will take time and investment to revitalize, 4. many of Venezuela’s core assets are in technologically complex and capital-intensive heavy oil projects that take time and resources to develop and must now be viewed in light of the global array of

upstream options that are now on the table for international oil investors as compared to a decade ago, 5. some of Venezuela’s current commercial relationships on the upstream or export side may have to be revisited in light of a more commercially-based hydrocarbon policy, 6. Venezuela’s energy sector is dominated by the state’s decisions and management and it will take time to replace the managerial competency that once existed, 7.

highly subsidized oil is a key feature of Venezuelan society and the political will to reform the entire energy sector into one that is more market-based and open to private investment will necessarily have to feed into the domestic demand-side of that equation.

solvency deficit -- timeframe/china

Takes years to solve and opens the door to Chinese influenceSanchez 5/4/13 staff writer for Associated Press (Fabiola Sanchez, 4 May 2013, “Outlook Grim in Venezuela’s Essential Oil Industry,” ABC news, http://abcnews.go.com/m/story?id=19108842)//KP

Ramirez said that PDVSA's efforts remained focused on developing the remote Orinoco belt, site of the world's biggest oil reserves, with the aid of oil firms from China, Russia , the U.S., Italy, Vietnam, Malaysia, Japan and Spain. Venezuela hopes to lift overall production to

some 3.32 million barrels a day, 200,000 more than last year. "We're in a process of trying to attract investment in dollars other than ours," Ramirez said, assuring reporters that PDVSA would work

with private investors to not take on more debt to make new investment. Outside experts, however, are deeply skeptical. They say PDVSA is badly mismanaged and that even a radical

overhaul would take years to show results .

Can’t solve oil industry – expertise loss – Venezuela would turn to China Tissot 12 Independent business consultant specializing in South America and founder of Tissot Associates, former Director of Latin America at PFC Energy (Roger Tissot, 1 June 2013, “Why the health of Hugo Chavez matters to Alberta’s oil sands,” Alberta Oil Magazine, http://www.albertaoilmagazine.com/2012/06/hugo-chavez-is-losing-his-hold-on-power-in-venezuela-should-albertas-oil-and-gas-sector-be-worried/)//KP

It’s important to point out that any efforts to revive a “technocratic” PDVSA may face some political realities. Chavez’s meddling in petroleum matters caused many of Venezuela’s best and brightest petroleum minds to leave the country. The expertise lost is now leading an oil boom in Colombia; and one would doubt that after being successful in the private sector, former employees would want to return to a

“government job”. As difficult as the situation is, there are reasons to believe the period of production

decline in Venezuela is over. In fact, realizing its huge financial burden and numerous operational challenges,

PDVSA seems willing to assign more resources to capital development. Central to the reversal of production is the US$2-billion “Tri- color” investment plan in the Orinoco belt, aimed at boosting

production there to 1.6 million bpd by the end of the year. Secondly, PDVSA appears to be asking its partners to help finance its share of their joint ventures. Large companies such as Chevron and the China National Petroleum Corporation seem willing to accept the request in exchange for better governance in the joint ventures. However, the question remains if Capriles, Chavez or a Chavista successor would have the vision and capabilities to further open up the sector, improving contractual terms and offering a concession model that would bring back the capital and competition necessary to finally meet its old goal of doubling current production by the time the next presidential elections take place. If that were the case, Venezuela, free of ideological hobbles, could focus on regaining market share in its most profitable market, the U.S. Gulf of Mexico – the main target of Alberta oil producers.

hybrid turn

Hybrid approaches hamstring growth Noriega and Trigos 13 former senior US Department of State official, vising fellow at AEI, and managing director of Vision America LLC; research analyst at Vision Americas LLC and a contributor to interamericansecuritywatch.com (Roger F. Noriega; Felipe Trigos, July 2013, “Latin American Energy Monopolies; Booms or Bust?” American Enterprise Institute for Public Policy Research, http://www.aei.org/files/2013/07/30/-

latin-american-energy-monopolies-boom-or-bust_152807142348.pdf)//KP Throughout Latin America’s history, oil and its byproducts have been valued as sovereign patri-mony. The involvement of foreign companies and investors in the resources industry has stirred sig-nificant nationalistic

debate over many decades. Populist governments have likewise blamed for-eign investment and capitalism in general for every economic ill in the region. However, these political arguments have fallen flat as state-run oil companies have failed to deliver bonanzas for their people despite historically high oil prices and the discovery of staggering oil deposits. It is clearer than ever that government interference and barriers to foreign capi-

tal and technology have inhibited the growth of a strate-gic industry. In short, government policies based on nationalism rather than on free market principals are a recipe for failure. Even “ innovative” hybrid solutions —in which some private capital, companies, and

competition are welcomes alongside a state-run enterprise— have fallen short of

the goal of producing a dynamic, healthy industry. As long as the state has a

direct stake in a “national oil company,” clientelism, over-taxation, politicization,

union influence, and corruption will hamstring the companies’ ability to compete . And government regulators and politicians would rather adopt policies that restrict the petroleum sector as a whole than see a state-run enterprise fall behind private (or, worse yet, foreign) competition.

reversion turn

Unilateral Venezuelan reforms risks reversion and can’t attract foreign companies Evans 3/5/13 Energy specialists at Citi Future Perspectives (Tim Evans, 5 March 2013, “Instant View: Oil analysts' reaction to death of Venezuela's Chavez,” Reuters, http://www.reuters.com/article/2013/03/06/us-venezuela-chavez-oilmarket-idUSBRE92500820130306)//KP

"I don't think anybody gets a windfall out of this. If it opens the country up to more investment, that may be an opportunity for profit, but it's also a risk . Chavez was not the

first one to nationalize oil operations in Venezuela. "There was a prior cycle of nationalization in the 1970s so the country has this history of some periods where international investment is welcome and encouraged and other periods in which the government of the day decides they don't like the terms of the investment and they take it back . "So I don't know how eager oil companies would be to return to Venezuela."

u.s. key -- relations

U.S. influence now is key – limited time to drive positive relations Ladislaw and Varrastro 3/6/13 co-director and senior fellow with the Energy and national Security Program at CSIS; senior vice president and James R. Schlesinger Chair for Energy & Geopolitics at CSIS (Sarah O. Ladislaw; Frank A. Verrastro, 6 March 2013, “Post-Chavez Outlook for Venezuelan Oil Production,” Center for Strategic and International Studies, http://csis.org/publication/post-chavez-outlook-venezuelan-oil-production)//KP

What about Venezuela’s relationship with the United States? Over the last ten years the sustained trading relationship between the United States and Venezuela has been one of the stabilizing forces in an otherwise contentious and sometimes volatile relationship. U.S. refineries in the Gulf Coast are specifically designed to process Venezuela’s sour and medium to heavy crude and serves as its natural market. Despite oil production being down, the United States still imports just under a million barrels of crude per day from Venezuela (down from a peak of 1.4

mmbd in 1997) and, as stated earlier, the government of Venezuela is highly dependent on those revenues for their ongoing stability, especially as revenue from other exports and domestic

consumption decline. As we look ahead to another period of transition in Venezuela it is important to be mindful of the potential for disruption and to look for ways to mitigate the impacts of such disruption, but it is equally important to remember

the trade ties that bind the two countries for the time being and to find

opportunities to drive change in a positive direction. Time may be limited

in this regard because the U.S. domestic production outlook is changing thanks to tight oil development in the United States and the influx of Canadian oil sands, both of which are giving U.S. refiners more options in terms of the crudes they use and more decisions to make

about how they want to configure their refineries going forward. A future in which Venezuela is

no longer as competitive in its natural market in the United States would change the outlook for Venezuelan crude marketing decisions.