VENEZUELA'S HYDROCARBON-FUELED FOREIGN POLICY: A DIFFICULT TEST FOR PDVSA DESPITE HIGH OIL PRICES

The Venezuelan government has recently made noticeable efforts to increase its political influence in Latin America. This strategy has largely been fueled by the state-owned oil company, Petróleos de Venezuela SA (PDVSA), with more than US$20 billion committed to various energy cooperation agreements with Caribbean and Latin American countries. The growing financial burden has put PDVSA's future at risk, raising serious questions about the sustainability of the government's strategy.

* Venezuela's effort to lead a Latin American energy integration strategy represents an attempt to export the Venezuelan patron-client relationship system, emphasizing oil rent distribution over wealth generation. The approach has had limited success as most Latin American countries have evolved away from the rent-based relationship and have developed far more diversified economies.
* The strategy requires PDVSA to provide technical support to other state oil companies to a level that is straining its technical and personnel capabilities, which are already challenged by domestic operations alone. The resulting financial burden has also raised doubts about PDVSA's capacity to deliver on its business plan and continue to contribute to government-led social programs.

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