Due to the political vacuum left by Hugo Chavez’s absence whilst he battles cancer behind closed doors, Venezuela’s oil industry has experienced the first decline in foreign investment in five years.
No new credit lines have been announced from China, the largest foreign contributor to Venezuela’s oil industry, since April last year, and both Russian and Indian companies are withholding their planned investments until the political situation becomes more stable and transparent.
This lack of investment from foreign governments is contrasted by the private sector where investors are eager to buy into Venezuelan assets, believing that Chavez’s successor will reduce the state’s grip on the economy.
Matt Ferchen, a scholar at the Carnegie Tsinghua Centre for Global Policy, explained that “there There is simply nowhere in the world, outside of China, where the CDB has built up such a huge financial presence. Even if Chavez wasn’t the easiest partner for China, he was their man, and now they don’t know who is in charge.”
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Vice President Nicholas Maduro is currently running the country, but Chavez’s political opposition have called for Maduro to stand down temporarily and cede power to their party whilst Chavez is ill, in order to increase the political stability in the country and give investors some assurance.
Current delays to the funding threaten the ability of one of the most oil rich countries in the world to reverse its declining output. Oil production in Venezuela has fallen 13 percent since Chavez first took power in 1999 to just 2.7 million barrels a day.
By. Joao Peixe of Oilprice.com
Joao is a writer for Oilprice.com