Books
Hellinger, Daniel
The Magical State: Nature, Money, and Modernity in Venezuela. By Fernando Coronil, University of Chicago Press, 1997, 368 pp., $20 The Paradox of Plenty: Oil Booms and Petro-States. By Terry...
...It was launched in 1989 by PDVSA executives, and permits private, foreign capital to re-enter the industry through service contracts to reopen abandoned fields and develop new ones through risk and profit-sharing agreements...
...Karl contends that oil booms produce an economic malady known as "the Dutch Disease...
...The law mandated that the oil industry remain a state monopoly...
...2. Mailer Mattie and Dorothea Melcher, Salvador de la Plaza: Petrdleo y soberania nacional (two vols, Mi6rida: Universidad de los Andes, 1996...
...The largest beneficiaries of state largess have been private capitalists who steadfastly prefer commercial, real estate and financial speculation to entrepreneurial activity...
...The term-which originally referred to damage to Dutch manufacturing by North Sea gas development-was coined by the World Bank to describe how booms result in highly overvalued currencies that discourage other export sectors and overwhelm domestic producers competing with cheap imports...
...Petr6leos de Venezuela S. A. (PDVSA), a state holding company, took over the operating companies in the fields on January 1, 1976...
...Karl takes aim at countries that use territorial sovereignty to submit natural resources to state, not private, control...
...Coronil challenges the orthodox view that Venezuela's democratic stability from 1958 to 1998 was due to the maturation of its ruling class and to what it learned from the collapse of the first democratic experiment from 1945 to 1948...
...Bernard Mommer, La cuesti6n petrolera (Caracas: Asociaci6n de Profesores, Universidad Central de Venezuela, 1988...
...Fernando Coronil says the country failed despite, not because of, VOL XXXIV, No 4 JANUARY/FEBRUARY 2001 55BOOKS oil...
...President Carlos Andr6s PNrez proclaimed nationalization Venezuela's "second independence...
...The Iran-Iraq War brought a reprieve, but then came devaluation, collapse of oil prices, staggering losses in basic industries Daniel Hellinger is professor of Political Science at Webster University in St...
...But before P6rez's five-year term ended there were signs of trouble: falling oil prices and recourse to massive borrowing...
...Unfortunately, neither book deals with the issue of the Apertura Petrolera (Oil Opening...
...President Chdvez's oil diplomacy makes Washington nervous because it challenges a neoliberal consensus that rent-seeking obstructs the free flow of capital...
...She traces the roots of the Venezuelan crisis to the decision by dictator Juan Vicente G6mez in 1922 to reserve negotiation of oil leases to the state, which prohibited private landowners from arranging concessions with the companies...
...The "paradox of plenty" is that such states have little incentive to develop their own administrative efficiency or to encourage a strong, productive private sector...
...Neoliberal solutions fail to address the need to otherwise strengthen state authority...
...yet the private sector has hardly followed...
...Following Karl, one might think that the state-owned PDVSA would mistrust the Apertura...
...With the 1958 political and economic pacts, the native bourgeoisie merely exchanged the right to rule for the right to make money...
...Smith directed his criticism of rent-seeking at aristocrats whose grip on land and resistance to free trade penalized England's industrialists and workers...
...P6rez prepared the public poorly, but the deeper problem lay in the historical tendency, says Karl, to rely on the state to collect and distribute oil rents...
...Profit-sharing agreements spare PDVSA and the state from risk and needed investments but allow foreign companies to produce on better terms than before nationalization...
...The goal of the Apertura has been to raise production drastically in the short run, which contradicts President Hugo Chivez's efforts to revive OPEC...
...As a colonial plague that malformed the third world into narrowly specialized primary exporters, the Dutch Disease should be renamed the third-world or neo-colonial disease...
...The Venezuelan state has for 65 years committed itself to "sowing the oil" in economic development...
...The basis for these booms is the state's use of sovereign ownership of natural resources to collect "mineral rents...
...The most controversial aspects of the Apertura concern the return of foreign companies into "upstream activities," such as exploration and drilling...
...On this base, other industries, such as automotives, were expected to rise, and Venezuela would overnight become the economic dynamo of the Andean and Caribbean regions...
...This obscures the continuity between the authoritarian and democratic eras, says Coronil...
...Karl, quoting Adam Smith, calls such rents "the income of men who love to reap where they never sowed...
...Jos6 Enrique Arrioja, reporter for the Caracas daily, El Nacional, documents how PDVSA executives have come to view the foreign oil companies less as competitors than as allies to promote the Apertura and to liberate themselves from state control...
...Karl believes the former...
...the culmination was the OPEC oil bonanza...
...But Venezuelans were not the only ones to benefit from the illusion...
...Instead, it will only get tighter...
...The illness is not economics but ideology, says Coronil...
...When prices collapsed, Karl writes, "Just as Spaniards had once waited for the next ship of gold from the New World to rescue them, Venezuelans seemed to believe that another boom in black gold was just around the corner...
...Reduced states may revert to rentier behavior in the future...
...PNrez planned to use oil money to capitalize a massive expansion, not only of hydroelectric capacity but also of the steel and aluminum industries...
...PDVSA also embarked on an "internationalization" program of partnerships overseas, and purchases of refineries and distribution systems abroad...
...These consist of extraordinarily high profits resulting from the natural productivity of the subsoil (e.g., high ore grades or light crude oil close to the surface) or from cartels that limit supply and fix prices...
...Colonel Hugo Chivez Frfas, organizer of the first of two unsuccessful military coups in 1992, capitalized on public anger in his victory in the December 1998 elections...
...Few in Venezuela were critical either, until the election of Chavez, whose oil policies have revived debates with deep historical roots...
...In The Magical State, he argues that oil empowered the Venezuelan government to conjure developmental projects out of nature, as if by magic...
...1 Not surprisingly, the oil company critique of "rent-seeking" receives sympathy from most oil economists overseas...
...Too often, she says, mineral rents foster "a bias toward unproductive activities, leading to poor development outcomes...
...Mass resistance helped drive out a dictator in 1958, but elites controlled the process...
...Louis and has published several books and arti- cles on Venezuela...
...Karl may think the state should divest itself of control of oil, but if Coronil is right, the symbiotic relationship among these actors will not be loosened by the Apertura that neoliberals prefer...
...This is one reason why Venezuela lacks an effective system of internal taxation and failed to develop the non-oil economy...
...Comisi6n Ideol6dgica de Ruptura, El imperialismo petrolero y la revolucin venezolana (three vols, Caracas: Fondo Editorial Salvador de la Plaza, 1975...
...Between the cracks one could fleetingly see that the magic of oil money could no longer sustain the magical state, as national oil money dissolved into global financial torrents of international capital...
...For decades, the independentthinking Communist writer Salvador de la Plaza urged a more aggressive assertion of Venezuelan sovereignty over subsoil resources...
...The great myth of Venezuelan democracy is that it originated in a struggle to wrest oil revenues from an oligarchy...
...Petroleos de Venezuela bajo la generacid6n Shell (Caracas: Los libros de El Nacional, 1998...
...During the oil boom they warned that Venezuelan prosperity was a facade built on rents, but unlike advocates of Apertura they do not eschew rent-seeking.2 They advocate a revised Apertura that retains state ownership of the subsoil, cooperation with OPEC, limits on the profits of foreign companies, and guarantees that Venezuelan private capital, not just foreign capital, participate in new investments...
...Executives say this keeps the company competitive, but critics, including President Chavez, think PDVSA uses overseas investments to shelter profits from the state...
...By 1988, when P6rez was reelected, a full-scale economic and social crisis was brewing...
...It would not surprise Coronil, however, that transnational and national oil executives are aligned in this policy debate...
...His critics denounce such policy as "rent-seeking" and a repeat of past mistakes...
...outside of oil, and a moral crisis of massive corruption...
...Through OPEC the oil exporting countries dictated pricing and supply...
...Was it the bonanza that undermined state capacity or vice versa...
...By Terry Lynn Karl, University of California Press, 1997, 380 pp., $22 Ascant quarter century ago, events seemed to portend a global shift in power and wealth toward the Third World...
...The petro-state is, in effect, an unproductive, third-world rent seeker...
...P6rez's effort to transform eastern Venezuela overnight into the "Ruhr" of South America resulted, Karl shows, in an inefficient complex of steel, aluminum and energy enterprises that survived only with massive state subsidies...
...When P6rez was re-elected in 1988, Venezuelans were entirely unprepared for his turn toward structural adjustment...
...once companies lost control over these decisions, they had little reason to resist compensated nationalization of their holdings...
...Each successful government effort to increase its share of oil profits gave it more economic power...
...ChAvez has already committed Venezuela, a notorious OPEC cheater, to adhere to production cuts...
...NACILA REPORT ON THE AMERICAS 56 Books 1. Jos6 Enrique Arrioja, Clientes Negros...
...Urban rioting erupted after P6rez announced a structural adjustment package in 1989...
...Ali Rodriguez Araque, El proceso de privatizaciodn petrolera en Venezuela (Caracas...
...He inspired Alf Rodriguez, Chivez's first Minister of Energy and Mines, and his key advisors...
...This came after publication of Paradox of Plenty, but ChAvez's rise seemed to many to confirm the thesis of Terry Lynn Karl's highly praised book, which argues that oil resources have retarded, not advanced "petrostates"--developing countries that greatly depend on oil exports...
...Venezuela advanced this struggle through its leadership in organizing the Organization of Petroleum Exporting Countries (OPEC...
...1977...
Vol. 34 • January 2001 • No. 4
