PDVSA?s wealth has also been used to back multibillion-dollar loans from China and to buy arms from Russia. It supplies, almost single-handedly, Venezuela?s foreign exchange market. It is also a source of patronage: the number of employees, hired on the basis of their loyalty to the ?Bolivarian Revolution,? has tripled since 2003 to more than 121,000.
?[The Amuay disaster] is not a random occurrence. It is the consequence of PDVSA?s transformation from an efficient and effective company into a profoundly politicized institution,? says Diego Gonzalez, president of the Caracas-based Centre for Energy Orientation. It is ?a reflection of what is happening in the rest of the country.?
A decade ago, PDVSA was considered one of the best-run oil companies in the Americas. Today, inefficiency and incompetence have led to a string of accidents, causing 77 deaths before the Amuay explosion since 2003. The company?s annual report admits a lack of funds has hurt maintenance.
?The only maintenance they have done is to paint things red,? says Francisco Luna, a PDVSA union leader. ?They make everything look nice and pretty but underneath it is all rusted. They don?t replace parts until they break,? he said, describing worker conditions as ?disastrous.?
With fewer resources and attention dedicated to oil, it is no surprise that, according to BP, production has fallen from 3.1 million barrels per day to 2.7 million b/d in the past decade. Higher oil prices have masked that decline. When Mr. Ch?vez came to power, oil was less than $10 a barrel, now it is more than $100. Much of this windfall has also been spent on social projects, helping to reduce poverty from 44 per cent in 1998 to 27 per cent in 2011, according to government statistics.
But investment has been scrimped on, and the cost to PDVSA?s operational ability has been huge. Last year there was even a moment when markets feared for PDVSA?s solvency; its bonds still yield a hefty 11 per cent.
Indeed, Gustavo Coronel, a former board member, likens the company today to ?a toothless tiger resting on its haunches before a huge slice of raw meat.? Venezuela might have the largest oil reserves in the world, some 300 billion barrels, according to BP?s statistical review. Yet these remain undeveloped because of ?severe management, technical and financial constraints driven by the application of a rigid statist ideology for what should be a commercial enterprise.?