Petroleos de Venezuela May Make Shoes, Build Ships, Grow Beans

Petroleos de Venezuela SA, the state oil company that controls the biggest reserves in South America, may begin making shoes, building ships and farming soybeans as President Hugo Chavez widens the government role in the economy.

Chavez has approved the creation of seven subsidiaries that range from oil services to agriculture, according to a written report to the company’s management. The plan would make Petroleos de Venezuela an even bigger force in the country’s daily life and put it in competition against companies from around the world.
Petroleos de Venezuela already controls the oil production that accounts for 90 percent of Venezuelan foreign trade and about half of government revenue. The effort to expand into other businesses may siphon off managers and capital, hobbling efforts to reverse a slide in energy production.

“Having more of the economy under one roof, you’re more and more vulnerable,” said Robert Bottome, an analyst at Caracas- based research company Veneconomia. “The state is taking over everything. Maybe that wouldn’t be a bad idea if they knew what they were doing.” Declining oil output “suggests they don’t know what they’re doing,” he said.

The document, “New Subsidiaries and Orinoco Oil Belt: Direction of Special Projects and Report to Management,” records a June 28 meeting among 13 company employees, including Ramon Key, who works for the new oilfield services unit, and Leida Martinez of the purchasing unit. The author isn’t identified.

The new subsidiaries will provide necessities ranging from construction to oilfield services to social projects, furthering Chavez’s effort to create “21st Century Socialism” in Venezuela, the document says.

Bloomberg