OK, not quite. But our friend Chávez just did something that will put meat on the bones of his somewhat jokey promise not to expropriate Brazilian investments in his country. What did he do? He agreed to plonk around $4 billion into a refinery located in the Brazilian state of Pernambuco.
Refineries are notoriously hard to liquidate. The market is thin; prices for similar installations in the United States have jumped around by a factor of ten. This is part of the reason why the big international oil companies continue to operate them, despite low margins and big liabilities. It's also why PDVSA has been unable to unload Citgo for a reasonable price, despite the fact that President Chávez would clearly like to do so. Add in the fact that PDVSA will be a minority shareholder with Petrobras, and there's no way it's going to get out of this investment easily.
Which means that the Bolivarian Republic just gave the Brazilians a big fat $4 billion hostage. More so since (1) the only other reasonable outlet for Venezuelan crude is in the United States; (2) civil law, unlike common law, allows Brazilian companies to sign contracts that spell out a predesignated list of damages to be paid should the government take certain actions; and (3) Brazil is basically independent of foreign oil, and therefore well-positioned to exercise a threat to embargo Venezuela. Viva the not-empire!
It is quite brilliant. I stand in awe. How did he sucker Hugo in that one? Is the prize of Mercosur really enough? Then again, our Bolivarian friend seems to have just signed a contract paying a Spanish company a ridiculous amount of money to build a CCGT plant, so who knows?
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