Before the Storm
Venezuela’s PDVSA 1998
- PDVSA, although a state-owned company, was subject to private law – a corporation whose shares were the property of the nation. Being under private law, PDVSA and its subsidiaries were subject to the Commercial Code, with the transparency and accountability safeguards that this entails. The distant relationship ensured that the government had no direct interference in the operation of the company.
- At the time of nationalization, it was decided to keep the structures of the transnational companies that operated in the country, which became PDVSA’s affiliates. In the same way, the systems of checks and balances were maintained to ensure the transparency of the national corporations. These structures were gradually merged until, in late 1997, there was only one operating company.
- By 1975, almost all the personnel, at different levels, were Venezuelan. The nature of a private law company allowed PDVSA and its affiliates to ensure competitive salaries with the international oil industry and thus preserve the most qualified personnel, at least in the initial stages.
- PDVSA was allowed to retain the net after-tax earnings to finance its investments. Also, a legal reserve of 10 percent of annual gross income was established to fund PDVSA’s expenditures. The company was able then to grow steadily, financing its investments and paying taxes similar to those paid in other oil countries.