U.S. company PBF is buying the Chalmette oil refinery, a “joint venture” between Exxon Mobil and Petroleos de Venezuela SA (PDVSA), Venezuela’s state-owned oil company. The sale appears to be, at least in part, an attempt by Venezuela to round up some cash quickly, after the country spent large amounts of its reserves in recent months.
As the FT puts it, “The deal, while modest in size, should offer some minor reprieve to Venezuela’s battered coffers.” But a sale like this doesn’t paint a pretty picture for the country’s future, no matter what short-term relief it might bring. As we saw with Greece a few months ago, selling off fixed assets is a one-off move that indicates a country is in long-term trouble. Venezula’s economy has been in a downward spiral for a while now. This exchange indicates that its chances of pulling out of that spiral are getting increasingly slim. That’s a tragic prospect for a country that should be much richer than it is, as we’ve noted before:
In reality, Argentina and Venezuela should, based on their natural resource endowments, be among the most prosperous countries in the world. Toxic political cultures are making these countries poorer every day, and as their economies deteriorate their authoritarian populist leaders turn to ever more ugly and less effective policies. Capitalists around the world should thank heaven for both countries. By demonstrating the costs of economic quackery, Argentina and Venezuela do more for the cause of global capitalism than the Koch brothers could ever dream of. Who knew that President Kirchner would be so effective at making the world a safer place for Scrooge McDuck and friends?