The Political Economy of Oil Contract Renegotiation in Venezuela

Manzano, Osmel; Monaldi, Francisco

doi:10.7551/mitpress/9780262013796.003.0020

Cited by 22 publications

(24 citation statements)

References 14 publications

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“…Other technological considerations are the prevalence of sunk costs in resources, combined with mineral price volatility (Nellor 1987;Manzano and Monaldi 2010;Engel and Fischer 2010), and varying uncertainty over project returns at various phases of investment (Kobrin 1980). Mineral extraction typically requires large outlays for exploration and excavation infrastructure before any revenues are realized.…”

Section: Sectoral Patternsmentioning

confidence: 99%

Expropriation of foreign direct investments: sectoral patterns from 1993 to 2006

Hajzler

2011

Rev World Econ

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This paper documents expropriation of foreign direct investment (FDI) across all developing countries for the 1993-2006 period, extending data constructed for earlier decades. This unique data set on worldwide expropriation between 1960 and 2006 is used to highlight several (interrelated) stylized facts. First, although expropriations have become less frequent compared to the 1970s, the number of takings has risen since the mid-1990s. Second, foreign firms are more vulnerable to expropriation in resource-based sectors, particularly in mining and petroleum. Third, the timing of expropriation coincides with fluctuations in mineral output price levels. Finally, when newly constructed FDI stock estimates are used to compare the sectoral distribution of FDI of recent expropriating countries to that of non-expropriating countries, average resource-based FDI shares are higher in expropriating countries; however, this difference is not reflected in higher value added shares for the expropriating group. This last fact is puzzling given that natural resource-based FDI has traditionally been considered high risk.

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Section: Sectoral Patternsmentioning

confidence: 99%

Expropriation of foreign direct investments: sectoral patterns from 1993 to 2006

Hajzler

2011

Rev World Econ

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“…33 I also present total capital expenditure records of the world petroleum industry. 34 During the late 1950s and 1960s, capital expenditures in the world petroleum industry were stable with the exception of Venezuela in the late 1950s ( Figure 5, left panel). From 1958 to 1961, capital expenses were stable in the rest of the world, but declined by more than 70% in Venezuela and then remained stable until 1975.…”

Section: Key Patterns In the Oil Industrymentioning

confidence: 98%

Productivity, Nationalization, and the Role of “News”: Lessons From the 1970s

Melek

2018

Macroecon. Dynam.

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Occurrences of an old phenomenon, the expropriation of foreign-owned property, peaked in the 1970s when virtually every significant oil-producing developing country nationalized its oil. Nationalization was again on the rise in the 2000s. Using novel data, this paper quantitatively evaluates the effects of nationalization. First, the paper finds significant productivity losses associated with nationalization in a sample of oil-producing countries. Venezuela in particular experienced a striking decline in productivity. Second, the paper presents a new channel through which nationalization affects productivity: a long-term pre-announcement can shift the composition of the workforce with a huge decline in highly skilled foreign workers and result in higher extraction and lower exploration. Guided by a quantitative dynamic partial equilibrium framework disciplined by features of the Venezuelan data, this paper then evaluates the effects of nationalization. A comparison of the simulated and time series data shows that the model can explain about 80% of the productivity pattern over 1961–1980 in the Venezuelan oil industry. Counterfactual experiments suggest that the shift in the composition of the workforce is important in accounting for the productivity pattern. Furthermore, if nationalization had been sudden, long-run losses would have been lower.

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“…Leaving aside corruption in awarding contracts in the oil industry, other authors (Manzano and Monaldi, ) have focused on how the volatility of rents makes for particular difficulties in affixing a durable set of institutional arrangements for their capture by governments over the longer term. Therefore, governments have ‘powerful incentives for contract renegotiation or nationalization’ (Manzano and Monaldi, , p.411). In relation to this, others (e.g., Stevens, , p. 15) have examined how governments in the 1970s, tired of protracted negotiations with IOCs, established NOCs, thereby ‘cutting out the middle man’ in acquiring rents.…”

Section: Driving Resource Nationalismmentioning

confidence: 99%

“…Leaving aside corruption in awarding contracts in the oil industry, other authors (Manzano and Monaldi, 2010) have focused on how the volatility of rents makes for particular difficulties in affixing a durable set of institutional arrangements for their capture by governments over the longer term. Therefore, governments have 'powerful incentives for contract renegotiation or nationalization' (Manzano and Monaldi, 2010, p.411).…”

Section: Driving Resource Nationalismmentioning

confidence: 99%

Explaining Resource Nationalism

Pryke

2017

Global Policy

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This article attempts to dissect the term resource nationalism (hereafter RN). It looks first at the origins of the term. Second, it examines various definitions of RN: in the business press where a zero sum conception of state and corporate interest is generally assumed, related definitions in academic writings that hinge on the relative control of resources by government and company, explanations that subsume the phenomenon within economic nationalism, accounts that stress how it restricts outputs and, finally, recent discussions that question prevailing understandings of RN and emphasise instead the diversity of its contemporary forms. The article then considers drivers of RN: the capture of economic rents, the corollary of the influence of market prices on this objective, obsolescing bargaining, the pressures of natural scarcity and the role of national identity. Fourth, the global context, commercial and legal, in which RN operates. Finally, the article considers the fluctuations in RN in recent years.

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The Political Economy of Oil Contract Renegotiation in Venezuela

Cited by 22 publications

References 14 publications

Expropriation of foreign direct investments: sectoral patterns from 1993 to 2006

Expropriation of foreign direct investments: sectoral patterns from 1993 to 2006

Productivity, Nationalization, and the Role of “News”: Lessons From the 1970s

Explaining Resource Nationalism

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