State-owned oil company Pdvsa announced that on Monday it will begin to pay debts to contractors. The oil industry's liabilities up to September 2008 amounted to USD 7.8 billion (File Photo)

Economy
While government officials say that they have enough resources to tackle the income gap resulting from falling oil prices, liabilities with contractors and workers continue to grow.

The Venezuelan state is in default with contractors which, in turn have failed to pay their employees. The companies providing services to state-run oil company Petróleos de Venezuela (Pdvsa) and the Venezuelan Guayana Corporation (CVG) are going through the most critical situation.

The boards of directors of the state companies are negotiating with suppliers to settle debts, but the liabilities of both the oil industry and Guayana corporations would be over USD 8 billion.

According to the financial statements of Pdvsa, the holding's debt to suppliers was USD 7.8 billion at the end of the third quarter of 2008. Meanwhile, CVG contractors estimate that delayed payments amount to USD 372 million.

Failure to honor debts comes amidst crumbling oil prices. So far this year, the Venezuelan oil basket has averaged USD 36 per barrel, while financial officials estimated the oil price at USD 60 to calculate FY 2009 budget. The funds the Treasury has received are used to meet the minimum requirements for the operation of the state. In almost two months, the government has disbursed 9 percent of the current fiscal year expenditures, which amount to USD 77 billion.

Oil debt
Pdvsa is the corporation with the largest outstanding debt among state companies. In order to meet obligations, Pdvsa has asked oil suppliers to cut their rates by 40 percent.

President of Pdvsa and Minister of Energy and Petroleum Rafael Ramírez recently said that if local service companies did not review their rates downward, Pdvsa would no longer enter into agreements with them. "We are reviewing the 5-year term contracts because current rates are unaffordable. They must understand the situation."

After five months of delays, Pdvsa announced in a statement that the holding Monday will begin to pay debts to more than 90 percent of providers, including cooperatives, small- and medium-size enterprises, most of the hospitals and other health services.

These companies have asked Pdvsa to resume weekly payments and mediate with the banks to renegotiate financing agreements, to keep on operating.

Other obligations
The CVG is facing the same difficulties as Pdvsa. According to professional and business associations, more than 200 companies are affected by the delays in payments and if state corporations do not meet their obligations, jobs in the sector are likely to be hit.

Translated by Gerardo Cárdenas

Mayela Armas H
EL UNIVERSAL

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