In the view of some critics, PdVSA became “a state within a state,” with control of the nation’s purse strings. Moreover, the oil company promoted itself as a model of efficiency and success in contrast to a corrupt government bureaucracy. PdVSA also served as a model of what a managerial class could do to improve the government.

While some sectors in Venezuelan society approved of PdVSA policies, others remained more critical. They worried that PdVSA’s contributions to the national treasury had declined and that it utilized much of its resources internally for its growing bureaucracy or new international ventures. The PdVSA president and its board of directors increasingly represented a parallel power to the elected president and the legislature. Others also feared that many PdVSA officials viewed themselves as part of a global managerial petroleum network, whose decisions reflected international concerns rather than primarily Venezuelan interests. Moreover, there were few checks and balances on their power and little accountability.

For the great majority of Venezuelans, PdVSA and the oil policy it pursued had acquired diametrically opposed symbolic meanings. The immense revenues it had generated in the almost 25 years since nationalization served as a constant reminder of the prosperous way of life which had eluded the majority of Venezuelans. Before his death, Arturo Uslar Pietri, one of Venezuela’s most revered pundits, wrote an article entitled “El parasitismo petrolero,” (Petroleum Parasitism) in which he remarked that the country, between 1976 and 1995, had generated and largely squandered US$270 billion dollars from oil sales. This, he concluded, should be the main topic of national debate. But few political figures took up his challenge.

Faced with this stark economic reality, arguments concerning professionalism and meritocracy rang hollow among the poor who made up the backbone of the population or the lower middle class who had seen their situation worsen in the past two decades. For a great number of Venezuelans, PdVSA embodied much of what had gone wrong with the nation—a legacy of squandered wealth and a managerial class and privileged labor elite whose experiences stood in sharp contrast to the lives of most common people. Promising to use oil profits to implement new social programs from education to health care, many Venezuelans applauded the Chávez government’s efforts to “reel in” the oil conglomerate and use revenues to improve their declining standard of living.

The extreme polarization that surfaced in Venezuela after the election of Chávez in 1998 appeared to catch many foreign observers, including academics, by surprise. Many in this arena drew their information from the extensive professional relations and personal friendships they had fostered with leading Venezuelan political and intellectual figures. On the surface their surprise seemed reasonable.

After all, since the January 1958 ouster of military dictator Marcos Pérez Jiménez, Venezuela appeared to have become a model democracy for the region, an “exceptionalist” case when compared to its Latin American neighbors and especially Cuba. Since 1958, the army had remained in the barracks and ostensibly stayed out of politics. The leading parties, Acción Democrática (Democratic Action) and the Christian Democrats, forged a political consensus that excluded the left and some popular sectors, but assured the smooth transition of power. A succession of popular, reform-minded civilian governments ruled Venezuela and seemed to use the nation’s oil riches to mollify class contradictions. Immersed in the Cold War, Washington supported and approved of developments in Venezuela.

By the mid-1970s, oil profits allowed Venezuelans to enjoy one of the highest standards of living in all of Latin America and the people became known as the “Venezuela Saudita,” or the Saudis of the region. While neighboring countries experienced prolonged and debilitating guerrilla conflicts and a legacy of brutal military dictatorships, the Venezuelan model appeared to have produced 30 years of sustained political peace and economic prosperity. During the last half of the 1980s, however, the Venezuelan “miracle” began to unravel. The price of oil plummeted. Social inequality, always a persistent and neglected feature of the society, increased dramatically and became visible in the remarkable growth of the informal sector. Charges of corruption, mismanagement, and favoritism, previously muted by the political consensus forged in the 1960s, now surfaced with increased frequency. Public faith in the Venezuelan political system and the leading political parties began to diminish.

Nothing, however, prepared Venezuelans for the events of February 1989, when the government of Carlos Andres Pérez sought to implement a series of foreign-inspired austerity measures that included increases in the price of gasoline and removing subsidies from basic foodstuffs. In protest, thousands of Venezuela’s poor descended from the hills that surround Caracas, and the government, fearing a loss of social control, unleashed the military, which brutally supressed the demonstrators. Beyond the hundreds who perished in the Caracazo, as the event became known, the greatest victim of this debacle was the Venezuelan democratic process and the image of the nation as a democratic model. The headlines in the March 13th, 1989 edition of Newsweek proclaimed, “South America’s most stable democracy explodes.”

Openings for Oil

In February of 1992, as popular discontent mounted, disgruntled military officers, including Chávez, staged an unsuccessful coup. The officers who participated in the coup were imprisoned, but their action drew greater national and international attention to the failures of the Venezuelan political system. By 1994, a series of banking and insurance company failures worsened the plight of thousands of Venezuelans. Against this backdrop of repeated crisis and a weakening national government, the PdVSA oil conglomerate continued to exercise greater autonomy. Nowhere was that more clear than in the naming of Giusti as leader of PdVSA, an appointment that President Rafael Caldera had actually opposed on two previous occasions but eventually accepted.

This increasing autonomy also became evident in the Caldera government when the oil company promoted a series of joint ventures with foreign oil companies that culminated in what became known as the Apertura Petrolera, or the new Oil Opening. This policy permitted the participation of numerous foreign companies, who would ostensibly serve as PdVSA partners, to bid on oil fields previously abandoned by the company. If oil was found, a suitable arrangement would be made with one of the PdVSA subsidiaries and the profits shared. According to one leading newspaper, bidding by 131 companies on these so called “marginal fields” transformed Caracas into the “Petroleum Capital of the World.” The bidding itself became a lavish production hosted at the most luxurious hotels in Caracas and widely reported in the press.