Institutional failure in Venezuela: the cases of spending oil revenues and the governance of PDVSA (1975-2005)

This thesis looks at the Venezuelan oil sector. The ‘oil economy’ represents the singular most determining variable in the political economy of Venezuela. The thesis challenges the view that oil, per se, has been some sort of a ‘curse’ over the country. Instead, this thesis aims to highlight the fact that other characteristics of the political system have influenced the way Venezuelans have dealt with their oil wealth. The thesis presents empirical evidence that the management of the oil industry and oilrelated income in the three decades following nationalisation of oil in 1975 became politicised. Politicisation occurred despite the fact that the political elite was aware of the danger that this might happen. Political elites embarked upon designing institutions to try to prevent this outcome. The institutions themselves were not in principle badly designed, and the thesis shows that there was nothing so inherently wrong with their design that they were unworkable. What was lacking was the political will to make them work, and evidence of this can be seen across two dimensions. One relates to the fact that all institutional forms studied – the holding company PDVSA, the Investment, Stabilisation and Development Funds – all ended up politicised. The other relates to the fact that an essentially similar pattern of politicisation can be seen across a whole series of different Venezuelan governments. In this sense the Chávez government has been an exercise in continuity and not in rupture. The thesis analyses two concrete aspects of the relationship between the Venezuelan State and oil. It scrutinises oil policy in Venezuela over the three decades following the nationalisation of the oil industry in 1975. The research focuses on the institutional arrangements (i.e. the ‘rules of the game’) concerning, first, the spending of the revenue which the Venezuelan State obtains from oil exports and second, theexercise of political authority and the use of institutional resources to control PDVSA and define its policy guidelines. This thesis facilitates a deeper understanding of the politicisation that has occurred in Venezuelan political economy at critical points in the relationship between the State and the oil sector. These insights contribute, in turn, to a better understanding of contemporary Venezuelan problems