Day: April 18, 2018

Chevron said on Tuesday two of its executives were arrested in Venezuela, a rare move likely to spook foreign energy firms still operating in the OPEC nation stricken by hyperinflation, shortages and crime.

Venezuelan Sebin intelligence agents burst into the Petropiar joint venture’s office in the coastal city of Puerto La Cruz on Monday and arrested the two Venezuelan employees for alleged wrongdoing, a half-dozen sources with knowledge of the detentions told Reuters.

Venezuela’s Information Ministry and state oil company PDVSA did not respond to a request for information about the detentions, which come amid a crackdown on alleged graft in the oil sector.

One of the detainees, Carlos Algarra, is a Venezuelan chemical engineer and expert in oil upgrading whom Chevron had brought in from its Argentina operations. The other, Rene Vasquez, is a procurement adviser, according to his LinkedIn profile.

Arrests comfirmed

The U.S. company confirmed the arrests, which are believed to be the first to affect a foreign oil company’s direct employees.

“Chevron Global Technology Services Company is aware that two of its Venezuelan-based employees have been arrested by local authorities,” Chevron said in a statement.

“We have contacted the local authorities to understand the basis of the detention and to ensure the safety and wellbeing of these employees. Our legal team is evaluating the situation and working towards the timely release of these employees.”

Disagreements lead to arrests

A Chevron spokeswoman declined to provide further details on the case or the status of its operations. The U.S. State Department did not immediately respond to a request for comment.

The executives were arrested after disagreements with their PDVSA counterparts over procurement processes, two of the sources said.

The arrests highlight risks for foreign companies in Venezuela, home to the world’s biggest crude reserves but heaving under a fifth straight year of recession. Some insiders say a fracturing ruling elite is using the purge to wage turf wars or settle scores.

“Our view has been that oil industry companies would do well to be cautious and stop assuming that good relations with PDVSA can last forever due to a common interest in pumping oil,” said Raul Gallegos, associate director with the consultancy Control Risks. “The level of corruption in PDVSA, especially under a military administration, can and will trump production logic.”

Other oil executives jailed

President Nicolas Maduro since last year has overseen the arrest of dozens of oil executives, including the former energy minister and PDVSA president.

The purge comes years after industry analysts began criticizing PDVSA for widespread graft. The government long decried such accusations as “smear campaigns.” But last year, Maduro changed his tone and started blaming “thieves” for rampant graft in the oil sector and an economic crisis that has spawned malnutrition, disease and emigration.

Vowing a cleanup, Maduro replaced many jailed executives with soldiers, but the unpopular management has spurred a wave of resignations.
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VOA’s Celia Mendoza interviewed U.S. Secretary of Commerce Wilbur Ross on the sidelines of the Summit of the Americas in Peru. This is an edited transcript of that interview.

Question: Secretary Ross, tell us what the importance is for the United States to do business with Latin America, especially now that we have a global market and China is trying to come into the region. China has been arriving in the past few years, bringing more investment and starting to bring more goods and services to the region.

Wilbur Ross: The U.S. has 12 of its foreign trade agreements, free trade agreements with Latin America. That is 12 out of the 20 that we have, so the majority of our trade arrangements are with Latin America. Second, Latin America exports far more to us than it does to China, and third, Latin America has a surplus with the U.S. and a deficit with China, in fact the surplus with us is almost twice the deficit that the region has with China.

Question: In the past few weeks, we have talked about tariffs, we have talked about the exchange of goods, but recently we learned that Argentina might be one of those countries that might be buying pork from the United States. How does that affect that exchange?

Ross: We’ve been having very constructive dialogues with Argentina. President [Mauricio] Macri and President [Donald] Trump have a very good working relationship and so we are exploring all sorts of things, bilateral things, things that Argentina can sell us, and things that we can sell Argentina.

Question: You have mentioned that China is more protectionist than a free market country, explain how that could affect the relationship with Latin America as many countries try to broaden their market.

Ross: What China is buying from Latin America is basically raw material, agricultural commodities, mineral resources, oil and things of that sort. They’re buying very little in the way of high value … manufactured goods. But in terms of the U.S., more than 70 percent of what we are buying is high value-added manufactured goods. That’s much more stimulative for the Latin American economy, because you have the basic labor content from mining or ag (agriculture) plus the value added in the factories, so it has a more therapeutic effect and is also a favorable trade balance for Latin America versus a negative one.

Question: Something you have mentioned in the past, which I think is very interesting, is how you have said that United States can be a better partner to Latin America because of ecommerce. How will that work? And how do you see that benefiting the region?

Ross: Well, the region has relatively little trade within the region itself and the reason for that is the borders. The borders are complicated. One of the producers I spoke with at this conference said it’s very hard to comply with the labeling requirements in each country, because each has a little different word. Well if the labeling requirements become ecommerce, e-labeling, rather than physical, that will facilitate trade among the Latin American countries. Further, it takes nine days and something like $800 to clear goods through customs on average. In the U.S. it takes a few hours and a couple of hundred dollars to clear a container [of goods]. Those are unnecessary barriers to trade and, worse than that, when you have complex regulations, that lends itself to corruption. The more delays, the more complexity, the more regulation, the easier it is for improprieties to spring in.

Question: And since you bring that up, that is the subject of the Summit of the Americas: corruption and how that affects relations with those countries, because a lot of times American companies and the United States are not very confident that the companies that they are doing business with can keep up with the regulations of the United States.

Ross: Well, the United States has the Foreign Corrupt Practices Act, which prohibits American companies from giving bribes or any other form of corruption. So when Latin American government procurement agents deal with an American company, they know they are relatively safe from problems like the Odebrecht situation. I think Odebrecht is going to be a turning point for Latin America. I believe all the public opinion polls say that the public is insisting on less corruption, and the way to deal with corruption is to have voluntary standards worked out with the regulators. We learn today about self-regulation by four nations of medical devices, including quite a few practitioners, quite a few countries, and I believe the next one will be pharmaceuticals and the one after that will be construction, that is a good thing, the more transparency, the less corruption.

Question: Right now we have negotiations between Canada, the United States and Mexico. How do you see those conversations going, and are we close to a final deal? We have heard this morning that President Trump might be thinking about coming back to the trans-Pacific agreement, which Peru was part of the negotiations, as well as some of the other countries. Is that a possibility in the future?

Ross: Well, those are two very different questions. On NAFTA, there have now been about eight sessions, eight formal sessions. A lot of the easy issues have been resolved. They’re now working on the more difficult issues and that was a deliberate system. The idea was let’s get out of the way the easy things, let’s build some momentum toward the more difficult ones. So within the next month or two we should know pretty well whether we’ll have a reasonably quick deal or whether it will come after the elections that are coming up in the third and fourth quarters.

Question: In terms of the Pacific alliance, for now is a negotiation being considered?

Ross: Well, I’ve learned in this conference that there are much friendlier relations between the Pacific Alliance and [South American trade bloc] Mercosur, than there have been before, partly because the change in government in Argentina and also in Brazil. If those two could get together, on a less protectionist basis, you’d have a huge powerful trading bloc that could be a real factor globally. So, I think it will be in everyone’s interest, longer term, to encourage that development.

Question: Finally, Venezuela is a big subject during this conference not because it is on the agenda but in the surroundings of the conference. Just a few minutes ago, Vice President [Mike] Pence announced $60 million for countries that are taking refugees from Venezuela. But in terms of the economy, Venezuela has levels never seen in the region. Do you think that could affect the other countries? What do you think could happen there?

Ross: Venezuela is abusing its population and that is not a satisfactory thing to happen. We are grateful to the Lima group for their support of our actions against Venezuela, and I think that is very good and shows the partnership spirit. The vice president’s announcement about giving funding to the countries that have taken in refugees, our intention is not to burden those countries, our burden is to try to deal with the problems in Venezuela.”

Question: What do you think could happen in the next year or two in terms of relations between the U.S. and Latin America countries, because we have many presidents on the way out. The Mexican president is on the way out, as well of the president of El Salvador … and we have countries that are establishing markets that are complicated, like Bolivia and Cuba, that continue to be a problem for the region.

Ross: Well, I think in general the U.S. is going to be paying much more attention to and working much more closely with Latin America than prior administrations had. Given how important Latin America is to the U.S. geographically, and in national defense and trade, is a very natural thing for us to be very close allies. So we are going to try to facilitate that, an example is the gesture that the United States made through Vice President Pence. I hope that people understand what it is. We are sharing the hardship with them of the refugees that have come out of Venezuela.
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Republican leaders in the U.S. Congress are moving forward with a plan to vote before the 2018 midterm elections on a bill to make permanent the temporary individual tax cuts in their recent tax overhaul.

It is not yet clear, however, if the plan would pick up support from Democrats, whose votes would be needed to pass legislation in the Senate.

The Republican tax law, approved in December without Democratic support, permanently cut the top corporate rate to 21 percent from 35 percent and created a permanent deduction for pass-through businesses. It created lower rates and new credits for individuals, but those expire at the end of 2025.

Democrats have said the tax code rewrite favors businesses and the wealthy, and that working-class taxpayers will see little benefit in their paychecks.

The nonpartisan Congressional Budget Office said last week that the tax bill, as written, is projected to add $1.9 trillion to the national debt over the next decade.

“We fully intend to make these things permanent, and that’s something we’ll be acting on later this year,” House Speaker Paul Ryan told reporters on Tuesday, referring to the individual rates.

Making the individual cuts permanent after 2025 would cost an additional $1.5 trillion over the next decade, according to a Tax Foundation analysis of data from the nonpartisan Joint Committee on Taxation.

Senate Majority Leader Mitch McConnell, asked if he would hold a vote, said that if Democrats are interested, “that’s something we ought to take a look at.”

But many Democrats have already said Republicans could have prioritized low- and moderate-income taxpayers over the wealthy and businesses when writing permanent sections of the original law.

In order to comply with the Senate rules that allowed Republicans to pass the tax overhaul with a simple majority – and no Democratic support – the measure was not supposed to add more than $1.5 trillion to the U.S. debt over the next decade.

“Look, we’d have to see what their bill is,” Senate Minority Leader Chuck Schumer said.

In order to make the individual rate cuts permanent, other parts of the bill should be renegotiated, some Democrats have said.

“Let’s see what they do, but if they’re going to create more debt, and they’re not going to pay for it … I think we can show the American people that is a shell game,” Representative Steny Hoyer, the No. 2 House Democrat, told reporters.
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