Hugo Chavez Appoints New Head of PDVSA

President Hugo Chavez on Saturday appointed a banker as head of state oil company PDVSA. Gaston Parra had been a lecturer on petroleum economics at the provincial University of Zulia, before being appointed as first vice-president of the central bank a year ago.

Mr. Parra's appointment, announced by chief of staff Rafael Vargas, appears geared to installing a compliant head at PDVSA, which is obliged to sell most of its hard currency income to the central bank, in preparation for foreign exchange controls, analysts said.

Mr Chavez, who has been in an ongoing cabinet meeting since Friday, is expected to announce several economic measures likely designed to help close a forecast fiscal deficit this year of around 5 percent of gross domestic product. Observers said the appointment of Mr. Parra, who will be the fourth head of the state oil company since Mr. Chavez came to office three years ago, is likely to meet a frosty reception from multinational oil firms which operate association contracts with PDVSA. Mr. Parra helped draft legislation that led to the nationalization of the oil industry in the 1970s and he opposed the later opening up of the industry to foreign capital in the 1990s.

Mr. Parra will replace army General Guaicaipuro Lameda who, despite having no previous oil industry experience, had been seen as a capable manager, winning the confidence of oil companies after a year in the job. Mr. Lameda had opposed a new hydrocarbons law decreed by Mr. Chavez in November, a law which oil executives said heralds the virtual 're-nationalization' of the industry. The new legislation requires the state's equity participation in joint ventures to be above 50 percent, adding Venezuela's rising country risk premium to investment costs and putting additional financial strain on PDVSA. The law raises royalty taxes from 16.6 percent to 30 percent, leaving them among the highest in the industry. Oil industry executives said they were barely consulted during the drafting of the legislation, despite intense lobbying. Mr. Lameda is also said to have opposed the most recent round of output cuts agreed to in January by OPEC. Venezuela's corresponding cut of 170,000 barrels per day, to a quota of 2.49 million barrels per day, reduces PDVSA’s ability to invest in increasing production capacity in the medium term, analysts say.