06 December 2007 00:10 [Source: ICIS news]
By Jasmina Kelemen
CARACAS (ICIS news)--The weekend's electoral defeat of a constitutional referendum was a stinging political rebuke to Venezuela's President Hugo Chavez, but will be unlikely to affect the nation's ambitious petrochemical development plans, according industry leaders and analysts.
Nor will it alter the economic controls that have exacerbated a serious shortage of local resins, they said.
Chavez suffered his first electoral defeat in over nine years of presidency after learning in the early morning hours Monday that his plans to radically rewrite the nation's constitution were defeated by a margin of 51% to 49%.
The defeat prompted speculation as to how a newly chastened Chavez would move forward, but market observers said there would be little change, at least for now.
Venezuela's plans to spur investment of more than $20bn (€14bn) in the nation's petrochemical sector and to raise the production of plastic resins by 2013 are buffered from political vagaries, said Carlos Celis, president of the local plastics industry association AVIPLA.
"The basics of the petrochemical revolution are actually a very good idea," Celis said in an e-mail response to questions. "We do not think that such a project should be delayed by either this government or any other one."
By the end of 2013, state-producer Pequiven expects to boost production to 5.4m tonnes/year from 630,000 tonnes/year. However into the foreseeable future, the former exporters Pequiven will have to rely on imports to meet the needs of the local transformer industry.
Chavez's populist government has embarked on a massive public spending spree, boosting demand for everything from food packaging to construction materials. However, years of deferred maintenance have caught up with Pequiven, which has had to reduce capacity just as an economy flush with cash clamours for more goods.
As well, stiff governmental controls on currency exchange and importations make it nearly impossible for most processors to buy product abroad, creating what local industry leaders have a called a crisis in the plastics sector.
That situation is unlikely to change anytime soon as an unusually subdued Chavez reiterated his determination to move towards socialism following the election results.
"He's no longer this enigmatic figure that can do anything he wants," said Juan Pablo Fuentes, a Venezuelan economist at Moody's Economy.com. "[The results] were very significant in that sense…but he's not going to go backwards and eliminate market controls or become more market friendly."
Indeed, even though the constitutional reform was defeated, Chavez still enjoys executive privilege to rule by decree and can use those powers to ensure state control of joint-venture projects in the petrochemical, natural-gas and coal sectors.
As such, it remains likely that future investment in Venezuelan energy projects will come from politically aligned nations such as Iran and Belarus.
Recently, Chavez and his Iranian counterpart Mahmoud Ahmadinejad signed agreements to jointly finance methanol projects in both Venezuela and Iran. In addition, Belarus's state-owned petrochemical company, Belneftekhim, plans to start producing and refining oil in Venezuela with an eye towards Latin American markets.
However, analysts agree that now the referendum is over, Chavez could revive efforts to boost regional integration.
Chavez has put forth "very interesting" ideas of regional integration but his approach was very difficult to swallow for other Latin American governments that want to both strengthen local ties and trade relations with the United States, said Roger Tissot, a political risk analyst at PFC Energy.
Chavez has fashioned himself as a political counterweight to the US in South America and has consequently exchanged pointed barbs with important regional trading partners such as Brazil, Colombia and Peru.
In his most recent spat with other heads of nations, he recalled his ambassador from Bogota, Colombia, after trading insults with Colombian President Alvaro Uribe.
Last week Chavez warned he could nationalise Spanish banks if Spanish King Juan Carlos I did not apologise for telling him to shut up last month at the Iberoamerican Summit in Chile.
($1.00 = €0.68)
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