Outlook grim in Venezuela's essential oil industry

MORON, Venezuela (AP) — Only the filthy water from broken sewer pipes keeps the dust down in front of Ramon Boet's shop, which sells statues of saints and other religious objects.

In the distance, massive tankers pull up to a half-century-old refinery that processes much of the oil that earns Venezuela more than $100 billion a year.

"It doesn't help us at all," Boet, 58, says as a blackout snuffs the lights in his shop in this Caribbean coastal town. He closes before dusk. Too many robbers.

The oil flowing from the El Palito refinery sells for more than five times what it cost when President Hugo Chavez took office in 1999. Yet when Chavez died in March he left Venezuela's cash cow, its state-run oil company, in such dire straits that analysts say $100-a-barrel oil may no longer be enough to keep the country afloat barring a complete overhaul of a deteriorating petroleum industry.

The situation is more urgent than ever, analysts say. The price of crude has slumped in recent weeks and Chavez's heir, Nicolas Maduro, appears to have done little to address declining production, billions in debt and infrastructure deficiencies that have caused major accidents including a blaze that killed at least 42 people at Venezuela's largest refinery last year.

Maduro has retained Chavez's oil minister and the head of state oil company Petroleos de Venezuela S.A., Rafael Ramirez. And he appears intent on continuing to send cut-rate oil to members of the 18-nation Petrocaribe alliance, for which Venezuela is hosting a summit on Saturday.

Ramirez said Friday that Maduro would use the meeting to propose creating a special economic zone for group members.

PDVSA, which accounts for 96 percent of the country's export earnings, no longer "generates enough income to cover all its costs and finance its commitments," said Pedro Luis Rodriguez Sosa, an energy expert at the Institute for Advanced Studies in Administration in Caracas.

He said that "you can see PDVSA is in trouble" at the $100-a-barrel level because of the many millions lost to gasoline subsidies and spending on domestic social spending and PDVSA's use as a "geopolitical tool" to maintain regional alliances.

Venezuela has the world's largest oil reserves but PDVSA's production, earnings and income all appear to be on a downward slide and its debts to suppliers rose 35 percent. Its debt to the Central Bank of Venezuela reached $26.19 billion last year, a nearly eight-fold increase in two years.

The government makes no apologies. It says it is employing the country's most important natural resource for the good of the people and promises increased production and revenues in the immediate future.

Ramirez said that PDVSA's efforts remained focused on developing the remote Orinoco belt, site of the world's biggest oil reserves, with the aid of oil firms from China, Russia, the U.S., Italy, Vietnam, Malaysia, Japan and Spain. Venezuela hopes to lift overall production to some 3.32 million barrels a day, 200,000 more than last year.

"We're in a process of trying to attract investment in dollars other than ours," Ramirez said, assuring reporters that PDVSA would work with private investors to not take on more debt to make new investment.

Outside experts, however, are deeply skeptical. They say PDVSA is badly mismanaged and that even a radical overhaul would take years to show results.

Rather than reinvesting enough profits in exploration and maintenance, Chavez dedicated oil revenues to social spending such as building hundreds of thousands of homes and free medical clinics for the poor, they say. Last year PDVSA said it spent $28.83 billion, nearly a quarter of its income, on various state programs.

PDVSA also loses billions subsidizing gasoline for Venezuelan drivers, who pay less to fill up their tanks than people anywhere else in the world.

"The government of Venezuela today uses PDVSA as its petty cash box to lead populist social programs," said Jorge R. Pinon, associate director of the Latin America and Caribbean Program at the University of Texas, Austin. "Whatever capital is left in PDVSA is being mismanaged, mismanaged because they're just not focused on running the company. ... They're focused on building hospitals and schools."

On top of that, state oil company PDVSA dedicates 42 percent of its production to favored partners in the Caribbean and to consumption inside Venezuela, where gasoline is almost free, which means it can sell less than 60 percent at market price.

Ramirez said that a rise in daily domestic oil consumption to 650,000 barrels this year is expected to drive down exports by 7.8 percent to 2.36 million barrels a day, inevitably damaging revenues for PDSVA and the broader Venezuelan budget.

The alliance's Caribbean and Central American member nations receive hundreds of millions of dollars annually in deeply discounted oil, part of Chavez's bid to project Venezuela's influence in the region. Socialist ally Cuba is the largest recipient.

Maduro made his first major foreign trip as president to Cuba last weekend, recommitting to sending it some 130,000 barrels of oil a day.

Now, Maduro must wrestle with the consequences of Chavez's energy and economic policies, which included a campaign spending spree last year ahead of Chavez's re-election.

In order to control capital flight, Chavez imposed controls that require any business that wants to import goods to purchase dollars directly from the government, which rations them out in relatively small amounts at an artificially set official exchange rate.

Even with gasoline at roughly $100 a barrel over the last six months, the government hasn't been meeting the demand for dollars. That's created frequent and worsening shortages of staple goods such as flour, sugar and cooking oil.

And despite promises to increase the flow of dollars it pumps into the economy, independent economists don't see how it can be pulled off. Crude prices fell about 10 percent over the last three weeks and analysts say they could stabilize at $90 a barrel.

At the same time, official figures show Venezuela produced 3 million barrels a day last year, a 95,000 barrel-a-day decline from 2011. Independent organizations such as OPEC estimate Venezuela's production could actually be around 2.7 million barrels a day.

Ramirez has played down questions about the company's performance, and PDVSA says it invested billions in exploration last year, drilled 2,010 wells, more than double the previous year, and projects increased production to reach 4 million barrels a day in 2014 and to 6 million by 2019.

Venezuelans such as Zaida Eleonora Mejicano are skeptical of such talk and are impatient to see the benefits.

Mejicano used to travel around Venezuela buying gold jewelry that she resold in Moron, her hometown. Now, she says, she's amazed by the deterioration of the quality of life. She can't travel anymore for fear of being robbed.

"You can't get anything here. Here women have to wait in line four, five even six hours for a stick of butter," she said. "I've always worked hard but now one's afraid to even travel. Things are really ugly here."

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AP writer Michael Weissenstein contributed to this report.

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Hugo Chavez coffin parades past Venezuela's ills

CARACAS, Venezuela (AP) — The road from the military academy where Hugo Chavez's body has been lying in state to the hilltop museum where he'll be displayed indefinitely is lined with some of the most dangerous slums on the planet. It runs under bridges in dire need of repair and past grocery stores with no groceries.

Tens of thousands of Venezuelans gathered along that route Friday to watch the late president's body cross the city in yet another choreographed show designed to keep Chavez supporters in thrall, at least until an April 14 election scheduled to replace him. Afterward, people will have to go on living with the problems that Chavez left behind.

This tense, relentlessly gray capital embodies many of Venezuela's problems, with crumbling apartment towers and food lines often sharing the same sidewalk with cheering crowds eager to greet their departed Comandante.

"More than anything, the government continues fighting with everyone, and does everything badly," said Francisco Olivero, a 54-year-old carpenter who lives with his wife and five children in the poor neighborhood of Catia, just blocks from the funeral route.

Like many Venezuelans, Olivero said wartime-levels of street violence all over the city were his top worry.

"They kill people here every day," he said. "I've lost friends, relatives."

Even as thousands of bused-in police academy cadets gathered along the route, Olivero and his wife Yelitza Acuna were hiding from the sun while waiting in a block-long line to buy flour, coffee, butter and other food staples that they said have been hard to come by for about two years.

The store, which sat along the most trafficked part of the route, happened to be selling the raregoods that day, drawing a crowd of people desperate for a few bags of flour.

"The word spread in the street, and we all came running here," said Oliver's wife, Yelitza Acuna, a cook's assistant.

Economists say government-imposed price controls designed to dampen inflation topping 20 percent have made it impossible for store owners to sell basic foods at a profit, sparking widespread shortages. For their part, officials have accused suppliers of hoarding the goods and have invaded warehouses looking for sugar, flour and other food items in short supply.

"You can't find anything," said 27-year-old lawyer Anglys Bericote, who rode a bus for four hours from the town of Cajigal to view the funeral cortege. Wearing a heart-shaped "I am Chavez" pin, she said she was taking the opportunity to also stock up on basic goods. People in her town have even had to go without toothpaste and toilet paper, she said.

"It's all the plan of the private businesses," she said, repeating the government's line of attack. "They want to hold onto everything so that it riles up people."

A few blocks from the military museum, where a ceremonial fire awaited the arrival of Chavez's body, Jonathan Rodriguez watched government supporters pass by in red T-shirts bearing Chavez's image. Raw sewage trickled from a broken pipe down the street, and the 37-year-old insurance agent scolded his two sons for playing nearby.

"The majority of them don't complain about the problems here," Rodriguez whispered about the passing Chavez supporters. "It's as if they didn't exist."

Rodriguez said he doesn't have that luxury. Violent crime is so bad in his part of town that he and his family shut themselves inside their home every night by 6 p.m., only opening the iron gate covering his front door the next morning. Yet for Rodriguez, staying indoors might not be enough to protect him and his family from the war outside. Several weeks ago, a stray bullet penetrated the zinc roof of a neighbor's house.

Almost all of Caracas' streets empty of people by dusk as residents live under the pall of a homicide rate 20 times that of the United States. On Thursday, the U.N. Development Programme issued a study finding Venezuela had the world's fifth highest homicide rate, only behind Honduras, El Salvador, the Ivory Coast and Jamaica.

Rodriguez blamed his working-class neighborhood's ills on thugs who prowl the streets on motorcycles and called for more police patrols.

Many, however, believe the police are a big part of the problem. In an astounding revelation, former Justice Minister Tareck El Aissami said in 2009 that police were responsible for up to 20 percent of the country's crimes.

"I just stay inside now," Rodriguez said. "Outside, it's not safe."

All along the funeral route are unmistakable signs that this 28 million-person country is not only unsafe, but that its basic services no longer work.

The hills around the military academy are covered with bare-brick slums that rise almost vertically into the Caribbean sky. More Venezuelans have moved into such slums during Chavez's government, casualties of a housing deficit that the human rights group Provea estimates at 2 million units. Official figures show the number of houses deemed "inadequate" in the country grew from 295,000 in 1999 to more than 404,000 in 2011.

The growth of such neighborhoods has contributed to other problems. Due to crumbling or inexistent infrastructure, sewage all over the city goes mainly to one place: the once-pristine Guaire River, which runs along most of Chavez's funeral route.

In 2005, Chavez had famously promised that Venezuelans would one day be able to swim in its waters. Trying to do that Friday would be nothing less than life-threatening.

Retired truck driver Miguel Mosquera said he remembered the idyllic scene there decades ago, when the river was a perfect place to spend a sunny day.

He lives in the neighborhood of San Antonio, close to the river and within sight of the funeral route.

"The city grew too much," the 67-year-old said. "In the '30s and in the '40s, people bathed in this river. ... Here, when it rains, it's chaos, you see that the river sometimes spills over when it rains."

Jose Leal, who had stopped by a bakery near the route, said he had given up on any change under the current government, led by Chavez's hand-picked successor Nicolas Maduro.

"It isn't easy, brother," Leal said as Chavez supporters headed to the river to watch the cortege pass. "It's worrying. It creates stress, stress in the family, stress at work."

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Associated Press writers Christopher Toothaker, Jorge Rueda, and Fabiola Sanchez contributed to this report.

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Fiery funeral for Venezuela's Chavez

CARACAS, Venezuela (AP) — Hugo Chavez was lauded as a modern-day reincarnation of Latin American liberator Simon Bolivar at a fiery, foot-stomping state funeral Friday, hours before his handpicked successor was sworn in as acting president over the fierce objections of the opposition.

Nicolas Maduro took the oath of office in the National Assembly before ruling party legislators, dignitaries and a boisterous crowd of sympathizers that chanted "Chavez lives! Maduro carries on!" Holding up a tiny blue-bound booklet of Venezuela's 1999 constitution in his right hand, Maduro pledged his "most absolute loyalty" to Chavez.

He broke into tears as he spoke of his mentor during a strident acceptance speech that included numerous attacks on the United States, capitalist elites and the international media.

Maduro also claimed the allegiance of Venezuela's army, calling it "the armed forces of Chavez" as he pumped his fist in the air, a gesture that was reciprocated by the defense minister watching from the gallery. Critics have voiced increasing concern about the overt support the military has shown to the ruling party since Chavez's death despite a ban on the army's participation in politics.

The opposition largely boycotted the swearing-in, calling it unconstitutional. Henrique Capriles, Maduro's likely opponent in presidential election that must be called within 30 days, spoke condescendingly of the former bus driver and union leader, referring to him as "boy" and accusing him of "shamelessly" lying to the country.

At Chavez's state funeral earlier in the day, Maduro stood before an assemblage of presidents, princes and left-wing glitterati, speaking in a booming voice over the flag-draped casket in a ceremony that at times smacked of a political rally.

"Here we are, Comandante, your men, on their feet," Maduro shouted, government officials rising behind him. "All your men and women ... loyal until beyond death."

The funeral began with Venezuela's national youth orchestra singing the national anthem, led by famed conductor Gustavo Dudamel. A government-allied congressman later belted out cowboy songs from Chavez's native Barinas state.

The streets outside the military academy took on a carnival atmosphere, with military bands launching into marches and an expanse of supporters wearing the red of Chavez's socialist party. Street vendors sold paper replicas of the presidential sash, which many people in the line slipped over their shoulders.

Throngs watched the ceremony on huge monitors under the blazing sun. A line of people waiting to see Chavez's body stretched 1 ½ miles (2 kilometers), but the viewing was halted as the funeral got under way.

In the funeral hall, more than 30 political leaders including Cuba's Raul Castro, Spanish Crown Prince Felipe de Borbon, and Iran's Mahmoud Ahmadinejad stood at attention before Chavez's flag-draped coffin, which was closed for the ceremony.

Maduro said that no Venezuelan leader, even Bolivar, who died in exile, faced and overcame such treachery and opposition as Chavez, who succumbed to cancer Tuesday at age 58

"Here you are, unconquered, pure, transparent, unique, true and always alive," Maduro shouted as many in attendance cried. "Comandante, they couldn't defeat you and they will never, ever defeat us."

Despite the blustery language of his speech and the expulsion on Tuesday of two U.S. military attaches on suspicion of spying, Maduro made a point of welcoming the U.S. delegation led by Rep. Gregory Meeks, a New York Democrat, and former Rep. William Delahunt, a Democrat from Massachusetts. Chavez often railed against the U.S. even as he sold the country billions of dollars in oil each year.

State Department officials have voiced hope that Maduro will prove a more pragmatic leader than the often bombastic Chavez, assuming he wins a full term.

Television cameras captured Hollywood star Sean Penn at the funeral, while the Rev. Jesse Jackson preached rapprochement between his country and Venezuela.

"We pray to God today that you will heal the breach between the U.S. and Venezuela," Jackson said. He later attended Maduro's swearing-in, and was hailed by the acting president as "a good man from the United States."

U.S. enemies such as Castro and Ahmadinejad won loud applause.

"It is a great pain for us because we have lost a friend," Ahmadinejad said upon his arrival at the airport the night before. "I feel like I have lost myself, but I am sure that he still lives. Chavez will never die. His spirit and soul live on in each of our hearts."

Maduro announced Thursday that the government would embalm Chavez's body and put it on permanent display, a decision that touched off strong passions on both sides.

Most of the normally traffic-choked streets of Caracas were empty, with schools and many businesses shuttered. The government also prohibited alcohol sales.

Venezuelans watched the funeral from cafes, with many saying they were flattered to be the subject of the world's attention.

"If my Comandante was such a divisive man who fought with everyone and with other countries, wouldn't he be alone (at his funeral)?" asked Argenis Urbina, a 51-year-old bookseller who was riveted to the coverage on TV.

Others said they were put off by what they saw as an excess of pomp, particularly the plan to put Chavez's body on display.

"He was a president, and I would say not a good one. Not a hero," said Gloria Ocampos, a retired office manager. "He should be buried, just like any other president. They are treating him like he was the father of the country ... It's crazy."

Some 300 people watched the funeral on screens set up in the Simon Bolivar plaza in Chavez's plains hometown of Sabaneta, where mourners had laid out flowers, candles and photos of the late leader.

Chavez was particularly beloved by the poor, whose lot he championed. But critics say he left his successors a monumental task, with annual inflation of more than 20 percent and public debt that quadrupled to more than $100 billion. Crime is endemic and Chavez's chaotic management style has been blamed for a breakdown in infrastructure, particularly in the key oil industry.

In an hour-long television address, Capriles said the opposition had asked to attend Chavez's funeral, but was told "better that you don't come." He said he had withheld criticism since Chavez's death out of respect, but could no longer hold his tongue at what he saw as a power grab by Maduro.

"I tell you clearly, Nicolas, I am not going to speak of the times you lied to the country, shamelessly," Capriles said. "The people have not voted for you, boy."

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Associated Press writers E. Eduardo Castillo, Christopher Toothaker and Paul Haven contributed to this report.

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Vivian Sequera on Twitter: www.twitter.com/VivianSequera

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Venezuela's political divisions spill into streets

CARACAS, Venezuela (AP) — Under a three-story-tall banner blaring "You are all Chavez," Jose Rafael Hernandez crouched low with a can of spray paint, outlining on a wall a black heart and the words "And long live Chavez..."

He and his three-man crew had already sprayed some 20 murals over the past week all over the "23 de enero" slum where support for the late President Hugo Chavez, their "Comandante," remains rock solid even after his death Tuesday. Dozens of other graffiti crews have also been at work, showing their allegiance in slogans and murals on countless doorways and walls.

"This is how we keep Chavez alive," said Jorge Luis Gonzales, a state bank accountant overseeing Hernandez's graffiti crew. "This is going to continue because the elections are coming, and the Comandante needs a big surprise. The opposition has their own graffitists, and we have ours."

Nearly a week after Chavez's death, Venezuelans have shown no signs they're ready to lower the rhetorical temperature. In fact, the national obsession with politics has only intensified as Venezuelans gear up for April 14 elections pitting Chavez successor Nicolas Maduro against opposition candidate Gov. Henrique Capriles.

All over this gritty capital built amid rolling hills, evidence of more than a decade of political warfare over Chavez and his socialist legacy is everywhere, from murals and billboards to even the T-shirts and caps worn by people in the city's chaotic streets.

In the eastern half of Caracas, which has long been known as an opposition stronghold, neighborhoods exploded in fireworks and car-honking Sunday night when Capriles launched his candidacy by accusing Maduro of using Chavez's death for political gain.

On the back of a barbecue shack in the neighborhood of Marquez, a mural with orange-and-yellow flames pleaded "Something Different!" while Capriles' youthful face looked out of graffiti stenciled here and there on surrounding blocks. Chavez images were conspicuously absent.

"I'm thinking that we'll have continuity for three years, more or less, and then real democracy will come," predicted Jose Garnica, a business owner reading the newspaper in a park bench.

He said the government had seized an apartment building he owned in the city center to house poor families and had only offered to pay him a pittance for it. He is still fighting to receive full compensation.

"This population is split 50-50," Garnica said, "and the government has fooled much of the poor here. What we need now is a change of government, not a socialist government but a democratic one."

For Jose Escobar, the plan for the future should be exactly more Chavez. Dressed in the late president's trademark red, he was drinking beers with fellow true believers in a plaza covered with graffiti images of the late president, despite a ban on public alcohol consumption during seven days of mourning.

"We will live and we will fight!" Escobar pledged, echoing a phrase used often by Chavez during his battle with cancer. "All the social programs must continue."

To be sure, the government has worked hard to keep the political fever high, as it rallies behind Maduro's candidacy.

Graffiti artist Reynaldo Rodriguez, who was helping Gonzales, said they had received paint and other materials directly from an army colonel to paint pro-Chavez slogans all over the slum, a violation of a constitutional ban on the military from engaging in politics. Banners pledging loyalty to Chavez hang from dozens of public housing towers and government buildings, while the displaying of Chavez's embalmed body in the army's military academy has turned into a running celebration filled with folk bands and thousands of weeping adherents.

"The government has been very clear and up-front that the media strategy is extremely important," said David Smilde, a senior fellow and Venezuela expert with the think tank the Washington Office on Latin America. "The exposure on Chavez has been very dramatic, trying to keep that sense of him being omnipresent."

Yet not everybody was pledging eternal battle.

Venezuela's bright yellow, red and blue flag has been flying at half-mast all over the capital, from improvised flagpoles set up on bare-brick huts in pro-Chavez slums, as well as on the manicured lawns of middle-class apartment towers in opposition-dominated neighborhoods.

Some Venezuelans said they were exhausted from all the attacks and counter-attacks, while others who had spent years criticizing Chavez said they mourned the man.

In a small, dimly lit salon in the working-class neighborhood of San Juan, Chavez backers Elle Coba and Darly Gomez laughed with unemployed teacher Joanna Machado even though she minced no words about her distaste for Chavez.

Coba lauded the food programs, schools and free public housing Chavez had launched across the country. She was wearing an armband and several hair scrunchies emblazoned with the flag's colors in honor of her Comandante.

Gomez joined in the praise, though she opted for orange-and-black spandex.

"All governments have their mistakes, but Chavez has tried to make our lives better," she said. "He's contributed and done things our nation has never done before."

Then, Machado had her say.

"I am not a supporter of their policies, which they've used many times to keep themselves in power," Machado said. "They haven't done anything about jobs, which is what everyone needs. We have so many problems that need to be solved."

Coba hugged both women.

"I wish there were no fights, and everyone respected the ideology of everyone else," she said. "Poor, rich, we are all together in this."

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