Friday, August 8, 2008

The historical origins of Venezuela's oil curse

Translated from El Universal

1. The Ordinance of Alcalá (Spain) by King Alfonso XI, in1348 established: "All mining of silver, gold, lead and any other metal, of any kind, belong to Us; therefore, no one dares to work without our special license and mandate".

2. The Ordinances of San Lorenzo, issued by Felipe II in 1584, which incorporated all the mines into the royal patrimony, were in force in America until 1783. Then these were repealed by the Mining Ordinances for New Spain, promulgated by King Carlos III, which precepted "The mines [including the bitumen or “juices of the earth”] are the property of my Royal Crown".

3. "In 1829, Venezuela’s “Liberator”, Simón Bolívar, promulgated a Decree in Quito that tacitly established that the mines passed from the Royal Spanish Crown to the domain of the Republic of Venezuela... whose government grants them ownership and possession to citizens who request them, under the conditions expressed in the Mining Laws and Ordinances, and with the others contained in this decree". As if wanting to reaffirm its origin, Congress, in the Law of 1832, resolved: "according to the Decree of October 24, 1829, the Ordinance that should serve as a rule for the Government in relation to mines, is that of New Spain of 1783".
4. The first Mining Code of 1854, which incorporates aspects of the French Mining Law of 1810, caused some confusion. Although it indicates that the property corresponds to the State, it also talks about the possibility of a perpetual ownership of a mine... a transferable property without the need for authorization from the Executive Branch. Between the Constitution of 1864, which establishes the federal regime, until 1909, we read that the property belongs to each Federal State. Between 1910 and 1925 seemingly "nothing was said about the ownership of the mines."
5. And in 1920 the first Law on Hydrocarbons and other Combustible Minerals was enacted and which to this day establishes that "the State can directly exploit... discuss freely, like a private owner, the conditions of the assignment. It is not obliged, however, to grant the assignment of his right".

That centralization of the net oil revenues in the state guaranteed, sooner or later, these would be captured by inept profiteers or simply by vulgar bandits.
Simón Bolívar was without doubt a Liberator, at least in a geographical and political sense, but sadly, when it comes to the economy, he de facto doomed us Venezuelans to not live in a nation but, sadly, only in somebody else’s good business.