VENEZUELA: Nationalizing Oil, Building Steel

Its Caribbean beaches, its expanses of jungle, its kinetic, polyglot capital, have long made Venezuela a fascinating place for off-the-beaten-trackers to visit. More important, for six decades the country has been sort of an ancillary Texas, supplying the U.S. with immense quantities of cheap and handy oil. Now, riding on the rapid ascent of petroleum prices, Venezuela is fast becoming one of the most formidable nations in the Western Hemisphere.

Last year its output of goods and services leaped nearly 40%, to $25 billion —mainly because its oil revenues hit $10 billion. Among the members of the Organization of Petroleum Exporting Countries, Venezuela stands out for its additional wealth in iron ore, asphalt, diamonds and hydroelectric power. In Caracas, a new skyscraper seems to rise every day, a new millionaire to appear every hour, and traffic jams to grow worse every minute. Drawing boards bulge with expansive economic plans, and the democratic, staunchly nationalistic President Carlos Andrés Pérez —whom everybody calls "Cap"—yearns to extend Venezuela's influence over its Latin neighbors.

To increase further Venezuela's oil income and economic independence, Pérez last week sent to the country's Congress his long-awaited bill to nationalize the oil industry, and reiterated that the takeover will occur later this year. Venezuela plans to pay the foreign companies—Exxon's subsidiary, Creole Petroleum, and Royal Dutch/Shell are the two biggest—only the net book value less several deductions, or about $1.4 billion. The offer might seem reasonable. Under existing contracts, the foreigners in 1983 were supposed to give over all their properties to the Venezuelans, without compensation. But the oil-company managers argue that the depreciated book value of the properties does not approach their true worth of $5 billion.

French Food. Soon the industry will be run by a state company under the Bureau of Mines. Demonstrating a certain flexibility, Pérez recommended that if the national oil industry runs into trouble, the government might enlist foreign companies to help produce or market the petroleum.

In January, Pérez's government also nationalized the rich iron ore industry, which had been controlled by U.S. Steel and Bethlehem Steel. Last year Venezuela produced more than 26 million metric tons of ore, almost all for export. Venezuela's grand plan is to use much of its oil income to build a huge steel industry that will exploit its iron ore and great sources of hydroelectric power. Deep in the backlands on the Orinoco River, more than 200,000 people have already clustered in the government run, iron-and-steel community of Ciudad Guayana, where international businessmen come to swing deals, dine on fine French food and gaze upon spectacular waterfalls. Pérez aims to raise steel output from last year's 784,000 metric tons to 5 million tons by 1978, and to 15 million by 1985. If those hugely ambitious goals are met, Venezuela will have a multibillion-dollar export to fall back on when the oil dries up—or slips in value.