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Politics rule everyday govt in Venezuela, from state oil company to subways

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CARACAS, Venezuela - A sea of marchers in red and yellow T-shirts flowed through the capital's main downtown boulevard, paralyzing traffic while state TV cameras stood ready to record every second. The crowd had come out to show their support for the late President Hugo Chavez and his successor Nicolas Maduro, but they weren't student activists or community organizers.

The march had been launched by state-run telecommunications company CANTV, and the hundreds of employees were heading for the presidential palace to "deliver" the company's 2012 dividends to Maduro, Venezuela's acting leader and the official candidate to replace Chavez.

"We want this political project to continue," said customer support supervisor Maya Leon. "We're all Chavistas here."

Former government workers and experts said Monday's event was only the latest example of changes a decade in the making. The late leader transformed this country's enormous state industries into political arms of the government, they said, with partisan loyalties trumping technical competence in hiring and ministries turning out thousands of civil servants for election year rallies.

State companies such as oil producer PDVSA and the manager of Caracas' subway system used to be known around the world for their professionalism. In recent years, many of those companies have seen service and revenue deteriorate as political cadres rather than engineers were brought in to run everything from oil exploration to mass transit.

Public safety non-profit groups say the same politicization has crippled efforts to fix Venezuela's super-violent prisons or lower one of the world's highest homicide rates, with the government refusing to work with opposition governors or mayors on any public safety plan.

Vicente Gonzalez de la Vega, a Central Venezuela University law professor, said he remembers when the capital's 37-mile-long subway network was considered Latin America's most modern, and drew engineers from around the world to study it. Power outages began hitting the system more frequently and trains were often delayed, as Chavez grew suspicious of the autonomous state company that ran the transport system. New stations and rail lines were left unbuilt, despite booming ridership.

Tensions exploded in 2010 when passengers upset about the system took over a subway train, resulting in 33 arrests.

"We used to say there were two cities, one above, and one below that was more decent, more efficient," de la Vega said. "But this has become a hyper-politicized city. And we've seen the effects."

To Chavez supporters, politicization has merely meant awakening needed class consciousness in a federal bureaucracy that employs about a tenth of all Venezuelans. They also deny it's hurt government services or bottom lines.

"Before, a housewife didn't talk about politics because she said, 'I'm just a housewife,'" said Eduardo Saman, a former Chavez commerce minister. "An athlete was just surrounded by sports and didn't talk about politics. One of the great achievements of President Chavez was to elevate the level of political consciousness in general terms."

"Now, we have technicians who at the same time have the ability to come up with political solutions to problems. Now they're conscious in their work. Politics and technical capacity should not be separated."

More than anything else, the country's future hinges on the welfare of PDVSA and its management of the world's biggest proven oil reserves. The company produces about 90 per cent of Venezuela's export income and about half of all government revenue.

Yet from 1999 to 2011, Venezuela's daily oil output dropped by nearly 25 per cent, from 3.3 million barrels of oil a day to 2.5 million barrels, according to U.S. Energy Department figures. Data from the OPEC group of oil-producing countries show Venezuela trailing five other nations in daily production despite its massive reserves. Russia, for example, produced three times more oil than Venezuela although it has a quarter the proven reserves.

Oil industry analysts blame the production drop on a PDVSA brain drain during the Chavez years and the company's failure to invest in new exploration while it funded popular social programs. The economic effects are already being felt nationwide, with dropping exports bringing in fewer dollars, which in turn has spurred shortages of everything from cars to machine parts to basic foods.

Venezuelan officials have pledged to boost oil production, and the country's economy depends on that happening. Yet production numbers have stayed flat for the past three years, U.S. Energy Department figures show.

The company "isn't looking for people who have know-how," said Diego Gonzalez, a former PDVSA oil exploration engineer who left in 2001. "It doesn't seem to be producing new deposits now. There are no new refineries, petrochemical plants. There's nothing new."

On top of that, Venezuela continues to sell the cheapest gas in the world, at 6 cents per gallon, thanks to government subsidies designed to keep consumers happy. That program costs Venezuela about $16 billion a year, according to the International Energy Agency, further eroding potential export earnings.

Andres Izarra, a former Chavez information minister, called reports of declining oil production "lies" and said PDVSA's current workers had in fact saved the company after a general strike in 2002 and 2003 that paralyzed the economy.

"The PDVSA worker has been through a war," Izarra said. "They were the ones who recovered the oil industry. It's thanks to them we can produce oil again and have gasoline again. These are guys who are very much militants of the revolution."

By all accounts, the move to purge government ranks began in earnest with the strike, which shrank the economy by nearly 8 per cent in 2003. Chavez responded by demanding loyalty throughout his government, from the armed forces to doctors, and replaced striking PDVSA workers with party members, Gonzalez said.

Once known as some of the best in the industry, many PDVSA engineers and managers have since moved to the Middle East and other oil-producing regions.

Saman said the company's workers are as professional as ever, even if they didn't come from the same social classes as before. He said education wasn't a prerequisite to public service, pointing to his own rise from pharmacist to commerce minister.

"The opposition thinks they're the owners of knowledge," Saman said. "They wrote me off because I didn't have education. The truth is I didn't have their kind of education."

Maduro, for one, has made direct appeals to government workers a key part of his campaign, holding rallies with workers from PDVSA, the federal electrical company and CANTV, among others.

"I guarantee and say before you oil workers," Maduro told PDVSA workers last week, "brothers and sisters of the petroleum working class, that if you elect me as president of the republic, I will know how to defend the accomplishments of the petroleum industry in the streets."

Luis Izquiel, an aide to opposition presidential candidate Henrique Capriles, said such partisan governing would end with a change of administration.

"This has to stop," Izquiel said. "We have to stop dividing people in these categories, of red or yellow or blue. We have to bring in people independent of their politics."

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