F1 »

Kate Walker: The broke funding the broke…

In her latest exclusive column for Crash.net, Kate Walker looks at the financial situation in Venezuela and why PDVSA's involvement in F1 could be a saving grace...
It is no stretch of the imagination to say that the Venezuelan economy has seen better days.

Last year saw violent fights over shortages of food and basic commodities in cities around the country, while escalating inflation only exacerbated the situation. This year, prices are continuing to climb with a staggering rate of inflation of 56.2 percent.

The picture is no prettier for the government: since 2012, Venezuela's gold and foreign currency reserves have plummeted by one-third, and the country holds only $2 billion in liquid assets. The country is running perilously close to insolvency, and its burden of debt is becoming insurmountable. According to The Economist, “the country's arrears on non-financial debt … include more than $3 billion owed to foreign airlines for tickets sold in bolívares, and around $9 billion in private-sector imports that have not been paid for because of the dollar shortage.”

That dollar shortage is causing practical pain as well as financial. Foreign companies are cutting back on or stopping their business with Venezuela due to non-payment of bills, with the result that basic commodities from food to medicine are becoming ever harder to source. Government debts to private firms are affecting production at companies whose foreign suppliers are threatening to stop shipments of raw materials.

But the government is attempting to ameliorate the situation with stricter currency controls, even if their crisis prevention methods have been roundly criticised by expert analysts. A new law restricting corporate profit margins has been introduced, while private citizens have seen cuts to the amount of money they can take (or send) overseas.

It is a financial climate that makes PDVSA's contracted sponsorship activities somewhat hard to stomach, but legal obligations must be fulfilled. And if the Venezuelan government has the balls to rethink its foreign investment policy, PDVSA's relationship with the global entity that is Formula One could yet become the country's saving grace.

PDVSA is vital to the Venezuelan economy – the state-owned oil enterprise is solely responsible for 96 percent of Venezuela's foreign earnings. But in recent years oil production has stagnated, and strict controls on foreign involvement in the industry have blocked sorely-needed investment. If those controls are relaxed, PDVSA's F1 presence is a 19-weekend advertisement to potential investors.

Relaxing rules on foreign investment doesn't need to mean a return to the days when Venezuelans barely profited from their own natural resources. But with the situation as things currently stand – and with PDSVA such a cornerstone of the country's economy – isn't a situation where Venezuela earns (say) 60 percent of the profits of a growing business preferable to being dependent on 100 percent of a company in decline?

Kate Walker

Kate Walker is the editor of GP Week magazine and a freelance contributor to Crash.net. A member of the F1 travelling circus since 2010, she keeps an eye on the behind the scenes wheeling and dealing that makes Formula One a political melodrama.

Tagged as: pdvsa , Kate Walker

Related Pictures

Click on relevant pic to enlarge
24.10.2013- Williams F1 FW35 rear wing details
20.03.2016 - Nikki Lauda (AU), Mercedes and Ron Walker (AUS)
Dave Walker
15.03.2015 - 2015 F1 drivers with Ron Walker (AUS) Chairman of the Australian GP Corporation
15.03.2015 -  2015 F1 Drivers with Ron Walker (AUS) Chairman of the Australian GP Corporation
15.03.2015 - Ron Walker (AUS) Chairman of the Australian GP Corporation, Lewis Hamilton (GBR) Mercedes AMG F1 W06 and Pasquale Lattuneddu (ITA), FOM
12.03.2015 - Sir Jackie Stewart (GBR) and Ron Walker (AUS) Chairman of the Australian GP Corporation
Murray Walker Get well soon card
Murray Walker Get well soon card
15.03.2013- Free Practice 1, (L-D) Nikki Lauda (AU), Mercedes,  Ron Walker (AUS) Chairman of the Australian GP Corporation, Johnny Herbert (GBR) and Demon Hill
15.03.2013- Free Practice 1, Ron Walker (AUS) Chairman of the Australian GP Corporation
15.03.2013- Free Practice 1, Ron Walker (AUS) Chairman of the Australian GP Corporation
23.09.2012 - Race, Kate Perry (USA) singer on the grid
Murray Walker
Ron Walker, Chairman of Australian Grand Prix Corporation
Ron Walker, Chairman, Australian Grand Prix Corp
27.03.2011- Race, James Packer and Ron Walker (AUS) Australian Grand Prix Corporation Chairman
27.03.2011- Ron Walker (AUS) Australian Grand Prix Corporation Chairman and Ted Baillieu, Premier Minister of Victoria

Join the conversation - Add your comment

Please login or register before adding your comments.

Although the administrators and moderators of this website will attempt to keep all objectionable comments off these pages, it is impossible for us to review all messages. All messages express the views of the poster, and neither Crash Media Group nor Crash.Net will be held responsible for the content of any message. We do not vouch for or warrant the accuracy, completeness or usefulness of any message, and are not responsible for the contents of any message. If you find a message objectionable, please contact us and inform us of the problem or use the [report] function next to the offending post. Any message that does not conform with the policy of this service can be edited or removed with immediate effect.


February 12, 2014 12:09 PM
Last Edited 483 days ago

Is this a press release for PDVSA? Corruption in PDVSA is endemic, it's a well known fact in the oil industry. if PDVSA in it's current state is the answer to the Venezuela economy then they are stuffed. RBS used to sponsor an F1 team, that did the UK economy a power of good....oh hang on. Seriously, you need to research the subject matter a little further.


February 12, 2014 4:46 PM
Last Edited 483 days ago

The bus driver in charge of that country (and his predecessor) have run it into the ground with their ridiculous economic policies. Inflation there is like nothing seen in 30 years. Venezuela was very rich with petro dollars and has managed to squander almost all of it in pursuit of state power and communist ideology. The stores are out of toilet paper, yet they are paying for Maldonado to run in Formula 1.

© 1999 - 2017 Crash Media Group

The total or partial reproduction of text, photographs or illustrations is not permitted in any form.