CITGO,Venezuela, and MERCOSUR

CITGO
MERCOSUR & Venezuela
Hassan Omar Jr
BUS230
John Hargiss
May 23rd, 2009

CITGO
MERCOSUR & Venezuela
In 2006, Venezuela applied for full membership in MERCOSUR. MERCOSUR is in short the equivalent of NAFTA. As a result the country of Venezuela and the businesses of Venezuela will have to reap the consequences and benefits of joining this corporation. The benefits and repercussions could be costly to large and small businesses of Venezuela.
CITGO a state oil company from Venezuela would be one of the first to feel the effects of Venezuela joining MERCOSUR. CITGO is one of the few foreign companies selling hydrocarbons in the US. MERCOSUR and CITGO have much potential in the long run of being a beneficial alliance. The alliance would grace CITGO access to a larger market within South America at a much lower price on imports and exports.
Venezuela’s recent attempt to join MERCOSUR is a step in a good direction when it comes to helping the region and continent as a whole. The drawback of joining this corporation is a common tariff with all of its neighboring countries. Meaning they can’t set the tariffs as high as they would like. Also the benefit of having a set tariff is that your neighbors all have a meaning no large set tariff differences in trade tariffs.
CITGO would have the same benefits and drawbacks as the rest of the nation. Instead of having a tariff set by the Venezuelan government, it would be set by MERCOSUR. CITGO however may not like the tariff rate set by MERCOSUR for whatever reasons it maybe. The benefit to having a set tariff by the corporation would be that the rate would never vary from country to country within the continent of South America.
Another benefit to joining MERCOSUR for Venezuela is that it would be apart of union of nations from the same region. This union would help protect the region, not just Venezuela’s interests solely. By protecting the interests of the region commerce wise and economically Venezuela can benefit from the protection of its neighbors. This protection helps curb the effects of single nations indirectly affecting the growth of Venezuela’s economy. The drawback to this is if the region slips into a recession or just as things are now economically all around the world, the entire global economy slips into a recession Venezuela can not however protect itself from the effects.
Another drawback is that Venezuela must adjust its laws to fit the expectations of the integration. The laws used to protect Venezuelans could be sacrificed. This means any laws, rules, and regulations may or may not comply with MERCOSUR. The big down side to this is Venezuela’s interests are no longer a main priority.
The benefits and drawbacks of the country of Venezuela as a whole entering MERCOSUR does in fact directly affect CITGO. CITGO would reap the benefits of having its interests being protected by the region. It would also reap the benefits of having protection from indirect factors affect its revenues. The down side to this is when the region falls; the company falls with the region instead of being able to protect itself.
There are a few changes that need to be made to CITGO in order to fit with the new changes being set by MERCOSUR. The first would be that all trade tariffs would change. Expected revenues and expenditures would need to adjusted for the coming years. Recognition of MERCOSUR’s policies and expectations would be another change to be made. Thirdly making the correct adjustments to follow the objectives of MERCOSUR’s regulations in all areas of commerce and business.

Reference:

http://actrav.itcilo.org/actrav-english/telearn/global/ilo/blokit/mercosur.htm
http://ec.europa.eu/external_relations/mercosur/index_en.htm