The ratings on Petroleos de Venezuela S.A. (PDVSA) and on the Bolivarian Republic of Venezuela (BB-/Negative/B), its sole shareholder, are tightly linked, reflecting our opinion that PDVSA is a public policy-based institution that plays a central role in meeting the sovereign's political and economic objectives. The ties of ownership and economic interests between PDVSA and Venezuela are evident in the significant contribution of the oil industry to government revenues (50%) and the country's exports (90%). PDVSA has evolved into an institution that plays a direct role in social programs and has acted as an acquisition vehicle for some industries (particularly electricity) that are deemed strategic for the government. The sharp increases in direct social spending by PDVSA and investments in
