When Hugo Chavez became president of Venezuela, he decided to seize complete control of Venezuela´s most important asset: PDVSA, the Venezuela oil company. His question to the people was simple: why if the country is so rich you are so poor?
Decades later the Venezuelan diaspora has moved to places such as Miami, Panama and most recently Colombia. The technical expertise of many of these talented Venezuelan PDVSA professionals has been key to improving the know how in the emerging Colombian oil industry. Combined with changes in the regulation of the Colombian oil industry which eased the restriction on the activities of foreign nationals in the oil fields, Colombia has begun to see major improvements in exploration and output. Critical to this success are Canadian petroleum firms operating in Colombia. The most successful one is certainly Pacific Rubiales (PRE.to).
As Pacific Rubiales has grown its operations, attention to the company and its practices has also grown. So when workers in the oil field protested and halted production for one week, Pacific Rubiales became a public subject for Colombians overnight. The cause of the disturbance? A classic labor dispute: local operators who were contractors felt their wages were too low for the working conditions they were asked to endure. Simply put, the workers wanted better pay and better working conditions.
What has followed are a series of mistakes by Pacific Rubiales that continue to make matters worse — and will ultimately threaten the oil sector as a whole if not corrected.
Mistake #1 Failing to understand the cultural norms, and respect them.
During the same week of the oil field strike, newspaper and magazine readers were treated to two very different views of Pacific Rubiales . One could see the protesters in the oil fields amidst their poor working conditions. While in the business and social magazines the Venezuelan owners of Pacific Rubiales were showing off their elegant new apartments in Bogota’s land of high rise living, and appearing in the social pages of Jetset magazine while partying at posh clubs trendy restaurants. In Colombia, a country known for its conservative culture and preference for privacy, this did not sit well with anybody.
As the pressure from the protests grew, a Pacific Rubiales spokesperson took to the airwaves of the most important Colombian radio station (W Radio o La W), and called for military troops to step in and protect the company’s interests and investments in the oilfields or they would halt production. Colombia, as a country, is emerging economically after a prolonged period of insecurity involving leftist guerillas, nacro-traffickers, and para-military groups. The Colombian military was instrumental in bringing security to the nation, and is recognized by the people for its success in helping the society regain its footing. Calls by a private company with non-Colombian roots for military intervention as the solution to a labor dispute were insensitive at best. The public and the media were shocked at the recklessness of the request, and no surprise, the Santos government politely ignored the calls by Pacific Rubiales to send in the troops.
Mistake #3 Flexing political muscle to get the job done
Pacific Rubiales then looked for a political solution. Instead of taking measured steps and enlisting Colombia’s Minister of Labor, Pacific Rubiales reached higher and threw the situation into the lap on the Vice President, a former union leader, knowing that he could find a solution to the protests. He did solve the protests, but not the issues for the company. Pacific Rubiales was no longer the darling of the oil sector in Colombia. In fact, their behavior has now attracted the attention of international labor groups and human rights advocates. More on that at the end of this post.
Mistake #4 Relying on the Failed Old Model
With protests behind them, the company decided to launch a campaign to rehabilitate its once stellar image. The company began to pursue what we at Thaw refer to as the failed old model, a combination of PR and advertising that not only fails to rebuild a tarnished reputation, but it actually makes matters worse. Pacific Rubiales went big — really big — which only highlighted their earlier mistakes.
- Step 1. Pacific Rubiales went to the most traditional golf club in Bogota and sponsored a PGA tournament: The Pacific Rubiales Colombia Championship.
- Step 2. The company flew Bill Clinton to Bogota to play golf, and make sure he was surrounded by the current president of Colombia, Juan Manuel Santos, and by a former president, Andres Pastrana. Also don´t forget to add the head of the Inter-American Development Bank, Luis Alberto Moreno. Then, Pacific Rubiales (PRE.to) made sure to snap photos of these presidents with the senior executives of Pacific Rubiales.
- Step 3. Next, Pacific secured the front page of Colombia´s most respected financial magazine Revista Dinero, and made sure to grab a good headline “The Magic of Pacific”.
- Step 4. Let’s not forget that Pacific Rubiales quietly secured an 11% interest in the most important Colombian newspaper El Tiempo. When was the last time an oil company purchased a 10% stake in a media comapny? When it was revealed, the purchase raised more then eyebrows. It was a cause for renewed suspicion.
- Step 5. In an attempt to bring their most important critic nearer to them, Pacific Rubiales bought a significant amount of air space with W Radio (La W) and Julio Sanchez Cristo.
- Step 6. Finally, they began blasting W Radio (La W) and TV with a triumphal campaign targeted to the middle and lower socio-economic classes with a tagline “Pacific is for me, Pacific is for Colombia and Pacific is for you”
In short Pacific Rubiales executives have used all the bells and whistles in the PR, advertising and lobbying handbook. However, times have changed. The issues are different. These old model tactics now have what we refer to as the Boomerang Effect. They will come back to harm Pacific Rubiales with even more force than when they were launched. As a result of the grand style and enormous scale of Pacific’s old model tactics, the Boomerang Effect may even harm the entire oil and mining sector in Colombia.
The first the Boomerang Effect has just begun. An NGO, Proyecto Gramalote, uploaded a video to YouTube highly critical of the “Pacific is for me” campaign. Shots of barbed wire fencing and armed gates are contrasted with the company’s narration claiming, “We are a family.”
Pacific Rubiales needs to recognize that a new approach involves much more than solving short term issues and telling everyone how good you are for them. They still have time, but not much. The international community of NGO’s and multilateral bodies will make the next move, and a Presidential appearance at a sponsored golf tournament will not put the issues they raise to rest.
These attacks will no doubt be initiated in Colombia, but they will most likely be Canadian based since legal claims can be made in Canada where Pacific Rubiales is based. As for the Venezuelan management team of former PDVSA executives now based in Colombia, they could potentially be risking attacks for acting “too Venezuelan” and not very Colombian. After the significant progress that Santos has made to repair the rift between neighbors, this would be a potent attack that unfortunately plays to well in countries with historic rivalries. In fact Revista Dinero, Colombia´s most respected magazine, recently reported that a Hays Oil & Gas study found that within the Colombian oil industry, foreign workers earn twice as much as their Colombian counterparts.
The Boomerang Effect is a powerful one. It only needs one more spark to trigger outrage.