The Socialists United of Venezuela and its president Nicolas Maduro continue to run this once relatively prosperous South American oil nation into the ground. People are still starving. Hospitals are short staffed. People of means have moved to Madrid or Miami. People of no means are hightailing it to Colombia and Brazil. If this unfolding disaster were taking place in Washington., one would probably blame the Russians. But this is Caracas, so it must be the CIAs fault.
At this point, the country of Venezuela is being held together with duct tape and God's will.
Oil production is still dismal at best, collapsing at worse. Wall Street bond lords have been waiting for at least a year now for the economy to get so bad, that PSUV leaders kick Maduro to the curve. But so what? If they did, who would lead? Surely there is scant evidence that the party of Hugo Chavez can save Venezueal from itself.
The latest cabinet reshuffle was just noise as Maduro simply realigned his power base to insulate himself against a palace coup from within the ranks. Oil prices are higher than they have been in years, but Venezuela keeps getting worse. Its economy is producing quadruple digit inflation. Its central bank is useless against it. The currency, the Bolivar, is utterly worthless. Nobody wants it.
"It’s all about petrodollars and whether there are sufficient (funds) for rental and corruption income to leverage military support," says Sioben Morden, the managing director in charge of monitoring Venezuela's life support systems over at Nomura Securities in Manhattan.
The top tier military still has power at oil firm PdVSA, but it’s going to be increasingly difficult to trickle down funds to the mid-level officers and public workers.
The regime change theory which Morden and other hedge funds holding PdVSA have been wargaming for over a year is dependent on the assumption that Maduro fails when the petrodollars are tapped out. He needs them to keep PdVSA oil workers, the guys with the red hats and the red shirts that can always be counted on to shout, sing, wave Venezuela flags during Maduro rallies citing foreigners for his country's woes.
Investors should no lonnger assume that negative headlines will eventually spell the end of PSUV. They have hunkered down. Didn't you know? Venezuela is basically a dictatorship now.
PdVSA has defaulted on its bonds.
HIV patients are unable to get medication to keep them alive.
People are selling garbage to make ends meet.
This is a shame.
This is all on PSUV.
Latest oil industry data from May reaffirmed the roughly 50,000 barrels per day decline in oil production. PdVSA produced around 1.4 million barrels per day in May.
The Baker Hughes rig count declined to 28 in May. It’s been years of mismanagement and underinvestment, says Morden, but the recent production drops reflect a total lack of maintenance, no spare parts from the import markets, weak refining capacity and technical personnel -- many of whom have fled the coop to Miami-Dade County or Bogota.
Moreover, there are financing constraints on the Venezuelan government by the U.S. Maduro will say that this is why his economy is getting worse. But these sanctions are less than two years old and Venezuela's economy has been in a free fall now for at least three years.
ConocoPhillips' May 13 seizure of PdVSA assets on the tiny island of Curacao may exacerbate the decline for June production now. Argus media is suggesting production of somwhere between 1 and 1.2 million bpd; so another fall in oil.
Meanwhile, the threat of lawsuits from bondholders is still on hold -- lucky for Venezuelans -- as investors assess the prospects for new management and whether recovery value is a function of debt restructuring or either offloading or acquiring equity in offshore assets, be it oil fields, ships, or refineries.
Wall Street bond lords are likely to sue PdVSA if World Bank investment settlement claimants are more aggressive on pursuing Venezuela's offshore oil assets. If this keeps up, Venezuela's crisis would have forced them to do the thing they fear doing the most -- giving the family jewels over to big bad Yankee capitalists. They put themselves in this spot. Their investors did not force them there.
"It’s going to be increasingly difficult for PdVSA to continue to operate under these legal threats," says Morden.
Those threats may be a more serious problem for PSUV's rulers than its declining collection of petrodollars.
Monday, June 25, 2018
Tuesday, June 19, 2018
June 19 (UPI) -- Ahead of what could be pivotal talks among OPEC members, production from founding member Venezuela could hit new lows soon, an industry report found.
State-backed oil company Petróleos de Venezuela, known commonly as PDVSA, notified 11 of its international customers earlier this month that it wouldn't be able to meet contractual obligations of 1.5 million barrels per day. According to commodity pricing group S&P Global Platts, PDVSA had only 694,000 barrels per day available for shipments.
"As workers have fled the country, state-owned oil company PDVSA has had a difficult time maintaining crude output, let alone boosting production," its report, emailed to UPI on Tuesday, read. "PDVSA's refining sector has also deteriorated on a lack of funds and manpower."
PDVSA is facing mounting obligations to its partners, notably ConocoPhillips. Meanwhile, U.S. sanctions pressures have made it difficult to do business with Venezuelan entities, including PDVSA. A digital currency embraced by President Nicolas Maduro was banned under U.S. actions.
Secondary sources reported to OPEC that Venezuela produced around 1.4 million barrels per day last month, down by more than half a million barrels per day from last year's average. OPEC ministers last this week are expected to decide to put more oil on the market to buffer against the chronic shortages from Venezuela, though the Maduro administration is opposed to those considerations.
Higher oil prices support oil-exporting nations and prices would drop if OPEC decides to make a supply-side move later this week.
According to the International Energy Agency, Venezuelan production could drop to as low as 800,000 barrels per day, though Platts expects output to say above the 1 million barrels per day mark through next year.
The country's rig count, a loose barometer of future production, was 28 last month, down about half from the start of the year.
"PDVSA has experienced similar drops in the past," the Platts report read. "In the 1980s, the number of rigs fell to less than 30, causing crude production to fall to 1.3 million barrels per day."
Wednesday, June 6, 2018
The Organization of American States on Tuesday narrowly adopted a resolution that could trigger a process for suspending Venezuela at a later date if enough votes are gathered.
The language sponsored by the United States, Argentina, Brazil, Canada, Costa Rica, Chile, Guatemala, Mexico, Paraguay and Peru was adopted with 19 votes in favor, four against and 11 abstentions after prolonged negotiations during the organization's General Assembly meeting in Washington. The number of votes required was 18.
The resolution was adopted a day after U.S. Vice President Mike Pence had asked officials from 22 countries to begin the process of suspending Venezuela from membership and participation in the OAS.
"The OAS must stand for freedom. And now is the time," Pence said Monday night.
Venezuela's foreign minister, Jorge Arreaza, responded by saying the officials from the countries who voted in favor "cannot call (Pence) today and tell him 'mission accomplished.' There are only 19 votes."
Carlos Trujillo, U.S. ambassador to the OAS, acknowledged that 19 is still far from the 24 votes required to launch a process that could end in a suspension of the South American country, but he said that President Nicolas Maduro "only has three friends."
Arreaza said the resolution opens the door to all options, including a military intervention.
"Whoever supported this resolution also support the possibility of a military intervention in Venezuela," he said. "It is up to your conscience."
The resolution calls on member states to implement politic and economic measures "to assist in the restoration of democratic order in Venezuela."
The document also declares that the victory of Maduro in the May presidential election lacks legitimacy, a position already adopted separately by at least 15 countries of the hemisphere.
It is the strongest statement adopted so far by the countries of the OAS about the Venezuelan crisis since its secretary-general said in 2016 that the South American country had suffered "grave alterations of democratic order."
At the General Assembly last year in Cancun, foreign ministers from throughout the Americas were unable to get enough votes for a relatively strongly worded proposal calling on the Venezuelan government to reconsider its call for an assembly to re-write the constitution and to respect the separation of powers.
OAS members have kicked out only two nations before. Communist Cuba was expelled in 1962 and Honduras was suspended briefly following a 2009 military coup. The ban of Cuba was lifted in 2009, but the communist island rejected rejoining the hemispheric group.
Friday, June 1, 2018
The Organization of American States has confirmed in a 400-page report what millions of Venezuelans, living in that country or in exile, have long known.
In the scathing report, the influential organization accuses the Venezuelan government under President Nicolás Maduro of committing crimes against humanity, setting the stage for a potential investigation by the International Criminal Court.
Last year, an OAS resolution condemning Venezuela lost by three votes. Now, its members can compensate for that failure by officially jump-starting an ICC probe. The report’s chilling findings demand it: At least 131 Venezuelans were killed by soldiers and paramilitaries during last year’s street protests. Worse yet, the report says that the Maduro government carried out more than 8,000 extrajudicial executions.
After spending months reviewing evidence and listening to witness testimonies, the OAS found that there are more than 1,300 political prisoners in Venezuela, and that torture is carried out in the country’s appalling prisons — electric shock, beatings, burnings and sexual and psychological abuse.
The report is a devastating blow to the world image of a repressive regime that remains in power. It concludes that there is enough damning evidence for the International Criminal Court to investigate the Maduro government — as if more evidence were needed.
It’s a sad irony that Maduro’s chavismo government has strayed so far from the principles of justice and solidarity that Hugo Chávez’s movement tried to embrace in its earliest days. The OAS report unmasks a repressive regime that does not hesitate to use despicable methods to hold onto power and squash opponents.
And what will Maduro and his followers do now that the OAS has denounced his government and threatens to embarrass it with a probe on the world stage? That’s simple. They will try to remain in power at any cost, strangling the opposition and continuing to govern with illegitimate institutions such as the National Constituent Assembly, created to supplant the National Assembly.
To its credit, the United States has long denounced Maduro’s government. It has also sanctioned high-ranking government officials for corruption and crimes such as drug trafficking.
Other nations are getting on board. The government of Canada, for instance, has just imposed sanctions, this week accusing 14 Venezuelan officials of undermining democracy and freezing any assets they have in Canada. Cilia Flores is among the officials that Ottawa has sanctioned. She is Maduro’s wife.
International scrutiny has intensified since the controversial May 20 presidential election in which Maduro all but declared himself the winner. The United States, the European Union and most Latin American countries did not recognize these elections, carried out to give a veneer of legality when Maduro allowed a sham candidate to oppose him.
Now, with the damning report in hand, it’s imperative that at least one member of the OAS request a formal ICC investigation of Maduro and his far-reaching authoritarian abuses. Earlier this year, the ICC’s prosecutor opened a preliminary probe of Maduro. But an OAS member must ask for an investigation for it to have any heft.
In light of the OAS report, the United States should step up and lead in persuading fellow members to present a united front to the ICC — and to all those who value democracy.
Wednesday, May 30, 2018
Venezuela trudged further down its road to serfdom when a sham election on May 20 returned Nicolas Maduro to the presidency for another six-year term. Venezuela's experiment with democratic socialism has now run its course from early optimism through economic dysfunction and now ever-closer to political tyranny.
A mere 20 years ago Hugo Chavez ran for president on a populist campaign promising socialist economic policies. He won the 1998 election with 56.2% of the vote in what was considered a fair election overseen by international observers, including former U.S. President Jimmy Carter.
Venezuela quickly became the poster child for successful socialism. Unlike the other socialist governments, Venezuela's was democratically elected and political freedoms were maintained. Incomes rose; poverty, illiteracy, and inequality all fell. Venezuela seemed to deliver socialism's promise unlike anywhere else in the world.
Leftists in the United States praised Chavez after his death in 2013. Salon.com claimed "Chavez racked up an economic record that a legacy-obsessed American president could only dream of achieving."
Bernie Sanders, Oliver Stone, Michael Moore and many others praised Chavez for his leadership and Venezuela's economic achievements.
Except it was all a mirage. Venezuela sits atop the world's largest proven oil reserves and Chavez cashed in on strong global oil prices. His socialist policies, meanwhile, caused dysfunction throughout the economy.
A 2016 study by economists Kevin Grier and Norman Maynard, published in the Journal of Economic Behavior & Organization, compared Venezuela's economic performance under Chavez to what it "likely" would have been if Chavez "had not been elected to the Venezuelan Presidency in 1998" and the existing policies had remained in place.
Their conclusion: "Although average incomes rose somewhat during his time as president, they lagged far behind where they might have been if Chavez had not taken office."
The same held true in other key measures, such as life expectancy, infant mortality and poverty. Life expectancy improved, but by less than it should have. Infant mortality and poverty decreased, but by no more than would have been expected without Chavez's policies.
Venezuela's economic mirage collapsed when oil prices tanked and revealed an economy incapable of feeding itself.
The average Venezuelan lost 24 pounds last year — 19 the year before. Agricultural production is way down: rice, corn, and coffee by 60% over the last decade.
The cattle herd decreased 38% over the last five years. When Chavez came to power, there were more than 800,000 private businesses. Today, fewer than 230,000 remain.
Chavez's successor, Maduro, has resorted to the printing press to "pay" for import supplies. As a result inflation is skyrocketing. In March and April alone, inflation registered 18,000%.
Meanwhile, price controls make it unprofitable to produce anything. The result is the downward spiral Venezuela finds itself in.
It's hard to imagine any sitting president anywhere getting reelected when voters are literally starving amid hyperinflation. Yet Maduro claimed victory with a record 68% of the vote.
Not surprising, since the government had banned the largest opposition parties and had violently repressed anti-government protests. The election was a fraud.
Many voters went directly from the voting booth to nearby "Red Spots," where the government checked their IDs and handed out food rations.
The connection was not lost on them. It's hard to maintain your political independence when the ruling party hands out your food and determines your economic future.
Nobel Prize-winning economist Friedrich Hayek spelled out the intimate connection between economic freedom and political freedom in his 1944 book, "The Road to Serfdom."
He argued that only within a capitalist system is democracy possible and that when a country "becomes dominated by a collectivist creed, democracy will inevitably destroy itself."
Venezuela's democratic socialism is no more. Its socialist policies created economic dysfunction while curtailing economic freedoms. Now its citizens are losing their political freedoms while Venezuela joins the long list of totalitarian socialist regimes.