Oil sanctions destroy what was left of Venezuelan industries



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At the beginning of March, Nicolás Maduro He went to a somewhat ruined steelworks to boast of the country's export capacity despite the imposition of increasingly severe economic sanctions in the United States.

"No one will stop us," he said alongside the first lady, Cilia Flores, as they watched a conveyor belt of steel briquettes in the Guayana steel and metallurgical complex (Consigua). ). "We are at the time of victory, our greatest victory is to advance the economic output of all businesses."

Two days later, the complex stopped working. It was paralyzed by the national power outage that lasted nearly five days and devastated what was left of Venezuelan basic industries. The blackout, as well as new US sanctions against Venezuela's critical oil sector, pushed the country even further towards a total economic collapse.

The less disadvantaged citizens of Venezuela used their savings in dollars to buy portable generators, import non-perishable goods, rest and feed in hotels or churrasquerias. For the most disadvantaged, signs of relief came on Friday, March 29, when the Red Cross announced that it would soon be conducting an emergency relief campaign in Venezuela.

However, for many people, the only palliative with increasing adversity is the hope that the conditions will lead to Maduro's departure.

During the power outage in early March, Venezuela's gross domestic product lost a billion dollars, or about 1 percent of GDP, according to the investment bank Torino Capital. It has left in its wake more than five hundred looted businesses, at least forty dead hospital patients and half a dozen closed factories.

The oil production equivalent to the total of a small oil state, such as Brunei, he was irretrievably lost by the damage done to the oil fields by the sudden cut in electricity, according to IPD Latin America consulting firm.

And the blackout came after sanctions were announced against any purchase of Venezuelan oil in the United States, issued in January, which added to the years of mismanagement and corruption in the sector during the war effort. Maduro and his deceased. predecessor, Hugo Chávez.

"Sanctions prevent the government from buying and importing everything it needs to run the countrysaid Francisco Rodríguez, chief economist at Turin Capital.

Many opposition supporters see the current economic chagrin as a necessary evil to get rid of Maduro. But the sanctions also provide the president's supporters with a substantial enemy to blame for the economic difficulties.

Few Venezuelans say they are ready if the conditions, which in themselves are extreme, deteriorate, if Maduro bears the blow of new sanctions, whose effects are only beginning to be felt among ordinary Venezuelans.

"The crisis will worsen"said María Altagracia Perozo, retired from the popular district of Concagüita in Caracas. They tell us to look for candles, matches and kerosene in case the lights go out. "

Prior to the reduction in oil revenues and the exodus of energy technicians, Maduro was struggling to try to restore several basic services since the blackout of March 7, the worst in the country's history. The water supply is intermittent in most cities, and students and officials stayed at home this week, as a fire in an electrical substation caused a new outage.

According to a poll released in early March by the country's chief investigator, Datbadisis, less than half of Venezuelans reject the sanctions imposed by the US government against the oil industry by Donald Trump. This is a surprisingly low percentage, given the direct impact of these sanctions on the standard of living.

"If we have to sacrifice a month without electricity or water, we will do it because that is the only way to improve this country"said Valdemar Álvarez, Maduro's opponent and laboratory badyst at the Sidor steel complex in Puerto Ordaz.

The Venezuelan economy is expected to shrink by more than 25% this year, according to Rodriguez, one of the few economists trying to predict the extent of the country's economic decline. Inflation is expected to exceed 51 million percent by the end of the year, with which the national currency, the bolivar, will lose virtually all its value.

According to the Institute of International Finance, only the financial crisis of Zimbabwe ten years ago exceeds the magnitude of Venezuela 's collapse.

Crude oil production in Venezuela, whose country previously drew more than 90% of its cash income, fell 13% in February – the worst decline in 10 years – according to OPEC.

February was the first month after the imposition of sanctions by the US Treasury, which banned US-based companies from doing business with Petróleos de Venezuela, S.A., or PDVSA. Since then, the collapse has only worsened.

With sanctions, power cuts and increasing brain drain, 60% of Venezuelan oil production would be lost this year alone, according to IPD consultants. Analysts at the company estimate that the country's output will grow from 1.36 million barrels a day in February to 550,000 barrels a day by December. This would put oil power once in the production chain of a small country like Ecuador.

The United States, once PDVSA's main customer, did not buy any Venezuelan crude in March for the first time since the 1970s, according to the Ministry of Energy. And that the ban only officially enters into force in April.

Maduro has struggled to reorient its exports to other buyers.

PDVSA considered India as the best substitute, but the Asian country cut back its Venezuelan oil purchases in March under pressure from the United States. Oil companies such as Lukoil or Trafigura, based in Switzerland, have stopped supplying Venezuela with the petroleum products that PDVSA needs to maintain its operations.

The sanctions then accelerated Venezuela's vicious economic cycle, in which the reduction in oil exports leaves Maduro with less money to invest in basic services. That, in turn, further reduces oil production, said Siobhan Morden, emerging markets strategist at New York-based investment bank Nomura.

"This multiplier effect of feedback is very powerful and affects almost everyone" in Venezuela, explained Morden. "The impact will be very serious"

The sanctions prevented the government from importing the diesel necessary for the operation of thermoelectric power plants. Pdvsa's dilapidated refineries, once the largest in the world, have long since ceased to be sufficient to supply the necessary quantities of fuel and diesel at the national level.

The lack of maintenance and supplies for thermoelectric power plants prevented Venezuela from having a power reserve to address when a forest fire under a line to high voltage hit the country's main hydropower plant on March 7.

When the light came back, whole industries in Venezuela did not exist anymore.

The power outage has eliminated the last vestiges of steel, aluminum and iron, which Maduro had reported as alternatives to oil to generate revenue.

More than 10,000 workers were enrolled in moribund factories and factories to provide food for free in the dining rooms, which was for many the main means of obtaining food. Hyperinflation has decimated your wages so that they hardly oscillate around a few dollars a month.

"It's like working in a coma," said Rona Figueredo, union leader of Oriqueco Briquetera's Puerto Ordaz plant, which suspended its production line during the blackout.

At least half a dozen other state-owned metal processing plants ceased operations after the blackout, including Sidor, Alcasa and Venalum aluminum producers and three steel mills, according to workers .

The lack of electricity was "the last nail of the coffin" industries that were functioning at a minimum after years of mismanagement, said Damian Pratt, union activist in Puerto Ordaz for years and author of a book about the basic industries of Venezuela. .

The Maduro government has accused of electrical problems what it calls US-led sabotage, without proving it. Officials also said that heavy industries controlled by the state had maintained their production despite the power outage.

"Without these industries, there is no economic recovery in Venezuela"said Pratt.

Isayen Herrera collaborated with the Caracas report

* Copyright: c.2019 New York Times News Service

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