Salaam
Like to share. Another perspective on Venezuela's economic problems.
https://www.youtube.com/watch?v=pK_CgcHrgNA&t=637s
Letter from Caracas
If there is one symbol of the mess our country is in, it is state oil company Petroleos de Venezuela (PDVSA)m which produces and exports most of our oil, earns almost all our money and is also one of our biggest borrowers, with debts around $40bn.
In its heyday around 30 years ago, PDVSA was considered the worlds best run national oil company; it is now among the worst - and there is plenty of competition.
Our reserves surpass those of Saudi Arabia; but years of mismangament, corruption and chronic underinvestment have taken their toll, with oil production around half what it was only three years ago. Output of 1.1, barrels a day look certain to drop further now that Donald Trump has hit PDVSA with sanctions targeting exports to the US (equivalent to more than a thrid of production) and freezing the assets of its US oil refeining subsidiary, Citgo. the longer our lumbering president Nicolas Maduro clings to power, the more likely the US will tighten these sanctions.
At a time of crises, you'd think Maduro might call upon people with experience to turn the company around and get production back on its feet. But no: the person running PDVSA and the oil ministry is General Manuel Quevedo, who has more experience cracking the skulls of opposition protestors than getting oil out of the ground. He speaks no English and railes to journalists at Opec meetings about 'neo imperialists' ie US - trying to steal our oil wealth.
PDVSA is now effectively under the armys control, with former company executives either in the slammer on corruption charges or forced to flee the country. Exiles include PDVSA former long serving overlord, Rafael Ramirez, who did a stint as Venezuelas ambasador to the UN, is hiding somewhere in Europe and is plotting a comeback if Maduro is swept from power. But he too, has been tainted by corruption: last year a judge in Andorra charged his cousin, former PDVSA exec Diego Salazar, with masterminding a scheme to launder $2bn from the company between 2004 and 2013. Ramirez was, somehow not involved.
Oil could be a decisive factor in how long Maduro, ostracised by the US and most of Europe and Latin America, is able to hang on. Russia backs Maduro, as much for commercial reasons as political ones. Over the past 5 years state controlled giant Rosneft (in which BP is a minority shareholder) has been awarded several lucrative oil production assets. Rosneft has also lent PDVSA $6.5bn and is now being repaid in oil.
That debt has been halved, but the Russians fear regime change in Caracas could leave them out of pocket, and isolated, as the US oil companies move in. China, too, has big exposure to Venezuela and is also being repaid in oil - leaving PDVSA with previous little cash of its own.
Most PDVSA's outstanding debt is to bondholders, which include US heavyweights such as Goldman Sachs. there dream is that Maduro makes a quick exit, US backed upstart Juan Guaido takes over, and PDVSA becomes great - and a great customer - again.
As US sanctions kick in, PDVSA could normally rely on firendly trading firms to get around the restrictions. But maybe not this time. Last March, a trust representing PDVSA filed a lawsuit in Miami against several prominent trading firms, including the top three of Vitol, Glencore and Trafigura, accusing them of colluding in a scheme to rig oil supply tenders conducted by PDVSA. the traders deny any wrongdoing, of course, and their lawyers say the case should be thrown out because the US no longer recognises Maduro as president.
PE Issue 1490