Commentary: Venezuela sinks further, dragging other countries with it

Commentary: Venezuela sinks further, dragging other countries with it

January 21, 2018 – By Youri Kemp

Venezuela is crumbling right before our very eyes. It’s sad that a once prosperous country — even under the tamest Bolivarian dramatics — is being reduced to rubble under what we can only call mismanagement at its highest level.

Since President Nicholas Maduro took office after quelling a mini-coup and massive dissent to his rule, coupled with ongoing civil unrest, there has been nothing but chaos, confusion, allegations of corruption, the suppression of news, assaults on the opposition and media and the repression of a proud people that deserve better.   

In the latest in this sad drama, it was reported that a Venezuelan oil tanker was seized at a port in the Dutch-controlled island Curacao earlier this month, and is being held by the Dutch authorities over failure to pay off debts owed to Panamanian shipping companies to tune of $30 million.

This is not the first time Venezuelan oil tankers have been held over the Venezuelan government’s failure to pay off loans on behalf of their state owned oil company, Petroleos de Venezuela SA (PdVSA) and/or the central government.

Just last year April another Venezuelan oil tanker was stopped in the Dutch controlled island of St Maarten for failure to pay debts owed to a Russian state-owned shipping conglomerate, Sovcomflot, with hopes of the Russian firm collecting partial payment on a $30 million debt that it claims PdVSA owes for unpaid shipping fees.

Going back further to January 2017, more than four million barrels of oil spread between 11 vessels were held up between Venezuela and Curacao due to Venezuela’s failure to pay ship-cleaning fees, as well as a failure to meet international shipping and safety clearances from several maintenance and cleaning businesses in the maritime industry due to the fact that they either owed the said companies and/or the vessels being held were deemed unfit for transport.

The trend here is becoming obvious: The Venezuelan government does not pay its bills, and possibly cannot pay its bills even if it wanted to, so their largest economic driver, petroleum products, is suffering from tremendous financial and economic distress.

Even worse above all of this is that the issues are creating further tensions between the Dutch and their Caribbean territories known as the “ABC” islands of Aruba, Bonaire and Curacao, in addition to Dutch St Maarten.

The latest wave of allegations stemming from the Dutch against Venezuela along with the oil crisis, reported widely in the Netherlands and their other Caribbean territories, is the alleged smuggling of gold to the tune of several thousand kilos per month from Venezuela into Curacao.

Dutch politicians have asked for a full investigation into the matter, most notably calls from Dutch parliamentarian Ronald van Raak of the Socialist Party (SP), in hopes of prompting the Dutch government to become more active in ensuring that the crisis in Venezuela does not become a larger Dutch problem.

This cannot become the “norm” for relations for Venezuela with the rest of the world. If it wasn’t for the fact that that international sanctions were bad enough, President Maduro seems to be digging his heels in, looking for the next scheme to wrap the country’s oil reserves in order to make some quick cash.

As reported by Caribbean News Now earlier this month, the opposition controlled Venezuelan parliament rejected the idea of President Maduro starting the country’s first cryptocurrency backed by oil, what officials referred to as the “Petro”.

No one is thrilled about the notion of a Venezuelan oil-backed cryptocurrency: not possible investors, who see the investment as risky as Venezuela has been known to stiff people on their bills; not a significant portion of the Venezuelan parliament, who do not trust Maduro’s management to any great extent; not the international financial agencies and other regulatory bodies, who see this as a way for the Madura regime to dodge around sanctions, misappropriate and squander more of his country’s wealth; and most of important of all, cryptocurrency dealers and traders, who claim that the method is useless and that dealers do not see an appetite for an oil-backed digital currency or its usefulness.

There seems to be nowhere to turn for the Maduro-led government. Nobody wants to deal with the associated problems. No one wants to spend time dealing with it, considering everything that’s taking place. No one wants to take the risk of losing out, and no one wants to be branded as an enabler of a weakened country being overrun by pirates and organised smuggling and crime.

The humanitarian crisis is taking a toll on Venezuela’s neighbours too, as citizens are fleeing the country in droves. Countries like Panama, Mexico, Columbia and Argentina are facing a deluge of immigrants from Venezuela.

Even as far as Anguilla, former Eastern Caribbean Supreme Court Judge, Don Mitchell, in an op-ed published by Caribbean News Now: “Brothel keeping in Anguilla”, stated clearly Venezuelan women are flocking to the tiny island as sex-workers; and used additional photo-editorial from Belinda Socini in a work titled: “Desperate Women: Venezuela’s Latest Export!”

Former friends and allies of Venezuela, Panama and Russia, are turning their companies against Venezuela as routine international business cannot be conducted. Worst of all, the people of Venezuela suffer greatly as a result of the internal political pressures between the Maduro executive branch, the courts and the parliament causing the armed services to take sides.

Forces inside Venezuela have been fighting for the Maduro regime’s removal. Forces outside, some of whom have worked inside Venezuelan establishment, like Harvard economist Ricardo Hausmann, have called for foreign military intervention to oust the Maduro regime.

At a time when even oil prices are steadily rising globally, which conventional wisdom dictates that oil producing countries “should” reap huge returns from oil revenues, Venezuela is set to take another $3 billion shortfall on oil sales to just over $23 billion (down dramatically from the 2012 revenue peaks of over $93 billion) and are projected to have a production decreases bringing them closer to one million barrels per month, well below the already modest projected estimates of over 2.5 million.

The credit-crunch, brought on by a lack of foreign currency through oil revenues, has sparked hyperinflation, as the Venezuelan government prints obscene amounts of money to supply the demand, causing prices overall to skyrocket by 80 percent in just one week.

A stark reflection of how out of control the hyperinflation in Venezuela is seen in Bloomberg’s Café Con Leche Index, where over the last year the price of a cup of coffee in Venezuela jumped from 5,500 Bolivars to 45,000 Bolivars; or in USD over $4,505. Nearly a 4,000 percent increase, with prices noticeably rising back in September 2017 and skyrocketing in December 2017.

All of this is as a result international sanctions taking hold against the Maduro regime — creditors to the nation are requesting immediate payment for services rendered, which puts reinvestment in equipment and machinery in jeopardy.

For a country that is estimated to have the largest oil reserves in the world, not to have the ability to sell that oil seems to be a particularly cruel paradox, all things considered.

A tragedy, to say the least!

Youri Kemp

Youri Aramin Kemp, BA, MSc., CFM, AFA, ChE, is and Associate Editor of Caribbean News Now and the CEO of KEMP GLOBAL, a management consultancy firm based in The Bahamas

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  • needybad4u  On 01/22/2018 at 2:11 am

    Venezuela economic gangrene creates a humanitarian crisis the world must not ignore. Sad.

    ~Leonard Dabydeen

  • Rosaliene Bacchus  On 01/22/2018 at 1:49 pm

    I envisage a future in which Guyana’s suffers the same fate.

    • Ali  On 01/22/2018 at 11:56 pm

      Can I burrow that crystal glass?

    • Mark  On 01/25/2018 at 9:23 pm

      I thought that America will ensure that the Guyana’s share of oil profits will be placed into a Sovereign account like Norway?
      I would really be scared if the oil wealth ends up in the hands of a corrupt few; you don’t know the civil unrest and damage that corrupt officials can cause,
      Equatorial Guinea exported oil for at least a decade, or longer than that, and up to now, over half of the citizens live on less than 1 dollar a day.
      Where did the oil $ go?
      It went in the hands of a few leaders who siphoned the oil wealth to purchase mansions, Ferraris and upscale living in America while paying mercenaries to censor dissent.

  • Mark  On 01/25/2018 at 9:25 pm

    Mr. Youri, 1 US dollar can buy over $220,000 Bolivars! It’s ironic that a country with over 300 Proven Billion barrels of oil, vast amounts of steel and industrial production will plummet like that!

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