Venezuela’s Collapse Holds Lessons For Neighboring Guyana – Forbes

Commentary By FORBES

Venezuela’s slide from top of the heap to a virtual bit player in the oil market is a slow-motion car crash. Production sank progressively from 2.6 million barrels per day (b/d) a decade ago, when it was third in OPEC behind only Saudi Arabia and Iran, to 2.0 million b/d by Q3 2017. Decline since has been precipitous – today it’s just 1.1 million b/d.

The market has shrugged off the loss, even with the absence of sanctioned Iranian oil. Venezuela’s heavy barrels have been largely displaced by supplies from Canada, Mexico and elsewhere.

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  • Trevor  On 02/17/2019 at 1:02 am

    America sanctioned Venezuela until the country was basically prohibited from selling oil to foreign countries, most of which are also sanctioned.

    I’m telling you folks—ExxonMobil plans to use Guyana’s oil production to supplement and also replace Venezuela’s oil.

    You’re going to tell me that it takes months to have matters sorted at the GRA or GWI, but ExxonMobil is able to stack up oil production tenfold by 2025, from 100,000 barrels this year-2020 to 1,000,000 in five years’ time?

  • Trevor  On 02/17/2019 at 1:26 am

    [quote]Another clear lesson from Venezuela is not to become too dependent on a single source of revenue. Building infrastructure and raising education standards will facilitate development of other sectors. Local content and employment requirements for the oil industry can support this process.[/quote]

    This white Jewish last name man has to either naive or pushing his American agenda, blaming Venezuela for the sanctions that have destroyed the country’s economy.

    Venezuela was sanctioned that it couldn’t conduct trade with other sanctioned partner. Trump recently implemented sanctions on Venezuela’s oil industry, leading to a collapse in oil production.

    How strange of the white man to paint a rosy picture for Guyana, when Venezuela, a country which gave every Caribbean country cheap oil under PetroCaribe, is bring thrown under the bus for Exxon-Mobil.

    Why should we, as Guyanese, celebrate the collapse of our neighbour?

    Does anyone believe that we aren’t being dragged into this American imperialism?

    The white man is giving inaccurate facts that Guyana will get US$10 billion in taxes by 2030. Exxon doesn’t have to pay taxes on anything, even imports.

    Using the contract figures, 1 mil barrels of oil by 360 days = 360 million barrels of oil, and multiply that by estimating US$100= 36 billion sales, but profit-sharing is half of 25%, after 75% cost claiming of oil.

  • Clyde Duncan  On 02/17/2019 at 3:17 am

    “How did you go bankrupt?”
    Two ways. Gradually, then suddenly.”

    ― Ernest Hemingway, The Sun Also Rises

  • Clyde Duncan  On 02/17/2019 at 4:08 am

    Venezuela Proves Petro-states Can Also Go Broke

    Francisco Toro | The Washington Post [Caracas Chronicles]

    I remember the joke from my childhood.

    “What’s the most profitable business in the world?”

    “A well-run oil company.”

    “And the second most profitable business in the world?”

    “A badly run oil company.”

    There was a certain cockiness to the way Venezuelans used to tell this joke. A guffawing sense of invincibility. Here was a country sitting on the world’s largest oil reserves, where all you have to do is dig a hole in the ground and dollars come gushing out. A country like that can’t go bankrupt, can it?

    TURNS OUT IT CAN.

    In a somber speech to the nation, President Nicolás Maduro announced what financial markets had been anticipating for years:

    Venezuela can no longer pay its debts. The president decreed that the nation’s debts would be “refinanced and restructured” in the months ahead.

    The speech was not well received. Wall Street investors stampeded for the exits.

    Venezuela now finds itself under a mountain of debt: nearly $70 billion, most of it borrowed and then either wasted on boondoggle projects that were never completed, squandered on populist giveaways or just plain stolen.

    Payments on these loans have stretched the public purse for years, leaving people on the streets literally hungry as dollars that might have been used to buy food went to Wall Street instead.

    Maduro finally fessed up: Venezuela just can’t keep paying.

    One reason his speech alarmed markets is that he didn’t seem to really understand what he was saying.

    Maduro kept using the words “restructuring” and “refinancing” interchangeably, but those are two vastly different concepts:

    The former implies losses to bondholders, the latter merely a voluntary swap that leaves them whole. When facing a debt crisis on this scale, you would expect a leader to pick his words with extreme care. Maduro’s sloppiness told you all you needed to know about how professionally this process will be handled.

    But the problem went deeper: Neither restructuring nor refinancing seemed remotely realistic. Either one would amount to a delicate high-stakes negotiation with foreign bondholders:

    Talks where the Venezuelan side has to persuade them, they’ll still get paid, only perhaps not so soon, or not so much. But Maduro decreed a restructuring and/or refinancing.

    IT JUST DOES NOT WORK THAT WAY.

    Maduro needs to persuade investors to believe in Venezuela. But the economy is in the middle of a horrific collapse.

    The monthly inflation is pegged at 500-percent and rising. A profound three-year economic depression has brought per-capita incomes all the way back to 1950s levels.

    Food shortages have become endemic, with large majorities of Venezuelans involuntarily losing body weight because they can’t afford enough to eat. Basic development indicators such as maternal mortality are in free fall, while long-eradicated diseases such as diphtheria and malaria are making a terrifying comeback.

    Does this sound like a country you would want to invest in?

    Venezuela needs profound economic reforms just to put an end to the economic chaos. Rebuilding the kind of economy a sane international investor might want to lend money to on reasonable terms will take years. It will take a root-and-branch rethink of every aspect of economic policy. It will take major reforms to re-establish property rights and investment guarantees, to rein in the uncontrolled money-printing that has already set off a bout of corrosive hyperinflation and to put in place credible policy-making systems that give investors confidence we won’t go down this failed path again.

    Needless to say, Maduro offered no economic reforms of any kind. It felt as though he’s so used to autocratic decision-making at home that he has lost any notion that he cannot just order investors around.

    Which is why when Maduro said “refinancing”, Wall Street heard “default”.

    Credit-default swaps on Venezuelan debt plunged after his announcement, to levels that imply a 99.98 percent probability of default in the next five years.

    It has taken a staggering accumulation of blunders and crimes to bring a country as rich as Venezuela to this point.

    World-class corruption, on its own, wouldn’t have been enough to bankrupt the Venezuelan petro-state.

    Aggressive mismanagement alone wouldn’t have done the trick.

    Mindless adherence to a failed ideology, by itself, wouldn’t have put us over the top.

    It took a uniquely perverse combination of all three — uncontrolled corruption and rampant mismanagement, hand in hand with a failed ideology — to do the seemingly impossible:

    Bankrupt a country floating atop $15 trillion worth of oil.

    • kamtanblog  On 02/17/2019 at 5:10 am

      Sadly the horse has bolted ..any action by Maduro will be “too little too late”.

      Best reduce production to meet his commitments and negotiate bail out
      IMF/WB loans at reduced rates to build up his infrastructure hospitals/schools etc.
      The oil is more valuable in the ground so leave it there regulate production to meet demands.
      It’s not rocket science.!!

      Who is largestconsumer of oil ?
      No not China or India ! The USA.
      20+% of oil produced
      Most others less than 7% of world production.

      Now go do the maths for your marketing plans.

      Guyana willl serve the USA 🇺🇸 as an alternative source of cheap oil….
      With population of under 1m
      Venezuela population of 38m
      Which is easier to control/corrupt !

      Go figure

      Kamtan

      • Trevor  On 02/17/2019 at 5:34 pm

        Many of those living abroad aren’t getting the larger picture…Venezuela is being sanctioned into destitution and financial chaos by USA, Canada, UK and other EU superpowers.

        If it weren’t for the sanctions, Venezuela wouldn’t have been collapsing.

  • the #1 Itinerary  On 02/17/2019 at 8:16 am

    Great post 😁

  • ANTICONQUISTA  On 02/17/2019 at 4:40 pm

    Venezuela is not collapsing because of it’s own shortcomings. It is being systematically attacked and destabilized by U.S. imperialism.

    • Trevor  On 02/17/2019 at 5:31 pm

      Many of us know this here in Guyana. We also know that Exxon planned this oil discovery all along, waiting until sanctions were placed onto Venezuela back in 2014 to announce these oil discoveries.

      How will this oil benefit us when gold, bauxite and other minerals have barely improved our standard of living, and enriched the few who now aspire to become Dubai billionaires through supposed corruption.

      Many of us predict that Maduro will attack Exxon Mobil’s oil tankers in revenge once SHTF next year from the current sanctions against PDSVA.

    • kamtanblog  On 02/18/2019 at 4:40 am

      Sorry
      Beg to differ…
      That’s the ideological argument !
      Politics ?
      It’s all to do with “black gold” …
      USA consumes 20+% of oil produced
      world wide !
      Yes it’s not China or India or any other.
      Go google …

      Guyana’s oil already belongs to USA
      “Bought and paid for” ….
      Which oil is cheaper ?
      Guy population 1m
      Ven. 38M
      Fact not fake fiction or fantasy

      Go figure

      Kamtan

  • Clyde Duncan  On 02/18/2019 at 1:29 am

  • Clyde Duncan  On 02/18/2019 at 1:43 am

  • Trevor  On 02/18/2019 at 9:26 pm

    The USA is going to invade Venezuela.

    I don’t know why some of us here are preparing to become Saudi billionaires when Venezuela is going to become the Syria of South America & the Caribbean.

    But then again, the USA is a friend of Saudi Arabia, a country where if you offend those Dubai billionaires, the elites cut one’s head off.

    • kamtanblog  On 02/19/2019 at 12:14 am

      Barbarism is part and parcel of the Arabian culture. Wars are also a form of barbarism.
      Am sorry “invasion of Venezuela” is absurd.
      Cite Iraq Libya both oil producers who wished to trade oil in € or ¥ rather than USD$.
      Why no invasion of Syria ? Just prolonged war
      to market WMD ?
      The greed of the oligarchs of the planet has no limits and will go to war if neccessary to feed their insatiable greed for more wealth accumulation. Corruption a la carte !
      Will Venezuela now be “hostage” of the free world ?
      More questions than answers.

      Politricks !

      Kamtan ps USA has no right to invade Venezuela ..this is a red herring !

      • Trevor  On 02/20/2019 at 10:25 pm

        Unfortunately America is planning to do this, and they even taunted Maduro at the Venezuela-Colombia border.

        Venezuela is loaded military compared to other South American countries:

        Why America is bloodthirsty for war, I’m not sure, but many of us here knew it was bad news when Exxon mysteriously started “discovering” billion upon billion barrels of oil in a short time span despite being in Guyana since the 1990s.

        Exxon waited all of these years to speed up their oil production and discoveries at the moment Venezuela received major sanctions and also after Chavez died.

      • kamtanblog  On 02/21/2019 at 2:20 am

        USA does not have to invade Venezuela
        if it already owns its neighbour Guyana.
        Why invade a country of 38m when you own their neighbours of less than 1m.
        War is a last resort after the economics or politics has failed.
        Once Guyana’s oil production has surpassed Venezuela’s there is no need to invade.
        Exon is in partnership with China 25% in Guyana’s oil development plans.
        Google IDB bank for more info.
        The three bordering countries will be overrun
        by the exodus of Ven economical migrants seeking asylum with refugee status.
        An interesting development.
        The issues are economic with political
        implications/consequences.

        Kamtan uk/spain

      • kamtanblog  On 02/21/2019 at 9:09 am

        Why should USA invade Venezuela ?
        Military intervention is an absolute last resort.
        Economic and political pressure does the trick.
        Maduro will survive but as a very “impotent” military dictator.
        If the CIA wish they could have taken him
        out ages ago.
        Let’s see how this one plays out !

        Kamtan uk

  • wally n  On 02/21/2019 at 11:54 am

    All the great suggestions, conclusions, …….what about “ask the people” elections with outside observers [Jimmy Carter] sometimes the best solution comes from the people most affected.

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