The precise figure is difficult to determine, because Venezuela doesn’t disclose as much economic data as other countries do.
To say “Venezuela doesn’t disclose as much economic data as other countries do” is an understatement; Venezuela has not submitted economic data to the IMF for over 10 years.
What can be ascertained is that the Venezuelan economy is nealy entirely dependent on oil exports. In 1999, oil accounted for 80% of all exports. Back then the Annual Average Domestic Crude Oil Price (AADCOP) was $16.56. By last year, the number had risen to 95% at an AADCOP of $91.17.
Today’s opening oil price was $66.88. Venezuela’s oil, heavy and of poor quality, trades for much less. Some estimate (again!) that Venezuela gets as little as $24/barrel at this point,
As of yesterday, I discovered that Venezuela is selling its crude oil for $24 per barrel and struggling to deliver with it dilapidated production, processing, pipeline and terminal facilities. No one is interested in any contracts except at such a low price due inability to deliver.
What does that have to do with the U.S., you may ask?
While U.S. imports of primarily crude oil from Venezuela have been on the decline, U.S. exports of petroleum products to Venezuela have increased largely because of Venezuela’s tight finances that leave it unable to invest and maintain its own domestic refineries. A decade ago, the United States exported 7,000 barrels per day to Venezuela. In 2013, the United States sent Venezuela 84,000 barrels per day of petroleum products, primarily methyl tertiary butyl ether (MTBE), intended for blending in gasoline, motor gasoline, and distillate fuel oil.
Additionally, even when the Obama administration declared the Monroe Doctrine dead, the hemisphere’s politics and economies affect the U.S. – just look at the illegal immigration flood from countries with ruinous policies.
Venezuela, however, is not only a country with ruinous policies; it’s a country ruled by an elite intimately connected and committed to spreading a Marxist revolution which it funds through oil proceeds, and is now propping the Communist regime in Cuba to the tune of 100,000 barrels of oil per day. It also sends oil to a dozen countries in the Caribbean and Latin America at a discounted price, plus it essentially gives Venezuelan drivers free gasoline at a nominal 5 cents/gallon.
So, of course Venezuela is in a bind. So much so, it apparently sold Goldman Sachs the debt that the Dominican Republic has with Venezuela in what may be “the new normal” for old shell games, since it’s possible that the DR may be the end buyer. Jamaica is looking at a similar deal.
Yesterday Venezuelan dictator Maduro
authorized a 20% cut in government spending and plans to modify the country’s complicated foreign-exchange system, opening the door to a possible devaluation.
Clearly, the country’s economy is collapsing as the oil prices drop, and Cuba, dependent on Venezuela, will follow.
Looking at Cuba, will this lead to another Mariel exodus? Would Obama use this as a pretext to end the embargo with Cuba?
Looking at Venezuela, would the ruling elite and the military attempt to remain in power by relying more heavily on the drug trade? Would rioting and looting lead to further oppression? Since Iran and Russia are in the same oil boat, what role will China play? Giving the Chinese an oil field seems out of the question – for now
The next option, which is where Venezuelans think there is some value, is that The Government will simply give the Chinese an oil field in exchange for money. This, in fact, has been tried before, except that Chávez, in his minimal wisdom, created new laws that restrict the control of the foreign partners over the joint ventures. Thus, PDVSA has to contribute part of the money to the JV’s, unless the partner lends the money to PDVSA. Except that the Chinese have not been very amenable to this. They want “joint” to mean joint, not I put up all the money and you control. Some companies have accepted this, but not the Chinese, who, in fact did not participate in one of the Carabobo oil fields, precisely because they were told they had to put up all the money
On the bright side, the changing economic landscape may bring Japan, which
is looking to Latin America as a potential source of energy and other natural resources, and it is eager to import liquified natural gas from the U.S. via an expanded Panama Canal.
Will any of this bring opportunities for democracy and trade in the hemisphere? More importantly, is the U.S. government prepared to recognize them?
Times like this require strong leadership in foreign policy, which is exactly what the U.S. lacks now.
Fausta Rodriguez Wertz writes on U.S. and Latin American news, politics and culture at Fausta’s Blog.