World View: Socialist Venezuela’s Oil Output Plummets as Refugee Outflow Surges

Venezuela's President Nicolas Maduro gestures during a press conference to launch to the market a new oil-backed cryptocurrency called 'Petro', at the Miraflores Presidential Palace in Caracas, on February 20, 2018. Venezuela formally launched its new oil-backed cryptocurrency on Tuesday in an unconventional bid to haul itself out of a …
FEDERICO PARRA/AFP/Getty Images
JOHN J. XENAKIS

This morning’s key headlines from GenerationalDynamics.com

  • Socialist Venezuela’s oil output continues to crash – except for China joint venture
  • UN prepares Venezuelan refugee crisis, the largest in modern Latin American history

Socialist Venezuela’s oil output continues to crash – except for China joint venture

Venezuelan migrants travel aboard a truck in Tumbes, Peru, near the Ecuador border, on 1 November (AFP)
Venezuelan migrants travel aboard a truck in Tumbes, Peru, near the Ecuador border, on 1 November (AFP)

Venezuela’s economy desperately needs to be able to sell oil in order to survive. But Venezuela’s socialist dictators Hugo Chávez and Nicolás Maduro have done what many might consider an almost impossible feat – turned the country with the largest oil reserves in the world into a country that cannot produce oil. Other “socialist paradise” countries – including China, Russia, East Germany, Cuba, and Sweden – have partially or completely turned to private markets as their economies spiraled into disaster, but only two countries in the world have not: Venezuela and North Korea. And both are economic disasters as a result.

In Venezuela, Maduro has fulfilled his socialist dreams by turning the country’s nationalized oil company, Petróleos de Venezuela S.A. (PDVSA), over to army generals and other political cronies to run, lest some dirty capitalist make a profit on Venezuela’s oil. Well, Maduro has made sure that nobody is making money on Venezuela’s oil, including Venezuela.

Oil accounts for about 98 percent of Venezuela’s export revenue and, in November 2017, Maduro put Major General Manuel Quevedo in charge of PDVSA, in the hope of stopping its collapse.

Quevedo is a Maduro crony but knows nothing about the oil industry. In July, Quevedo joined his wife, a Catholic priest, and a gathering of oil workers in prayer to ask God to boost oil output. Prayer is a great management technique, but unfortunately, God was not listening this time. The collapse has continued, and production has dropped 20 percent since Quevedo took over, and is now at the lowest level in nearly 70 years.

And now there are reports that Maduro is thinking of firing Quevedo and replacing him with another army general who has no oil industry expertise. Ironically, Quevedo is scheduled in January to assume the rotating presidency of the Organization of the Petroleum Exporting Countries (OPEC) for one year.

There is one subsidiary of PDVSA that that has increased oil production this year. Sinovensa is jointly owned by PDVSA and China National Petroleum Corporation (CNPC), and it accounts for about 10 percent of Venezuela’s oil output.

China has lent over $50 billion to Venezuela through oil-for-loan agreements over the past decade. China has not been producing enough oil to make the debt repayments, and so this year China took over additional control of Sinovensa, and now owns 49 percent of the joint venture. The result is that oil production from Sinovensa increased 46 percent since April. Reuters and S&P Global and Hellenic Shipping and OilPrice.com

UN prepares Venezuelan refugee crisis, the largest in modern Latin American history

The problem of refugees fleeing from Venezuela into neighboring countries has become so massive that the United Nations refugee agency has created a Regional Refugee and Migrant Response Plan (RMRP) involving 95 organizations in 16 countries to respond to the humanitarian needs of the refugees and migrants from Venezuela.

Almost 3.3 million Venezuelans have fled into neighboring countries and beyond. This exodus is already the largest in the modern history of Latin America and the Caribbean and involves both refugees and migrants from Venezuela. UNHCR expects that another two million Venezuelans will flee in 2019, with the result that about 5.4 million Venezuelans, or 17 percent of the country’s total population, will be living abroad by the end of 2019.

The RMRP organizations are also asking for $738 million in financing in hopes of providing assistance to 2.2 million Venezuelans and 500,000 people in the host communities. The United States has earmarked more than $95 million in aid to Colombia, Brazil, and other host nations to deal with the Venezuelan crisis since fiscal year 2017.

It is interesting to compare Venezuela and North Korea. Both have devastated economies and enormous poverty. Both of them are supported by Russia and China. Both are international pariahs. There are some differences. Unlike North Korea, Venezuela does not have nuclear weapons and ballistic missiles and people are permitted to leave the country without getting shot to death. Miami Herald and UNHCR and Refugee and Migrant Response Plan (RMRP, PDF)

Related articles:

KEYS: Generational Dynamics, Venezuela, Hugo Chávez, Nicolás Maduro, Manuel Quevedo, Petróleos de Venezuela S.A., PDVSA, Petroleum Exporting Countries, OPEC, Russia, North Korea, China, Sinovensa, China National Petroleum Corporation, CNPC, UN High Commissioner for Refugees, UNHCR, Regional Refugee and Migrant Response Plan, RMRP
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