Take the day off, or else…

…celebrating ten years of systematic destruction of Venezuela’s economy and its democratic institutions.

President Hugo Chavez decided late on 1 February to decree a paid holiday on 2 February as part of the celebrations of his tenth anniversary in power.

To guarantee everyone – employers and workers – would take the day off from work, Chavez then deployed thousands of National Guard troops nationally to make sure no one worked today.

Everyone who opened for business – stores, offices, factories, private clinics, restaurants, pharmacies, bakeries, fast food outlets, etc – wase ordered to close immediately by heavily armed National Guard troops.

Business owners also were threatened with arrest, and fines starting at Bs.F. 5,000, as punishment for committing the “infraction” of trying to work on 2 February.

The National Guard behaved boorishly, too. Rude, menacing, threatening, offensive are some of the adjectives used by angry business owners to describe the behavior of the troops today.

But Chavez’s decree was, perversely, a fitting way to observe ten years of systematic economic destruction that will plague Venezuelans for several generations to come.

Pdvsa has been wrecked beyond repair

Oil, basic industries, power, agriculture and agribusiness, manufacturing, commerce, services, banking, transportation – everything lies in ruins on the tenth anniversary of the Chavez regime.

Petroleos de Venezuela is the backbone, the cornerstone, of the government’s fiscal solvency. But Pdvsa has been destroyed in every imaginable way.

The company’s senior management is incompetent and corrupt.

Operationally, Pdvsa is in an ongoing state of collapse. Crude oil production capacity has plunged from over 3.4 million b/d in 1998 to under 2.3 million b/d as of 31 December, 2008, losing a third of its production capacity in a decade. Pdvsa’s refineries are breaking down, forcing the company to import gasoline to meet local demand.

All of Pdvsa’s planned investments in oil production, refining, gas production and liquefaction, etc. are running over a decade behind schedule, since the company’s much-touted Bolivarian “Siembra Petrolera” plan is a carbon copy of the expansion plan Pdvsa undertaken by Pdvsa in the second half of the 1990s.

In fact, Pdvsa has not added even one net new barrel of crude oil production capacity during the entire decade Chavez has been president.

President Chavez boasted to the National Assembly in January that Venezuela can survive nicely even if oil prices drop to zero per barrel because the revolution had over $100 billion of foreign exchange reserves.

Chavez also announced his government would invest $250 billion on infrastructure and development projects from 2009-2013, including $125 billion on 88 major oil and gas projects.

However, Pdvsa stopped paying its debts to oil services companies, contractors and suppliers in August 2008, and now owes this group between $11 billion and $12.5 billion.

As a result, the companies which provide all sorts of essential services to Pdvsa are reducing or shutting down their operations, firing thousands of workers, defaulting on their local and international bank debts, etc.

As these service companies curtail their activities in Venezuela, Pdvsa’s crude production will decline more quickly. Some ex-Pdvsa production experts estimate that on a full-year basis, Venezuela’s crude production capacity could fall between 250,000 b/d and 500,000 b/d

A drop of this magnitude over the coming year could reduce Venezuela’s crude oil production capacity from 2.3 million b/d at present to between 2 million b/d and 1.8 million b/d by 31 December 2009.

A steep drop in oil production also will cause more structural damage to oil reservoirs which never recovered from the oil stoppage of December 2002-January 2003.

Chavez and his crony in Pdvsa’s destruction, Energy Minister Rafael Ramirez, continue to insist there won’t be any cuts in Pdvsa’s planned investments during 2009-2010.

But Pdvsa’s closest strategic partners (Iran, China, Russia) already have been informed quietly that all of the Orinoco and offshore gas investments programmed for 2009 have been pushed back by one or two calendar years.

Dying basic industries

Ciudad Guayana is less than 1,000 km distant from Caracas, but it might as well be on another continent in terms of the general public’s awareness of the destruction of the country’s strategic basic industries.

In May 2008, President Chavez nationalized Argentine group Ternium’s 60% stake in steelmaker Sidor. As of 31 December 2008, liquid steel production at the new Bolivarian Sidor was down 20% compared with 2007.

Aluminum producer Alcasa, the first smelter inaugurated in 1968, probably will be shut down permanently this year because the government can’t make a profit, even when aluminum prices were close to $4,000 a ton barely one year ago.

Venalum, the other state-owned smelter, is also piling up huge losses, as are all the other basic industries in the Guayana region.

Agriculture and Manufacturing

Venezuela imported $50 billion worth of food and other intermediate and finished consumer goods in 2008.

A decade ago Venezuela was not agriculturally self-sufficient, though there aren’t any countries in the world which are fully self-sufficient in their food production. However, Venezuela in 1998 was making slow progress towards expanding food production in areas where it had competitive advantages, and a small but robust food export sector was growing.

Sadly, ten years of Chavez rule have demolished Venezuela’s agriculture and agro-industry sectors, and left the country dangerously vulnerable to massive food shortages if Central Bank’s hard currency reserves are spent and food imports halt.

During the decade Chavez has been president, the private manufacturing sector has shrunk over 50%. In 1998, Conindustria counted about 14,000 manufacturing companies in Venezuela. By the end of 2008, over 7,000 had gone out of business.

Since 1999, the Chavez regime has built a legislative and regulatory “iron curtain” around the private sector. In essence, the regime has criminalized and/or imposed tight controls on practically all aspects of private enterprise, while legalizing/deregulating all sorts of business “practices” which other countries view as illegal.

Booming Insecurity and Defense Spending

Since 2005, President Chavez has purchased and ordered close to $7 billion of weapons, mostly from Russia, including assault rifles, jet fighters, troop transports, armored vehicles, missile-capable frigates, and transport and attack helicopters. He also plans to buy hundreds of battle tanks and armored fighting vehicles (ie self-propelled howitzers capable of transporting troops), more fighters, submarines, and advanced surface-to-air missile systems.

Chavez says all these weapons are needed to modernize Venezuela’s national defense and be prepared for a future US military invasion, or an attack from Colombia. However, the first target of the Bolivarian military’s new weapons most likely will be Venezuelans opposed to Chavez’s increasingly dictatorial regime.

The second likely target could be neighboring states with something Chavez wants, like Guyana’s Essequibo region or Trinidad & Tobago’s offshore gas and oil fields. It is no coincidence that Venezuelan Defense Ministry maps show the waters (and submarine resources) surrounding Trinidad & Tobago as belonging to Venezuela.

Chavez also says Venezuela needs advanced fighters to defend the Panama Canal against (US?) attack. He hasn’t said anything about the Netherland Antilles, but Defense Ministry maps also show the waters around Curacao, Aruba and Bonaire as belonging to Venezuela.

While Chavez arms the Bolivarian military for war against the Venezuelan people, neighboring states or the US, a low-intensity war waged by criminals against the citizenry has made Venezuela the most violent country in Latin America measured in terms of homicides per 100,000 inhabitants.

Estimates of the total number of homicides committed in Venezuela during 2008 range from over 12,000 to over 14,400, compared with just over 4,000 homicides in the mid-1990s. Over one-third of all murders committed last year were in the greater Caracas Metropolitan Area. Every weekend between three-dozen and four-dozen murder victims arrive at the Bello Monte morgue.

The Chavez government imposes tight controls on gun ownership by law-abiding private citizens. However, the Chavez government finances and arms many civilian gangs which engage in criminal activities but disguise themselves as people’s militias created spontaneously to defend the revolution.


About Caracas Gringo

Representing less than 0.00000000001515152% of the world population as of 31 December 2011.
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One Response to Take the day off, or else…

  1. Bois says:

    Just found your blog and I find it very informative and accurate.

    On Monday, our company decided to halt all business with PDVSA. They are behind on their payments and their maintenance and repair decisions are made by incompetent managers.

    These managers have no idea of what the impact of their decisions are. That is why the refineries are breaking down, you see a spike in fires, and people are being hurt or killed by the policies put forward by these managers.

    The talk among contractors is PDVSA is rotting from the inside out by the incompetent people running it. Chavez has gutted PDVSA financially.

    I employed a small work force from Venezuela, these men were hardworking, had pride in their workmanship and were the most loyal employees.

    Now, they are left without work because of PDVSA’s hidden agendas, incompetent management and failure to meet their obligations.

    To my friends in Venezuela, Mucho Gracias.

    May God be with you.


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