委内瑞拉：成也石油 败也石油

Venezuela is facing the worst economic and humanitarian crisis in its history. Venezuela has been hit by the 24 months collapse in oil prices. Its economy is expected to shrink 10 percent at the end of 2016, the biggest contraction in the last 13 years, while inflation has reached more than 700 percent according to the International Monetary Fund (IMF). Other analysts say that inflation has already reach 1,000 percent.

Venezuelans are living day-by-day facing a very complicated situation with rising crime and corruption rates, daily electricity blackout, medicines and food shortage (more than 80 percent). Venezuelans can’t get even the most basic lifesaving medical supplies as antibiotics.

On Monday 22th August 2016 Brent oil traded around $49 a barrel, but two years before Brent was $102 a barrel, and even then Venezuela was already having economic problems. Even with a recovery in crude, higher prices are unlikely to solve the economic, humanitarian and political crisis.

In Venezuela 96 percent of foreign currency earnings come from oil industry and with the collapse of the oil prices the income has fallen more 50 percent. But in addition to declining revenues, oil production has also dropped, doubling the pain for Venezuela.

The problems could grow worse. Several oil service companies suspended or slowed operations in Venezuela this year due to difficulties in obtaining payment from the state-run oil company, Petróleos de Venezuela (PDVSA). Contractors have cut back on drilling in Venezuela amid rising unpaid debt, which threatens to take Venezuela’s output down even further.

On June 28th 2016, Baker Hughes reported that the number of oil rigs in Venezuela dropped from 69 to 59 in May of this year. The CEO of the Italian oil and gas contractor Saipem SpA said that in April the company had suspended 89 percent of its operation rigs in Venezuela (25 of its 28 rigs). Other companies as Schlumberger or Halliburton Co are reducing their activities in Venezuela because of unpaid services bills. Venezuela’s active rig count, a good indication of future production, fell from 71 to 49 in July according to Baker Hughes, the lowest since the end of 2011.

Since 1998, oil production in Venezuela has been reduced by 750,000 barrels per day, with output falling by 250,000 barrels per day in the first half of 2016 alone, according to Dr. Francisco Monaldi, a fellow in Latin American Energy Policy at the Baker Institute at Rice University in Houston. Luisa Palacios, a senior managing director at Medley Global Advisors LLC, said that exports in Venezuelan crude has fallen by more than 300,000 barrels per day in June 2016, compared with 2015 average.

PDVSA is in talks with oil services companies to turn unpaid services into financial instruments, a process known as securitization. Venezuela’s oil minister Eulogio Del Pino last month said that PDVSA had signed financing agreements with Weatherford International Plc and Halliburton and was close to a deal that would allow Schlumberger to boost its presence in the OPEC nation. “This mechanism enables to trade commercial debt for financial debt, improving cash flow holding instruments with financial return, in order to manage the low oil price environment” said Del Pino. These mechanisms allow the contractors to continue local operations. The statement describes these operations as a “plan in development” that was supported by “important drilling and services companies,” without naming which ones were involved in the discussions.

In recent years PDVSA’s debt has increased from $3 billion to more than $43 billion, Dr. Monaldi said on César Miguel Rondón’s radio program from Union Radio, Caracas Venezuela in August 16th this year.

Even if oil prices increase, the situation is very complicated for Venezuela’s economy. PDVSA has no cash, it is struggling to pay its debts and the oil industry needs huge investments to keep oil production from falling, leaving aside investments in new operations.

For the moment the Venezuelan government has prioritized meeting debt payments even if that means deteriorating conditions for its populace. It seems like an odd choice, but for a country that depends on oil exports for 95 percent of its revenue, the government is certainly concerned about exposing itself to legal actions by bondholders in international courts. Also, the cost of default could be higher than the payment of his obligations.

Furthermore, the non-payment will add a more negative image for the government bonds, which puts it in uncomfortable position to renegotiate any new lines of credit. Venezuela, so far, is still solvent. However, this issue is badly managed by the government with the erroneous policies. Venezuela must learn from past mistakes and needs massive reforms to put the country in the right direction.