Skip to comments.Global Consequences of the Venezuelan Revolt
Posted on 02/24/2014 12:07:41 PM PST by Parmenio
The bloodbath in Venezuela directly effects a large part of West-Indie but most of all, the 17 members of Caricom, and the Petrocaribe-oil alliance.
The population of Venezuela is revolting because the socialist State of Venezuela is out of money, rather out of dollars, and since most consumptions is imported ( 80%) and not locally produced, out of food and everything else. The Bolivarian Revolution of Hugo Chavez spent more money than its economy produced and the shortfall could only temporarily be bridged by international loans, mostly from China, and the money press. The latter caused dramatic inflation ( 58%), and China is calling in its loans by barter of oil deliveries.
Cornered by a revolting and hungry crowd, international pressure, and a standstill of its entire economy, the Venezuelan government has no choice but to change the Petrocaribe-oil alliance with its 17 members, and charged much higher prices, or eliminate the agreement all together. The effect on the economies of all these 17 countries could be dramatic, especially, on the already very weak economy of Cuba.
1. Petrocaribe is an oil alliance of many Caribbean states with Venezuela to purchase oil on conditions of preferential payment. The alliance was launched on 29 June 2005 in Puerto La Cruz, Venezuela. In 2013 Petrocaribe agreed links with the Bolivarian Alliance for the Americas (ALBA), to go beyond oil and promote economic cooperation.
The payment system allows for purchase of oil at market value for 5%-50% up front, with a grace period of one to two years; the remainder can be paid through a 17-25 year financing agreement with 1% interest if oil prices are above US$40 per barrel. Petrocaribe accounts for 30% of Venezuelas production. There are a total of 17 members, plus Venezuela; 12 of the members are from the 15 member CARICOM (excluding, Barbados, Montserrat and Trinidad and Tobago). At the first summit, 14 countries joined the alliance. These were: Antigua and Barbuda, the Bahamas, Belize, Cuba, Dominica, Dominican Republic, Grenada, Guyana, Jamaica, St Lucia, St Kitts and Nevis, Saint Vincent and the Grenadines, Suriname and Venezuela. At the third summit, Haití and Nicaragua joined the union. Guatemala joined in July 2008 but left the organization in November 2013 stating that Venezuela had not provided them with the ultra-low financing rates that they had been promised.
2. Venezuelas oil export to the USA is at its lowest since 1986 and further decreasing, since the USA has become, from an oil importing, an oil exporting country. Oil sands from Canada fill the Houston refineries and new pipelines are being constructed to guarantee a continuous stream of crude. Desperately, Venezuela has been looking for new markets, but with little success. The sales to Asia are, due to high transportation costs, far too expensive.
3. The local market of Venezuela of 700,000 barrels per day, enjoyed a price of only a few cents per gallon, which is far below cost price of extraction and refinery. Inevitable and eventually, Venezuelans will have to start paying normal prices for their gas at the pump.
So, State income of Venezuela has collapsed, and hugely expensive social programs can no longer be financed. A central command economy, with exchange rates and retail prices set by the government, is not very realistic, since local production dried up, and nearly all goods have to be imported and bought for hard currency. So, no matter who will be in power in Venezuela, a new and painful rebuilding of the economy, based on productivity and world markets is inevitable. The 17 Caribbean countries, that benefitted so nicely from the Petrocaribe agreement, will face the same dilemma. Piggy backing of the Venezuelan Bolivarian grand gesture is over soon. All 17 countries will have to increase their productivity dramatically and start paying market prices. The manana mentality of the islands is no longer sustainable. Since change of a culture takes time and leadership, it is likely that the Caribbean, consequently, will slide into a deep and lengthy economic recession.
This could be a good time to boycott CITGO.
Before Chavez, Venezuelans would say “why are we so poor when we are so rich?”. And I would say, because a one product economy isn’t rich, regardless of how much it brings in. One wage earner in a huge extended family isn’t enough to make you rich.
And even before Chavez, it was a rather centralized economy. He claimed the problem was capitalism but the fact was they had an overly centralized economy and he just made it light-years worse.
Cuba will finally collapse.
Collectivism. Both the joke and the punchline.
Too late, I've been doing that for years.
The road to a ‘Cuba Libre’ runs thru Caracas!
Crazy- glad we are smarter than that!!!!!!!
They nationalized whole industries, banned profits, stifled the local economy and now they are broke and can’t import food.
What did they think would happen?
What goes around comes around?
They nationalized whole industries, banned profits, stifled the local economy and now they are broke and cant import food.
Whoa, that’s getting a little close to home. Sounds like us.
I was down there in the late '80s, working for a rent-a-rig outfit out of California. The guys down there said when they first came to Venezuela, the locals were wearing burlap sacks with holes cut out for arms and heads - and nothing else.
Then the oil boom hit and everyone bailed for jobs in the oil fields (can't blame 'em), but that decimated the farms. We flew from Caracas to Puerta La Cruz in the northern sector and flew over nothing but empty plains or jungle, where there used to be farms.
Their beef was from Argentina and looked burgundy instead of scarlet, range fed, little fat, and tasted like a million bucks. But, it was imported, as was much of their food.
Liked the people but felt sorry for them as the rich, as in most South American countries, seemed to go out of their way to wring every drop of blood out of those who weren't.