Skip to comments.REPORT ON VENEZUELA
Posted on 01/06/2003 11:27:22 AM PST by Cincinatus' Wife
28 days have passed since a nationwide strike was called by the leading sectors of the Country - Unions, Political Parties and Fedecamaras (Federation of Commercial and Industrial Chambers and Associations) which were joined early December by the Oil People (association of the oil workers acting as private citizens and not as an Union or representatives of the Oil Industry) - with the following results:
Crude oil production is down to 190.000 barrels a day (6% of total output) from a normal average production of 3.2 mm, (Occidental area 145.000, Oriental area 25.000 and South area 20.000). It is noteworthy that the Oriental area is where most of the foreign oil companies operate holding joint exploitation contracts, including synthetic oil and Orimulsión. Local consumption (Domestic market) represents 270K barrels/day.
Gas production is down by 80%, current levels being used basically to generate electricity and for household consumption (note that gas pressure in the domestic pipes was down by 15%). Some rural areas are already using wood and coal to prepare food, while waiting lines in metropolitan areas average 2km.
Fuel: Gasoline stored in the Paraguana complex (Cardon and Amuay refineries, the world's largest) might grant 20 days supply of national consumption (around 40 Mm barrels), at the same time, this inventory does not allow the refineries to operate for lack of additional storage capacity. One tanker was partially loaded by the end of the week with some difficulty due to shortage of qualified manpower. It is a well-known fact that the complexity of these refineries makes them not available for production in the short term.
The El Palito refinery was positioned as a symbolic figure and the Government is focusing all efforts and manpower into its start up, however there are several difficulties to overcome in order to succeed.
PDVSA refineries located abroad: Isla in Curaçao, closed operations December 29th, and will require at least 15 days to get restarted. St. Croix refinery is in full operation.
Gasoline distribution seems to worsen the problem on a daily basis. There are difficulties in the Andean region, gasoline is being smuggled from Colombia and sold at 14 times its current price in Venezuela. Caracas is being served from the Guatire reservoir, yet this terminal and its pipelines were contaminated when at the peak of the crisis, the Government pumped more than 200.000 barrels of Catalytic Nafta in order to pump out the gasoline inside the pipes. There is an existing black market in major metropolitan areas selling gas at $1 per liter (v. standard market price of $0.06 per liter) and the danger of accidental death due improper gasoline storage in jerry-cans has already occured.
This last weekend clean gasoline was pumped in again without purging the pipelines. The resulting mixture of gasoline and nafta will be distributed with the high risk of engine damage. (Explosion grade of gasoline is lower than nafta - nafta is a primary derivative of crude refining, needing additional refining plus the addition of derivatives to obtain gasoline. Additionally, the usual quality control of gasoline is not being conducted, and damage to vehicles is expected to happen). The Central region, Maracaibo, Oriente and Guayana areas are being hit the hardest by the fuel shortage.
It is noteworthy that only around 40% of available tank trucks are operating, most of them in an illegal manner, since they were confiscated "de facto" by government supporters. The available fuel, in no manner, covers distribution needs.
Crude Exports: For reference, please note that regularly, around 240 to 260 vessels are used to move oil exports from Venezuela. During the current strike, only 6 have been dispatched (carrying around 4.5 mm barrels). There are 27 vessels in the bay, an additional 17 have refused to enter Venezuelan ports and 4 are either loading or unloading (Vessels positioned in non operating terminals: Puerto La Cruz B/7 O/2, Jose B/1, Criogenico B/1, Puerto Cabello B/2, Cardon B/3, Amuay B/6, Tacoa O/1 Catia la Mar B/1, Carenero O/1, Bitor and Petrozuata none, Bajo Grande B/1, El Palito B/1 - B: moored in bay, O: in operation, None no vessel in port). It is noteworthy that PDVSA's own ships carried 90% of the operation and these are being operated under armed military supervision, which adds danger to the critical operation.
Operations - production and refining facilities are closed in all the Oriente Areas and also in Tia Juana, Paraguana and El Palito. Petrochemical plans are also closed. All facilities, nationwide are under military control.
Brazil' s elected President Lula ordered Petrobras to supply Venezuela 450.000 barrels of unleaded gasoline - one day national consumption, in what may be interpreted as a rescue operation. However, considering Venezuela's economic rating, including the fact that PDVSA' s rating was downgraded, Petrobras, not willing to assume political risk, requested payment in advance, prior to unloading. This support has resulted in demonstrations at the doors of the Brazilian Embassy, and society is calling for a boycott to all Brazilian made products.
It is worth to notice that the equivalent to 10 tankers is required just to fill in empty gas stations' tanks and after that, one tanker daily to support demand.
PDVSA is hardly hit by the actual situation. December sales of over $1.2 Bn to foreign markets are not made, the revenue of local sale of gasoline did not enter PDVSA' s bank accounts because gas was sold on cash basis to pumps without invoices, (the Army personnel, truck drivers and pump operators negotiated the operation to their personal interest and benefit), an additional loss will be incurred by the sale of the imported gasoline at below cost prices, which may not even be collected. (There are no administrative control over sales)
The problem is compounded by the fact that PDVSA's receivables, including December invoicing which was a zero, were sold for cash in order to sustain the liquidity of the Government.
In order to reach November 30th production level PDVSA needs at least 4 months (the expiry of substitution contracts signed by their customers to other vendors, work over of wells, which by the suspension of production will clog requiring repair and maintenance, etc.)
It is expected that PDVSA will not meet payroll payment due at the end of December, which will add to the workers unrest.
Most industries closed their plants at the very beginning of the strike, taking the precaution of storing enough inventories to last for 1 month of staple food.
Beer, sodas and other products are not available, as inventories have run out, thus creating a black market of some products selling at 4 to 5 times its standard price.
The availability of products in general was good, as imports for the end of year demand were imported early August
Fresh foods, vegetables, meat (75% of slaughterhouses are closed), eggs, etc. are in short supply and available mainly in the great urban areas. Fresh milk is not being processed and most producers distribute it free of charge, in the poorest areas, in support of the strike.
Communications, TV, newspapers, and electricity are operating normally, except for the fact that TV; Radio stations and newspapers do not run any ads.
All foreign and local franchises are closed since December 2nd.
The Central Bank failed to submit the December monthly report, due mainly to the fact that figures show a deep negative impact on the economy (Year 2002 GDP estimated to be -8%, capital flight at around $11Bn). Devaluation during the 3rd week of December alone was 16%.
Commercial Banks, based on insecurity, banknotes shortage, fuel shortage, and the Unions call for the strike, operate 3 Hours a day. They do not want to assume additional risks for fear of Government intervention, while operating under strong scrutiny of Banking Authorities requiring a daily report of all activities processed. The Bank system operates providing basic services: withdrawals and deposits, while loans and other related services are suspended until further notice.
Ports are closed and ship owners decided not to call Venezuelan Ports since these were declared non-secure. No more than 5% of ships calling the country ports have docked since the beginning of the strike, most carrying food.
Ports are operating under uncertain conditions for lack of certified pilots, tugboats, crews and ship handling agencies, all of which have joined the strike.
Airports are operating normally, however there is a strong reduction of total regular domestic flights while international service has been also reduced. Planes landing either have enough fuel to return to base or refuel in the Caribbean. No planes are allowed to stay over during the night.
Customs personnel have joined the strike - 70%.
Public transportation - subway, buses and taxis - are in service. Fuel supply is granted on priority basis to public transport.
CRIME & SECURITY
Due to diminished presence of the authorities in the streets, the crime rate has increased (over 50%).
Bombing of the Fedecamaras headquarters, Radio, Newspapers and TV Stations have occurred. Additionally, pro Government supporters have damaged media facilities and attacked news personnel while working.
Private homes and offices have been searched with and without search warrants; the Political police either follow leaders of the opposition or harass them by placing official cars close to their homes. Telephone lines are tapped. Threats to have opposition leaders killed or to have the members of their families attacked or kidnapped are a common situation.
Military repression and attacks to civilians demonstrating in the street are now common (shooting at point blank range, tear gas bombs use, beatings using wide swords, etc).
Private homes, buildings and entire residential areas have deployed defense plans in case they feel threatened or attacked.
Police patrols are not operating normally, supporting emergencies only in view of gasoline shortage ( Government does not provide special facilities to non friendly Police forces.
Foreign governments have requested their nationals to leave the Country, among them: USA, UK, Canada, Australia, Belgium, Germany, etc. Governments have returned home most of their diplomats.
USA Embassy closed their consular section, therefore no visas are being granted unless there is a proven emergency or a Government request.
Government is speeding up the process of legalizing status to citizens of Colombian, Chinese, Cuban and Arab origin. They are granting them status of residents or citizenship in a fast manner. There are several implications, mainly political for this decision. Many of the Colombian citizens involved in this process have connections with the ELN or FARC guerrilla and the Cubans have a background of being members of Cuban security agencies. Most of these nationals were incorporated into Government offices, particularly in the Security, Education, Finance and Oil areas. This fact was publish in the Insight report, copy attach )
The people have taken over control of the country, regardless of race, religion, social or economic level.
People are demonstrating in the streets practically every day. They are a force of its own, evident when we consider that 92% of the population are calling or support the call for elections (according to latest survey by Datanalisis).
Leaders no longer lead or control the process, they just provide directions and schedules as to how to conduct marches and demonstrations in order to avoid "steam build up".
Many companies obtain the bulk of revenue during December and in view of the nationwide strike they were not able to meet payroll due after December 15th. Nor will they be able to meet January obligations, even in the event that the strike ends, which most likely will result in payroll reductions. Potential personnel dismissal due to lack of payment capacity of salaries is high. This will lead to increased unemployment, which in turn will trigger social unrest.
Some corporations will probably negotiate reduction of salary payments by 50% through a 50% reduction of work hours.
Please notice unemployment may rise to 22% in January 2003 while informal employment already runs at 54%.
Most corporations will be strongly affected by the aftermath of the strike; receivables will be difficult to collect, making payables hard to meet.
Banking system is likely to collapse, as many credits will be either uncollectable or delayed. This will force the Banking system to create a physical reserve at the Central Bank to cover potential losses, draining liquidity from the system.
It is expected that many companies will enter a payment moratorium process or declare bankruptcy.
The December strike represents 3 GDP points and the Government faces a strong financial crisis due to:
· PDVSA not being able to produce & sell oil during December and the next 4 months. · VAT tax revenue reduction by 80% due to the lack of sales during December. This will be perceived in January, and should the situation extend to January then the following months will also result in a strong income reduction. · Income Tax proceeds for the period ending December 31st due in March will be reduced by the impact of corporations' losses in December, traditionally the strongest selling month. This may result in zero tax payable for many corporations. · Unemployment is likely to rise, increasing the negative impact on the Government's cashflow. · Fiscal measures will be required in order to restore the economic situation, thus reducing Government revenue. · Taxpayers are looking for ways to avoid or withhold payment of taxes due, including VAT. Many are calling for tax payment disobedience.
The above factors create a very complicated situation for the Government, which does not leave many options open, among them:
· Maxi devaluation to compensate internal expenditure · Application to WB and IMF for relief support (unlikely due to experience with Argentina's recent crisis) · Issue of Venezuelan Debt papers at high interest cost · Deferral of payment of foreign and internal debt
It is noteworthy that the Government has decided to ignore the smuggling from Colombia - truckloads -, in particular via San Antonio, as a way to soften the shortage impact in the Andean region. In the long run, this will have a negative impact on the economy.
There is not a clear understanding by the Government Authorities of the predicament they face. They still apply short term strategies to maintain power (i.e. how to or what to do from now until January 6th. Then, to achieve this goal they sacrifice foreign currency reserves in order to pay and import fuel (Lula is paying back the economic support receive to meet presidential campaign expenses), food (rice from Dominican Republic who complies with the request despite the fact they import the grain, looking forward to a commitment in terms of oil supply)
Pressure is also applied to Multinationals in order to keep market supply i.e. Cargill has maintained supply and in cases, increased imports. Parmalat has opened plants in order to process and supply milk, Brink's has maintained their operation despite poor security and guarantee of fuel supply, not realizing that should Government succeed into maintaining power, the economy will be devastated and most likely free enterprise, like in Cuba will cease to exist.
Either way, retaliations are likely to occur.
Over 80% of industrial plants closed at the beginning of the strike, and soon after, as every year, granted collective holidays to their personnel, due to return between January 6th and 14th. However many are unlikely to open.
Organized commerce nationwide also joined the strike. Daily suspension of operations is measured to move between the 57% and 87% range, increasing as time passes.
The Chemical industry closed, and Pharmaceutical reduced operations to a minimum.
80% of food, beer and beverage producers joined the strike. (Beer black market current price is 6 times the regular price) In view of the duration of the strike and its de facto extension, some multinationals have decided to grant collective holidays to their personnel from January 2nd through January 20th or 25th.
GM has announced a total suspension of payment to vendors until further notice.
Over 92% of the voting population is demonstrating in the streets asking for elections and the President's dismissal. It is true that there is absolute freedom of information and that there are not political prisoners, yet the President controls all layers of power (Supreme Court, Public Attorney's Office, Congress, etc). Many Laws restricting social and economic freedoms have been approved (last one December 18th related to Security and National Defense of the Nation which includes Articles authorizing Government to seize, without any additional requirement, any property deemed necessary for Government needs, persons face up to 4 years in prison by refusing to comply with Government requests or by releasing information considered confidential, etc). This Law by itself creates a " de facto " status of exception.
Security apparatus has the presence of Security personnel lent by the Cuban Government. There is a lax attitude in what refers to the Colombian Guerrilla, and full support is granted to an uprise in the LAC region (Ecuador, Colombia, Bolivia and some Central American countries). The support of the CARICOM members and Central American Countries is granted through the oil supply agreement in the event any vote is required at the OAS or UN.
The Army faces the possibility of substitution by a militia through the Bolivarian Circles (armed gangs trained and equipped by the Government locally and in Cuba and in Colombia by the guerrilla).
The members of the Army have assumed a "wait and see" position, meaning they are officially not taking sides yet providing full support to the Government. (Army personnel are only allowed to watch and listen the State owned radio and TV station; and they have shown strong repression at street marches and demonstrations). Those opposing the Government position are retired very quickly.
Today, a General (highest in seniority and rank) was kidnapped at around 14:00 in the middle of a civilian protest by the political police ( DISIP ), breaking all Laws and Civil Rights.
It is noteworthy to know that the Venezuelan Constitution, in a move of the actual President, that he now regrets, grants equal freedom to military personnel in what regards political (i.e. voting) and public free expression of their opinions. This is a fact not easily understood abroad nor the fact that, in their free excersice of these rights, at least 180 high ranking officers are holding, in protest against the Government policies, a public square (The Altamira Sq.)
GOVERNMENT SUPPORTING PARTY
Over 70% of Government supporters are also demonstrating and marching in the streets asking for elections. While popularity is down by 92% of total population, the Government is trying to maintain an image of "legality and respect to human rights", while disqualifying the opposition, by presenting a strong media campaign both locally and internationally, informing that the situation is normal and that all actions against the government are illegal and a sabotage.
The Church has also adopted, to the public eyes, a "wait and see" position, while calling for peace and supporting the negotiation tables.
However, their counterparts abroad have been fully informed of the Country's situation.
In order to find a solution, the Political Parties, NGO's, Civil Organizations, Fedecamaras and the Government Representatives agreed to set up a Negotiating Table under the direction of the OAS General Secretary Cesar Gaviria.
So far 25 discussing points are under negotiation.
The Government representatives show up to the daily scheduled meetings only when they feel the heat of the Opposition or when any Government decision goes sour. It is somehow being used by the Government as a tool to gain time under the assumption that it will benefit them in the long run, not considering the danger of: · Increased social unrest due to the increasing food, gas and fuel shortage (already 2 trucks carrying bottled gas for domestic use were looted, the same happened to 1 truckload of corn flour, 1 truck load of canned sardines and 3 truckloads of Coca Cola. There was an aborted attempt controlled by the Army, to loot the Makro Hypermarket). · The Government is holding onto power yet they do not have control over the Country (Governing crisis similar to the one leading Argentina's President De La Rua to resign) · The Schools will not open next January, thus adding to the confusion. · Staple foods shortage likely to occur despite the fact that 2 factories processing rice and corn flour opened in order to guarantee supply. Yet the Government announces it is a Government triumph because the strike is over, not realizing this is a protective measure against a social uprise.
There is the perception that the Government representatives are acting as they are, in fear of the Rome Statute which will prevail world wide in the event they are prosecuted for crimes against the people, leaving them no place to live (and enjoy their fortunes), should the Government they preside fall.
Whichever the outcome, we will find ourselves with a Country with its economy in shambles, social unrest, high unemployment rate, increased poverty, a weakened oil industry and the industrial and commerce sectors financially very weak, and the banking system in the verge of collapse. All these factors strongly present the need to start planning for the solution of the problems lying ahead of us.
The above report was prepared confidentially by the Strategic Team of Expotran & Almaser. The purpose is to allow its customers and recipients to have a complete overview and better understanding of the country situation, allowing them to adapt and prepare their strategic plans and actions accordingly. Comments and questions are welcome( email@example.com).
For lurkers who'd like
a slightly less partisan
review of Chavez,
here's a BBC
summary of the big mess
going on down there:
Profile: Hugo Chavez
He then relaunched his party as the Movement of the Fifth Republic and made the transition from soldier to politician.
Here is the rest of the story. Hugo Chavez - Venezuela
Including alliances with other parties, Chavez's Fifth Republic Movement, or MVR, controls 87 out of the National Assembly's total 165 members, and will likely vote Ameliach in at the poll Monday afternoon, Cabeza told Dow Jones Newswires in a telephone interview.
Ameliach, whose term will run through Jan. 5, 2004, replaces two-term president Willian Lara, another Chavez ally, who was reported in local media as having declined an invitation to run again.
A retired military officer who has been the National Assembly's Defence Commission president and, in 1999, helped rewrite Venezuela's constitution, Ameliach is seen by analysts to be a hardliner who has always backed Chavez.
"He's defended everything Chavez has said," said Janet Kelly, a public policy professor at the Caracas Graduate Institute for Advanced Management.
Ameliach's likely posting comes as a general strike against Chavez enters its sixth week, having brought the country's vital oil industry to a near-halt and forced the government to import essentials, including gasoline and food.
Opposition leaders launched the strike Dec. 2 and are demanding that Chavez agree to call elections in 30 days if he loses a Feb. 2 nonbinding vote on whether he should remain president.
Chavez has thus far maintained the constitution only requires him to accept the results of a possible recall referendum next August, the midpoint of his term.
Chavez's critics blame his left-leaning policies for the country's deepening economic crisis with a likely 8% contraction in 2002, amid 17% unemployment and 31% annualized inflation sparked by a 46% devaluation of the bolivar ($1= VEB1403).
Chavez has said the problems are due to an "economic coup" led by his opponents. [End]
Like most dictators-or would be kings-this creep, along with his buddies, Castro and Saddam, not to mention Osama bin pig pen, is fully to blame for the conditions in his nation. May the people prevail. God Bless those who are bravely opposing this filthy pig and his slimeball operation. I pray he is on the run, soon.
Gadaffi has given Chavez a bridge loan. He's always so helpful to dictators in need. I think Libya just about owns Zimbabwe by now. I guess bits and pieces of Venezuela are being traded off to tyrants around the world. Chavez is mad.
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