Fausta's Blog

American and Latin American Politics, Society, and Culture

By

Venezuela: Digging in, for gold

Ellen Wald proposes The Radical Option to Save Venezuela, which amounts to privatizing the oil industry immediately by respecting private property rights and observing the rule of law in order to attract foreign buyers into buying into the oil company, which was nationalized in 1976.

Unlikely as that is, Nicolás Maduro now is inviting multinational firms into investing in gold mining, which was nationalized in 2011.

Ponder that for a moment.

Venezuela has the largest proven oil reserves.

Venezuela’s gold deposits, if proven, may be second only to Australia’s.

Both industries are owned by the government.

Venezuela is broke.

Maduro is inviting, but there’s a problem: Wildcatters and colectivos are not welcoming,
Armed Gangs Confound Venezuela’s Bid to Exploit Gold Mines. Illegal miners aren’t about to yield access to the international companies President Nicolás Maduro has invited in (emphasis added)

But at the illegal Arenosa gold mine in the heart of the Orinoco Mining Arc, gang leader Ramón said he had other plans. On a recent day, dozens of his henchmen armed with pistols, shotguns and machine guns stood guard surrounding the mines. Around them, hundreds of wildcatters dug pits with shovels amid blaring salsa music.
. . .
Most of the workers came to the mines in the past 18 months from Caracas, regional capital Ciudad Bolívar and other cities to find work in a national economy that will shrink by 11.5% this year, according to consultancy Síntesis Financiera. They said they have no intention of returning to slums plagued by power and food shortages.

“The president wants to grab us and throw us out of here,” Ramón, a nom de guerre, said amid armed bodyguards in a makeshift tent by the pits, as army helicopters flew nearby. “Here there’s work, outside there’s hunger. The belly is stronger than fear.”

Organized gangs began to arrive at the mines in 2011, after the government nationalized gold mining and then failed to exploit the areas it seized. The trickle became a flood in the past two years, as the economy nose-dived.

Violence followed as rival gangs battled for control. The surrounding state of Bolívar is now one of the most dangerous states in the country, which itself ranks second world-wide in homicides.

On March 4, a gang gunned down 17 miners north of the town of Tumeremo, according to Venezuela’s public prosecutor. That area was licensed to China’s Yankuang the month before, although the government and the company declined to provide the exact location of the concession.

Local gang leaders believe the assailants acted on government orders to clear out the mines for companies to enter. A congressional committee set up by Venezuela’s opposition-controlled congress to investigate the violence agrees. In a recent report, the committee accuses the state governor’s office of arming the killers.

And you thought Deadwood was rough.

RELATED:
Venezuela’s deadly colectivos

UPDATED:
Linked to by Rest in the Vine. Thank you!

Share

By

Venezuela: US investigates PDVSA, we get two Capt. Louis Renault moments

Among the investigated: Venezuela’s ambassador to Washington and former president of Petróleos de Venezuela.

U.S. Investigates Venezuelan Oil Giant. Former PdVSA officials suspected of looting billions of dollars through kickbacks and other schemes

Now, U.S. authorities have launched a series of wide-ranging investigations into whether Venezuela’s leaders used PdVSA to loot billions of dollars from the country through kickbacks and other schemes, say people familiar with the matter. The probes, carried out by federal law enforcement in multiple jurisdictions around the U.S., are also attempting to determine whether PdVSA and its foreign bank accounts were used for other illegal purposes, including black-market currency schemes and laundering drug money, these people say.
. . .
No charges have been made public in the PdVSA matter and it is possible none will be filed. Earlier this month federal prosecutors from New York, Washington, Missouri and Texas met in person or by teleconference in Washington to coordinate actions and share evidence and witnesses in the various PdVSA-related probes, say three people familiar with the matter. The meeting also included agents from the Department of Homeland Security, the Drug Enforcement Administration, the Federal Bureau of Investigation and other agencies, these people say.

Allegedly the funds went through Andorra’s Banca Privada d’Andorra (BPA).

As for the ambassador (emphasis added),

Under Mr. Ramírez, the soft-spoken son of a Marxist guerrilla, PdVSA completed a transformation from one of the world’s most-efficient oil companies to an arm of the late President Hugo Chávez’s socialist revolution. Petrodollars went to pay for housing, appliances and food for the poor, efforts that won voters at election time but starved the oil industry of funds needed for investment and maintenance. The company’s aircraft have been used to transport the families of ministers and allies, from Bolivia’s president to Colombian guerrilla commanders.

As Capt. Louis would say, I am shocked, shocked, that anyone would allege that the son of a Marxist guerrilla would do so, while lining his pockets and sipping “the best Château Pétrus wines”,

Which brings us to the second Capt. Louis moment, Brazil Quits Venezuela Election Monitor Mission. The reason that is a Capt. Louis moment is that

Venezuela rejected the Brazilian official named to lead the group.
. . .
Venezuela’s lack of response “did not allow the mission to accompany the auditing of the electronic voting system, nor start assessing the fairness of the electoral contest, which, less than two months from the election, prevents a fair observation,” Brazil’s independent electoral board said, explaining its decision to withdraw from the process.

Having set the election for December 6, a big day for Chavismo, I am shocked, shocked! that Maduro was unhappy with Nelson Jobim, former head of Brazil’s Superior Electoral Tribunal and former Supreme Court justice (not to be confused with the much more famous Jobim), asking to accompany the election auditing.

Bonus Capt. Louis moment:

Mr. Maduro said during an Oct. 1 televised address that he wanted Jimmy Carter to serve as an election observer, five months after the former U.S. president’s pro-democracy organization, the Carter Center, closed its election observation office in Caracas after 13 years in the country.

You really can’t make up this stuff if you try.

Share

By

LatAm currencies slide

The WSJ reports,
Latin American Currencies Hurt by Commodities’ Drop, U.S. Fed ExpectationsMexico’s peso at new low against dollar, though nation may benefit from weakness

While the economic factors vary from country to country, most are suffering from lower global growth, loss of export revenue from falling commodities prices, and a rising dollar that is making emerging-market yields less attractive to portfolio investors anticipating that the U.S. Federal Reserve will start raising interest rates soon.

Latin American countries never seem to get out of the extractive economic model set under the Spanish and Portuguese empires; add to that the end of quantitative easing and of zero interest rates in the U.S., and the prospect is glum.

Mexico’s recent public auction of shallow-water exploration blocks in the Gulf of Mexico failed to attract international bidders:

The private sector often has a better understanding of subsea prospects than the public sector, but Mexico’s wariness about fully ceding control may have prevented the government from understanding the true value of the blocks. “They are still having trouble letting go of the old mindset of full control, rather than letting the market decide,” says one industry executive. One of the two blocks awarded to the winning consortium (comprising Mexico Sierra Oil and Gas, Dallas-based Talos Energy and London-based Premier Oil) was more hotly contested than the government expected; four groups offered well above the government-mandated minimum.

Because of historical sensitivities, Mexico awarded rare profit-sharing contracts between the state and private firms, rather than fully confer ownership of oil reserves to the private sector. It also required a level of corporate guarantee to cover spillages that went beyond international norms. Its potential ability to rescind contracts has alarmed some oil companies, too, lest their wells be expropriated without compensation in the future.

Once you factor in those risks vs current oil prices, the real story here is simpler: the financial arithmetic facing a potential investor has been totally upended by the collapse of oil prices.

And let’s not forget the batshit-crazy approach to debt.

Share

By

Ecuador: Correa thinks Brad bought the wrong book

Brad Pitt bought the movie rights to Paul Barrett’s book, Law of the Jungle: The $19 Billion Legal Battle Over Oil in the Rain Forest and the Lawyer Who’d Stop at Nothing to Win about fraudster Steven Donziger.

Rafael Correa is not happy:

Ecuador’s president urges Brad Pitt to scrap Amazon oil spill movie
Socialist leader Rafael Correa concerned film will be based on a book he alleges covered up actions of oil giant Chevron

He said: “Now they’ve brought out a book, Law of the Jungle, all paid for by Chevron, in which we look like savages in a country without any separation of powers. If he has any doubts, we invite him to come to Ecuador and scoop up with his hands the oil which still lies in pools 30 years later and which was left by that corrupt oil company Chevron-Texaco, continuing to pollute our forest. Given the clarity of the facts, anybody who signs up to or collaborates with Chevron is an accomplice to that company’s corruption.”

Correa seems to have heeded John Oliver’s advice to stay away from Twitter, but there’s a hashtag all the same – #braddotherightthing.

One with misspellings, complete with photo of Brad’s 2012 trip to Lago Agrio,

One grammatically correct,

Correction:
In my original post, I snarked about Brad Pitt. I reconsidered, and apologize for unduly casting aspersions.



Share

By

Venezuela: Electricity rationing because of . . . global warming

The country with (allegedly) highest oil reserves is starting to ration electricity.
Venezuela to Begin Nationwide Power Rationing
Persistent heat wave causes a surge in demand for air conditioning

Shaky power supply is one of many problems facing Venezuela as the resource-rich South American country reels from an economic crisis and a cash crunch partly due to lower oil prices. Frequent blackouts in the interior of the country have stoked accusations of mismanagement and insufficient power grid investment by the government, which nationalized the electricity sector under the late leftist leader, Hugo Chávez.

But authorities in Venezuela, which relies on hydroelectric turbines for two-thirds of its power supply, say climate change is to blame.

“This is, of course, linked to global warming and the excessive industrialization of capitalism, which never stops, nor has ever stopped, for the effects that it can have on the climate, on society and on Mother Earth,” Mr. Arreaza said.

The blackouts have been going on for a couple of years, but the rationing is new.

Talking from both sides of the mouth, they ask that you get a generator, to use up more Venezuelan gasoline that the government insanely subsidizes to a consumer price of $0.002 a gallon, because, capitalism causes global warming or something,

Vice President Arreaza also made a bizarre call for the use of “autogenerated” electricity to reduce demand on the government’s plants. “Both the public sector as well as large [private] consumers should opt for autogeneration,” he said in the statement announcing the new plan. “That is to say, that they use their own equipment and plants to generate electricity, especially in peak hours, and not use the National System.”

Venezuela is probably netting less than US$20/barrel on its heavy, low-quality oil. It needs oil at $151 a barrel to balance its budget.

Another Venezuelan export, cacao, can’t generate revenues because the government cancelled export permits.

Again, Communism doesn’t work.

Share

By

Venezuela: Get ready for $10 oil?

Gary Shilling at Bloomberg is saying, Get ready for $10 oil It has to do with the marginal cost of production,

or the additional costs after the wells are drilled and the pipes are laid. Another way to think of it: It’s the price at which cash flow for an additional barrel falls to zero.

Last month, Wood Mackenzie, an energy research organization, found that of 2,222 oil fields surveyed worldwide, only 1.6 percent would have negative cash flow at $40 a barrel. That suggests there won’t be a lot of chickening out at $40. Keep in mind that the marginal cost for efficient U.S. shale-oil producers is about $10 to $20 a barrel in the Permian Basin in Texas and about the same for oil produced in the Persian Gulf.

Also consider the conundrum financially troubled countries such as Russia and Venezuela find themselves in: They desperately need the revenue from oil exports to service foreign debts and fund imports. Yet, the lower the price, the more oil they need to produce and export to earn the same number of dollars, the currency used to price and trade oil.

With the drop in prices,

Among the hardest hit are those nations that rely on oil for much of their government revenue and were in financial trouble before prices plunged. Venezuela along with its state-run oil company issued more debt than any developing country between 2007 and 2011. Venezuela has been downgraded to the bottom of the junk pile — CCC by Fitch — and credit-default swaps on Venezuelan debt recently indicated a 61 percent chance of default in the next year and 90 percent in the next five years. The nosedive in oil prices also is devastating African exporters Ghana, Angola and Nigeria, where oil finances 70 percent of the government’s budget.

How Bad Is Venezuela’s Economic Chaos? Bad enough that

Maduro has yet to fully account for how his government will meet its $10.3 billion debt obligations in 2015. A March 16 payment totally $1.1 billion is fast approaching and Venezuela’s economy is languishing.

I am not optimistic at all; even if Maduro goes, the country can remain under a dictatorship, just as Cuba has, for decades to follow.

And, by the way, even when the minimum monthly wage of 5,600 bolivars ($32 on a new exchange market created last week) is close to useless, the late dictator Hugo Chavez managed to sock away US$12 billion in his HSBC account.

So, all of you who preach that “Chavez immensely decreased inequality” in Venezuela can take that, spread it, and eat it on a cracker.

Share

By

Venezuela: Maduro wants a Puerto Rican out jail

. . . who didn’t want to be pardoned.

Taking a cue from the U.S.-Cuba sweet deal (sweet for Cuba, that is), Venezuelan dictator Nicolás Maduro wants to make a deal:
Venezuela’s Maduro would free Lopez if U.S. freed Puerto Rican

Venezuelan President Nicolas Maduro said on Sunday he would only seek the release of jailed opposition leader Leopoldo Lopez if the United States agreed to release a Puerto Rican nationalist currently held in a U.S. prison.

The man in question, Oscar Lopez Rivera, is serving

70 years for seditious conspiracy and a variety of weapons charges as well as the second thwarted escape attempt (which included plans for the use of violence)

in Leavenworth, and,

he is a dangerous terrorist as well as a sociopath, and has never been known to express any regret or remorse. He was a co-founder of a deadly terrorist group, who constructed bombs (their weapon of choice) and trained others in both how to build them and how to use them. He twice attempted to escape from prison, and the latter attempt included plans of violence and murder.

Lopez-Rivera was offered clemency by Bill Clinton in August of 1999 (in a move that was engineered by then Deputy Attorney General Eric Holder) but refused to show remorse.

So, not only is Maduro meddling into Puerto Rican politics again – where he clearly is not wanted, he’s offering to exchange Leopoldo Lopez, an innocent man, for a sociopath terrorist:

“The only way I would use (presidential) powers would be to put (Leopoldo Lopez) on a plane, so he can go to the United States and stay there, and they would give me Oscar Lopez Rivera – man for man,” Maduro said during a televised broadcast.

After his offer, Maduro headed overseas – in a Cuban jet – in search of money, since at home the shelves are empty and oil hit $50/barrel as of the writing of this post.

He bundled up for the occasion:

First Russia, where Putin couldn’t fit him in his schedule. After that, China, where he has a date with

Chinese President Xi Jinping during his visit and take part in a meeting between China and the Community of Latin American and Caribbean States Jan. 8-9 in Beijing.

Busy, busy.

UPDATE:
Regarding China, read today’s post by David Goldman.

China will be more active in Latin America.



Share