International Trade
SPECIAL REPORT: The
Venezuela-China Relationship, Explained
This is the first of a four-part series, which
will be published on Mondays this month, that spotlights the Venezuela-China
relationship. Key points:
- In 2001, Venezuela became the
first Hispanic country to enter into a “strategic development partnership” with China, a relationship
that was elevated to “comprehensive
strategic partnership” in 2014, and which now totals at least 790
investment projects in Venezuelan territory. They range from
infrastructure, oil, and mining to light industry and assembly.
- China’s development projects in
Venezuela have disappeared over the past 11 years, mostly devoured by
corruption or by the debt default that this has incurred with the Asian
giant, which froze many direct investments.
- Loans from China to Venezuela
reached at least US$ 50 billion by 2017, with some estimating the number
to have been as high as US$ 60 billion. (The uncertainty regarding the figure
is the result of opaque loans, split into payments of US$ 2 billion and US$
5 billion each.)
- As of 2016, China has stopped
issuing new loans to Venezuela. Since then, Chinese representatives have
sought unofficial meetings with individual members of the opposition,
trying to secure guarantees that the debt, about US$ 20 billion, will eventually
be paid back.
- In 2000, there was an immigrant
population of approximately 60,000 Chinese in Venezuela. Eighteen years
later, President Nicolás Maduro estimates there are 500,000 Chinese
citizens residing in the country.
- Venezuela has gold reserves
with a commercial value of more than US$ 200 billion. In Coltan, reserves
are valued at least at US$ 100 billion, and iron is estimated at more than
US$ 180 billion. China worked with Venezuela on the Venezuelan Mining Map
in an area of 111,800 square kilometers (12.2% of Venezuelan territory),
and currently has direct investments of over US$ 580 million. (SUPCHINA: https://supchina.com/2019/01/07/venezuela-china-explained/)
Oil & Energy
Venezuelan crude sales to U.S. drop to lowest
in almost 30 years
Venezuelan crude
exports to the United States last year fell 15% to the lowest annual average in
nearly three decades, according to REFINITIV EIKON data, as fast-declining oil
output and financial sanctions continued to hit sales. Crude volumes to the
United States by state-run PDVSA and its joint ventures dropped to 500,013
barrels per day (bpd), a third less than five years ago and the lowest since
1989, figures from REFINITIV EIKON and the U.S. Energy Information Administration
showed. A lack of investment, mismanagement and fleeing workers have driven oil
production to the lowest in almost seven decades. Under a military-led board of
directors, output fell to an average of 1.516 million bpd from January through November
last year, a 27% fall compared with the 2.072 million bpd for all of 2017,
according to numbers officially reported to OPEC. Other estimates are lower. The
largest U.S. receiver of Venezuelan crude last year was PDVSA's refining unit CITGO
Petroleum with 175,873 bpd, followed by Valero Energy with 166,099 bpd and CHEVRON
with 83,041 bpd. (Reuters: https://uk.reuters.com/article/oil-venezuela-usa/venezuelan-crude-sales-to-us-drop-to-lowest-in-almost-30-years-idUKL1N1Z415R)
France's Maurel & Prom to invest US$ 400
million in Venezuela oil venture
France’s Maurel &
Prom will invest US$ 400 million to acquire a 40% stake in a Venezuela oilfield
joint venture called PETROREGIONAL del Lago, state oil company PDVSA President
Manuel Quevedo said on Monday. Maurel & Prom said in a December statement
it had agreed to pay US$ 80.5 million to buy the stake from Royal Dutch Shell
and that it would invest US$ 402.5 million) in boosting output. “It will participate together with PDVSA with
$400 million in investment to increase production in Lake Maracaibo,” said
Quevedo in a broadcast from Venezuela’s presidential palace in the company of
Maurel & Prom President Michel Hochard. “We have signed agreements to ensure the necessary investments at the
start of 2019 ... to boost production to 70,000 barrels per day,” he said,
without making any reference to Shell. The field in 2018 produced around 15,500
barrels per day. The Lake Maracaibo area has been plagued by frequent theft of
equipment and chronic power cuts as Venezuela remains mired in deep recession,
hyperinflation and chronic shortages of food and medicine. (Reuters: https://www.reuters.com/article/us-venezuela-oil-quevedo/frances-maurel-prom-to-invest-400-million-in-venezuela-oil-venture-pdvsa-idUSKCN1P11VX)
PDVSA in oil deal with firm part-owned by
Florida Republican
With brand-name
drillers unwilling to jump in, Venezuela is resorting to a newly formed U.S.
company for help in shoring up production from its crude reserves, the largest
in the world. Venezuelan state oil firm PDVSA has signed a deal with
little-known U.S. energy firm EREPLA, partly owned by a prominent Florida
Republican, to help increase the socialist-run country’s plummeting crude oil
output, the company said. EREPLA Services LLC, with an undisclosed stake held
by Republican Harry Sargeant III and which Delaware state records show was only
registered in November, said it plans to invest up to US$ 500 million to
increase production at three Venezuelan oil fields in exchange for a portion of
the crude produced. Sargeant and Petróleos de Venezuela, S.A., known as PDVSA
have clashed in the past. Between 2006 and 2008, The new arrangement faces
significant hurdles, including obtaining an exemption from Trump administration
sanctions that block U.S. companies from providing financing to the government
of President Nicolas Maduro or Venezuelan state firms. EREPLA will supply rigs
and crews in the onshore fields for 25 years, with an option to extend for
another 15 years, according to the contract. "The agreement gives U.S.-based Erepla enhanced managerial participation
and an innovative payment structure designed to avoid the shortfalls that have
plagued previous projects," Sargeant said in a statement Saturday. He
said the agreement will “revitalize oil
production” at the Tia Juana Lago and Rosa Mediano fields in the western
Lake Maracaibo region and in the Ayacucho 5 bloc, in the eastern heavy-oil
Orinoco Belt. The company added that the deal gives it “enhanced managerial participation” in the projects and will be
responsible for procurement, a key difference from long-established joint ventures
between PDVSA and oil majors, where PDVSA has full operational control. EREPLA
said it would be “responsible for the
entirety of the investment.” A spokesman declined to elaborate on how it
would raise the funds. Sargeant, who has served as finance chairman of the
Florida Republican Party and runs asphalt trading and shipping firm Global Oil
Management Group, owns a stake in EREPLA, but declined to reveal the
percentage. The deal is the first new partnership between PDVSA and a private
company since Oil Minister Manuel Quevedo in August announced a set of “joint service agreements” with 14
little-known companies that did not appear to have experience operating
oilfields and PDVSA. EREPLA said it had applied to the U.S. Treasury
Department’s Office of Foreign Assets Control, which implements sanctions, for
a “Specific License affirming the
agreement.” The deal has been criticized by hardline Chavez supporters, who
say it cedes too much control to a foreign company. (Reuters: https://www.reuters.com/article/us-venezuela-oil/venezuelas-pdvsa-in-oil-deal-with-firm-part-owned-by-florida-republican-idUSKCN1P11EM;
Oil Price: https://oilprice.com/Latest-Energy-News/World-News/Newcomer-To-Help-Venezuela-Reverse-Oil-Production-Drop.html;
Bloomberg, https://www.bloomberg.com/news/articles/2019-01-04/venezuela-taps-obscure-driller-to-replace-big-name-oil-companies)
Why Venezuela is clashing with its old foe EXXON
again
President Nicolas
Maduro has vowed to block EXXON Mobil Corp. from exploring for oil in contested
waters off neighboring Guyana. The dispute threatens the development of the
world’s biggest new deep-water oil play. EXXON moved two vessels away from the
disputed region after Venezuela’s navy confronted them last month. Venezuela
claims everything west of the Essequibo River -- about two-thirds of what
Guyana considers its territory, in some cases threatening military action. EXXON
CEO Darren Woods has targeted Guyana’s oil riches in his push to arrest
declining production and stagnating returns. The world’s biggest publicly
traded oil company was granted an exploration permit by Guyana in 1999, and finally
hit a gusher in 2015, and the discoveries have kept coming -- 10 to date,
totaling 5 billion barrels, with at least a dozen exploration wells yet to be
drilled. So far, the discoveries have been concentrated in the southeast part
of the Stabroek block, a vast area about 100 miles (161 kilometers) from
Guyana’s coast. Exxon wants to extend exploration farther east, closer to
Venezuela’s border and into the disputed region. When Exxon made the initial
"Liza" discovery in 2015, Maduro demanded that the drilling stop,
said it threatened to "bring war to
our borders” and withdrew Venezuela’s ambassador to Guyana. EXXON owns 45%
of the Stabroek block, with Hess Corp. at 30% and China’s CNOOC Ltd. at 25%.
Together they plan to produce at least 750,000 barrels a day by 2025, putting
Guyana ahead of OPEC member Ecuador’s current production. EXXON said its ships
were intercepted more than 68 miles west of its nearest discovery and had been
conducting seismic work, mapping the geology under the ocean floor. EXXON said
its plans to begin producing oil by 2020 and subsequent development plans are
unaffected. Still, with expectations high that there’s a lot more oil to be
found. Venezuela’s stance is causing worry. United Nations Secretary-General
Antonio Guterres referred the boundary case to the International Court of
Justice last year. So far, Venezuela’s response has been to deny the court has
jurisdiction in the matter. The U.S. government supports Guyana’s “sovereign right to develop those resources,
which includes allowing ships to go about their business doing surveys and
other seismic activities." (Bloomberg: https://www.bloomberg.com/news/articles/2019-01-07/why-venezuela-is-clashing-again-with-old-foe-exxon-quicktake)
Economy & Finance
Venezuela lets Bolivar slide but can't keep up
with black market
Given Venezuela’s
deep economic crisis, the fact that the government has devalued its official
rate massively in the past month has barely made any headlines. Most people
focus instead on the black-market exchange rate which is accessible for all and
which sets most prices in the beaten-down economy. Despite the government’s
efforts over the past decade to stamp out the street trading of money, the
market has flourished and the struggle to have a single rate looks doomed
without a series of economic reforms and policies that would correct the
imbalances. The bolivar weakened 67% on Venezuela’s currency auction system,
known as DICOM, over the past month. Last week, dollars were selling at 638
bolivars on the platform, which sets the official price of money for both
private business and individuals, compared to about 213 bolivars at the same time
in December. On Monday, as much of the country was returning to work after the
holiday season, greenbacks were fetching nearly 1,100 bolivares on the street.
(Bloomberg, https://www.bloomberg.com/news/articles/2019-01-07/venezuela-lets-bolivar-go-but-it-can-t-keep-up-with-black-market)
OP-ED: Venezuela's hyperinflation hits 80,000%
per year in 2018, by Steve Hanke
Venezuela's economy
has collapsed. This is the result of years of socialism, incompetence, and
corruption, among other things. An important element that mirrors the economy's
collapse is Venezuela's currency, the bolivar. It is not trustworthy.
Venezuela's exchange rate regime provides no discipline. It only produces
instability, poverty, and the world’s highest inflation rate for 2018. Indeed, Venezuela’s annual inflation rate at
the end of 2018 was 80,000%. How do we accurately measure Venezuela’s
inflation? There is only one reliable way. The most important price in an
economy is the exchange rate between the local currency - in this case, the
bolivar - and the world’s reserve currency, the U.S. dollar. As long as there
is an active black market (read: free market) for currency and the data are
available, changes in the black-market exchange rate can be reliably
transformed into accurate measurements of countrywide inflation rates. The
economic principle of purchasing power parity (PPP) allows for this transformation.
And the application of PPP to measure elevated inflation rates is rather simple.
And, what criteria are used to categorize an inflation as an episode of
hyperinflation? The following criteria should be met before any episode of
elevated inflation be termed “hyperinflation”: An episode of hyperinflation
occurs when the monthly inflation rate exceeds 50%/mo. for 30 consecutive days.
In Venezuela, the monthly inflation rate exceeded 50%/mo back on November 13,
2016 and remained above 50%/mo until December 14, 2016 (32 consecutive days).
On December 15, 2016, the monthly inflation rate fell below 50%/mo mark. Then,
on November 3, 2017, the monthly inflation rate again exceeded 50%/mo
threshold, before falling below the threshold on December 17, 2017 (for 44
consecutive days). So, Venezuela has been engulfed in a hyperinflation episode
ever since November 13, 2016, with another flare up of the same episode
occurring during the November-December 2017 period. Venezuela is the only
country in the world that is currently experiencing the ravages of
hyperinflation. Devastating as it is, 80,000% is a far cry from the
International Monetary Fund’s unbelievable end-of-the-year inflation forecast
for Venezuela of 2,500,000%/yr. One should never forget that one can measure
episodes of hyperinflation with great precision, but no one can reliability
forecast their durations or magnitudes—a fact that has failed to penetrate the
walls of the IMF’s insular bureaucracy. How can Venezuela pull itself out of
its economic death spiral? Venezuela must officially dump the bolivar and adopt
the greenback. Official “dollarization” is a proven elixir. I Just what does
the Venezuelan public think of the dollarization idea? To answer that question,
a professional survey of public opinion on the topic was conducted in March
2017 by DATINCORP in Caracas. The results are encouraging: Sixty-two (62%) of
the public favored dollarization. The fact of the matter is that the public has
already spontaneously dollarized the economy. (FORBES: https://www.forbes.com/sites/stevehanke/2019/01/01/venezuelas-hyperinflation-hits-80000-per-year-in-2018/#31f2c1534572)
Politics and International Affairs
New Venezuela congress
chief says Maduro will be usurper president
Venezuela's opposition-controlled congress
opened its first session of the year Saturday, installing a fresh-faced leader
who struck a defiant tone and vowed to take up the battle against socialist
President Nicolas Maduro. Juan Guaido, 35, assumes the presidency of a National
Assembly stripped of power by Maduro. Speaking to legislators, Guaido named off
several opposition politicians and opponents of Maduro's government who have
been jailed, driven into exile or killed. He said desperation has forced masses
of citizens to flee abroad looking for work. "We are under an oppressive system," he said. "It's not just that — it is miserable."
Tall and youthful, Guaido is an industrial engineer and former student leader
from the same political party as Leopoldo Lopez, Venezuela's most popular
opposition leader under house arrest. Guaido called Maduro a dictator whose
legitimacy has run out. Venezuela is living a "dark but transitional" moment of its history, he said, adding
that among its first acts congress will create a transitional body to restore
constitutional order, but he offered no details. The newly elected chief of
Venezuela’s opposition-run Congress said President Nicolas Maduro will be “usurping the presidency” when he swears
in for a second term on Jan. 10 after winning a much criticized and broadly
boycotted 2018 election. His statements add to criticism by governments around
the world that have accused Maduro of undermining democracy and mismanaging the
economy. But the largely powerless congress has few concrete means of stopping
the inauguration or easing Maduro’s grip on power. “Maduro from January 10 will be usurping the presidency of the Republic,”
said Guaido. “This National Assembly, as
the only legitimate power elected by Venezuelans, assumes the representation of
the people.” Roughly 20 foreign diplomats from the United States, Canada,
Japan, Italy and Germany attended the assembly's inaugural session in a show of
solidarity. "The National Assembly
should inspire hope in the Venezuelan people for a peaceful, prosperous, and
democratic future, even as the corrupt and authoritarian Maduro regime and its
allies seek to deny Venezuelans that right," the State Department said
in a statement. It added: "Every
nation must take strong action to help the Venezuelan people reclaim their
democracy." The assembly opened days before Maduro's inauguration to a
second, six-year term widely condemned as illegitimate after he declared
victory in the May 20 election that many foreign powers considered a sham. Venezuela's
socialist party boss Diosdado Cabello said Saturday that Maduro will be sworn
in on Jan. 10 before the Supreme Court, which is stacked with government
loyalists. This defies the constitution that requires a president take the oath
before the National Assembly. As international pressure mounts, a dozen Latin
American countries and Canada on Friday urged Maduro to cede power and hand it
over to congress until a valid president is elected. (NZ Herald, https://www.nzherald.co.nz/world/news/article.cfm;
Reuters, https://www.reuters.com/article/us-venezuela-politics/new-venezuela-congress-chief-says-maduro-will-be-usurper-president-idUSKCN1OZ0N8)
Latin American nations call for new elections in
Venezuela
A group of 12 Latin American nations plus
Canada urged Venezuela’s leader to hand power to the opposition-controlled
National Assembly and call new elections, stepping up pressure on Nicolas
Maduro days before he’s due to start a new term. The so-called Lima Group of
nations views the presidential election in Venezuela last year as illegitimate
and won’t recognize Maduro as leader when his new term begins Jan. 10,
according to a joint statement issued Friday following a meeting of
foreign ministers. The countries agreed to bar the entry of senior Venezuelan
officials and reevaluate diplomatic relations with the crisis-racked country.
Governments will draw up a list of individuals and companies with which banks
will be barred from doing business and will freeze assets if necessary,
according to the statement. They also agreed to suspend military cooperation
with Maduro, including the transfer of arms. (Bloomberg, https://www.bloomberg.com/news/articles/2019-01-04/latin-american-nations-call-on-venezuela-to-hold-new-elections)
Mexico defends
hands-off stance on Venezuela
Mexico’s new leftist government on Friday
called on its peers to refrain from interfering in Venezuela’s internal
affairs, declining to back a regional declaration that urged President Nicolas
Maduro not to take office on Jan. 10. Mexico was the sole country in the
14-member Lima Group that opted not to sign a statement critical of Maduro, the
first time Mexico has not supported a declaration by the group since it was
created in 2017 to push for democratic reforms in Venezuela. Mexico was once
among the most outspoken critics of Maduro. But ties with Venezuela have warmed
under President Andres Manuel Lopez Obrador, who invited Maduro to his
inauguration last month. Maximiliano Reyes, Mexico’s deputy foreign minister
responsible for Latin America, said following a Lima Group meeting in Peru that
Mexico was concerned about the “situation
regarding human rights” in Venezuela but would not comment on the
legitimacy of its government. Mexican President Andres Manuel Lopez Obrador
defended his administration's hands-off policy on Venezuela Monday, saying it
marked a return to the country's longstanding policy of non-intervention. The
new policy is not without its critics. On Friday a Colombian woman approached
Lopez Obrador at an airport — the president flies commercial class on regular
flights — and asked him why Mexico hadn't taken a position on Venezuela. "I don't get involved in other countries'
affairs," Lopez Obrador answered her. On Monday, he acknowledged that
"this is an issue that generates a
lot of polemics, but it should be understood that this is not an issue of
political sympathies." Some have accused Lopez Obrador, a leftist, of
sympathizing with Maduro, a self-declared socialist. But Lopez Obrador said it
is a return to the non-intervention policy Mexico practiced from the 1960s —
when it resisted U.S. pressure to condemn or isolate Cuba — until 2000, when
the conservative National Action Party began a adopt a more activist, U.S.-allied
stance in foreign affairs. "For me
the best foreign policy is domestic policy," Lopez Obrador said.
"This doesn't just apply to
Venezuela's case." Lopez Obrador may be positioning Mexico to serve as
a trusted mediator in any possible negotiated solution to Venezuela's crisis. Raul
Benitez, a security expert and professor at the National Autonomous University
of Mexico, said: "Maduro is
isolated, and Mexico could be a negotiator ... because Maduro will have
confidence in him," Benitez said. Lopez Obrador also hinted at
dialogue, though such efforts have failed in the past in the face of the
government's intransigence and violation of democratic norms. "We are for dialogue," Lopez Obrador
said. "Will participate in that, let
everything be done by dialogue." (South Florida Sun Sentinel: https://www.sun-sentinel.com/news/sns-bc-lt--mexico-venezuela-20190107-story.html;
Reuters, https://www.reuters.com/article/us-venezuela-politics/mexico-urges-regional-bloc-not-to-meddle-in-venezuela-idUSKCN1OY1R4)
Antigua and Barbuda and
Venezuela strengthen bilateral relations
Venezuelan Foreign Minister Jorge Arreaza
visited Antigua and Barbuda on Monday, with the aim of strengthening various
areas of common interest between both countries. He held a working meeting with
the Prime Minister of Antigua and Barbuda, Gaston Browne, where both
representatives ratified their desire to contribute to the well-being of the
two sisterly nations and to strengthen cooperation with Petrocaribe and ALBA. For
his part, Browne expressed a message of solidarity for Venezuela and President
Nicolás Maduro, rejecting all kinds of interference and sanctions from foreign
powers. In turn, the Prime Minister augured success to the Venezuelan President
for his upcoming presidential term that begins this January 10. (Foreign
Ministry of Venezuela: http://mppre.gob.ve/en/2019/01/07/antigua-and-barbuda-venezuela-bilateral-relations/)
Venezuela calls in UN
Human Rights Commission
The office of the United Nations’ top official
for human rights, former socialist Chilean President Michelle Bachelet, said
Friday she has been officially invited to visit humanitarian-crisis stricken
Venezuela, just as the opposition has begun announcing street protests in the
days leading to the polemical second inauguration of embattled head of state
Nicolas Maduro January 10th. The UN has not announced a date for Bachelet’s
visit as of Friday, however. “Noticias
ONU”, the UN’s web news service in Spanish, posted Friday: “The High Commissioner for Human Rights,
Michelle Bachelet, has received a formal invite by the Government of Venezuela
to visit the country”. Opposition figures in Venezuela, as well as family
members and lawyers of political prisoners, have repeatedly asked Caracas to
grant the UNHCHR access to the country amid widespread allegations of human
rights abuses. Bachelet and many of her predecessors have previously been
denied permission to visit the country by President Nicolas Maduro’s
government. (Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=2472554&CategoryId=10717;
http://www.laht.com/article.asp?ArticleId=2472583&CategoryId=10717)
Supreme Court Judge denounces
Maduro government flees to U.S.
A Venezuelan Supreme Court judge who once
supported President Nicolás Maduro has fled to the United States and publicly
denounced Maduro's re-election days before the inauguration. Justice Christian
Zerpa left Venezuela with his wife and two daughters. Their destination in the
U.S. was unclear. Zerpa met a reporter in Orlando and told the outlet, "I think the president, Nicolás Maduro, does
not deserve a second chance because the election he supposedly won was not a
free election, was not a competitive election." Zerpa said he did not
speak out against the election results months ago out of concerns for his
family's safety. Maduro's Socialist Party "gradually but steadily" co-opted the Supreme Court and "turned it into an appendage of the executive
branch," according to the International Commission of Jurists. In
2016, following a landslide electoral victory by the opposition, Zerpa helped
Maduro consolidate power through a court decision that diminished the powers of
Congress. The Maduro regime’s Supreme Courte responded to Zerpa's decision to
leave by noting he was being investigated for sexual harassment, lewd acts and
psychological violence. Zerpa "fled
the country, exercising his constitutional right, to avoid justice and so his
crimes remain unpunished," said Supreme Court President Maikel Moreno,
who said the investigation began last November. Moreno himself was arrested in
connection with the homicide of a teenager in 1989 and was defrocked as an
appeals court judge in 2007 for improperly releasing two murder suspects.
"Under Moreno as chief justice, the
court proceeded to dismiss every legal challenge to Maduro's authority that has
reached the bench," the report stated. Zerpa is not the first
Venezuelan justice to flee to the United States. Former Supreme Court Judge
Eladio Aponte Aponte fled in 2012 after accusing the government of corruption.
Maduro, then the foreign minister, called him a fugitive who "sold his soul." (NPR: https://www.npr.org/2019/01/07/682865392/venezuela-supreme-court-judge-denounces-government-flees-to-u-s;
Reuters, https://www.reuters.com/article/us-venezuela-politics/former-venezuela-supreme-court-judge-flees-to-u-s-denounces-maduro-idUSKCN1P00OU;
Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=2472666&CategoryId=10717)
Publication of new Venezuela-related
Designations, including the GLOBOVISION TV network
Today, the Department of the Treasury’s Office
of Foreign Assets Control (OFAC) is issuing Venezuela-related General License
6. General License 6 authorizes U.S.
persons to engage in specified transactions related to winding down or
maintaining business with GLOBOVISION Tele C.A. and GLOBOVISION Tele CA, Corp.
and their subsidiaries until January 8, 2020. OFAC is issuing a new FAQ about
General License 6. See ANNEX.
OP-ED: Why January 10 could
spark another crisis in Venezuela
When Nicolás Maduro begins another six-year
term on Thursday, politics in the crisis-stricken country will get even more
complicated. On Jan. 4, the Lima Group announced they would only recognize the
country’s National Assembly as a legitimately elected body and called for the
OAS to follow suit. The group includes the governments of Argentina, Brazil,
Canada, Chile, Colombia, Costa Rica, Guatemala, Guyana, Honduras, Panama,
Paraguay and Peru – but not Mexico. A president that much of the region
considers illegitimate could mean that Venezuelans representing the Maduro
government won’t be able to enter many countries. Further, financial dealings
could be thwarted, accounts in foreign soil frozen, and weapons cooperation
suspended. If there is no longer a legitimate government, what happens to
Venezuelan delegations at international organizations? What happens to the
Venezuela’s representation at the IMF, the World Bank, the Andean Development
Corporation? What will happen to Venezuela’s ambassadors? These are relevant
questions. The declaration of the Lima Group underscores how invested many
countries in the region are in finding a solution to the Venezuelan crisis by
exerting maximum diplomatic pressure on the Maduro regime. Their statement that
the National Assembly is the only elected body they recognize and the
suggestion about the legitimacy of the Supreme Court in exile sets the stage
for the opposition in Venezuela to start moving in the direction of an
institutional transition that many countries could support. In his inauguration
speech, the newly elected speaker of the national assembly, Juan Guaidó from
the Popular Will party, laid out a blueprint for a political transition,
including naming a transitional committee. There will be more actions taken in
coming days and it is not yet clear if the National Assembly will move to
appoint an outright parallel government in Venezuela. But some within the
opposition see this as the goal after January 10, given the unique historical
moment that could help trigger a crisis of legitimacy that could finally break
chavismo and the military. “On Jan. 10,
the clock starts ticking on a full-fledged accountability crisis in Venezuela,”
says Luisa Palacios, the head of Emerging Markets research at Medley Global
Advisors. “To believe that the Maduro
government can keep itself in power amidst the legitimacy crisis he is about to
face, you also must believe that he can stabilize either the economic
situation, or inflation, or oil production. However, everything that could lead
to stabilization is going in the opposite direction”. Ms Palacios adds: “Maduro’s capacity to distribute rents is
significantly declining and the value of those rents is evaporating. Guaidó in
his inaugural speech mentioned something which is also very true: Maduro cannot
protect anyone anymore, because the revolution is killing his own. The recent death of Nelson Martinez, former CEO
of PDVSA in a Venezuelan prison is a very chilling example for other chavistas,
as is the recent defection of a Supreme Court justice. Both were Maduro
loyalists. It’s true that Maduro has lived through other governability crises
and he has survived them all. In fact, since 2013 he’s had one every year, but
the combination of events in 2019 will be much harder to face given the
multiple challenges Maduro will be facing on all possible fronts imaginable.”
She concludes: “I have always thought
that regime change in Venezuela might be a two-stage process with some kind of
political change within chavismo before there is a transition towards an
opposition government.” (Americas Quarterly: https://www.americasquarterly.org/content/why-january-10-could-spark-another-crisis-venezuela)
SPECIAL REPORT: 7
Reasons for describing Venezuela as a ‘Mafia
State’
There is no universally accepted definition of
what constitutes a “mafia state.” Here are seven arguments as to why we think
Venezuela qualifies and what the implications are of this troubled Andean nation
as a regional crime hub.
1. Top
level criminal penetration into state institutions. For the last three
years InSight Crime has been tracking individuals we believe have links to
organized crime and have held, or currently hold, senior positions in Venezuelan
state institutions. We have found 123 officials that we confidently believe are
involved in criminal activity. For legal reasons we will not publish the entire
list, but some of the clearest cases are named in this investigation, “Drug Trafficking within the Venezuelan
Regime: The Cartel of the Suns.” What is clear from our investigations is
that the following institutions are staffed at the higher echelons by
individuals we believe are, or have been, engaged in criminal activity: The
Vice Presidency, the Ministries of Interior, Defense, Agriculture, Education,
Prison Service, Foreign Trade and Investment, Electricity, the National Guard,
the Armed Forces, the Bolivarian National Intelligence Service (SEBIN) and PDVSA.
The penetration of so many key institutions, and the fact that they constitute
the state’s main organs in the fight against organized crime, means that
Venezuela cannot even contain organized crime, let alone effectively fight it.
With so many state actors with interests in criminal activity, be it fuel
smuggling, the black-market sale of food and medicines or the trafficking of
cocaine, this factor alone suggests that Venezuela qualifies as a mafia state.
2. Evidence
of kleptocracy. The state coffers have been pillaged on an industrial scale
by the Bolivarian elite. With no transparency or public accounting of state
budgets or expenditure, it is hard to calculate how much has been looted from
the country. An investigation by a congressional committee put the number at US
70 billion. A former minister has stated that the number is closer to US$ 300
billion.
3. The
devolution of state powers to irregular and illegal actors. Following the
2002 military coup that ousted Hugo Chávez from power for 48 hours, the
president made key changes to the levers of power to ensure he could not be
toppled in the same way again. One of the measures he adopted was to devolve
state functions to irregular and even criminal elements. The security forces
also lost the monopoly on carrying arms. Instead there has been a proliferation
of weapons and munitions into criminal hands, either by design or through
corruption. We have two articles in this investigative series dedicated to two
examples of this: “The Devolution of
State Power: The Colectivos,” and “The
Devolution of State Power: The Pranes.” The colectivos are irregular,
usually armed groups that have control over many neighborhoods, principally in
Caracas. The pranes are the criminal bosses within Venezuela’s prison system.
Under Prison Minister Iris Varela, the government has largely delivered control
of the prison system to the pranes, with the understanding that they keep
violence to a minimum and prevent disorder within the penitentiary system.
4. Exponential
growth of Venezuelan organized crime. Today crime is rampant, and Venezuela
is likely the kidnap capital of Latin America, although there is no hard data
to support this claim. There have been a series of government policies that
have directly benefited organized crime. One began in 2013, when the government
began implementing what became known as its “peace zone” policy which was to
engage in social investment in areas of high criminality and negotiate with
local communities to reduce crime. Linked to growth of criminal gangs has been
the increase in illegal economies. The biggest has long been the smuggling of
subsidized fuel, the cheapest in the world to buy, into Brazil and Colombia.
This is now largely in the hands of the National Guard, working with Colombian
groups. But a far more widespread series of black markets was created via the
system of government subsidies on foodstuffs and medicines. This black market
has fed the growth of criminal actors, who profit from their trading or
smuggling.
5. High
levels of violence by state and non-state actors. While there are no
official homicide statistics, the most realistic data on murders is provided by
Venezuela’s Violence Observatory. It placed Venezuela at 89 homicides per
100,000 of population during 2017, making the nation the most dangerous in
Latin America, in a region with the highest homicides rates in the world.
Caracas ranks as one of the deadliest cities on the planet, with a murder rate
of 130 per 100,000. Of the 26,616 homicides registered by the OVV in 2017,
5,535 occurred at the hands of the security forces, a very high proportion,
amid widespread accusations of extrajudicial killings, often in the context of
the Operations to Liberate the People. These are anti-crime offensives, launched
by President Nicolás Maduro, aimed at bringing down rampant crime rates. 6. The Exportation of Criminality. Colombian
drug trafficking organizations and warring factions have set up shop, turning
Venezuela into a logistics base, safe haven and one of the principal transit
nations for Colombian cocaine. Venezuela is becoming a net exporter of
criminality. In the article on the cocaine pipeline from Venezuela through the
Caribbean, “Dominican Republic and
Venezuela: Cocaine Across the Caribbean,” we track the growing involvement
of Venezuelans in a wide variety of criminal activities.
7. Widespread
international accusations of criminal behavior. Another indicator of a
mafia state is when enough international actors question a state’s legitimacy,
not just on its democratic credentials, but for criminal activity. Not
surprisingly, the United States has taken the lead in condemning the Venezuelan
government. In one of the most recent declarations, Nikki Haley, the US
Ambassador to the United Nations, said that ordinary Venezuelans were “the unwilling victims of a criminal
narco-state.” Colombia’s president, Juan Manuel Santos has accused the
Maduro administration of “using criminal
gangs to be able to exercise better control over society, over the people, a
macabre association of criminal gangs with security forces to control the
population.” The United Nations has received reports of “hundreds of
extrajudicial killings in recent years, both during protests and security
operations,” the UN High Commissioner for Human Rights Zeid Ra’ad al-Hussein
stated. Panama placed 54 Venezuelan government figures, including President
Maduro, on a list of persons at “high
risk” of engaging in money laundering or financing terrorism. The European
Union placed sanctions on seven senior government officials, including Interior
Minister Nestor Reverol, Supreme Court president Maikel Moreno, intelligence
chief Gustavo Gonzalez Lopez and the number two of the ruling socialist party,
Diosdado Cabello. They are now subject to asset freeze and travel bans. Even
Switzerland, not known for its aggressive foreign policy, announced sanctions
against Venezuela, stating it was “seriously
concerned by the repeated violations of individual freedoms in Venezuela, where
the principle of separation of powers is severely undermined and the process in
view of the forthcoming elections suffers from a serious lack of legitimacy.”
This article is part of a multipart investigation looking at organized crime in
Venezuela. See other parts of the series here and the full report here: (InSightCrime:
https://www.insightcrime.org/investigations/seven-reasons-venezuela-mafia-state/)
ANNEX: Publication of new
Venezuela-related Designations
Today, the Department of the Treasury’s Office
of Foreign Assets Control (OFAC) is issuing Venezuela-related General License
6. General License 6 authorizes U.S.
persons to engage in specified transactions related to winding down or
maintaining business with GLOBOVISION Tele C.A. and GLOBOVISION Tele CA, Corp.
and their subsidiaries until January 8, 2020. OFAC is issuing a new FAQ about
General License 6. In addition, OFAC has updated its SDN list. The following
individuals have been added to OFAC's SDN List:
DIAZ GUILLEN, Claudia Patricia (a.k.a. DIAZ, Claudia; a.k.a.
DIAZ-GUILLEN, Claudia), Cap Cana, Dominican Republic; Spain; DOB 25 Nov 1973;
citizen Venezuela; Gender Female; Cedula No. 11502896 (Venezuela); Passport
030415788 (Venezuela) expires 22 Nov 2014 (individual) [VENEZUELA-EO13850].
GONZALEZ DELLAN, Leonardo (a.k.a. GONZALEZ, Leonardo), London, United
Kingdom; DOB 11 Sep 1966; citizen Venezuela; Gender Male; Cedula No. 8639102
(Venezuela); Passport 073785390 (Venezuela) expires 01 Jul 2018; alt. Passport
046041771 (Venezuela) expires 24 May 2016; alt. Passport 002272834 (Venezuela)
expires 14 Aug 2012 (individual) [VENEZUELA-EO13850].
GORRIN BELISARIO, Raul (a.k.a. GORRIN BELISARIO, Raul Antonio; a.k.a.
GORRIN BELISARIO, Raul Antonio De La Santisima Trinidad; a.k.a. GORRIN, Raul;
a.k.a. GORRIN, Raul A; a.k.a. GORRIN, Raul Antonio; a.k.a. GORRIN-BELISARIO,
Raul Antonio De La Santisima), 4100 Salzedo Street, Apt. 1010, Miami, FL 33146,
United States; 4100 Salzedo St., Unit 804, Coral Gables, FL 33146, United
States; 144 Isla Dorada Blvd., Coral Gables, FL 33143, United States; DOB 22
Nov 1968; citizen Venezuela; Gender Male; Cedula No. 8682996 (Venezuela); Passport
129603081 (Venezuela) expires 14 Oct 2020; alt. Passport 066936455 (Venezuela)
expires 10 Jan 2018; alt. Passport 007931220 (Venezuela) expires 24 Jan 2013
(individual) [VENEZUELA-EO13850].
PERDOMO ROSALES, Gustavo Adolfo (a.k.a. PERDOMO ROSALES, Gustavo A;
a.k.a. PERDOMO, Gustavo; a.k.a. PERDOMO, Gustavo A; a.k.a. PERDOMO, Gustavo
Adolfo; a.k.a. PERDOMO-ROSALES, Gustavo), 4100 Salzedo St., Unit 804, Coral
Gables, FL 33146, United States; 18555 Collins Avenue, Unit 4405, Sunny Isles,
FL 33160, United States; DOB 05 Feb 1979; citizen Venezuela; Gender Male;
Cedula No. 14585388 (Venezuela); Passport 083119116 (Venezuela) expires 28 Jan
2019; alt. Passport 023639834 (Venezuela) expires 13 Jun 2014 (individual)
[VENEZUELA-EO13850].
PERDOMO ROSALES, Maria Alexandra (a.k.a. DE PERDOMO, Maria A; a.k.a. DE
PERDOMO, Maria Alejandra; a.k.a. PERDOMO, Maria Alexandra; a.k.a.
PERDOMO-ROSALES, Maria), 144 Isla Dorada Blvd., Coral Gables, FL 33146, United
States; 4100 Salzedo Street, Apt 1010, Miami, FL 33146, United States; DOB 25
Mar 1972; citizen Venezuela; Gender Female; Cedula No. 10538067 (Venezuela);
Passport 135278046 (Venezuela) expires 14 Oct 2020; alt. Passport 079280833
(Venezuela) expires 22 Oct 2018; alt. Passport 018516885 (Venezuela) expires 04
Dec 2013 (individual) [VENEZUELA-EO13850] (Linked To: GORRIN BELISARIO, Raul).
TARASCIO-PEREZ, Mayela Antonina (a.k.a. DE PERDOMO, Mayela T; a.k.a. DE
PERDOMO, Mayela Tarascio; a.k.a. TARASCIO DE PERDOMO, Mayela A; a.k.a. TARASCIO
DE PERDOMO, Mayela Antonina; a.k.a. TARASCIO, Mayela; a.k.a. TARASCIO-PEREZ,
Mayela), 4100 Salzedo St., Unit 804, Coral Gables, FL 33146, United States; DOB
20 Feb 1985; citizen Venezuela; Gender Female; Passport 083111668 (Venezuela)
expires 28 Jan 2019; alt. Passport 023639818 (Venezuela) expires 13 Jun 2014;
alt. Passport C1453352 (Venezuela) expires 02 Nov 2009 (individual)
[VENEZUELA-EO13850] (Linked To: PERDOMO ROSALES, Gustavo Adolfo).
VELASQUEZ FIGUEROA, Adrian Jose (a.k.a. VELASQUEZ, Adrian), Cap Cana,
Dominican Republic; Spain; DOB 02 Nov 1979; citizen Venezuela; Gender Male;
Cedula No. 13813453 (Venezuela); Passport 024421568 (Venezuela) expires 25 Jun
2014 (individual) [VENEZUELA-EO13850].
The following entities have been added to
OFAC's SDN List:
CONSTELLO INC., Saint Kitts and Nevis
[VENEZUELA-EO13850] (Linked To: TARASCIO-PEREZ, Mayela Antonina; Linked To:
PERDOMO ROSALES, Gustavo Adolfo).
CONSTELLO NO. 1 CORPORATION, 4100 Salzedo
Street, Unit 804, Coral Gables, FL 33146, United States; DE, United States
[VENEZUELA-EO13850] (Linked To: TARASCIO-PEREZ, Mayela Antonina; Linked To:
PERDOMO ROSALES, Gustavo Adolfo).
CORPOMEDIOS GV INVERSIONES, C.A., Calle Alameda Quinta Globovision Pb,
Libertador, Caracas, Venezuela [VENEZUELA-EO13850] (Linked To: GORRIN
BELISARIO, Raul; Linked To: PERDOMO ROSALES, Gustavo Adolfo).
CORPOMEDIOS LLC, 4100 Salzedo Street, Unit 804, Coral Gables, FL 33146,
United States [VENEZUELA-EO13850] (Linked To: GORRIN BELISARIO, Raul; Linked
To: PERDOMO ROSALES, Gustavo Adolfo).
GLOBOVISION TELE C.A. (a.k.a. GLOBOVISION), Caracas, Venezuela
[VENEZUELA-EO13850] (Linked To: GORRIN BELISARIO, Raul; Linked To: PERDOMO
ROSALES, Gustavo Adolfo).
GLOBOVISION TELE CA, CORP., 4100 Salzedo Street, Unit 804, Coral Gables,
FL 33146, United States [VENEZUELA-EO13850] (Linked To: GORRIN BELISARIO, Raul;
Linked To: PERDOMO ROSALES, Gustavo Adolfo).
MAGUS HOLDING II, CORP., 4100 Salzedo St., Unit
804, Coral Gables, FL 33146, United States; 140 Paloma Drive, Coral Gables, FL
33143, United States [VENEZUELA-EO13850] (Linked To: PERDOMO ROSALES, Gustavo
Adolfo).
MAGUS HOLDING LLC, 4100 Salzedo St., Unit 804,
Coral Gables, FL 33146, United States [VENEZUELA-EO13850] (Linked To: PERDOMO
ROSALES, Gustavo Adolfo).
MAGUS HOLDINGS USA, CORP., 4100 Salzedo St., Unit
804, Coral Gables, FL 33146, United States [VENEZUELA-EO13850] (Linked To:
PERDOMO ROSALES, Gustavo Adolfo; Linked To: TARASCIO-PEREZ, Mayela Antonina).
PLANET 2 REACHING, INC., DE, United States;
7043 Fisher Dr., Unit 7043, Miami Beach, FL 33109-0064, United States
[VENEZUELA-EO13850] (Linked To: GORRIN BELISARIO, Raul).
POSH 8 DYNAMIC, INC., 18555 Collins Avenue,
Unit 4401, Sunny Isles, FL 33160, United States; DE, United States
[VENEZUELA-EO13850] (Linked To: GORRIN BELISARIO, Raul).
POTRICO CORP., DE, United States [VENEZUELA-EO13850] (Linked To: PERDOMO
ROSALES, Gustavo Adolfo).
RIM GROUP INVESTMENTS I CORP., 4100 Salzedo
Street, Apt 1010, Miami, FL 33146, United States; 4100 Salzedo Street, Unit
608, Coral Gables, FL 33146, United States; 4100 Salzedo Street, Unit 807,
Coral Gables, FL 33146, United States [VENEZUELA-EO13850] (Linked To: GORRIN
BELISARIO, Raul; Linked To: PERDOMO ROSALES, Maria Alexandra).
RIM GROUP INVESTMENTS II CORP., 4100 Salzedo
Street, Apt 1010, Miami, FL 33146, United States; 4100 Salzedo Street, Unit
813, Coral Gables, FL 33146, United States; 4100 Salzedo Street, Unit 913,
Coral Gables, FL 33146, United States [VENEZUELA-EO13850] (Linked To: GORRIN
BELISARIO, Raul; Linked To: PERDOMO ROSALES, Maria Alexandra).
RIM GROUP INVESTMENTS III CORP., 4100 Salzedo
Street, Apt 1010, Miami, FL 33146, United States; 144 Isla Dorada Blvd., Coral
Gables, FL 33143, United States [VENEZUELA-EO13850] (Linked To: GORRIN
BELISARIO, Raul; Linked To: PERDOMO ROSALES, Maria Alexandra).
RIM GROUP INVESTMENTS, CORP., 4100 Salzedo
Street, Apt 1010, Coral Gables, FL 33146, United States [VENEZUELA-EO13850]
(Linked To: GORRIN BELISARIO, Raul; Linked To: PERDOMO ROSALES, Maria
Alexandra).
RIM GROUP PROPERTIES OF NEW YORK II CORP., 675
Third Avenue, 29th FL., New York, NY 10017, United States; 20 West 53rd Street,
Unit 47A, New York, NY 10019, United States; 60 Riverside Boulevard, PH 3602,
New York, NY 10069, United States [VENEZUELA-EO13850] (Linked To: GORRIN
BELISARIO, Raul).
RIM GROUP PROPERTIES OF NEW YORK, CORP., 4100
Salzedo St., Unit 1010, Coral Gables, FL 33146, United States
[VENEZUELA-EO13850] (Linked To: GORRIN BELISARIO, Raul).
SEGUROS LA VITALICIA C.A. (a.k.a. LA VITALICIA), Caracas, Venezuela;
National ID No. J310205361
(Venezuela) [VENEZUELA-EO13850] (Linked To: GORRIN BELISARIO, Raul).
TINDAYA PROPERTIES HOLDING USA CORP., 675 Third
Avenue, 29th Floor, New York, NY 10017, United States [VENEZUELA-EO13850]
(Linked To: PERDOMO ROSALES, Gustavo Adolfo).
TINDAYA PROPERTIES OF NEW YORK CORP., 155 SW
25th Road, Miami, FL 33129, United States; 330 East 57th Street, Unit 12, New
York, NY 10022, United States [VENEZUELA-EO13850] (Linked To: PERDOMO ROSALES,
Gustavo Adolfo).
TINDAYA PROPERTIES OF NEW YORK II CORP., 675
Third Avenue, 29th Floor, New York, NY 10017, United States [VENEZUELA-EO13850]
(Linked To: PERDOMO ROSALES, Gustavo Adolfo).
WINDHAM COMMERCIAL GROUP INC., Panama
[VENEZUELA-EO13850] (Linked To: GORRIN BELISARIO, Raul; Linked To: PERDOMO
ROSALES, Gustavo Adolfo).
The following aircraft has been added to OFAC's
SDN List:
N133JA; Aircraft Model Mystere Falcon 50EX;
Aircraft Manufacturer's Serial Number (MSN) 268; Aircraft Tail Number N133JA
(aircraft) [VENEZUELA-EO13850] (Linked To: PERDOMO ROSALES, Gustavo Adolfo).
(US Department of the Treasury: https://www.treasury.gov/resource-center/sanctions/OFAC-Enforcement/Pages/20190108.aspx)
