Trump’s Economic Sanctions Have Cost Venezuela About $6bn Since August 2017
Emersberger
analyses the recent article by government critic Francisco Rodriguez,
in which Rodriguez admits that US sanctions are "misguided" and have a
damaging effect on the Venezuelan people in general.
27 September, 2018
The following piece by Canadian political analyst Joe Emersberger was written in response to a recent article by Torino Capital Chief Economist Francisco Rodriguez.
Rodriguez
is well-known as an outspoken critic of the Maduro government, but in
his recent article he recognizes that Washington’s “misguided” sanctions
are exacerbating falling oil production in Venezuela and as such,
pejoratively affecting general living standards.
The resulting loss of access to credit appears to have helped precipitate the collapse in oil output, driving the resulting economic contraction.
Our point is that the spilling over of this political crisis into the arena of finance had consequences for the country’s economy and for the living standards of Venezuelans,
Despite
problematic comparisons between Venezuela and Iraq and Syria and
charged anti-government rhetoric, Rodriguez presents a coherent economic
argument against US sanctions which, amongst other things, block
international payments.
I argue that Venezuela’s economy has imploded because it can’t import.
Finally,
Rodriguez deconstructs Washington’s argument that the sanctions only
impact high-ranking figures in the Venezuelan government, claiming that:
Advocates of sanctions on Venezuela claim that these target the Maduro regime but do not affect the Venezuelan people. If the sanctions regime can be linked to the deterioration of the country’s export capacity and to its consequent import and growth collapse, then this claim is clearly wrong.
Venezuelanalysis team.
Venezuelan economist Francisco Rodriguez, a long time critic of the Venezuelan government, wrote a piece showing that
after sanctions Trump introduced in August of 2017 Venezuela’s oil
production dropped much faster than analysts had predicted it would.
Rodriguez was the economic advisor to former presidential candidate
Henri Falcon, who defied US threats to run in Venezuela’s presidential elections that were held in May despite the boycott of other opposition leaders.
Venezuelan
oil production followed essentially the same pattern as Colombia’s
during 2016 and most of 2017 –until August when Trump’s sanctions came
into force. A decline in production was driven by the price of oil
hitting its lowest point in about a decade at the start of 2016. But in
August of 2017 Trump’s sanctions made it illegal for the Venezuelan
government to obtain financing from the US which was devastating for two
reasons: all the Venezuelan governments’ outstanding foreign currency
bonds are governed under New York state law; and one of the Venezuelan
government’s major assets, the state-owned CITGO corporation, is based
in Texas. The sanctions also blocked CITGO from sending profits and
dividends back to Venezuela (which had been averaging about $1 billion USD per year since 2015).
The
table below shows my estimate of Venezuela’s oil revenues each month
since Trump’s sanctions came into force. The price of WTI oil (which
approximates the price of Venezuela’s) basically increased linearly
since August of 2017 from $50 to about $70 per barrel. The oil
production volumes are taken from the estimates Rodriguez has provided.
In the “no sanctions” case show below, it is assumed that Venezuela‘s
oil production would have continued to fall at the same rate as in the
12 months before Trump’s sanctions. Rodriguez cited a “worst case”
prediction made by a prominent oil consultant that a 13% decline in
production would take place in 2017 followed by a 6% decline in 2018.
The “no sanctions” case shown below is close to that “worst case
prediction”. It assumes an 11% decline would have taken place. In
reality (i.e. the “sanctions” case) production has fallen by 37% since
the sanctions were imposed. The difference in total revenue between the
“sanction” and “no sanctions” case over the twelve month period is about
$6 billion.
That sum, $6 billion, is 133 times larger than what the UNHCR has appealed for in aid for Venezuelan migrants. It is also equal to about 6% of Venezuela’s GDP at present. Health care spending in Latin America and the Caribbean averages about 7% of GDP.
Perversely,
Maduro’s government has been widely accused of “using” the economic
crisis to “buy” loyalty of the most vulnerable through the direct
delivery of food and other basic products. Trump’s goal is clearly to
starve the government of funds it uses to allegedly “buy support” (i.e.
respond to the crisis).
Rodriguez
pulls his punches and heavily qualifies his thesis, but the inescapable
conclusion is that Trump’s policy is depraved. The US has deliberately
made an economic catastrophe much worse in the hope that its Venezuelan
allies can seize power through violence as they briefly did in April of
2002.
https://robinwestenra.blogspot.com/2019/01/the-truth-behind-venezuelas-collapse.html
