Can the Venezuelan economy survive another Maduro’s term?

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With economic sanctions accumulating and debt growing, Venezuela is running out of options to keep its economy afloat

This Thursday, the president of Venezuela, Nicolás Maduro, will take office again to start a second six-year term in office. He does so facing adverse conditions, accusations of illegitimacy, and sanctions by the Lima group and a magistrate of the court who denounces the regime from exile.

Now, the renewed sanctions aim to pressure the Venezuelan government at its most vulnerable point, the economy. All people, natural and legal, involved with the Nicolás Maduro regime, will not find within the 12 countries that belong to the Lima Group, a single financial system that decides to work with them.

This means that the assets of companies and Venezuelan people tied to the Maduro regime, who remain abroad, can be frozen until the situation is resolved.

In addition, according to El Tiempo, the Lima Group also explores options that oblige international financial institutions, such as the World Bank, the International Monetary Fund, and the Inter-American Development Bank, to adopt a "restrictive criterion in the granting of loans" to Maduro.

Venezuela is dying

All these sanctions, and all those that preceded them, particularly those that come from the United States, have been slowly cutting off the oxygen supply to a regime that, faced with a devastating domestic economic situation, has had to feed on money coming from abroad.

The Venezuelan company Citgo, for example, which belongs to PDVSA and provides distribution and commercialization of fuels in the United States, used to be an economic bastion of the Maduro regime, since it would continue to generate dividends to the State in dollars, no matter how badly the country's economy was performing.

Now, Citgo is facing a possible seizure of assets, as it is litigating in different courts of the United States different cases of unpaid debts and defaulted agreements. Taking Citgo out of these lawsuits and restoring its profitability will take Venezuela the payment of several multi-million dollar agreements with its debtors.

One of the lawsuits involves Venezuela having to pay $ 100 million dollars to the Canadian firm Crystallex. The money was transferred from Caracas, but the Canadian bank that received it chose to return it to Venezuela, fearing that upon receiving it, they would be violating the sanctions imposed on the Maduro regime by the United States.

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This has been the last year for Venezuela. In a scenario that becomes increasingly hostile, it is increasingly difficult for Maduro to sustain his regime, as friends are scarce and enemies abound.

Russia and China, the lifeline of Venezuela

Given the need of Venezuela, its biggest strategic allies, Russia and China, have known how, when, and at what price to offer their help. They have been the support of Venezuela during the Maduro regime, because through loans, investment programs, and financial bailouts have been able to keep this government afloat.

In exchange for a rescue of $ 1,500 million dollars, for example, Venezuela offered 49.9% of Citgo, including three refineries on the Gulf Coast and a whole pipeline network, to the Russian state oil company Rosneft. For the Russians, this business simply makes sense, they have a lot to gain. For Venezuela, this business was an act of desperation.

However, according to El Nacional, Venezuela, which has agreed to pay off much of its debt to Russia and China with oil, has struggled to meet its payments and is now receiving pressure from its allies as well.

According to a source close to the company, quoted in El Nacional, Venezuela had to reduce by half the shipments of crude to Russia and China, which were used to pay the debt acquired. Of the 900,000 barrels per day agreed, Russia and China would only be receiving 450,000.

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According to the source, which remains anonymous, "this puts the creditors' patience to the test and will pressure PDVSA to fulfill its commitments on time and in the amounts agreed upon".

However, despite the difficulties, Maduro promised on October 19 last year that he would increase crude oil exports to China to one million barrels a day. "Rain or shine" he said. Now it is raining and there are thunders, and Maduro is still forced to fulfill his promise, because without the critical support of Russia and China he will not end the six years of his second term.

LatinAmerican Post | Pedro Bernal
Translated from "¿Podrá la economía venezolana sobrevivir otro término de Maduro?"