Blackouts savage Venezuela’s already tattered economy – Channel NewsAsia

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CARACAS: Two vast blackouts that hit Venezuela this month have savaged its already ragged economy, paralysing its vital oil industry and costing the country US$200 million a day, experts say.

No sector has been spared in the near-nationwide outages that struck from Mar 7 to 14 and again this week.

“Each day of blackout … we have losses of around US$200 million,” Carlos Larrazabal, head of Fedecamaras federation of chambers of commerce and production, said.

In a country of 30 million people already struggling with five years of recession, where inflation is forecast by the IMF to soar to 10 million per cent this year, the consequences of the power cuts are devastating.

Food companies were on the front line.

“The biggest losses are in the sectors that rely on food supply cold chains, from retailers to producers, and including wholesalers and distributers,” Larrazabal said.

According to representatives from different sectors, and the opposition-ruled congress, the first blackout drained US$1 billion from the economy, or around one per cent of GDP.

More than 2,000 tons of meat and five million liters of milk were lost, producers said – a blow for a country already low on food.

“It’s really unsetting to go through this situation so regularly,” said Maria Carolina Uzcategui, head of the Consecomercio business and services council.

The cut in power blanked out electronic payment terminals, leaving Venezuelans with little way to pay for anything, local bolivares being increasingly rare and only a lucky few having access to US dollars.

OIL SECTOR HIT

The oil industry, which brings in 96 per cent of revenues into the coffers of Venezuela, which has the biggest proven crude reserves in the world, was hard hit.

An expert, Luis Oliveros, said oil production dropped to zero during the worst of the blackouts.

This could be “the start of a cycle of deep deterioration” for the already degraded sector, he said.

PDVSA, Venezuela’s state oil company, has not released data on the impact. But Oliveros said the effect for some of its facilities could be “irreversible”.

Venezuelan crude production started its long slide in February 2018, when it registered two million barrels a day, according to sources close to OPEC. A decade ago, exports totaled 3.2 million barrels a day.

Now, according to the British bank Barclays, volume could drop to as little as 500,000 barrels a day.

Aggravating the situation, US sanctions barring the sale or purchase of Venezuelan oil will come into effect on Apr 28 – a terrible blow, as American purchases account for 75 per cent of PDVSA’s income, according to analysts.

US President Donald Trump’s administration has already frozen assets and funds in the US belonging to PDVSA and its American subsidiary CITGO, and given them to Juan Guaido, Venezuela’s opposition leader whom Washington and 50 of its allies recognise as interim president.

Since the end of 2017, the United States banned its citizens and companies from dealing in new Venezuelan state bonds or PDVSA debt.

In Venezuelan cities and towns plunged into darkness at nightfall, the risk of looting has increased. That is notably the case in the northwest city of Maracaibo, an oil industry hub, where at least 500 shops were pillaged in the first blackout, according to Consecomercio.

The resulting fear, coupled with the food cold chain disruption, has pushed down retailers’ orders for produce. Meat, milk and vegetable deliveries have halved, Fedecamaras said.

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