Photo: MIGUEL ZAMBRANO/AFP via Getty Images
A version of this commentary was originally published in Spanish in El Nacional on April 12, 2023.
More than 90 days have passed since Colonel Pedro Rafael Tellechea became president of Petróleos de Venezuela, S.A. (PDVSA). The technical-administrative audit of Asdrúbal Chávez’ management as the head of the state oil company from April 2020 to December 2022 was the excuse to put former oil minister Tareck El Aissami’s gang out of business. They had become rich from managing sales and transportation as well as billing and collections of oil exports. It also served to justify the deplorable situation of state coffers.
The story that “Venezuela fixed itself” was laid bare. State intervention in the currency exchange market to sustain the value of the bolivar against the U.S. dollar began to falter in April of 2022, and as of August, it was in a free fall. By January 2023, the bolívar had lost 395 percent of its value compared to 2022. Devaluation slowed in March 2023 compared with previous month but the accumulated damage had already led to calls for wage hikes. Daily protests have occurred over the past three months.
Photo: Central Bank of Venezuela
The hyperinflation monster was looming again and terrifying Maduro. He thought he had it under control by demonetizing the bolívar and allowing the U.S. dollar to circulate as a legal means of payment. Bars, nightlife, concerts, construction, high-end businesses, and restaurants were all symbols used by Maduro to try to make people believe that “Venezuela fixed itself.” The singular achievement was the return to positive GDP growth following an 80 percent decline since Súper Bigote (“Super Mustache,” a nickname and cartoon persona of Maduro)took power in 2013.
It seems that one day in February, Maduro woke up and discovered that his silver bullet to tame hyperinflation (dollarization) no longer allowed him to maintain the bubble. Not enough foreign currency was flowing in from exports of raw materials and refined products. This was unusual because the Miraflores usurper is considered an “economic wizard.” “He should teach classes at Harvard on how to run a country,” his son, Nicolás Maduro Guerra, said.
He couldn't believe that skyrocketing prices were happening to him again. For this reason, he announced three weeks ago that he would “fully” cleanse state-owned PDVSA of corrupt mafias with “draconian measures” and by “restructuring at the highest level.” However, he kept a bewildered silence as El Aissami failed to appear before the courts—in an orange jumpsuit?—and given the accusation that Asdrúbal Chávez was jointly responsible for what happened in the oil industry.
There is no way that Nicolás Maduro and Delcy Rodríguez were unaware of what was happening. Along with Aissami and Asdrúbal Chávez, they were responsible for the oil business. To determine the availability of funds for executing the national budget, a weekly meeting was held to reconcile accounts between El Aissami and Rodríguez, as ministers of petroleum and finance, respectively. Together they reviewed the figures in the report on oil income that was later sent to the executive and the head of the Public Treasury, who is none other than Maduro.
A close eye is kept on accounts because in the case of the Venezuelan mafia state, its operation depends on a mix of foreign currency obtained from oil exports, illegal activities, and remittances.
Since PDVSA was sanctioned by the U.S. administration in 2019, payments for exports are made in cash (dollars and euros), or in cryptocurrencies. Therefore, money laundering from corruption and illegal activities is done in the same way. Since the time of Hugo Chávez, Venezuela has been a great launderer of funds, using PDVSA, among other companies, for that purpose.
The Maduro regime “needs a minimum of approximately $300 million a month in cash to pay civil servants, the military, high-cost individuals, parliamentarians, diplomats, etc.,” according to CuentasClarasDigital.org.
When comparing the first quarter 2023 performance of Chávez's cousin to Colonel Tellechea, there was a 39 percent increase in the sale of PDVSA dollars to the Central Bank of Venezuela (BCV). However, net income from oil exports, were at the same level during the two administrations. This indicates that tankers loaded with oil continue to sail but do not generate cash for the state oil company, such as shipments sent to Cuba, China, and the United States, equivalent to $1.002 billion. The last two are to pay off debts with the China Development Bank and Chevron.
Photo: Central Bank of Venezuela
For exports to the refineries in the Gulf of Mexico, PDVSA received $216 million during the first quarter of 2023, despite the stipulation that Chevron's return to Venezuela does not authorize it to deliver resources to the state.
What is critical in the first quarter of the year are the remaining $341 million of the International Liquid Reserves. The Central Bank of Venezuela withdrew $522 million in February—double the average of last year—which provided foreign currency to stop the fall of the bolívar against the dollar. This is Maduro’s Achilles’ heel. If oil and iron exports do not increase to $2 billion a month, the Central Bank of Venezuela's intervention in the currency exchange to keep the dollar under control will remain insufficient. This will threaten the price of goods and services and hyperinflation will reappear again, with consequences for wages.
For now, the first quarter results show that oil exports and income levels are similar in the Chávez and Tellechea administrations—no surprise there. What is surprising is the narrative of fighting corruption to gain more control over the country.
The problems remain and people know that it is not the U.S. blockade but the looting by Maduro and his gang that has caused their misfortune. Don't be fooled.
Antonio de la Cruz is a senior associate (non-resident) with the Americas Program at the Center for Strategic and International Studies in Washington, D.C.
