December 8, 2023

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Sanctions do not help bring about political change

Caracas.- Economist and current dean of Metropolitan University, Luis Oliveros, discussed the effects of sanctions imposed by the US Treasury Department on the national oil industry on the “Disruption Podcast” with Oscar Dowell.

According to him, not allowing the sale of crude oil in natural markets like the US and Europe, and using financial limits to charge for hydrocarbons, creates “severe” difficulties for a country based on the oil sector. .

With sanctions imposed by the US government, PDVSA is limited to selling crude oil to Asian markets. Countries such as China use price reductions that “at one point ranged from 25% to 30% of the oil bill”; As of today, there is a 45% discount on crude oil sales.

Additionally, with sanctions, the government cannot refinance debt or attract capital; It cannot purchase raw materials or liquid crude oils, and controls the production of crude oil and derivatives.

Oliveros stressed that the decline recorded at Petroleos de Venezuela “did not start with sanctions.” “The PDVSA came with a myriad of problems,” he recalled, which, along with economic sanctions, accelerated the deterioration of the industry and the National Refinery Park.

Initially, the imposed restrictions sought to create political change in the country. You to Luis Oliveros Sanctions “do not serve” this purpose and exposed the case of Iran, Cuba, Yemen and North Korea, apart from South Africa, where the measure used worked.

“Sanctions forgot to talk about Venezuela’s foreign debt, so overnight 60 billion dollars stopped being a problem,” the economist pointed out.

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In the same way, Oliveros established a position on the changes to be applied in the national oil industry. He noted the need to refinance debt to access international markets and reform the Organic Hydrocarbons Law, particularly Articles 21 and 22, so that PDVSA does not own 50% of all oil projects or all mixed companies. Private international companies investing in the country.

Asked about privatizing Pdvsa, he said, “It will not solve the practical problem.”

On the conflict between Russia and Ukraine and its impact on Venezuela, he said the government faces barriers to selling oil in Asia and now has a competitor with more refining muscle. And a better crude, which is the case of Russian oil.

National oil production

Economist Oliveros estimated that national oil production could reach 800,000 barrels of oil per day this year in 2023, and not the target set by the national executive of producing one million barrels.

“Eni and Repsol are essential and they are giving Chevron more permits for new wells, I think that is a fundamental point; because Chevron is going to find a ceiling to increase production,” he said.

He recalled that when Chevron received the new license from OFAC, production levels went from 45,000 barrels per day to 125,000 barrels of oil by the end of the first quarter of 2023. The goal is to increase crude production to 250,000 or 300,000 barrels per day, in line with other Western oil companies.

“The problem here is not the oil, the problem here is the management of resources from the sale of oil.”

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Fundamentals of creating economic growth

Regarding the development of the national economy, the dean of the metropolitan university narrated that until a few years ago, the government raised on a monthly basis and till date the national executive did not increase the salary or raise the taxes. Obsession”..

“Though fiscal deficit still exists, the National Executive increased the state’s level from 50 points of GDP to 15 points in 3 years” Hence, the recorded inflationary levels arise from “structural” problem and fiscal deficit.

In collection alone, the country has recorded 4 thousand 500 million dollars in 2022 and in 2023, the estimate is close to 5 billion dollars respectively.

“A dollar-denominated country like Venezuela has the means to maintain a stable exchange rate, stable inflation and an increase in public investment.”

Higher oil income, more companies working, increase in the labor market from an oil perspective are the basic platforms for generating economic growth.

Promote dollarization, implement fiscal reforms, reduce legal reserve, Venezuela’s central bank independence is some of the strategic points to lead the country towards structural economic progress.

“You can’t think about sustainable growth, you can’t think about growth, you can’t think about restoring the credibility of the currency with a central bank that is not independent,” said Luis Oliveros.

Regarding the management of institutions, he felt it necessary to focus on appointments. For example: “Energy Minister cannot be the same chairman of PDVSA”.