Lagarde confirms worst complex crisis ever seen by the IMF in Venezuela

Bring all together the three worst cases of crisis resolution we have ever handled and that is Venezuela, IMF Managing Director points

Eva González Washington (USA), 7 June, 2019

Humanitarian and food crisis besides a currency crisis and the inflation in the millions percent, Chistine Lagarde (IMF Managing Director) underscored, on the complex crisis situation that should be solved in Venezuela, at the American Enterprise Institute think tank recently: “All we can do is from a distance and based on sporadic information and contacts that we have with a few people who are still on the ground is trying to assess what in our view based on what we’ve seen is likely to be just the most difficult protracted and complicated economic situation that we have seen and not just economy.”

Christine Lagarde (IMF Managing Director) at the American Enterprise Institute think tank. Caption of the IMF video on the event.

“Because you have a humanitarian crisis you have a food crisis. You have a currency crisis. You have inflation which is in the million’s percent. And the debt situation which is extremely complex as well, so you have to bring this all together. It’s like having, you know, you take the three worst cases of crisis resolution that we have ever handled in the history of the IMF. You bring them all together and that is Venezuela,” Lagarde concluded

About 11.8 million venezuelans can’t pay for the 5% of the products of a basic shopping basket 

There are already about 7 million people who need help, as reported by the National Assembly of Venezuela, the same day Lagarde said this.

Lineales vacíos en la Central Maderiense. Imagen, The Phopographer via Wikimedia Commons.

Central Maderiense supermarket lines run out of stock at Venezuela. Image by The Phopographer, through Wikimedia Commons.

Approximately 11.8 million venezuelans try to live of a minimum wage whose purchasing power is barely enough to acquire a 5% of what is considered a basic shopping basket.

The Venezuelan National Assembly also underscores that the number of citizens at nutritional risk and who suffer food insecurity is around 6.7 million.

Fuel, gas and power shortages in one of the countries with the highest proven oil and NG reserves in the world

The complex humanitarian situation described and debated by the Venezuelan National Assembly today is worsened by the shortage of fuel, even harder last week due to the poor management of PDVESA, but also to the sanctions imposed by the Trump Administration to the Venezuelan State Oil Company.

Neither natural gas nor the components needed to refine the gas and oil produced inside the Latin American country are being supplied. This affects the domestic production of both fuels, pushing the population into the energy shortage and poverty situation they are suffering today. And this is in a country with proven reserves at 302.809Bn barrels of oil and 5.707Bn cubic meters of natural gas, as certified by OPEC.

According to the figures published by the EIA of the Government of the United States, the proven crude reserves do not exceed 302.000 Bn. In any case those reserves of Venezuela are among the largest in the world.
OPEC informs as well that oil production in Venezuela has plummeted from 3.2 million barrels per day to the 1.03 million.

Returning to the data published by the US government, the number of active oil platforms in the South American country had dropped from about 2,300 in April 2016 to around 800 in September last year. And the situation worsens day by day.

According to the EIA report on the Latin American country the reduction in capital investments by the State oil and gas company Petróleos de Venezuela, SA (PDVSA) is making that foreign partners continue cutting back their activities in the oil sector, which means that the losses in production of crude oil are becoming even more widespread.

PDVSA run out of fuel

Given Venezuela’s heavy economic dependence on the oil industry, the country’s economy is likely to suffer even more contraction, and uncontrolled inflation will keep on being the every day bread and butter, at least in the short term.

Revenues sourced by Venezuela from oil exports are severely reduced because only about half of exports generate cash income.
US refineries are among the few customers that still make cash payments. The remaining crude oil exports are sold domestically at a loss or shipped to China and Russia as repayments of the loans received by Maduro’s Government. Repayments to Russia are sent to the Vadinar de Nayara Energy refinery in India to pay off the debt Venezuela owes the Russian oil company Rosneft, who is the co-owner of the Vadinar refinery.

All the facts described mean more poverty for the Venezuelan population, power and gas outages and an 12-24 hours queuing to fill the deposit of the car, when venezuelan people have enough money to pay for these supplies and gas stations have any fuel to sell. And Mr Maduro is still holding on to the presidential chair.

Image over the headline.- Youngster in Venezuela trying to feed himself eating paint. Image by Voice of America [Public domain], via Wikimedia Commons. Lineales vacíos en la Central Maderiense. Imagen, The Phopographer via Wikimedia Commons.