Before we get to our Down The Rabbit Hole Segment there were a few articles that reminded me of something. The Venezuelan people have been starving for a long time. Years ago when the average Venezuelan lost about 25 pounds they had a term for it, The Maduro Diet. Well, it seems the diet is still around. Check this out.

 According to The Cattle Site Venezuelan cattle herds are shrinking.They’re down to 1.7 million from over 2.5 million. Not a good sign.

 Investing.com tells us that ranchers are surviving selling milk for dollars and not selling beef. Under Chavismo beef consumption is down to 8 kilos per person from over 26 kilos per person. Not a good sign.

 CGTN reports that food spending in the last two years is down between 24 – 34 %. Not a good sign.

 And then there’s this from SBS. As if things weren’t tough enough for farmers and ranchers already there are no loans available to them. When cash flow gets too bad many of them are just leaving. Not a good sign.

 OK, so even though it’s not in the news that much these days the Venezuelan people are still starving. The Maduro Diet Lives.

 In financial news we have Kluwer Arbitration reporting that ICSID avoided political disruptions and complications in awarding Air Canada $20,790.574 plus unspecified damages. Air Canada suspended operations in Venezuela in 2014 due to breach of protection relating to transfer of funds. In short, the Chavistas wouldn’t give them the money they were owed. There will be plenty more of these.

 Then we have this from NBC, “Lack of unity in Venezuelan opposition party adds to Maduro’s hold on power.” Duh!

 Also on the political front we have a third party coalition forming as reported by Global Americans. The name of one of my personal favorites, Maria Corina Machado, is being talked about. She has maintained her hard line that for Venezuelans to have freedom Maduro has to go.

 And in oil news we have The Peninsula reporting that China oil imports from Iran and Venezuela were up 53% in 2021, despite sanctions. It’s a little difficult to track these shipments as the tankers generally “go dark” meaning they turn off their transponders. They also play a shell game with the shipments. They are rebranded to Oman and Malaysia. China shows no oil “officially” from Iran but shipments from these other countries are way up. So much for those “crippling sanctions.”

 Now, it’s Down The Rabbit Hole we go…

 While production dropped from it’s all time high under Chavez to approximately 2 and 1/2 million bpd (barrels per day) it didn’t fall off the cliff until Maduro came along with production going as low as under 500,000 bpd. Anyone who has ever owned a home,car, or almost anything for that matter, knows that without maintenance things break down. The Chavistas either failed to grasp this or simply didn’t care. They were too busy siphoning off all the profits to fund their ever expanding social programs referred to as “missions” or simply lining their pockets. Worse yet, as we discussed with the hospitals, they engaged on an unprecedented (and unnecessary)borrowing spree.

 Any rational person would see the outlook for the future wasn’t exactly rosy. Well, there are a couple of other factors to consider that would have a negative impact as well. Take,for example, Petrocaribe.

 The Chavez vision of “21st Century Bolivarian Socialism” wasn’t just about Venezuela being an economic power but a political one as well. He began engaging countries throughout Latin America and the Caribbean in multi lateral organizations like  ALBA,CARICOM, MERCOSUR, UNASUR, and so on. In order to ensure their support of Chavismo policies they set up Petrcaribe whereby Venezuela would use it’s ability to provide oil to the 17 members on unbelievably favorable terms in return for their solidarity with “The Bolivarian Revolution.”

 The members, of which Cuba is a de facto member, were able to buy oil, per their various quotas and terms tailored to the country’s specific needs and ability to pay, for anywhere between 5-50 % upfront, then a one or two year grace period, then finance the balance for a term of between 17-25 years at 1% interest.PDVSA would also allocate funds for member country’s social programs (while also funding Chavismo’s “Missions”) and partnering in various refining and power generation projects among member countries. While the available quotas were somewhat higher, Petrocaribe supplied, on average approximately 100,000 bpd to the member countries and another 98,000 bpd to Cuba. It’s worth remembering that Cuba paid nothing upfront in return for supplying medical, military, and security personnel to “The Revolution.”

 So let’s see, we have 100,000 bpd to Petrocaribe countries for almost no cash and another almost 100,000 bpd to Cuba for no cash. The domestic market during the Chavez years consumed 650,000 – 790,000 bpd and due to the unbelievably low gasoline prices (basically free in dollar terms) provided no cash to PDVSA. It’s also worth remembering, although the Chavistas won’t tell you this, that part of the agreement as a member of OPEC is domestic needs must be guaranteed. So, who actually pays PDVSA for their oil?

 I first became alerted to this situation years ago when Chavez went on his borrowing binge and then when Maduro continued to rely on credit to run the country instead of revenue. They would periodically announce a great new trade deal or development program with China or Russia and it was always guaranteed by Venezuelan future oil shipments. I kept seeing $5 billion here and $5 billion there and soon commitments of tens of thousands of bpd became hundreds of thousands. Eventually the total between the Chavez and Maduro years reached almost 700,000 bpd combined, guaranteed for which PDVSA received no cash. Add in, let’s say an average of 700,000 bpd for domestic needs , another 100,000 for Petrocaribe, and another 100,000 for Cuba and you have 1,600,000 bpd to be supplied for free!

 More tomorrow….