Deal Dreams?

 We’ll head Down The Rabbit Hole shortly but first let’s talk deals.The Hill (and pretty much everybody else) reported Saturday that senior State Department and White House officials traveled to Caracas.Originally it was not known who they were meeting with or what the agenda was. At the same time Maduro put out a statement that he was open to options. “Here lies the oil of Venezuela, which is available for whomever wants to produce and buy it.” Did you get that? Any questions now about whether or not Venezuela is already at maximum oil production? It’s like Venezuela is going self-serve. If you want to buy oil pump it yourself?

 The airwaves were rife with speculation.Is this about Biden’s oil strategy? Is he trying to replace Russian oil with Venezuelan oil? What is Maduro’s angle? He has openly supported Russia and bashed the US at every turn. My first question was, what do these guys even have to talk about? If Venezuela is already at maximum production, currently producing about 600,000 bpd (barrels per day), after they send oil to China to pay for past loans, send oil to Cuba to buy their continued help in staying in power, and take care of their own needs what’s left to sell? All oil analysts agree that for Venezuela to increase oil production would take a whole lotta’ time and a whole lotta’ money and it would have to come from outside as PDVSA (government owned oil company) has neither the expertise (all the oil professionals are gone and have been replaced with inexperienced, but loyal to the party, Chavistas) nor the money.So…what gives?

 Well, it turns out Biden’s boys were in Caracas to meet with Maduro and his VP, the ever loyal and equally inept Delcy Rodriguez, at Maduro’s request. He wanted to talk about sanctions removal. His position has been clearly stated many times. If the world (the US) wants to talk about him making all the changes we’ve detailed many times (Human Rights, rule of law, free and fair elections, free flow of humanitarian aid, etc.) all sanctions must be lifted and Alex Saab (architect of Maduro’s fraudulent financial schemes including the CLAP food program, currently awaiting trial in Miami) must be released. Biden’s position has also been clear. Maduro needs to show he’s serious about changes and actually enact some real reforms before sanctions removal. So, between the two it’s “You first”…”No. you first”…and so on. So, what could these guys be thinking?

 For Maduro it’s easy. He may not be the brightest guy in the world but he does have good survival instincts. Maybe he can make a deal. The Biden administration is pretty much the same as the Obama/Biden administration (only worse I would contend). These were the guys that went into the Iran nuclear negotiations in the Obama years with a list of things that Iran had to agree to do and by the time negotiations were concluded the Iranians gave up nothing and got billions in cash. These guys are not exactly world class deal makers.There may be an opportunity for Maduro here.

 For Biden it’s easy. With oil prices (and inflation) spiking he’s under pressure to show he’s doing something …so let’s talk to Maduro. He’s sitting on top of the world’s largest proven oil reserves. (We can talk about the quality and ability to produce that oil another time but, as we’ve said, there really isn’t any oil to sell to the US at this time) At least it will look like we’re doing something.

 So, the meeting ended with no progress made on various fronts. Maduro still wants total sanctions removal for Venezuela and himself as well as other high-ranking Chavistas. No mention was made of Alex Saab…hmmm… The US says they want Maduro to release detainees including the CITGO six. No mention was made of oil ….hmmm…Both side said progress was made and the door is open for further talks.

 Quartz (and everybody else) asks the big question, “Will the Biden administration set aside ethics to lower gas prices?”…Are they really trying to negotiate deals for oil with Venezuela and Iran? I don’t know about you but these people (and by people I mean governments) along with Russia, China,Iran, and North Korea are pretty much the worst humanity has to offer. It’s important to remember who you’re dealing with and what they’ve done.

 And if there’s any doubt that Maduro is looking to make a deal we have this from Digital Journal. Maduro has announced the resumption of talks with the opposition. Remember those? The Chavistas walked away from the negotiating table in a temper tantrum over Alex Saab’s extradition to the US five months ago. Everyone from Maduro on down said, in no uncertain terms, talks would not resume until Alex Saab is released. With no mention of Saab is Maduro putting on a show of good faith with the opposition in hopes of getting a sanctions deal with the US? Maybe…

 And since everything is about oil these days we have Argus Media reporting that Venezuela claimed to be selling it’s crude at $80 a barrel (a few days ago). The real number is more like $60. Maybe that’s what’s got Biden’s eye…”Hey,look…cheap oil!” They went on to confirm that although Venezuela says they’re producing 850,000 bpd  of oil the real number according to OPEC secondary sources is 600,000 bpd. Let’s say it again, there is no oil for Venezuela to sell to the US without waiting years and investing billions of dollars for infrastructure upgrades.

 Then, on the inflation front we have some good news from Reuters. According to BCV (Venezuela Central Bank) data February inflation puts the annual rate at 340%. OK, so maybe the BCV numbers aren’t all that reliable and in the real world 340% inflation is Armageddon still, it’s a positive sign. It’s down from the prior month’s rate of 686% and coming off hyperinflation of over one million percent.

 And we all know that the Chavistas are all about “the people” and are deeply concerned with the environment…right? Well, maybe not so much. There was an interesting piece from City Lab/ Bloomberg about Maduro’s “Communal City” plan proceeding on previously protected land. The farmers town of Galipan, on National Park land, had 4 new mansions in 2019 and now has 12 more. It’s shrouded in the Chavismo rhetoric “a project for the common good.” It’s really just a way for wealthy, connected Chavistas  to skirt environmental law. According to Venezuela law only natives can live there. (natives with mansions?) It’s reported that locals are organizing to try and stop it. Good luck!

 And now, a quick trip Down The Rabbit Hole…

 The card is not required by the government but over half the people have registered. The majority of them did so for benefit related purposes. Retirees get their pensions through the card, remember that from the “El Petro” story? The CLAP food program is run through the card.In return for supplying the government with basically all they could possibly want to know about your life …tell them everything and you get a box of food every month or so at a cheap price (free for some). This is the most common and insidious use of the card. With the distribution run by the ‘colectivos’,Chavismo’s private militia with numbers estimated at over 400,000, you can expect a visit anytime the government wants your participation or cooperation with (in) something. Comply and your CLAP food box arrives, maybe even on time.Don’t comply…good luck.

 With most of the population, to use a kinder,gentler term, in a food insecurity situation this is a very effective means of control. With the minimum wage in the single digits per month (the recent increase not withstanding) another effective means are the bonuses the government puts out there. At Christmas it might be “The Baby Jesus Bonus”.One time they had a “Mothers Day Bonus”…etc. The frequency of these is directly related to the government’s perception of the potential for unrest and the amounts, while seemingly substantial in bolivar terms are usually only a few dollars.It costs the government almost nothing as the bonuses/bolivares are created out of thin air so what’s the downside anyway? A more devalued bolivar? A few bucks is a big deal when you’re making a monthly minimum wage in the single digits so maybe you “tow the line.” All bonuses are issued through the card.

 More tomorrow….

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