Root Causes

 Before we head Down The Rabbit Hole, a few items from the news feed. KPBS had this piece which is a sample of articles I’ve seen reporting on locales from Tijuana to Juarez (California to Texas) “Tijuana shelter system at breaking point as Venezuelan migrants arrive”. The Biden administration has ignored the migration crisis pretty much since taking office. When Texas Governor Abbott and Florida Governor DeSantis started busing and flying migrants to New York, Washington D.C., Martha’s Vineyard, and other places everybody freaked out. All of a sudden Democrats everywhere and the Biden administration couldn’t ignore the border crisis anymore.

 Now, with the Biden administration returning to the Trump era “remain in Mexico” policy (the one he cancelled upon taking office, which caused a large part of the problem) things are changing. Now everybody in Mexico is freaking out. All of a sudden they can’t ignore the migrant crisis.

 Everyone says we need to address the “root causes” of migration. (It’s a popular talking point among Democrats in the US who’ve been calling for “comprehensive immigration reform” for decades…and in case you didn’t know, comprehensive is politi-speak for “we don’t want to do anything”)  I can’t speak to other countries  but in Venezuela the “root cause” of migration is the regime of Nicolas Maduro and 21st Century Bolivarian Socialism…that’s 7.1 million and counting…FYI, VP Kamala Harris, Biden’s “Border Czar”, showed the Biden administration’s commitment to finding the “root causes” of migration. She went to Guatemala, met with the president, then 6 months later he still hadn’t heard from her…maybe he still hasn’t.

 Then we have the T&T Guardian reporting that, as expected, the death toll in the deadly landslides in Venezuela has risen to 50 as the search for the missing continues.

 And we have AP reporting that Guyana’s government asked Facebook and Twitter to remove false maps posted showing the long-disputed Essequibo region (40% of Guyana’s territory) as part of Venezuela. No surprise that the region contains large oil, gold, and other mineral deposits.

 Then we have Caracas Chronicles telling us that professor Francisco Monaldi tweeted “Production remains stuck at lower levels than late 2021… while there’s no new investment for drilling of new oil wells, PDVSA’s (government-owned oil company) productive capacity will continue to decline. Bug surprise huh.

 And we have the San Antonio Report telling us that 90% of migrants processed at San Antonio’s migrant processing center are Venezuelan. The new DHS (Department of Homeland Security) policy is expected to reduce the number of illegal immigrants due to the reinstatement of the Trump era “return to Mexico” policy.

 And we have the New York Post reporting that Texas Congressman, Terry Gonzales, says the first 100 Venezuelan migrants returned to Mexico under the new Biden administration policy (the old Trump policy) were refused at the El Paso border. They said they simply weren’t ready with the logistics.

 Then we have Daily Mail reporting that Florida oil man, Abraham Shiers, received only a 12 month sentence for his part in the $1 billion PDVSA bribery conspiracy due to his cooperation with federal authorities. His business partner, Roberto Rincon, will be sentenced in December. The federal probe is ongoing.

 And we have Law 360 reporting that the Second Circuit Court declined to rule on the $1.9 billion defaulted Venezuela bond case saying it was a matter for the New York State appeals court. We told you… the bond vultures are circling.

 Now let’s head Down The Rabbit Hole, shall we…

 Chapter 3/ continued…

 … So lets see, we have 100,000 bpd to Petro Caribe 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 (it’s lower today for a number of reasons) 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. (How ’bout those long gas lines huh) So who actually pays PDVSA for their oil? (Remember, this was originally written in 2019)

 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 of oil 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 lets say an average of 700,000 bpd for domestic needs, another 100,000 for Petro Caribe, and another 100,000 for Cuba and you have 1,600,000 bpd to be supplied for free!

 Since everything Venezuela-related seems to be good news/ bad news lets look at the upside. With all the oil they basically had to give away for free due to their irresponsible use of resources and finances there were still some paying customers out there. Year over year they were exporting about 300,000 bpd to India and another 800,000 bpd to North America, most of that to the US. Despite all the anti-capitalist and imperialist bluster the USA was their number one trading partner. The downside regarding revenues from the US was that it wasn’t all cash. Remember, Venezuela needed condensate to process the extra-heavy crude and their number one supplier of condensate was the US. That said, the US still bought, and paid for, more Venezuelan oil than any other country.

 So now you have another 1,100,000 bpd to add to the ledger to maintain the status quo for a total of 2,700,000 bpd among the major players. Other than the peak production of 3,500,000 bpd, PDVSA produced 2,500,000 bpd most of the time so, as you can see, they had to do some juggling. They were 200,000 bpd short so one month the would short the free shipments and the next month they would short the paying customers and take the financial hit. But that only worked for just so long. From time to time they still needed to raid their gold reserves. You can see where we’re headed.

 Again, I apologize for the tedious nature of a lot of this but there are a lot of moving parts to this train wreck. I’ll try not to get too deep in the weeds but please bear with me.

 As this scenario is unfolding lets flip back to the personnel side of the story. Remember, even with the purge there were still some qualified people at PDVSA among the bloated payroll. That would begin to change when oil prices dropped and the Chavista credit dried up. First it was just people frustrated that Chavistas were promoted while the real oil professionals were expected to carry the “dead weight”. The desertions accelerated when employees saw the handwriting on the wall. Things weren’t going to get better any time soon so if they could get out they did.

 More tomorrow….


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