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Home / World / While the Venezuelan economy is no longer spreading, Maduro's opponents hope that the downturn will trigger it

While the Venezuelan economy is no longer spreading, Maduro's opponents hope that the downturn will trigger it



PUERTO ORDAZ, Venezuela – President Nicolás Maduro from Venezuela has been driving into a battered ironworks this month to announce his export capacity against the backdrop of tightening American sanctions.

"No one will stop us," he said with his wife At his side, they were watching a briquette conveyor belt in the Guayana Steel Complex. "These are the days of victory!"

Two days later the plant was out of service. It was paralyzed by the crippling national blackout, which lasted nearly five days and wiped out the rest of Venezuelan heavy industry. The blackout, coupled with new US sanctions on Venezuela's critical oil sector, has brought the country closer to total economic collapse.

The better-off citizens of Venezuela have invested the savings in dollars to buy portable power generators, import canned goods and recover in hotels and steakhouses. The unfortunates saw on Friday a sign of a possible break with the news that the Red Cross would soon carry out an emergency response campaign in Venezuela.

For many, however, there is the hope that the ever-increasing hardship is the only one. The deterioration of conditions will put Mr Maduro to a standstill.

According to the investment bank Torino Capital, the blackout has taken away around 1 billion US dollars from Venezuela's gross domestic product. More than 500 looted companies, at least 40 hospital patients who have died and at least half a dozen closed factories.

Oil production, equivalent to the total output of a small petrostat like Brunei, was irretrievably lost due to the damage caused, according to IPD Latin America, a consulting firm, about oilfields due to the sudden loss of power.

The power blackout followed the US ban in January on any purchases of Venezuelan oil that led to years of mismanagement and corruption under Maduro and its predecessor, Hugo Chávez.

"The sanctions make it almost impossible for the government to buy and import the things they need to run a country," said Francisco Rodríguez, chief economist at Torino Capital.

Many opposition supporters see economic pain as a bitter medicine to get rid of Mr. Maduro. For the supporters of the president, however, the sanctions provide much needed foil to blame the blame for the economic grievances.

Few Venezuelans say they are ready for the collapse of the already bad living conditions when Mr Maduro survives the onslaught of the new American sanctions that are currently prevailing on the Venezuelan roads.

"The crisis will intensify," said Maria Altagracia Perozo, a pensioner from the working-class district of the Caucagüita capital, Caracas. "We are asked to look for candles, matches and kerosene because there will be no light."

Faced with shrinking oil revenues and brain drain, Mr. Maduro has had trouble restoring basic services since the March 7 blackout. Worst ever Water supply was temporarily interrupted in most cities, and students and government employees stayed home this week after a fire at a substation led to another power outage.

Fewer than half of Venezuelans said they were against President Trump's sanctions against the Venezuelan oil industry According to a poll by country's leader, Datanalisis, in early March. Given the direct impact of sanctions on living standards, this was a surprisingly low proportion.

"If I have to sacrifice a month for life without electricity and water, I will do it because I know that this is the only way to improve this country," said Valdemar Álvarez, a laboratory analyst at the Sidor Steel Plant in Puerto Ordaz, who opposes Mr. Maduro.

Venezuela's economy is expected to lose more than a quarter of its size this year to Mr. Rodriguez, one of the few Wall Street economists who still tries to predict the extent of the country's decline. Inflation is on track to reach 51 million percent by the end of the year, making the national currency virtually worthless.

The extent of the country's collapse has only been surpassed in modern history by Zimbabwe, according to the Institute of International Finance.

Venezuelan crude oil production, which used to account for more than 90 percent of the country's hard currency, fell 13 percent in February – the steepest decline in a decade – according to the Organization of Petroleum Exporting Countries.

It was the first month since The US Treasury banned American companies from any business relations with national oil producer Petróleos de Venezuela SA or Pdvsa. And the decline has only accelerated since then.

Sanctions, blackouts and an accelerated brain drain could erase Venezuela's oil production this year, according to IPD's advisors. The country's analysts expect the country's output to drop from 1.36 million barrels a day in February to 550,000 barrels a day by the end of December, roughly at the level of tiny Ecuador.

The United States, once Pdvsa's biggest customer, did not buy Venezuelan oil in March for the first time since the 1970s, according to the Department of Energy. And the ban officially comes into force in April.

Mr. Maduro had difficulty relocating exports to other countries.

India, which Pdvsa had counted on as a replacement buyer, reduced its Venezuelan oil purchases in March under American pressure. Oil trading companies, from Lukoil of Russia to Trafigura, headquartered in Switzerland, have no longer supplied Venezuela with oil products for which Pdvsa must maintain its operations.

The sanctions have accelerated Venezolas economic cycle to invest in basic services. This in turn leads to a further deterioration in oil production, said Siobhan Morden, strategist for Emerging Markets at Nomura Investment Bank in New York.

"This multiplier feedback effect is very powerful and affects almost all people in Venezuela," she said. "The effects will be terrible."

The sanctions have made it difficult for the government to import the diesel fuel needed to run its thermal power plants. Pdvsa's run-down refineries, once one of the largest in the world, have long since ceased to meet national demand for products such as gasoline and diesel fuel.

Due to the poor supply and maintenance of thermal power plants, Venezuela was no longer in a devastating fire under an emergency supply The transmission line broke out on March 7, the country's most important hydroelectric power plant.

When the lights returned, the entire Venezuelan industry had ceased to exist.

The blackout erased the last vestiges of Venezuelan steel, aluminum and iron production, which Mr. Maduro had advertised as an alternative to oil exports for income generation.

More than 10,000 workers had come to shift shifts in moribund farms to get free meals in the canteen, which for many had become the staple food source. Hyperinflation has cut its wage to a few dollars a month for a long time.

"It's like working in a coma," said Rona Figueredo, union leader of the Briquetera del Orinoco Ironworks in Puerto Ordaz, who blackout her last production line.

At least half a dozen other state-owned metalworks have ceased operations after the blackout, including flagship Sidor, aluminum Alcasa and Venalum, and three ironworks.

It was the "last nail in the coffin" for the industries that were single-digit after years of mismanagement, said Damian Prat, a veteran of Puerto Ordaz, a labor activist and author of a book on Venezuelan heavy industry.

The government has blamed electrical problems for what it has termed sabotage from the United States without providing evidence. Government officials also said that the state heavy industry was able to maintain production despite the blackout.

"Without these industries, there can be no economic recovery in Venezuela," said the author, Mr. Prat.

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