Caracas Chronicles

From an economic standpoint, 2018 looks grim, with a government that refuses to change course. Meanwhile, the National Assembly’s Finance Committee has a plan and, according to lawmaker Ángel Alvarado, the drive to rescue Venezuela.

“I don’t see options for economic change without regime change,” says lawmaker Ángel Alvarado, who represents Petare neighborhood, Sucre municipality, in the National Assembly (AN). He’s an economist from the Andrés Bello Catholic University with a master’s degree in Statistics from the Simón Bolívar University.

The parliamentary year is about to start and, with the usual judicial obstacles, there’s much uncertainty on whether the opposition majority will be able to do much. After four straight years of economic recession, in the face of a 2018 that promises to be far worse, Caracas Chronicles sat with lawmaker Alvarado, a key spokesman for the Finance Committee, to figure out the role that the opposition majority will play in the fight to protect public finances from total collapse.

“They couldn’t sidestep the Assembly”

Limiting the government’s capacity to issue new debt has been one of the AN’s most effective efforts. Knowing that the government required Parliament’s approval to make the nation get in debt (even more), on May 30, 2017, the National Assembly spoke against the sale of PDVSA 22 Bonds to Goldman Sachs Asset Management, for a price 30% below the market price.

I don’t see options for economic change without regime change.

“These warnings have earned us the support and respect of the global financial community, along with more than 40 countries. On the session held in August 12, 2017 (the ANC had just been installed) we were accompanied by 12 ambassadors from the main countries of the world. They couldn’t sidestep the Assembly, despite rulings 155 and 156 issued by the TSJ and the installation of the fraudulent ANC.”

“In order to issue new debt, we must take a new political course. I don’t see options for economic change without regime change. As long as I sit in the hemiciclo, I’ll do my best to prevent Maduro from issuing new debt without the democratic majority’s approval.”

And that includes the Petro. According to Alvarado, the Petro is “noise”, because “a government that is incapable of managing one currency could not possibly manage a second one.” The cryptocurrency, which is backed by part of the oil reserves of the Orinoco Oil Strip, as per a presidential decree, would be “an illegal currency, because commodities can’t be sold without the AN’s approval.”

“Corruption is something we have to tackle with a plan to strengthen the institutions”

The ruckus caused by negotiations in the Dominican Republic and the apparent collapse of the opposition coalition has fueled rumors that some opposition leaders might have ties to the regime. Many believe that the monster of corruption is at home with the opposition caucus and in this regard, lawmaker Alvarado says they’re “working on an anti-corruption strategy that starts by: i) determining the amount of money that the regime and its cronies have embezzled (…) ii) exploring the legal options to return the embezzled funds to the country.”

“Corruption is something we have to tackle with a plan to strengthen the institutions. First, we must change the country’s economic structure, forcing the State to stop working like a company that subsidizes the interests of a few and buys people’s loyalty, and to return to the Rule of Law and to Justice. Second, we must reach an accord of governability with the unflinching commitment to fight against corruption, which we must honor as scrupulously as Betancourt, Caldera and Villalba did in 1958.”

The “Green Party”, Trafigura and PDVSA’s death spiral

2017 ended with an incomprehensible enigma: Why put a soldier in charge of PDVSA amidst this production crisis and in the face of eventual default?

They’ll destroy what’s left of PDVSA. You can see it on the street: there’s no gasoline or gasoil, there’s no cooking gas, no motor oil.

“Chavismo is divided. If that wasn’t the case, Maduro would’ve kept in his cabinet the two members that had some semblance of a good relationship with the financial community – Martínez and Del Pino (…) the men in green keep Maduro in power, but not for free. Since preferential dollars have almost run out, Maduro handed them the goldmine in order to hold on to power. Dicom is history and now Quevedo, a GNB, the most pro-Maduro security body, is put in charge of PDVSA. Quevedo isn’t there because of his skills, but because he represents the balance between PSUV’s political factions.”

But they’re not handling the crisis from a technical perspective, “they’ll destroy what’s left of PDVSA. You can see it on the street: there’s no gasoline or gasoil, there’s no cooking gas, no motor oil… PDVSA controls the entire economic process.”

There’s also Trafigura and its alleged agreement with PDVSA; the State-owned company would receive a cash loan on day one, under the contractual promise to ship crude on schedule. The lawmaker is skeptical: “[Trafigura is] taking a tremendous reputational and judicial risk if they choose to help PDVSA. They know what we think about the agreement.”

In any case, the reports issued by OPEC in October, 2017, showed that the oil output reported by Venezuela has fallen below the two million barrels per day, a level not seen since the 80s.

According to lawmaker Alvarado, “the problem lies in the political model,” which is concerning, but also “gives us hope because, once there’s regime change, we’ll have many allies. Material capital can be recovered and, in a reasonable time, we could also recover the company.”

When asked to comment on the partners of Joint Ventures, the lawmaker stated that “they’d rather not discuss it”; even though “they know that PDVSA’s situation is a disaster and that it’s difficult to do business in those conditions,” they’ve admitted that “after political change, they’d be willing to significantly increase their investment to boost output levels. Some of them are quite optimistic and tell us that they’re foreseeing output to rise significantly in the medium term, especially in the western field abandoned by Chávez’s government.”

Foreign debt and knocking on doors

“The government doesn’t learn, and they hold on to their mistaken strategy of paying debts with more debts in increasingly worse conditions. They’ll never evade default like that…”

Hunger is unforgiving.

In order to deal with the colossal foreign debt and the inevitable default, Alvarado thinks it’s necessary (and urgent) to implement a plan to recover PDVSA, unify all foreign currency exchange rates and allow joint ventures to operate independently. At the same time, “we require all the technical and financial assistance we can get from allied countries, from the global financial community, our creditors, multilateral institutions, foreign oil companies, etc. I think we need to refinance the debt with massive financial assistance.”

The priority “must be tackling the humanitarian crisis”

The recent pernil protests and delays in the delivery of CLAP boxes is a clear indication that “the hunger is unforgiving.” Alvarado, who has actively promoted the program Alimenta La Solidaridad to care for malnourished children in Petare, believes it’s a priority of any economic plan to tackle the humanitarian crisis. “Recovering our consumption levels requires that we recover PDVSA with an urgent plan to raise production.” We need to implement “new social policies based on direct cash transfers to the poorest families, along with the restructuring of the current network of subsidies and a plan to supply food and medicines based on the price system, as well as international humanitarian aid.”

What now? “We must conquer the future in 2018”

According to the lawmaker the AN opposition caucus and a sizeable group of collaborators are already creating a “fast, credible [economic plan] for stabilization and expansion since day one, focused on people’s wellbeing and on reactivating production.”

He immediately adds: “I’ll focus on two aspects of our strategy of democratic fight in 2018. One, accompanying the people in their suffering. We’re on the verge of a biblical famine. In Petare, my electoral circuit, we’ve opened five public diners to help children suffering from malnutrition thanks to Maduro’s hyperinflation and economic collapse. The idea is to reach 10 this year and prevent more children from starving to death. You have no idea how lives can change with proper access to food. We’ll have to write our own Schindler’s list.”

“Two, I work on the premise that we must accept our mistakes, admit our defeats and go out to conquer the future in 2018. That’s the only way we’ll channel people’s dissatisfaction through our fight to face the dictatorship and the fraudulent Constituyente. We must recover free elections as the tool for political change because this situation is too volatile, and without that political option, we’ll lose every chance to pull the country out of this catastrophe.”