Caracas Chronicles

Photo: The Blaze retrieved

As Venezuelans now have the unprecedented luxury of consuming free gasoline, the smuggling business at the border is more profitable than ever. “Gasoline and internal hydrocarbons must be sold at international prices to end smuggling to Colombia and the Caribbean,” said Nicolás Maduro on August 13, 2018. President Maduro then added that “in a few days” he’d announce a new price scheme for the hydrocarbon and a direct subsidy for two years for a part of the population.

But, since then, silence.

Gas went from being the cheapest in the world—one of Maduro’s complaints—to being the only one in the globe that’s given away for free, because sometimes service stations don’t even take money anymore. After all, the current monetary cone doesn’t have such small amounts (Bs.S. 0.00001 per litre.)

As Venezuelans now have the unprecedented luxury of consuming free gasoline, the smuggling business at the border is more profitable than ever.

When the raise was announced, filling a 40-litre gas tank in the country was 500 times cheaper than taking a bus. In November, filling the same tank is 300,000 times cheaper than a bus fare.

You can make the opposite conversion and it’ll be even more absurd: The entire content of a gas tanker truck—38,000 litres of fuel—is cheaper than a Metro de Caracas ticket (Bs.S. 0.5). Hence the profitability of the smuggling business.

In Colombia, for instance, gas prices were higher than ever on November 11, costing about $0.79 per litre. In other words, the whole tanker truck can be bought for $0.0013 in Venezuela (at the black market exchange rate) and upon crossing the border, it becomes $30,000. Voilá.

The smuggling mafias have a hand in this decision, while PDVSA struggles to fill the tanks of vehicles. “They pressure so they won’t lose their business,” says Iván Freites, general secretary of Falcón’s Union of Oil Workers. “It involves PDVSA employees, managers, the military on both sides of the border. It’s organized crime that requires a concerted effort between both governments,” he adds.

Colombia is the most active market for smuggling. 16,000 gas barrels cross the border daily, along with another 9,000 gas oil barrels. That doesn’t include micro-trafficking in smaller containers. Then, another 5,000 barrels may be smuggled to the Caribbean islands while some more go to Brazil. “We estimate that 80,000 barrels of fuel are smuggled daily. Rafael Ramírez once said that it was 100,000,” says Freites. That quota, he adds, is untouchable.

Colombia is the most active market for smuggling. 16,000 gas barrels cross the border daily, along with another 9,000 gas oil barrels.

“The price of gas hasn’t increased because it’d be like legalizing cocaine: it stops being profitable.” Rocío San Miguel, head of the NGO Control Ciudadano, which monitors the military, doesn’t play around. To her, the broad national border which ecompasses 70% of the territory, is a next level of corruption awash with fuel, even by sea.

“The Bolivarian revolution is interested in having a feudal model at the border. It’s about a model that isn’t controlled by the State, but by mafias who impose their own State,” says San Miguel. And her words resonate. After all, the Army is in charge of border surveillance, at least in theory. In July 2018, and for the first time our history, a National Guard officer, Major General Fabio Zavarce, was appointed commander of the Western Strategic Region of Integral Defense (REDI) which faces Colombia, the country that, according to chavismo, wants to invade Venezuela. Zavarce is sanctioned by the United States for being responsible of repression against the protests in Caracas during 2017. He’s also included in a list kept by the Panamanian government as a high-risk person in money laundering affairs.

A broken market, a fool’s quest

Venezuela’s internal market of gasoline needs 190,000 barrels daily, which is reduced by smuggling and international agreements: 52,000 barrels are set aside to be sent to Cuba. Those quotas are also untouchable, even though current production is unable to cover the entire internal demand.

The installed capacity of Venezuelan plants in barrels per day is: Amuay, 400,000; Cardón, 200,000; El Palito, 70,000; Puerto La Cruz, 14,500. But none of those operates at 100% capacity. They’re estimated to operate at 40% in general.

Venezuela’s internal market of gasoline needs 190,000 barrels daily, which is reduced by smuggling and international agreements.

In fact, in September, gasoline production in Amuay shut down for lack of components required for operation. The plant is currently at 30% of operational capacity, according to Ramón Castro Pimentel, former vice-president of Deltaven—a branch company of PDVSA created over 20 years ago to operate the business of fuel distribution for vehicles. A week later, it was revealed that Cardón was also shut down. Additionally, El Palito (Puerto Cabello) and Puerto La Cruz operate at half their capacity and with intermittent production since September 2017 at least.

Operation is down due to lack of foreign currency to import the necessary components for the process, on top of operational issues. According to figures from the Organization of Petroleum Exporting Countries (OPEC), in 2017, the country produced 179,000 gas barrels per day, 12% less than the previous year and its lowest level since the oil strike in 2003.

Journalist Andrés Rojas Jiménez, from Petroguía, says that there’s no money to recover the production of 2018-2019, nor to install the necessary infrastructure to increase fuel prices—biometric system and points of sale—because the costs are unaffordable. “PDVSA’s financial priority has been debt payments,” he says. Additionally, there’s the “political problem,” the fear that fuel price hikes could spark protests.

Iván Freites believes that gas prices are indeed going to increase, but in December or January, so that its impact isn’t registered in inflation rates for 2018. Naturally, he doesn’t dare to mention a price. “And the international price gimmick is ambiguous, there’s no standard.”

Castro Pimentel’s estimates say that the production costs for gasoline result in a price per litre of Bs.S. 27, which should increase to Bs.S. 41 in order to reach an international price calculated on the basis of exports values. If that’s the case, the price for a 40-litre tank for a small vehicle could be around Bs.S. 1,080 to cover PDVSA costs, or reach Bs.S. 1,640 to compete with border smuggling.

Miraflores could choose more cautious numbers, but hyperinflation won’t let them. Meanwhile, border smuggling grows strong, and citizens’ lives turn into an apocalyptic mess filled with shortages, long queues and fear.