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Venezuela’s political situation is in turmoil again.
On August 2, local time, 27 opposition parties in Venezuela boycotted the new parliamentary elections to be held at the end of the year in order to resist election fraud. In fact, they refused to recognize the Maduro government that was re-elected in 2018.
Previously, affected by the new crown pneumonia epidemic, Venezuela’s oil exports fell by 28% in the first half of the year, approaching the lowest level in more than 70 years; the cumulative inflation rate in the first five months reached 295.9%, and 9.3 million people were facing a severe food crisis…
February 24, 2020, Caracas, Venezuela.
Looking back at the middle of the last century, Venezuela’s oil exports ranked first in the world, and its GDP ranked among the top 30.
In 2010, Venezuela’s oil reserves reached 296.5 billion barrels, making it the world’s largest oil reserve country. Together with the undeveloped geological reserves, its total reserves are equivalent to half of the entire Middle East’s oil reserves.
So, why is this country that is supposed to be sitting on the oilfield and enjoying the energy dividend in such a deep trouble?
Unique “Feng Shui Treasure Land”
Venezuela is located in the north of South America, in the tropics. From the topography, the whole country can be divided into 4 regions:
Northwest: Maracaibo Basin
There are dense rivers and developed fisheries here. It is one of the important agricultural areas in Venezuela. On the east bank of Lake Maracaibo, there are many oilfield derricks, and it is located in the country’s largest oil storage and production area. Oil reserves and production account for more than 70% of the country.
Venezuela Bay is an important channel for oil transportation in Lake Maracaibo.
North: Andes Mountains
The northern mountainous area only accounts for 16% of the total area of the country, but it is concentrated in the main cities and industrial and agricultural centers of Venezuela. The capital, Caracas, is in this area.
Central: Orinoco Plain
The central plains are vast and sparsely populated. The large grassland in the western half is a natural animal husbandry area; the eastern half is a delta formed by the alluvial accumulation of the Orinoco River, which is rich in heavy oil. It is the second largest oil producing area in Venezuela, Bolivar Oilfield(one of the top ten oil fields in the world) is here.
Southeast: Guyana Plateau
The forest and grassland are alternated here, rich in iron, gold, bauxite and other mineral deposits; the terrain is large, there are many rapids and waterfalls, and the water resources are abundant. It is concentrated in major steel plants and large hydropower stations.
Rich natural resources give Venezuela unlimited development potential.
At the end of the 15th century, 350,000 to 500,000 Indians lived on this land, mainly engaged in fishery and agricultural production.
After becoming a colony in the middle of the 16th century, under the dominance of its sovereign state Spain, Venezuela closely followed the demand of the world market. Over the next few hundred years, it has grown and exported a large number of tobacco, cotton, cocoa and coffee, and single crop cultivation. Inclination continues to increase. By the beginning of the 20th century, coffee and cocoa exports accounted for more than 90% of total exports.
In the 1850s, the Carriao gold mine was discovered, and the mining industry began to become an important sector of the national economy. In 1883, gold exports accounted for 23% of the country’s total export value.
In 1878, the towerThe first oil well was drilled in Chila State, and Venezuela’s first oil company was established with a daily output of 10 barrels of crude oil.
Since then, due to the rapid development of industrialization and the surge in oil demand, Western capital has rushed to intervene in Venezuela’s oil industry.
Venezuela’s Maracaibo Lake oil production site.
In 1909, the American Petroleum Company obtained 27 million hectares of concession land for oil exploration; in 1914, the Anglo-Dutch Shell Petroleum Company discovered the Menegrand oil field on the east bank of Lake Maracaibo, the famous Sumac l Well No. 2 was drilled.
By 1917, Venezuela produced 332 barrels of oil per day; in 1922, the Anglo-Dutch Shell Petroleum Company’s Rouss Barrosos No. 2 oil well suffered a blowout, spouting more than 100,000 barrels of crude oil per day; in 1925, Western Andes Oil deposits have also been discovered in the area.
Western capitalists will naturally not miss out on business opportunities. 73 foreign oil companies have been established successively, and investment in Venezuela has increased rapidly.
Throughout the 1920s, Venezuela’s oil production increased by nearly 200 times, and exports increased by about 116 times. In 1926, oil exports exceeded agricultural exports, pushing Venezuela into the “oil age”.
Recapture the fruits of victory from foreigners
In 1811, Venezuela declared its independence and established the Federal Republic in 1830.
It stands to reason that Venezuelans who have completed their independence, with their unique natural resources, should gradually live a good life. However, political turmoil has given foreign capital an opportunity.
From independence to the mid-20th century, Venezuela had a long-term military dictatorship. The military government monopolized national resources and suppressed agricultural landlords, laborers and emerging entrepreneurial groups.
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The largest political party in Venezuela’s history was born.
In the 2010 parliamentary election, the United Socialist Party won 59% of the seats and has a firm grasp of the Supreme Court and other judicial institutions.
By the end of 2011, Venezuela had proven crude oil reserves of 297.5 billion barrels, crude oil production of 3 million barrels per day, and exports of 2.1 million barrels per day, making Venezuela the world’s fifth largest oil exporter.
Venezuela ushered in a new round of “oil boom”.
Vicious circle! Is it because of oil?
The return of prosperity cannot conceal Venezuela’s “mutilation”-a single economic model that is highly dependent on oil.
In 1999, 37% of Venezuelan government revenue came from the petroleum industry; 10 years later, in 2009, this figure increased to 86%, and 94% of national income came from petroleum. Therefore, fluctuations in international oil prices have become the Damocles sword hanging over Venezuela.
Not only that, the reform measures have also planted many hidden dangers for the future of this country.
First, since the nationalization reform, Venezuela’s economy has completely relied on oil for “bloodmaking”, and the development of other sectors has stalled.
From 1998 to 2013, the proportion of industrial manufactured goods export revenue in total export revenue fell from 18.5% to 1.8%. In 2014, non-oil export revenue only accounted for 4% of total export revenue that year.
Secondly, the enthusiasm for overseas investment has been seriously dampened, and the oil industry has difficulties in financing.
According to the National Oil Company’s 2005-2010 Development Plan, the Venezuelan oil industry still needs US$6.3 billion in government funding and US$2.5 billion in private investment.
However, the nationalization reform led to a decline in the rate of return on investment, and a large amount of foreign capital was withdrawn. From 2006 to 2009, Venezuela’s foreign investment was a net outflow, and it was the only country in South America where foreign direct investment was negative.
The National Oil Company, which is in urgent need of funds, has to borrow debts to survive. It is estimated that by 2027, there will be 92.75 billion US dollars of debt due.
Third, public investment has soared, which eventually caused the oil industry to reduce production.
The Chavez government devotes a lot of resources to employment, medical