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Collapse of oil production destabilizes the country's economy

November 15, 2018 – 11:26 am

A steady decline in oil activity has become the most critical variable that threatens to further destabilize economy Venezuelan, warns the National Academy of Economics in its report for the third quarter of 2018.

The document points out that if production in August last year compared with 1.23 million barrels per day to the secondary sources of the Organization of the oil exporting countries – with the average of 2017, the reduction in oil exploitation is 587,000 barrels per day, which partly explains the collapse of the entire economy, since this exports contributes 96% of the country's income.

They note that the drop in the pump has prevented a favorable impact that the recovery of international oil prices would have for the country. At the end of August, the price of Venezuelan crude oil was $ 68.86 per barrel, almost $ 24 more than last year.

The drop of extraction shows a decrease in the number of active wells, an indicator of future production. A report by Baker and Ges from May shows that activity fell to 27 wells, on average 49 in 2017.

The Academy's analysis points out that "at the end of the third quarter of this year, the contraction of the Venezuelan economy seems to continue to accumulate 19 consecutive quarters of declining GDP." He says that, although there are no official data, the National Assembly announced on September 12th the latest projections of the economic activity index evolution with a decrease of 25% in the first quarter of 2018.

The decline in GDP, according to the Academy, closed the shops due to a sharp decrease in demand and purchasing power of wages and a decrease in the production sector due to a decrease in purchasing orders and a lack of inputs and raw materials of import origin.

"By the rate of progressive productive collapse of the Venezuelan economy, the conservative estimates for the 2018 ECLAC and the IMF ranging from 8.5% to 15% will be significantly lower, as all indicate a major deterioration before a serious company situation due to lack of input, collapse basic services and the obvious collapse of the oil industry, "the Academy says.

He assures that the non-oil export sector "remains" due to difficulties in exporting goods and services at a lower rate than that which should be applied to imports of raw materials and inputs.

He adds that capital inflows have been suspended due to the uncertain financial situation of the Republic and Petrolea de Venezuela against external creditors due to the effects of sanctions imposed by the 13808 presidential order of the president of Trump in August 2017.

"Venezuela remains in the international market in a complex situation of selective non-enforcement, and since October, excluding the PDVSA 2020 bonds, it has failed to honor debt obligations presented in international bonds."

Deferred debt (grace period) or non-enforcement of Petroleos de Venezuela and the Republic exceeds $ 6.3 billion, but by the last quarter of 2018, they accumulate maturities of $ 3.5 billion, which would take a total sum of non-enforcement and debts to $ 10 billion.


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