Venezuela’s economic woes just won’t quit. Its currency recently hit an all-time low with black market traders. Now the South American country has to ration food – and, believe it or not, import oil.
Venezuela has the world’s largest oil reserves. But it produces mostly thick, heavy crude that has to be mixed with lighter oil to make it usable. Problem is, Venezuela’s seriously mismanaged state-run oil industry isn’t pumping enough light crude. So this weekend the country will receive its first ever shipment of foreign oil: two million barrels from Algeria.
“It’s a sad commentary,” says Russell Dallen, head of the Venezuela-based securities firm Caracas Capital Markets. “You’ve got a country that has more oil than Saudi Arabia. And Saudi Arabia can easily produce 11 million barrels a day. Venezuela can’t even produce 3 million barrels a day."
That’s also bad news for Venezuela’s economic crisis. The country relies heavily on oil revenues. As global oil prices drop, shortages of basic goods are getting worse – and this week Venezuela even started a food-rationing program more reminiscent of Cuba. Possible debt default is another concern.
“At a hundred dollars a barrel, Venezuela couldn’t pay all its bills," says Dallen. "Now we’ve fallen to $80 a barrel, and the situation is deteriorating for the country.”
Some relief did come this week when China agreed to restructure a portion of Venezuela’s debt.