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.

Caracas Chronicles is 100% reader-supported. Support independent Venezuelan journalism by making a donation.

5 COMMENTS

  1. What a cluster-fuck eh? And the day they raise the price of fuel, all product prices across the board will spike. As it stands right now,transportation is the highest cost of any industry multiplying the cost of every commodity because of the wear and tear on tires and engine parts not to mention the engine oil and filters. Imagine when transport costs include the real price of fuel as well. Things are barely creeping along now, add that expense and we shall see some extreme effects.

  2. Most of this smuggling is actually done by average civilians and “mafias” made of average people.

    Not by the Chavista “government”, mind you. They do tolerate it and even promote it, sure. It’s in their interest to have as many regular people involved in criminal activities as possible. Especially the military -all corrupt and complicit – and “law enforcement”, as it were, the Guardia Nazional, Police, Sebin, etc. All corrupt too. Which is why I often label what’s left of Venezuela as Kleptozuela. Because a vast majority of the people is involved in some sort of illegal, dubious, corrupt activity. Some form of theft or embezzlement. Not all, but most people left are culpable of some form of shady deal, underhanded trade, smuggling or what-have-you.

    Financial, twisted ruses and other forms of white collar crime. (Bogus exchange controls, crypto-crime..) Shady deals and obscure trades with food. Public and private construction contracts with massive kick-backs left and right. Unfinished projects with unaccounted funds that were originally allocated. Heck, countless projects that were financed but never even started.

    Basically, crime is everywhere. At all levels, from the lowest workers or office employees, to mid-management to upper management and owners. On both the public and private sectors. It’s not just the Chavista “government”, the mega-criminals in power doing the crimes. No. They just stole the oil and gold or gave it to the Chinese/Russians in for kickbacks. And they do the massive Drug Trade, coordinating with the corrupt military and guardia nazional. But the rest of the countless forms of more petty crime, such as the smuggling described in this article, is carried out by the average population, el Pueblo, yes. Thus the name Kleptozuela: because almost everyone left has their hands dirty with some twisted scam. In that sense, almost everyone is partly responsible and culpable for the country’s disaster and ultimate demise. Because almost everyone stole and steals a lot, everywhere, at all levels, not just “the government”.

  3. For instance, an old friend of mine owns the largest turkey production company in Venezuela. (Avicola Mayupan). For decades they have raised they turkeys, from the eggs incubation to feeding and raising the birds, fattening them, to the slaughter houses, packaging, transportation, sale and supermarket distribution.
    Lots of “smuggling” there too. Not gasoline to Colombia, but flat-out theft of the birds for resale. Sometimes by the dozens, sometimes one by one, the turkeys suddenly disappear. As if they could fly.

    Average people living nearby steal them at night or whenever they can. To the tune of 40% of the production, sometimes even the small chicks disappear, even the eggs if left unsupervised by armed guards. Call it turkey smuggling. And this happens in all industries that somehow have managed to survive. Chickens, fish, agriculture, not to mention the infamous mining industry, which is a den of thugs and thieves, the wild-wild west at El Callao..

    Average people even steal even the equipment and parts of the infrastructure, even PVC pipes, copper cables, truck spare parts, they dismantle everything with some resale value that is temporarily left unattended. Dare to leave a motorcycle or a bicycle in the street for 10 minutes? It’s gone. And if you put a massive lock on it, they’ll steal the wheels or whatever. Leave your car outdoors? The battery won’t make it through the night. Even in Margarita, years ago, another friend had to take the battery out every day. He owned a Ferreteria in Porlamar, if he blinked or went for an errand they would steal any supplies they could grab, average thugs from the street.

    Look at the houses in Caracas or any smaller town or pueblo anywhere in Venezuela: They resemble little fortresses, with “rejas” on every window, triple locks on every door, high walls, alarms. Heck, even the poorest “ranchitos”, the shabbiest little houses in Petare, the apartment buildings, everything is locked because petty thefts happen everyday, everywhere.

    No Chavista “government” is involved in any of that. The lack of police, law enforcement and actual punishment for petty crimes – jail time – promotes all this. (99% of all street crime would disappear under a Perez Jimenez or a tough government). But it comes down to the lack of moral values and lack of rectitude, lack of proper education of a large portion of the average population. It would take an entire generation to teach El Pueblo how to behave, with tough rules, tons of police and severe punishment for any petty crimes. Gas smuggling is just one of the thousands of ways people steal everyday, everywhere. It’s has become a country of bandidos, puro choro as we say, crooks and vandals at every corner, not just the Colombian border, not just the Chavistas.

    • Really well-said, Poeta. A friend had one of the biggest hog productions in Venezuela, 6m now down to 2m/less. When at the slaughter house, his employees had to watch the slaughter house employees to keep them from slipping pork cuts down into their rubber boots. His farm installed electric fences, but they were thwarted by inverted forked sticks so that even the fence alarm didn’t sound. Baby pigs, 15 at a time, are stolen regularly by his pata-en-el-suelo neighbors; he doesn’t install video surveillance, because then his neighbors will go after him/family. Professional gangs have kidnapped him/brothers twice, once cutting one’s little finger off as proof-of-life, and he’s payed them extortion money once to avoid another kidnapping. And, no one goes out at night in Venezuela, driving, or much less walking, if he values his life.

  4. 1) Pre-Chavismo, VZ prospered (more or less) with the absurdly “generous” gasoline subsidy, selling it for far below cost.

    2) VZ is collapsing.

    3) Raising gasoline prices isn’t going to do a fucking thing to help the economy of the country. Stopping smuggling to Colombia ain’t gonna help a fucking thing either. Stop the smuggling, and what happens? Now you have more gasoline within VZ that ain’t gonna change a fucking thing anyway, in any way. Make it $10 U.S. a liter, or 10 cents U.S. a liter:

    No one can afford to buy it.

    4) So gasoline smuggling to Colombia is SAVING the people who profit from it, and how can Chavismo be against saving people?

    ————

    This whole gasoline issue is a sideshow non-issue. Just something for Maduro to point to his as the cause of his failures.

LEAVE A REPLY

Please enter your comment!
Please enter your name here