Omitting the Evidence: What the IMF Gets Wrong About Venezuela
JANUARY 23, 2023
BY MICHAEL GALANT – FRANCISCO R. RODRÍGUEZ
On December 5, 2022, the International Monetary Fund’s (IMF) Western Hemisphere Department published a report titled “Regional Spillovers from the Venezuelan Crisis,” which assesses the causes of Venezuela’s economic crisis, the drivers of the country’s record emigration, and the impact that this influx of Venezuelan migrants has had on neighboring countries. While these are worthy topics of research, and there is much of value in the report, authors Alvarez et al. curiously omit a critical piece of the puzzle, and one of the single most important factors contributing to Venezuela’s current economic and humanitarian plight: US economic sanctions.
In August 2017, the Trump administration issued Executive Order 13808, barring the government of Venezuela, including the state-owned oil company Petróleos de Venezuela, S.A. (PDVSA) and its joint ventures, from accessing US financial markets. Though the United States had imposed sanctions on certain Venezuelan individuals and entities before this, including under the Obama administration’s E.O. 13692, which declared a US national emergency with respect to Venezuela, the August 2017 sanctions marked the beginning of a series of sweeping sanctions that would define the Trump administration’s approach to US-Venezuelan relations. Sanctions were escalated even further alongside the recognition of a parallel government beginning in 2019, most notably with the January 28 designation of PDVSA as a sanctioned entity, and the 2020 imposition of secondary sanctions against shipping companies involved in the transportation of Venezuelan oil. The vast majority of these sanctions remain in place today.
The impact of these sanctions has been swift and disastrous, particularly on Venezuela’s oil output, which is the country’s primary source of foreign revenue. While there are no doubt multiple factors that have contributed to Venezuela’s precipitous drop in oil production — from 2.4 million barrels per day (bpd) prior to the crisis, to a low of 0.4 million bpd in mid-2020 — a preponderance of evidence points to US sanctions as a significant driver of the decline. A 2022 analysis by one of the authors of this post, Francisco Rodríguez, attributes the loss of 797,000 bpd to the 2017 financial sanctions. Other studies using different methodologies have set this figure at 698,000 bpd (by Equipo Anova[1]), and from 616,000 to 1,023,000 bpd (by Luis Oliveros). And a recent paper by Rodríguez in the Latin American Economic Review uses variation in production across the country’s Orinoco basin to estimate the impact of sanctions at 255,000 to 637,000 bpd.
Despite these well-documented impacts, US sanctions on Venezuela are mentioned in the body of the 61-page IMF report only twice. Once, the report does appear to imply some adverse effects of sanctions, albeit while suggesting that they have been mitigated: “Venezuela has been able to place its heavy crude oil in the Asian market at a substantial price discount, alleviating in part the impact of sanctions.” However, the other mention of sanctions specifically downplays their impact: “The sharp decline [in oil output], which preceded the introduction of oil sanctions by the United States in January 2019, reflected both internal and external factors.”[2]
This latter assertion is an oft-repeated claim, one that is misleading at best. While it is true that the start of the decline in oil production, and indeed the beginning of the economic crisis itself, preceded the 2017 financial sanctions, this is hardly evidence that the multiple waves of sanctions have not had a significant causal effect. In fact, while the magnitude of the impact differs across the available data series, all show an accelerated decline in oil output following the imposition of sanctions (see Figure 1).
Figure 1
Venezuela’s Oil Production, 2008–2020
Source: OPEC. Republished from Francisco Rodríguez, “How Sanctions Contributed to Venezuela’s Economic Collapse,” Global Americans, January 9, 2023.
More:
https://www.counterpunch.org/2023/01/23/omitting-the-evidence-what-the-imf-gets-wrong-about-venezuela/
