Photograph of an oil freighter in Lake Maracaibo, Zulia, Venezuela, 26 October 2023. EFE/ Henry Chirinos

Rebulding confidence, Venezuela’s challenge after the temporary suspension of sanctions

Carlos Seijas Meneses

Caracas, Oct 26 (EFE).- Whether or not the temporary suspension of US sanctions will have an impact on the Venezuelan economy will depend on President Nicolás Maduro, who will have to inspire confidence in those interested in doing or resuming business in the country by sending signals consistent with the requirements set by Washington to maintain the relief, experts warn.

The US announced last week the lifting of a number of sanctions it had imposed on Venezuela, including oil and gas sanctions, for six months in response to the agreement between Chavismo and the opposition to provide electoral guarantees for the 2024 presidential elections, including international oversight.

However, Washington warned that it could reconsider the decision if American “political prisoners” in Venezuela are not released and if the anti-Chavez María Corina Machado, winner of last Sunday’s opposition primaries, remains disqualified from holding elected office, on which the US wants to see concrete steps before the end of November.

Economist Luis Zambrano, a member of the Economic and Social Research Institute of the Andrés Bello Catholic University, told EFE that Caracas must show that “there is a will” to “resolve the political problem.” Otherwise, the risks are “very high.”

But in his opinion, the government sent a “very bad” signal last Thursday when its chief negotiator, Jorge Rodríguez, declared that disqualified politicians could not run for the presidency and that Venezuela “does not accept pressure, blackmail or interference from any power or country.”

Limited impact

Thanks to the negotiations and the temporary suspension, Venezuela is entering the international energy market “with force”, according to the government, which expects “an impact on income in the medium term.”

The research institute, for its part, believes that the lifting of the embargo “will have a positive effect”, but that it will be “limited, given the restrictions on infrastructure and services.”

Zambrano believes that the easing of sanctions would allow oil production, which ended September at 762,000 barrels per day (bpd), to increase by “at most” 200,000 bpd.

But “a number of factors” limit the possibility of expanding production beyond that.

The recovery of the oil sector requires ” very significant investments that today PDVSA has no possibility of making”, investments need to be made in human capital, electricity, roads, transportation infrastructure and security, said the researcher.

Zambrano noted that the sanctions “accelerated the process of deterioration” of the industry, which a decade ago produced 2.78 million bpd.

Without sanctions

The financial analysis firm Ecoanalítica calculates that in a scenario without sanctions, the economy will grow by 9.9% next year compared to 2023, which would mean “higher oil production,” also driven by the “incorporation of other” energy companies, such as Spain’s Repsol and Italy’s Eni.

According to economist Asdrúbal Oliveros, director of Ecoanalítica, lifting the sanctions “does not solve the problems by itself” and Venezuela will have to “renegotiate and negotiate conditions with the oil companies.”

Furthermore, he believes that a “key issue” will be “how Chavismo resolves the dilemma of guaranteeing competitive elections and operating without sanctions, but facing the possibility of losing power.

Since Monday, the Maduro government and other state forces have been fighting against the primary held on Sunday, and on Wednesday the Attorney General’s Office opened a criminal investigation into it.

According to the organizing commission, 2.3 million Venezuelans participated in the primary elections, both inside and outside Venezuela, and 92.35% voted for Machado.

Maduro’s government, which called on the US to begin a “new phase” in relations that were broken in 2019, hopes that the temporary suspension of sanctions is the first step toward the “definitive and unconditional” lifting of the “unilateral coercive measures,” but shows no intention of enabling the disqualified opponent.