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  February 11, 2018

Tillerson Tries and Fails to Rally Latin American Support for Sanctions Against Venezuela


US Secretary of State recently completed a tour of Latin American countries where he unsuccessfully tried to rally support for regional sanctions against Venezuela. However, as Venezuela's Charge D'Affairs in DC explains, US unilateral financial sanctions against Venezuela is causing significant problems for the country
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Sharmini Peries: It's the Real News Network. I'm Sharmini Peries, coming to you from Baltimore. US Secretary of State Rex Tillerson completed his tour of politically conservative Latin American countries. During his trip, he met with the presidents of Mexico, Argentina, Peru, Colombia, and Jamaica. The express purpose of his trip, according to the state department was to rally Latin American support for economic sanctions against Venezuela, including the stoppage of Venezuelan oil imports to the United States. While in Argentina Tillerson spoke about Venezuela and how to put more pressure on the Maduro government.

Rex Tillerson: One of the aspects of considering sanctioning oil is what effect will it have on the Venezuelan people, and is it a step that might bring this to an end, to a more rapid end and a more rapid close? Because not doing anything to bring this to an end is also asking the Venezuelan people to suffer for a much longer time.

Sharmini Peries: Before Tillerson left the the US for the Latin American tour he said that the US will not recogonize the results of this election. Venezuela is still the 4th largest oil providers to the United States, taking in as much of one-third of Venezuela's oil production. Currently, US sanctions on Venezuela prohibit US banks and citizens to trade in Venezuelan bonds, which is seriously affecting Venezuela's ability to restructure its debt, do normal business transactions and to even make international payments. At heart of all of this is the Venezuelan owned American oil company CITGO, Venezuela relies on the income from CITGO to buy good and services needed for the Venezuelan people. Earlier this week I spoke to the Venezuelan embassy's Chargé D'Affairs in Washington DC, Carlos Ron, who joined me in our studio in Baltimore. One of the topics we talked about was US-Venezuelan relations. For full disclosure, I must say that Carlos and I used to work in Venezuela in Miraflores with President Chávez. So let's get that out of the way. Thank you so much for joining us, Carlos.

CARLOS RON: My pleasure.

SHARMINI PERIES: Carlos, you've been in this position as charge d'affaires for a couple of years now. Give us a sense of what normal relations with the United States look like. What's the atmosphere? Do you have contact with the State Department? Do you speak to anybody at the White House? Do you actually interact with congressmen on the Hill?

CARLOS RON: Well we haven't had a formal ambassador since 2010. However, the Venezuelan government has proposed in different periods of time the exchange of ambassadors under the premise that we could have a relationship that is respectful of one another. However, it has been, both under the Obama administration and the Trump administration ... They have not accepted these proposed ambassadors. We still have contacts with the State Department. We still have contacts with Congress and meet every so often, with some officials. However, it's very difficult to maintain a relationship in normalcy when your country is under constant threats.

Recently, last year, President Trump decided that he didn't want to keep the option of using military force against Venezuela ... he wouldn't rule it out. So, under that scenario, it's very difficult to have normal relations.

SHARMINI PERIES: Now, the relations with Cuba have obviously gotten a little better, at least it was under President Obama, where they were moving to normalize relations with Cuba. However, at the same time, there was a steady decline of relations with Venezuela, more outspoken sanctions against Venezuela. Give us a sense of what are the sanctions that are in place currently between the Obama administration, and now, with the Trump administration, and how this is affecting Venezuela, Venezuelan people in particular.

CARLOS RON: So there's a different set of sanctions that have been applied to Venezuela. Most of the officials in the United States will tell you that they're not really that serious or they're just targeted as specific individuals, but in reality, there's a list of actions that they're taking that are hurting the Venezuelan people. For example, I would point out the main one being Citgo, which is a company owned by Venezuela's national oil company, PDVSA, that works here in the United States, it can't repatriate any more of its funds, so there's a block on Citgo funding, coming back to Venezuela.

This is funding that, in many instances, was used to buy medical supplies, other types of supplies for internal production, other goods, food, all these other items. So, it really does hurt the Venezuelan society as a whole, not to be able to bring the money that it made in Citgo back. Then there's others sanctions that-

SHARMINI PERIES: But this is a bit of a strangling. I mean, this is-

CARLOS RON: Of course.

SHARMINI PERIES: ... this is Venezuela's main productive industry being strangled by the United States.

CARLOS RON: Of course. And then you have the issue that we're not being able to renegotiate that. So, you can have the case that Venezuela, in theory, would have the money to pay its debts. But then, sanctions prohibit banks to process such money or to find a way to restructure with other creditors. You will find the situation where Venezuela enters default. That affects us because it exposes the country to a series of other legal actions against the country's assets inside or outside of Venezuela.

But there's other sanctions also that I would say that are not really spoken about in the sense that, the individuals, for example, that have been sanctioned. They're important leaders of the country. I mean, that creates an atmosphere that banks, other businesses, trying to make deals with Venezuela decides that it's not a trustworthy country because its main officials are being sanctioned. I mean, the president's sanctioned, the vice president's sanctioned, and at the end of the day, that also hurts. For example, we have about $2.5 billion dollars right now that are stuck in international banks, because those banks will not process our money. Now, the sanctions don't tell explicitly to banks to-

SHARMINI PERIES: Not process it.

CARLOS RON: ... not process it. However, the banks, because they know the Venezuela's under sanctions, because they know our officials [are] under sanctions, and then they decide to look at the money for, you know, keep it under scrutiny for a certain period of time or decide after a while not to process. That's delaying our payments. That's not on allowing us to make important purchases and that's a real difficulty. A lot of officials ... The rhetoric of U.S. officials is sometimes that Venezuela is in need of a humanitarian aid, and they wanted help. If there was really an interest in helping out the Venezuelan people, the first thing they would do is something so that we could actually have access to our funds, and we could purchase the food, the medicine and the things that we need to provide for our people.

SHARMINI PERIES: Right. And give us a sense of the issues that the U.S. government is citing when you attend these meetings. Why are they imposing these sanctions?

CARLOS RON: Well, at the end of the day, you see that it's basically, it's all political. I mean, they decided that they don't agree with the political positions that President Maduro has taken, with the decision that the Venezuelan people have taken during the different elections. By now, in 19 years, we've done over 24 national elections. However, there is no agreement and coincidence in the worldview, and I think that does affect to the point that what we clearly see is an intention of undermining our institutions, and eventually, regime change in Venezuela.

SHARMINI PERIES: And is it also affecting the credit rating of Venezuela? So it cannot renegotiate its loans with other countries or other banks?

CARLOS RON: Sure, and you see Venezuela ... It's interesting, because Venezuela has paid -- until these set of sections were applied last year -- Venezuela had paid religiously all of its debts and on time. And yet, we have, for example, I think with Chile, we have about the same ratio of payment. However, our rating is much lower because of this political situation, because of these sanctions and this constant mentioning Venezuela in statements from the U.S. government, because it sort of breaks the trust that banks have in the country.

SHARMINI PERIES: Need to have in terms of their confidence levels to invest in the country.

CARLOS RON: Exactly.

SHARMINI PERIES: Now, off the top, I was saying that Venezuela is the fourth-largest oil provider to the United States. So this is not a light-weight country in terms of trade relations.

CARLOS RON: Sure.

SHARMINI PERIES: So, this has happened before where there's all these threats to cut off the oil supply as Tillerson did, so that Venezuela's not able to sell the oil to the United States. But we have all the major oil companies here in the United States doing business in Venezuela. They hold leases to the reserves and so forth. So how does this affect the relationship in terms of corporate America and Venezuela?

CARLOS RON: Well I think that there's a point that what the U.S. government should pay attention to is the fact that many companies are, like you said, are working in Venezuela, and many of them would be also affected by these sanctions. However, there's also companies that are not working in Venezuela, and they left because they weren't able to tolerate a more progressive stance that President Chávez, for example, made. I'm particularly thinking about Exxon Mobil. Exxon Mobil left around 2006 because it didn't want to comply with the oil-

SHARMINI PERIES: The changes in the contracts.

CARLOS RON: The changes in the contracts. And since, ever since, it has also been trying to create other problems for Venezuela. For example, we have a border dispute that for many years, with Guyana, over a certain region, and there's an agreement that we abide by where nobody should be doing exploration in that area unless it's of mutual consent, until the issue is resolved. And now, Exxon has been, from last year and a half, trying to get in there and making deals with the Guyanese government in order to enter that area, which is an area that's relatively close to the Orinoco Belt where most of the reserves of Venezuela still lie.

SHARMINI PERIES: So being in Guyana would allow them to siphon the oil from that reserve.

CARLOS RON: Oh, in a way you see the intent of certain oil companies also interested in a regime change in Venezuela. So, they could have more favorable terms.

SHARMINI PERIES: And favorable terms in terms of what they had before, pre-Chavez?

CARLOS RON: Right.

SHARMINI PERIES: All rights to and access to oil.

CARLOS RON: All rights and royalties for over 50%.

SHARMINI PERIES: If you speak to the business community that works in Venezuela in one way or another, whether it's airlines or whether it's the oil sector or anything, they would say that the current situation in terms of stability of the bolivar versus the dollar, and the exchange rate, is imposing quite a bit of havoc in the economy, and it is for the people who live there too. What is the government doing to address this problem? And I understand that just recently it took on the issue of trying to stabilize the currency, which we will take up in the next segment, because we are going to talk about the economy.

But quickly, in this segment, tell us what the government is doing to stabilize the currency so that that companies and businesses and airlines and so on can do business in Venezuela with some confidence.

CARLOS RON: Well I think we can think of this out of the context of sanctions. I believe it's important to keep that mind in, because whatever measures the government takes, they're all still going to be affected somehow by the implementation of these sanctions. So a matter of fact, last week, there was a forum and one of the think tanks in Washington where the Secretary of Treasury was talking about a loan that was going to be given to Venezuela by the Andean Development Fund, which is a CAF, and how they were interested in blocking, basically blocking that fund, because again, part of this same tactic to sort of circle Venezuela and block it out of financing.

What we're trying to do is solve some structural economic issues in Venezuela. As you said before, I mean, we eliminated one of the exchange rates that was to 10 bolivars to a dollar, and it was used basically for the purchase of foods and medicine and other primary products. So now, there's going to be market access to another rate that is more realistic with the inflation rates and all the other market forces at play. At the same time, the government is doing things so that the effects of these measures somehow are not felt by the most needed in society.

I mean, we have a way, a mechanism called CLAP, which is a distribution of basic food products at cost of very low prices for ... It's reached over a six million families already in the country. We have also issued the card of the Carnet de la Patria, which is the card of the homeland, basically, the rough translation, which is a way to subsidize not the products but directly the families that need specific subsidies and aid. The idea there is to break the chain of the previous administrations did of subsidizing directly the products and not the people that needed it most.

SHARMINI PERIES: And yet, the people in Venezuela are suffering. They can't get basic food and medicine and supplies that they need in order to function. Every day, I hear of stories of not having diapers, not having toilet paper, not having basic goods needed to function, and this is coming from people that are pro-government. Why has it taken so long for the government to address the exchange issue? And isn't there more aggregate, more socialist ways of addressing this problem than just subsidizing those who might or may not need it?

CARLOS RON: Well I think the issue here is not ... It's not really something that depends only on measures that the government can take. But you have to understand that there's been basically a war on Venezuela's economy. Not only, like I said before, because of sanctions on Venezuela from outside, but also you have the internal distribution chains that are in private hands who have also targeted ... that they have imposed targeted scarcity on certain products. Usually, if you take a look at when the peaks of scarcity is, in Venezuelan recent history, it's usually right before electoral processes, right before elections.

That's where you miss most of those basic products, that you say, that people aren't able to find. It's important because it's something that it's aimed at creating the stress on the people, and then with that, building upon that idea that Venezuela needs a foreign intervention. At the end of the day, it's not much different from what we saw in Chile, '73, or what we've seen in other parts of the world where right before, there's foreign intervention. That's not to say that there aren't things that the government can do to improve. I think that there has been a true effort to find solutions, and again, like I said, CLAP was one, you know, the subsidizing families directly.

There's other issues that those other areas that have already been boosted by the government. For example, nobody talks about housing, but in Venezuela, there has been a steady growth of public housing that has been constructed during this crisis and that has been given to a lot of families that didn't have a home before. So there's measures to try to ease the pain, but again, it's very difficult to have a solution when you have attacks, sanctions from outside, when you have attacks from inside that are targeting or promoting targeted scarcity in order to have a political outcome.

SHARMINI PERIES: All right, Carlos. Let's leave it here for now, but we will take up the issue of the exchange rate and how it's affecting people, the multiple exchange rates that are there still, and how this is affecting ordinary people in terms of inflation in the next segment. Thanks for joining us.

CARLOS RON: Thank you.

SHARMINI PERIES: And thank you for joining us here on The Real News Network.



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