Creating trust, Venezuela’s challenge after the temporary suspension of sanctions

Whether or not the temporary suspension of US sanctions will have an impact on the Venezuelan economy will depend on the president Nicolas Madurowho must create confidence in those who have interests in doing or resuming business in their country, with signals that correspond to the conditions established by Washington to maintain relief, experts warn.

The US announced last week the lifting of several sanctions, including those on oil and gas, for six months, in response to the agreement between Chavismo and the opposition on electoral guarantees for the 2024 presidential elections, which include international observation.

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

Economist Luis Zambrano, member of the Institute of Economic and Social Research of the Andrés Bello Catholic University (IIES-UCAB), said that Caracas must demonstrate that “there is a will” so that he “political problem is resolved.” Otherwise, the risks “they are very tall”.

But, in his opinion, the Government gave a signal “Very bad” last Thursday, when the official chief negotiator, Jorge Rodríguez, asserted that politicians who are disqualified cannot be candidates for the Presidency, and that Venezuela “does not accept pressure, blackmail or interference from any power or country.”

In the end, according to Zambrano, expectations “They are very important” and affect the decision of whether or not to make an investment, and given the nature of the US decision, which establishes certain “political conditions”there is uncertainty about “what is going to happen in the next six months.”

A limited impact

Venezuela, thanks to the negotiations and the temporary suspension, enters “hard” in the international energy market, according to the Government, which expects a “impact on medium-term income.”

For its part, the IIES considers that, although the survey “it will have a positive effect”, this will be “limited, given restrictions on infrastructure and services.”

Zambrano considers that sanctions relief gives “a margin in which production can be increased” oil company, which closed September at 762,000 barrels per day (bpd), at about 150,000 bpd“maximum about 200,000 barrels.”

But for “go further”, the lifting of measures “it’s not enough”assured the expert, for whom there is “a set of factors” that limit the “possibility of expanding” the production.

The recovery of the oil sector requires, in addition to “very important investments, which today PDVSA has no chance to do”human capital, electricity, roads, transportation infrastructure and security, aspects in which the Caribbean country has flaws, in the opinion of the researcher.

“There are some limits. Even in the best conditions, you have that problem that means you cannot make gigantic leaps or return to two million barrels,” assured Zambrano, who recalled that the sanctions “they accelerated the deterioration process” of the industry, which a decade ago produced 2.78 million bpd.

No sanctions

The financial analysis firm Ecoanalítico estimates that the economy will grow by 9.9% next year compared to 2023 in a scenario without sanctions, which would mean a “increased oil production”, also driven by the “incorporation of others” energy companies, such as the Spanish Repsol and the Italian Eni.

According to economist Asdrúbal Oliveros, director of Ecoanalítica, the suspension is “quite wide” and “It is practically a revocation of all the sanctions that the Government had,” which “the panorama changes for the year 2024.”

However, he added, the “Uprising does not solve problems alone”and Venezuela is going to have to “renegotiate and negotiate terms and conditions with the oil companies.”

Furthermore, consider that a “key theme” be “how Chavismo will resolve the dilemma of granting guarantees for a competitive election and operating without sanctions, but with the possibility of losing power.”

Since Monday, the Executive and other powers of the State have maintained a crusade against the primary process held on Sunday – into which yesterday the Prosecutor’s Office opened a criminal investigation – in which, according to the organizing commission, 2.3 million Venezuelans participated, including those who are in the country and the exiles, who voted, of which 92.35% chose Machado.

The Government, which called on the US to begin a “new stage” in relations, broken in 2019, hopes that the temporary suspension will be the first step towards an uprising “definitive and without conditions” of the “unilateral coercive measures”, but shows no intention of enabling disqualified opponents.