Today, Tomorrow and Beyond the Crisis
Here is our contribution to the Institute of the Americas’ special report on Covid-19 and its impact on the Latin American energy sector.
Venezuela is bracing for a pandemic at a time of unparalleled political crisis, and economic and infrastructure collapse. Local consulting firm Ecoanalitica expects Covid-19 to lower Venezuela’s GDP by 15% in 2020, on top of a previously forecast 10% decline.
On March 16, Venezuela imposed a nationwide quarantine and travel ban. Because most Venezuelans depend on daily wages to survive, only limited areas of major cities have observed lockdown. The country’s political crisis has precluded it from accessing international aid, including multi-lateral financing, as organizations like the IMF find themselves unable to collaborate with state institutions that lack legitimacy.
Venezuela’s oil production has been in freefall. Average output in March came in 155 mb/d below January levels. U.S. sanctions and crashing oil prices have severely restricted exports. Covid-19 is compounding PDVSA’s woes, as employees are unable to get to work. We expect to see production fall 45% month-on-month in April.
What are you most worried about?
Power supply, gasoline availability and access to potable water will be major short term challenges. Bloomberg cites a Central University of Venezuela study, published January 30, 2020, that shows Venezuela’s hospitals have recently averaged 342 hours each month without electricity, and eight of every ten hospitals confirm weekly interruptions in water supply. Roughly 80% of the population does not have regular access to potable water.
To make matters worse, water levels at the Guri hydroelectric facility, which supplies 60% of Venezuela’s power, are currently in the emergency zone, at 247 meters above sea level. If the dry season is prolonged, and Guri generation is curbed, the risk of national blackouts will increase exponentially. Covid-19 critical care requires ventilators, which cannot operate without electricity.
Venezuela’s internal market typically consumes 140 thousand barrels of gasoline each day. PDVSA has not received a single cargo of finished gasoline since February 29. The collapse of domestic refining capacity has caused a gasoline supply shortage that will likely lead to food distribution bottlenecks in the coming weeks. So even if international aid does reach the country, there may not be enough gasoline to fuel transport and emergency vehicles. Food shortages will inevitably exacerbate virus transmission as people rush stores for basic goods or are unable to self-isolate because they cannot achieve adequate food stocks at home.
What is the single most important energy policy government should consider implementing coming out of the immediate health care crisis?
It will be impossible to implement critical energy policy immediately after this health crisis without first achieving political resolution. Once Venezuela’s democracy and institutions are restored, U.S. sanctions must be quickly lifted. The government will have to move fast to secure financing for the maintenance of the country’s power generation capacity and, equally as critical, transmission and distribution infrastructure.
Download the full report here: Covid-19 and Latin America’s Energy Sector: Today, tomorrow and Beyond the Crisis
Expert contributions from: Andres Chambouleyron, Argentina; Alvaro Rios Roca, Bolivia; Nelson Narciso Filho, Brazil; Kevin Ramnarine, Caribbean; Silvia Alvarado, Central America; Ronald Fischer, Chile; Raul Gallegos, Colombia; Walter Spurrier, Ecuador; Leonardo Beltran, Mexico; Beatriz de la Vega, Peru; Marta Jara, Uruguay; David Voght, Venezuela.
Special thanks to Jeremy Martin of the Institute of the Americas for coordinating this report.