Saving the Venezuelan EconomyA combination of poor leadership and crippling sanctions have created a nation-wide economic crisis in Venezuela. The Center for Strategic and International Studies found that even before U.S. sanctions were placed on Venezuela, the country was already enduring hyperinflation, had seen food imports fall by 71% and more than two million Venezuelans had fled the country. Nevertheless, sanctions only exacerbated the crisis as Torino Economics found U.S. sanctions on Venezuela were associated with an annual loss of $16.9 billion in oil revenue. As a result, the Atlantic Council reports that more than 80% of Venezuelan households are food insecure and 3.7 million individuals are malnourished. Consequently, refugees filed more asylum claims globally in 2018 than any other country has. The number of Venezuelan migrants and refugees is expected to reach eight million in 2020, surpassing Syrian migration by more than three million. Reforms in the county are being implemented with the aim of saving the Venezuelan economy.

Saving the Venezuelan Economy

While this economic collapse still ravishes the country, there is certainly hope for the future. Due to both internal and external pressures, the president of Venezuela, Nicolás Maduro, has begun to encourage policies of economic liberalization and privatization that are indicating an economic rebound.

Toward the end of 2019, Argus Media reported the Venezuelan government was beginning to ease economic controls. Specifically, the Maduro government erased most price controls, loosened capital controls, tightened controls on commercial bank loan operations, and most importantly, began to accept informal dollarization. Immediately these policies curbed the levels of hyperinflation that had caused the food crisis across the country. Advisers estimate inflation to be at only 5,500%, a significant improvement compared to the International Monetary Fund forecasts that predicted inflation levels of more than 10 million percent. This is largely in part to the importation of dollars into the Venezuelan economy, pushing out the uselessly-inflated Bolivars. Indeed, a Bloomberg study found Venezuela’s economy is increasingly dollarized, as 54% of all sales in Venezuela by the end of last year were in dollars. Most importantly, food and medicine imports have rebounded, now reaching 15% of the population.

Privatization of the Oil Industry

In addition to the Maduro government relaxing economic controls, the economic rebound in Venezuela has occurred due to increased privatization of the oil industry. Despite being under the control of the military for years, Venezuela’s state-owned oil company has trended toward letting private firms handle operations, aiding in fixing the mismanagement perpetrated by the military’s control of the industry. For the first time in decades, the private sector accounted for more than 25% of GDP in 2019 and likely more by the end of 2020. Consequently, the Panam Post reported that oil production increased by more than 200,000 barrels, a 20% increase following privatization.

Initiatives to Help Venezuelans in Poverty

The South American Initiative, through its medical clinic, provides medical care and medicine to Venezuelans in need, with a special focus on mothers and children. To provide these essential services, it relies on donations that people provide on the GlobalGiving platform.

Fundacion Oportunidad y Futuro addresses hunger and malnutrition with regards to children in Venezuela. It is running in an initiative to provide meals to 800 school-aged children in Venezuela. It also operates through donations via the GlobalGiving platform.

The Future of Venezuela

While there is hope to be found in these reforms, Venezuela has far from recovered. The National Survey of Living Conditions indicates that more Venezuelans are in poverty in 2020 than in 2018, with food security decreasing another 7% over the past two years. The average income of Venezuela remains low at just over 70 U.S. cents a day. These reforms are the foundational steps needed to begin to reverse the economic trend that has relegated millions of Venezuelans to extreme poverty. If the economy is ever to correct itself, liberalization and privatization will be the jumping-off point for an economically thriving Venezuela in the future.

– Kendall Carll
Photo: Flickr

Gabon is a Central African country bordered by Cameroon, Equatorial Guinea and the Republic of Congo to the east and the Atlantic Ocean to the west. It is one of Africa’s richest countries because of its natural resources: however, one-third of Gabon’s citizens live below the poverty line, and the unemployment rate is 20 to35 percent among young people. Why is Gabon poor when the country is rich in natural resources?

The first reason for this is the decline in oil reserves and prices. Being the fifth largest oil producer in Africa, Gabon has experienced strong economic growth over the past decade. According to a report by the World Bank, “On average, over the past five years, the oil sector has accounted for 80 percent of exports, 45 percent of GDP and 60 percent of budget revenue.” An August 2016 report by the Guardian states that, due to huge oil wealth and a tiny population of 1.9 million, in 2015, Gabon had one of the highest GDPs in the continent at about $8,300. However, the country’s fiscal situation has worsened since 2015 after facing a decline in oil reserves. Gabon’s GDP growth slowed down to 3.9 percent in 2015. It was expected to deteriorate further in 2016. The declining oil reserves and prices are one reason why Gabon is poor.

Heavy dependency on the oil industry has led to a less diversified economy, which is another answer to the question “why is Gabon poor?” One challenge to the diversification of the economy is the poor quality of Gabon’s business climate. The 2016 Doing Business report ranked Gabon 164 out of 189 countries. The Gabonese government’s strategy for the promotion of non-oil sectors has so far been giving specific incentives to foreign investors. However, a recent World Bank policy note emphasized the “importance of improving human capital, building a fair and transparent business environment and improving the quality and cost of core infrastructure, as critical building blocks for economic and export diversification.”

Political conflict and turmoil seem to be another reason why Gabon is poor even though it is a rich nation. There are a number of political parties, but the Gabonese Democratic Party (Parti démocratique gabonais, or PDG) dominates the political field. Omar Bongo was the country’s president for 42 years, from 1967 until his death in 2009. The incumbent president is his son Ali Bongo Ondimba, who won the 2009 election against the backdrop of a social crisis. He was confirmed re-elected in 2016, which the opposition representatives refused to accept. This lack of transparency and fair play in elections has led to boycotts by the opposition and political unrest and violence at times.

Consequently, a rich nation has turned poor over the years. The Human Development Index ranks Gabon 109th, which is miserably low given its potential of oil and other natural resources. Data shows that about 30 percent of the population remains vulnerable, living with a monthly income below the guaranteed minimum wage of $1. Further, it has become increasingly difficult for people in 60 percent of the regions to have access to basic social services such as healthcare and drinking water.

However, the good news is that the Gabonese government has taken steps to improve the situation. In 2014, it introduced a new policy called “Assises Sociales” to define Gabon’s human investment strategy (SIHG). SIHG aims to assist low-income people to increase their income and reduce inequalities in access to basic public services. There is also hope that the deals that President Ali Bongo has signed with three Asian companies, worth $4.5 billion, will diversify the economy and bring more jobs to people at home, especially in rural areas.

Aslam Kakar

Photo: Flickr

Potential Rise in Poverty Among OPECThe drastic plunge that oil prices have taken from record figures of over $100 a barrel, down to averaging between $40-$45 a barrel, has left the economies of several OPEC countries beleaguered.

A potential rise in poverty among OPEC (Organization of the Petroleum Exporting Countries) is expected as oil is indeed the cornerstone of a majority of their exports and revenue has swung drastically since 2014.

The combined effects of excess supply and competition among markets over the years have impacted OPEC nations like Algeria, Nigeria, Venezuela, and Iraq. The economic uncertainty has deterred these large developing economies adversely.

An estimated 250,000 jobs have been lost as a result of the progressive decline in oil prices and many more are threatened owing to the 50 percent drop over the last two years. This crisis will result in a potential rise in poverty among OPEC, with declining national incomes overall.

Moreover, the presence of Boko Haram in Nigeria has also been a factor that is currently impacting its oil exporting capacity. The 50 percent price decline has only fueled this.

To combat a potential rise in poverty and economic instability, the African Development Bank plans to provide loans worth $10 billion by the year 2019 to bolster various sectors, including energy and electricity. Despite Nigeria’s depreciating currency and 70 percent poverty rate, this method can greatly increase investment capacity and attract more investment.

The Abidjan, a bank based in the Ivory Coast, also resolved to provide $1 billion for supporting the Nigerian budget.

A report by Nigeria’s Leadership newspaper has commended its diversification projects as a means to boost economic growth amid uncertainty.

Existing tensions between oil-producing nations have also escalated as a result of the plummet. Many nations argue about freezing and regulating their output. Consequently, mediating between countries is a viable way to ease the pressure. Iraq is currently heading a conciliation with Iran and Saudi Arabia in an attempt for both countries to reach a consensus regarding the crisis.

Ecuador, OPEC’s smallest member, was especially plagued by the plunge in oil prices as the government has to control and curtail public expenditure. The government has looked to OPEC remedy the situation in some way.

President of OPEC and minister of energy and industry in Qatar, Mohammed Saleh Abdulla Al Sada, is also working actively to agree upon a benchmark price and output level for all countries to adhere to. A renewed benchmark output of 32.5 million barrels has recently been discussed. This could alleviate the price volatility and circumvent a potential rise in poverty among OPEC countries.

Similarly, Algeria has also been a strong advocate of cutting production among OPEC nations as a means to raise oil prices again. Algeria is expected to see a 3 percent drop in its GDP this year.

Furthermore, political and economic turmoil in Venezuela, owing to the oil price decline and President Nicolas Maduro’s ration laws has resulted in food shortages and a 700 percent crippling inflation rate. Venezuela already has a concurrent poverty rate of 32.1 percent.

However, many neighboring countries like Chile, Peru, Argentina and Colombia are in the strategic position to aid the people and reach out to Maduro. Peru’s President Pedro Pablo Kuczynski recently called upon leaders to engage in the situation.

He believes that Peru’s pharmaceutical industry can be effectively used to help the country. Venezuela’s democratic Unity Alliance also echoes this view. Foreign aid is the only sustainable way for Venezuela to find its way through this major economic and financial bulwark.

Overall, a potential rise in poverty among OPEC countries may be the outcome of the drastic tumbling oil prices. It is vital that countries comply with OPEC proposals and guidelines to safeguard the interests of the economy and the people.

Shivani Ekkanath

Photo: Flickr

Poverty in Senegal
Senegal is a rapidly developing nation in West Africa. Like many developing nations, it is gaining access to lots of new technologies but still lacks many key tools for effective education among other issues.

More specifically, many schools in Senegal do not have electricity. While many technologies exist to foster education that can help to raise people out of poverty, few of these technologies can be used without a stable power source. However, the oil industry is emerging in strength and may be able to help end poverty in Senegal.

According to the International Monetary Fund, Senegal’s economy has been stable and growing at a rate of 6 percent. This is in part due to the development of the country’s oil industry. Oil is one of the world’s most demanded commodities. Despite this fact, the oil resources of Senegal and West Africa are mostly untapped.

Yet, interest in the region is increasing. The Scottish-based company Cairn Energy has stated they plan to spend nearly $70 million exploring projects to drill in Senegal; Australia’s FAR Ltd is considering setting up commercial operations in a basin off of the coast. This basin is speculated to contain at least 200 million barrels worth of oil.

The managing director of FAR’s development plan said that the expansion plan will yield “a world class oil field that can support a commercial development.” FAR has also noted that the costs of operating offshore have decreased by more than 20 percent since 2014. Because poverty in Senegal affects so many citizens, the government must take advantage of its emerging position as a major oil producer for the region.

Senegal’s economy is based largely on the agricultural sector. In addition to the lack of educational technology, poverty in Senegal often stems from agricultural workers who face the threats of drought and climate change.

However, the country benefits from peaceful leadership and one of the most stable democracies on the continent. With this in mind, the burgeoning oil industry may be able to help end poverty in Senegal.

Nathaniel Siegel

Photo: Flickr

Economic Crisis in VenezuelaOn Saturday, May 14, Venezuela’s president, Nicolas Maduro, issued a state of emergency in response to widespread discontent that had risen throughout the country. Protests and calls for a reform in the government came about because of the historic economic crisis in Venezuela.

Since the beginning of 2015, inflation within the country has been on a steady increase. During the months of June and July, it began to accelerate upward. By the close of the year, Venezuela was left with an inflation rate of 180 percent, the highest in the world. This has led to deficiencies in food, medicine and hygiene products.

However, the recent explosion of economic inflation is only a symptom of deeper troubles within the economy that have been building for the past years. Many are criticizing Venezuela for failing to diversify in products and services. Gretchen Bakke of the New Yorker summarized the economic crisis in Venezuela using the adage, “putting all its eggs in one basket.”

Various occurrences have led Venezuela to the brink of economic collapse, but three in particular bear mentioning:

1. Venezuela’s Dependence on Oil as a Profitable Export

Petroleum products made up roughly 93 percent of the $63 billion in exports that Venezuela made in 2014. This is not surprising, since Venezuela is sitting on the largest proven oil reserves in the world. Historically, various Venezuelan presidents have used petroleum production and exports to increase development, yet they failed to diversify their economic productions. In the 1920s Venezuela registered a third of its GDP as agricultural products, but almost a century later, these products make up six percent of GDP and less than one percent of the country’s exports.

Its identity as an oil-producing state has served Venezuela well in the past, but the tide is turning. With lifted sanctions on Iranian petroleum and increased oil production in the United States, Canada and Iraq, petroleum prices have been driven down by a saturated global market. The New York Times reported a barrel of oil to be 70 percent cheaper now than it was two years ago.

2. Venezuela’s Dependence on Water as its Primary Electricity Source

Almost 80 percent of Venezuela’s electricity comes from hydroelectric power. The international community has recently been pushing for cleaner energy (that which does not rely on fossil fuels) and hydroelectricity is one way to achieve these goals. However, hydro-power can be problematic when water turns into a limited resource.

Venezuela has currently been suffering through a three-year drought which many are attributing to El Niño, an intermittent weather pattern that has been accentuated by the recent rise in global temperature. In addition to the normal problems that are generated by water shortages, Venezuela is now facing a shortened work week due to the rationing of electricity for the many shortages.

These newly-prescribed measures are criticized for accelerating the process of economic collapse, since workers now have a shortened period in which they can earn money to pay for the necessities of life.

3. Venezuela’s Unipolar Political System

For years, the socialist party has dominated the branches of the central government, and in the recent escalations of the economic crisis in Venezuela have caused the government to “become more authoritarian,” as the Council on Foreign Relations wrote.

In December of last year, the opposing party finally took control of one part of the government, The National Assembly. Though a referendum is being constructed to oust Maduro from his seat, very few immediate solutions are being proposed to relieve the collapsing economy.

The economic crisis in Venezuela is provoking protests throughout the country. Various citizens of the country told the Wall Street Journal that they have to stand for hours in line to receive a small portion of food for the day. These individuals have hopes to change the trajectory of their nation, and with the majority of the people on their side, they may still have time to do so.

Preston Rust

Photo: Flickr

Poverty in Angola
Despite its economic success in the booming oil industry, poverty in Angola is a serious concern. The fact that a majority of Angolans live in extreme poverty contrasts greatly with the country’s booming economy. Angola is one of Africa’s most resource-rich countries. It is the second-largest oil producer in Africa and the fourth-largest producer of diamonds. In addition, the country is rich in such resources as minerals, lumber and fish. Although the oil industry in Angola brings in a majority of the state’s revenue, two-thirds of the population live on less than $2 a day and do not see the benefits of the industry.

The government claims that poverty rates have dropped in recent years, yet corruption is still a major factor. The question remains: “Where is this money?” Government elites and employees reap the benefits of the oil industry, while many Angolans live in arduous conditions. Additionally, the country possesses high infant mortality rates, poor access to clean water and sanitation and high illiteracy rates.

The civil war from 1975 to 2002 left Angola devastated, with countless deaths and millions of internally displaced persons. Angola can now boast a revived economic situation and an up-and-coming international profile. However, the country still has a great deal of work to do in its commitment to alleviate poverty in Angola.

The 2016 Human Development Index ranks Angola 149 out of 186 on the poverty scale, as poverty permeates the entire nation. Poverty in Angola is greater in rural areas, which contains 38.5 percent of the population. In fact, 94 percent of rural households are categorized as poor.

There is a very low electrification rate in rural areas of Angola, with only 6% of rural households having access to electricity. A considerable amount of the population (38 percent) does not have access to safe water sources. Consequently, the mortality rate for children under five is around 17 percent. In addition, many children do not have access to education, making future employment difficult. In fact, 34.6 percent of people have unequal access to education. As a result, 28.9 percent of the population have an unequal income.

The capital city of Luanda, one of the largest cities in Angola, drastically contrasts its outskirts. Just outside the city limits, hundreds of thousands of people live in extreme poverty.With no running water or proper infrastructure for sanitation, disease runs rampant. Diarrheal diseases, cholera, measles and diphtheria are just a few such illnesses.

According to the World Health Organization, there were over 2,000 cholera outbreaks in 2009. Yet, there was only 1 doctor available for every 10,000 people. As a result, countless families lack access to vaccines or clinics to treat these diseases.

In recent years, there have been successful reconstruction programs, including roads, airports, bridges, hospitals and schools. Although the Angolan government is beginning to make progress towards rebuilding, the answer for widespread poverty alleviation lies within the ruling party and channeling the revenue from the oil industry into the hands of Angolan’s themselves.

Kimber Kraus

Photo: Flickr

It’s no secret that two major resources that the world depends heavily upon are oil and gas, but in limited supply, they must be managed as work is put in to find more eco-friendly solutions. In the two-day conference, the Nigeria Oil and Gas Trade and Investment Forum organized by the Federal Ministry of Industry, Trade, and Investment will welcome thousands of representatives from different energy corporations to network and do business as well as listen to top-tier speakers from different firms based in Nigeria.

This forum will offer its delegates the opportunity to study new products and solutions that will further their companies, speak with global executives, hear from Nigerian dignitaries, and discuss the relevance of the Free Trade Zone to investment possibilities.

Here is this year’s speaker lineup:

Thomas Sule

Chief information officer and chief corporate services officer of Oando PLC. Prior to this position, Sule was the chief operating officer of the Helios Tower in Nigeria. His background on Bloomburg Business indicates that “Mr. Sule was focusing on strengthening HTN’s position as a leader in the industry and providing direction and leadership toward the achievement of the organizations, mission, strategy, and its annual goals and objectives.” Sule also has backgrounds in re-engineering initiatives as well as business processes and practice.

Adeolu Olufemi Adeyemi

As representative of GM Capital Projects and Shell Petroleum Development Company, Adeyemi’s main focus is on how technology can be used differently to improve efficiency. With the rise in mobile connectivity throughout the world, many successful companies are developing and using technology to raise their bottom-line profits.

Augustine Igwegbe

As CEO and MD for Ingwetin Glo Ltd and Former Regional IT Business, Igwegbe joined Shell Upstream International in 1988. “As the Shell regional Technology Manager for EP Africa, Mr. Igwegbe led IT department that managed one of the biggest private communication networks in Africa.” With his 28 years of experience and a B.Sc in Computer Science along with a background in banking, manufacturing and consulting, he hopes to introduce new business requirements regarding the delivery of IT services.

Ademola Agboola

Agboola is head of IT at one of Nigeria’s leading exploration and product companies, Pan Ocean Oil Corporation. Established in 1973, this is a joint venture with the Nigeria National Petroleum Company (NNPC). “Pan Ocean is a trailblazer in the bid to achieve the gas flare out objective of the Federal Government. Since 1984, Pan Ocean went ahead with its initiative on gas utilization despite the challenges of an under developed Nigeria Gas Market.” The core values of Pan Ocean are Integrity, Resilience, Safety and Security, Fairness, Excellence, Team Spirit, and Appreciation.

Rufus Ehikioya

Ehikioya is applications Analyst from Chevron Nigeria. Chevron is an established corporation worldwide that’s working toward sustainable economic progress and worldwide human development. “In the months that followed the creation of ChevronTexaco, the new company found itself looking for resources in ever-more-difficult environments.” Chevron is currently working with several different academic institutions in pursuit of renewable energy technology which is becoming increasingly accepted in the developing world.

Adepeju Adekunle

Adekunle is head of IT Projects at limited liability company Nigeria NLG Limited, producers and exporters of Liquefied Natural Gas. One of the current objectives of Nigeria NLG as of late has been to eliminate gas flaring, and thus far has brought down the amount of flares from over 65 percent to less than 25 percent. This company is owned by Shell, the NNPC representing the Federal Government of Nigeria, total NLG and Eni.

Adesina Odukoya

Odukoya is the director of IT Operations for sub-Saharan Africa GE Oil and Gas. GE Oil and Gas has approximately 45,000 employees worldwide and seven global research centers. “Total global natural gas demand may have risen by approximately 2.7 percent since the year 2000 but global LNG demand has grown by 7.6 percent per year over the same period, indicating an almost threefold increase in demand for LNG.” And since around 85 percent of offshore rigs use GE’s drilling system, the rise in demand works for the benefit of bases around the globe. With so many employees dependent on this kind of demand, GE Oil and Gas seeks to continue to expand, and will even be providing new technologies for a Trans-Anatolian Natural Gas Pipeline Project in the near future.

Anna Brailow

Sources: Bloomberg, Chevron, GE Oil and Gas, IT News Africa, Nigeria Oil and Gas Invest, Nigeria LNG Limited, Enterprise Mobility, Panocean Oil Nigeria, SMI
Photo: Global Village Extra

Petróleos Mexicanos (PEMEX,) Mexico’s state-owned oil company, has announced a record $28 billion of investment for the 2014 fiscal year. It is expected that the vast majority of money invested (approximately 85%) will go towards production and exploration for new oil fields.

The $28 billion figure is 10% higher than last year’s level of investment, which amounted to $25.3 billion, of which $19.3 million went to production and exploration of crude oil and gas fields. Despite this increase over last year’s investment level, PEMEX CEO Emilio Lozoya Austin claimed that in order to develop the country’s resources to their maximum potential, a further $32 billion would need to be invested.

In late 2013, Mexico’s legislature passed a bill permitting foreign companies to invest in PEMEX, a groundbreaking move that was not previously allowed since the company’s nationalization in 1938. This permission comes amidst flagging levels of oil production and Mexico hopes the move will boost its productive capacity.

While levels of PEMEX investment have increased steadily from 2008 onward, levels of oil production fell from 2.79 barrels per day to 2.54 million barrels a day in 2012, and levels of gas production fell from 7,030 cubic feet per day to 6,900 cubic feet per day over the same time period.

In 2008, PEMEX reported a production of 43.5 billion barrels per year, while in 2013 it reported 44.4 billion barrels per year. This slight increase can be attributed to the discovery of six new oil fields that added about 180,000 barrels per day at the end of 2013.

PEMEX is responsible for funding approximately one-third of Mexico’s national budget, with much of the revenue going towards social programs that improve education and infrastructure throughout the country.

Additionally, PEMEX hopes to increase exploration of deep waters in the Gulf of Mexico and improve its technological innovation in shale extraction through its newly minted partnership with the Russian oil giant Lukoil earlier this year.

– Jeff Meyer

Photo: Huffington Post
International Business Times, El Economista, Oil Price