Caracas’ Push for Illegal Mining Is Creating Problems for Its Neighbors (Stratfor Worldview Assessment – November 20, 2018)

Venezuela’s desperate attempts to offset the loss of revenue from its collapsing oil sector are creating headaches for its neighbors. During the past two years, the government has put in motion a survival strategy to replace its declining hydrocarbon income with proceeds from mining exports, often from illegal excavations operated by criminal and militant groups.

But these illicit operations are spreading over the poorly patrolled borders into western Guyana and potentially into northern Brazil, meaning Caracas’ game plan could soon come into direct conflict with the interests of those two countries.

Desperate Times

For Venezuela’s government, the decline in petroleum income represents an existential crisis. Oil provided nearly all of its export revenue, and it is the glue that holds society together. Without it, the economy, public services and political stability fall apart. Over the past 18 months, oil production has fallen by nearly 50 percent to 1.1 million barrels per day (bpd).

The decline is significant enough that tiny neighbor Guyana — which until several years ago received minimal investment for exploration and production — could produce more crude than Venezuela within a decade. Complicating matters even more, Chevron Corp. is considering pulling out of a joint venture with Petroleos de Venezuela (PDVSA), the state oil and gas company. Even if Chevron pulls out slowly, the move would cost Venezuela about 100,000 bpd of oil production, which would not soon be replaced.

In addition, oil workers continue to immigrate in droves, production and refining infrastructure is failing and not being replaced, while the PDVSA is struggling to meet Chinese debt payments with oil shipments. The government of President Nicolas Maduro is looking at a further drop in oil income in 2019, as these pressures worsen.

A Survival Strategy

To save the day, Caracas is turning to its mineral-rich hinterland. Illicit mining, particularly of gold, has long been common in the east and southeast. In 2016 and 2017, the government tried to entice foreign firms to come to the Orinoco Mining Arc, an area of south-central and eastern Venezuela rich in gold and other minerals. But foreign companies were wary of making sizable investments with the military-run mining firm Camimpeg amid the country’s rapid economic collapse.

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