A Life in Venezuelan Oil and Politics: Second Installment

A Life in Venezuelan Oil and Politics: Second Installment

Eduardo Blanco, a self proclaimed ruler of the Blanco family, is my Grandfather who was born, raised, and currently lives in Caracas, Venezuela. Once, the country of Venezuela was the most affluent in South America in part to its booming oil industry. Now, Venezuela is a state of social, economic, and political crisis. With Caracas named the most dangerous city in the world, inflation skyrocketing, and a government rampant with corruption, Venezuela is in chaos. Eduardo Blanco graciously recounted his experiences growing up in Venezuela, working within a leading oil and natural gas company, as well as his insight of the Hugo Chavez administration and the long term effects of the “Chavismo” ideology has had on Venezuela and it’s people. The following is a transcript of his recount of his life and career in Caracas, Venezuela.


This is the second and final instalment of the series.

Talullah Blanco and her grandfather on vacation in San Francisco.
Talullah Blanco and her grandfather on vacation in San Francisco.


Can you recount your experience of essentially being forced into early retirement by late President Hugo Chavez?


When Chavez came into power, I lasted six months after I realized that they were doing things that I was in total disagreement with. After having difficult encounters with his affiliates in the company, I retired. The decision was not hard on some account and on the other hand difficult.

It was easy because the people affiliated with Chavez on the PDVSA board were in a crusade to get rid of the most senior officers of the company.


I have to give you a little background. During 1998, the way the payment of the years you worked in the company was changed. The people that had been in the company and the previous companies like Exxon for example, were adversely affected if they stayed. So many asked for their retirement. The highest ranking officers in key departments decided to stay on, more because of loyalty to the company. After a short while, it was obvious that they [those executives who stayed] did not care about the company. They have an idea that the company should be used for whatever purpose they could think of. For example, funding the missions, building apartments, importing food and selling it . All of these [programs] competed against the medullary activities of the company and the funds for investment.


If my memory serves me right, the total amount of employees was 45,000 people and we were producing over 3.0 million barrels [of oil] a day. Now, it is reported that the company has over 150,000 employees and the production is maybe less than 2.0 millions barrels a day. So anticipating this disaster, it was easy to leave.


It was hard because we did a lot of good and exciting things while working there. We left behind a bunch of good friends that later on were fired and their rights as workers totally ignored.


How has the Venezuelan political, economic, and social state changed under the Chavez administration?


My personal view of the political, economic and social situation of Venezuela before Chavez was that the political could be described as leftist social democracy ruled by two big parties and a bunch of small ones. No right wing or conservative party existed. The main focus of the big  parties was how to employ the oil income for the betterment of the Venezuelan citizens. The historic records show that they did a relatively good job in education, health and social improvement. The main issue was that as the population grew the oil income–which was the engine for all of the above–could not any longer sustain the demands of society. Many of the industrial options to increase the income were not enough to supplement the oil. The leftist view of the world gave them the concept that the state would be able to do everything. Obviously, they used the vast state properties to further the interest of the party. Basically, both parties were populist and this philosophy of governance produced a very inefficient government.


I had hopes for a radical change in the state of things with the second coming of Carlos Andres Perez. His government program was one of concentrating the efforts in the medullary responsibilities of any government–say health, education, justice–and let the private sector handle the rest. As you can see, many entitlements were affected even in his own party. He was boycotted, his program was partially implemented and later on eliminated and he was destituted and jailed.


Chavez came into power through a platform anti party and promised more power to the people, to erase corruption, and to increase economic growth. His promises were to develop huge industries based on the transformation of the raw materials in existence in the country. For oil, his argument was that we were in collusion with the big oil companies to rob the state.


Chavez had the idea that we sold out to the companies and by using the long term belief that the government can do everything, his campaign was quite successful.


The reality of his government was quite different than his promises. He did modify the constitution to conform to more or less what he promised. But in practice, he went over into the implementation of his socialist ideas. He tried to modify his own constitution to a socialist one but a referendum was realized and it did not pass. However, he did implement many of the changes via decree. Many of his economic measures were oriented to provide goods and services with heavy subsidies. The main element of his policies was a strict exchange control–the main recipient of money is the government–that allow the government to import everything using a preferential rate. So with this grossly overvalued Bolivar [the Venezuelan currency], the government took many of the private sector functions and in turn it weakened the production capabilities of the country as a whole–importing instead of producing.


The end result of many expropriations was the control over the private sector. Rampant corruption within the government and their companions, there was a decrease of the domestic activities, rampant inflation and a massive exodus of young and professional Venezuelans. For example, all of the doctors that took care of us are now working in the United States.

All of this was hidden as long as the oil prices were high and growing. In a downturn of the oil market, all of the negative forces ran free.

Eduardo Blanco at corporate headquarters
Eduardo Blanco at corporate headquarters


Can you explain the state of Venezuela today under the Maduro administration?


During the Chavez era, the government enjoyed high oil prices. The large oil income was used to replace private domestic production of goods and services. His view was that this sector was his political adversary and financial sponsor of the opposition–with imports. Also, that income was used to promote parties along his same political lines in other countries and to finance their campaigns (Argentina, Bolivia , Ecuador and even in Spain, among many others). Cuba was the country that received the largest financial support. In turn we [the Venezuelan government] received advice and help to implement a socialist state. Areas like health, education, armed forces and internal security were greatly influenced by the political Cuban establishment. Along  those lines it was possible for the Chavez government to hide the problems that [the socialist] system brings with it.


When Maduro came into power the prices of oil weakened and the oil income was greatly reduced. On top of the large oil income, the administration acquired large amounts of debt with a payment profile skew to the short term. These two elements by themselves imposed on the Maduro administration a dilemma, either to declare insolvency or constraint imports. They spent all possible savings accumulated in past times (like the rights in the IMF), some foreign oil assets were sold, they leveraged Citgo and swapped the gold in the country reserves. Many other actions were taken to get dollars.


Since domestic production of goods and services was contracted, severe scarcities did appear. So like in any socialist country, the Venezuelans now have to queue in order to obtain the most basic products.


During Chavez, price controls were adopted for the goods and services that were basic for most people in Venezuela as well as an exchange control. There were several exchange control rates.

It is easy conclude that the domestic industry could not compete in food and medication, and when the government importers did not have money as before, food in the form of basic goods became scarce and rationing was put in place.


Another effect of these measures is that the oil company is forced to sell its dollars obtained in the export of oil at 10 Bolivars per Dollar, while the whole economy had a exchange rate on average larger than that. This creates a large cash flow deficit which was compensated by the central bank  with inorganic money which in turn produced inflation rates that in 2016 reached 700 percent and it is anticipated that for this year inflation will be over 2000 percent. So the country under Maduro experienced contraction of the economy calculated for 2016 in the order of 13 percent and the mentioned inflation.


Under these conditions the opposition did gain popularity. In the congressional election they obtained a resound victory (2/3 of all seats). Maduro government did however, practically deadlock the congress using the supreme court to impair all possible actions of the congress. They also, increase in coercive actions against opposition leaders and society in general.

The Blanco family at oldest daughter's graduation
The Blanco family at oldest daughter’s graduation

What are you thoughts on United States, President Trump’s political platform?


I still can not understand how he got elected. His political agenda is quite wrong. His stance in immigration goes against the spirit that made the US great, like the message that is inscribed at the base of the statue of liberty. The issue of the illegals should be handle in a different and more just manner. Environmental issues are totally ignored which may be a huge mistake. The slogan “Make America Great” is catchy but does not seems to solve issues on the economic front.


How have the government’s actions affected you and your loved ones and how does your experience differ from the average Venezuelan citizen?


My wife and I feel trapped and not free. We see how the government is limiting our rights to the point of not allowing elections that are mandated by the constitution. Moreover, they are implementing policies that discriminate. For example, what is called the Gran Mision Vivienda GMV. If you are a follower of the GMV you get an apartment that you can live in, but you do not hold the property of it. You may be able, like in Cuba, to exchanged for another one in a different GMV. If you do not live by their rules, you are expelled. Another element of their controlling policies is food. They sell a standard package of food bags called claps. These claps have 2 kilograms of Harina Pan for Arepas, 2 kilograms of pasta, 2 kilograms of rice and 1 kilogram of powder milk, all of it heavily subsidized. To get those claps you have to have the “carnet de la patria” which now let them census who are under their control and who does not. So if you are poor, you better get in line to be able to have some food. It is quite disgusting.


All of their policies are geared to make the majority of people poor to control them. Any protest or rebellion is quickly squashed by the army, militia, police and or paramilitary forces(colectivos). These forces are kept happy with preferential treatment. Their higher up associates that need to get goods and services are at the center of the extreme prevailing corruption.


When your grandmother and myself were younger and working, we put all of our savings in dollars and invested all of those dollars in the US market. At one time we invested in some limited partnerships to remodel apartments in Boston and even in a small building. We did build apartments in Venezuela and sold them. The profits were saved in dollars. My pension has been reduced to peanuts by inflation but we have been able to keep our standard of living by exchanging in the non official exchange market with small amounts of dollars on a regular basis.

The stuff that we are not able to get in the country, we get from other countries. For example, I have imported medicines for us from Spain, the U.S, Mexico, Colombia and Ecuador. We buy our food from supermarkets with higher price structures that get most of their supplies from private importers at unregulated prices. They do not sell regulated products on a regular basis. These types of supermarkets typically are independent and relatively small. The large chains are under strict supervision of big brother and are forced to sell regulated products. At these places, there are huge lines everyday.


Let’s not forget the bachaqueros, these people obtain for resale regulated products and resell them for a large profit. In the recent past a bag of flour to make Arepas was regulated at 21 Bolivars per kilogram and now they sell it for maybe 500 Bolivars. I did just buy one kilogram of that flour for 3500 Bolivars which is 1 dollar in the black market, but that is equal to almost 4 days of the basic salary of a Venezuelan citizen.


So if you have the means you can get along [in Venezuela] but I guess that is a valve that will be closed in the future. So there will be only one option for people that can not accept this government and it is to get the hell out of the country.

Talullah Blanco and her grandparents in Venezuela
Talullah Blanco and her grandparents in Venezuela