Introduced by Norman Anderson, Chair/CEO CG/LA
Thank you, Norm, for the kind words and to the CG/LA team for convening this discussion highlighting the future of Venezuela.
Venezuela’s infrastructure needs are far more severe than other Latin American countries because of years of neglect. And because their economy has shrunk between 5 and 25 percent a year under Maduro, the amounts seem disproportionately large. Commitments therefore must be underpinned by confidence in rapid economic growth. That confidence will be based upon economic reforms, rule of law, transparency and integrity in government and business, global cooperation, and regional integration. Growth also will require massive initial aid to jump start the engine.
Today’s presentations are an important step, and I look forward to working with each of you on the rebirth of Venezuela. Before we discuss the solution, let’s look at the situation today: Inflation rates were relatively stable until Maduro’s 2013 election, after which they soared to over one million percent per year. Most Venezuelans cannot afford a basic 2,200 calorie diet, and the average adult involuntarily lost 24 pounds last year.
Nothing works properly. Not electricity, not water, not sewage, not the bus system, not healthcare, not distribution of food or medicine, not much liquidity. Over 4 million people have fled; Combined Venezuelan debt is about $190 billion and climbing; GDP has steadily shrunk since 2014; And neither the Maduro government, nor its allies, are capable or willing to solve these problems.
Venezuela will continue to deteriorate until the internationally recognized government of Juan Guaidó is able to implement needed economic, political, and social reforms. At this breakfast, you will hear from President Guaido’s Ambassador to Brazil Maria Teresa Belandria, economic advisor Daniel Sierra, and from Victor Garcia, an expert on Venezuelan oil and gas. They will discuss their vision for Venezuela’s economic reform and recovery.
In order to prepare for the days after a change in regime, the National Security Council asked Commerce to develop a U.S. whole-of-government approach to economic stabilization of Venezuela after the exit Maduro and his cronies. Fourteen different federal agencies and nearly 100 people have worked for four months and produced hundreds of pages of action items and their time phasing.
ALL of our work follows on one overriding assumption: Everything we are working on are suggestions – The Guaido government that will decide what is best for the people of Venezuela and how the international community can best help improve the situation. Coordination with and support for them has, and will continue to be, the keystone of our entire effort. We also work closely with Brazil and other partner countries in Latin America, as well as the International Financial Institutions like the Inter-American Development Bank, and executives with recent private sector experience in Venezuela.
We established four main workstreams in the stabilization process – energy, macroeconomic and financial stabilization, agricultural normalization, and private sector rehabilitation. There are important elements in the short, medium, and long term for each. Both from humanitarian and political perspectives, there must be quick and visible benefits to the population.
The short term is immediate humanitarian and other relief in the first one to two months, the medium term is work to reverse the impact of socialism in months three through twelve, and the long term effort is to restore sustainable economic growth.
In the energy workstream:
“Immediate Relief”: Liberalize the sector and promote participation of private firms, including from the U.S., through the new hydrocarbons law under consideration in the National Assembly.
“Reversing Socialism”: Facilitate private investment, rehabilitation of power generation, and oil bid rounds. During this time the government will fully establish their terms of governance for energy firms and investments. Remember – even such simple things as ordering spare parts were neglected – so undoing the effects of socialism is no small task.
“Restoring Growth”: The U.S. will continue technical assistance to create conditions for sector revival. The one-year goal is to reverse the decline in energy-sector investment and production, facilitating the infusion of money and skills in oil, natural gas, and electricity.
In macroeconomic and financial stabilization:
“Immediate Relief” : The U.S. will ease sanctions, promote domestic and international trade credit, deploy technical advisors, and engage international financial institutions to build confidence in Venezuela’s new economic policies.
“Reversing Socialism”: Overhaul Venezuela’s central bank, tax system, fiscal institutions, debt, and banking sector in the context of a long-term IMF deal and the need for economic stability and free elections.
“Restoring Growth”: Continuing reforms, capital and talent infusions, including the return of expats, to trigger sustainable economic growth.
In agricultural normalization:
“Immediate Relief”: Support the provision of immediate food aid, jumpstart imports of seed and fertilizer equipment, engage technology suppliers and domestic producers.
“Reversing Socialism”: Foster U.S.-Venezuela agricultural cooperation and stimulate local and regional supply chains, helping domestic producers to meet more of the country’s needs.
“Restoring Growth”: Strengthen technical expertise, improve capacity and standards, develop a national market information system, reform land ownership, and increase access to credit.
And, in the private sector restoration workstream:
“Immediate Relief”: The U.S. will remove commercial restrictions for U.S. firms, mobilize business contacts with Venezuela, and foster a constituency for pro-market, pro-business reforms. For instance, the Department will promptly create a virtual and then in-country clearing house with real time intel on trade and investment opportunities for U.S. and international businesses.
“Reversing Socialism”: Liberalization of Venezuela’s business climate, the removal of state controls, a privatization strategy, the reform of commercial law, and the fight against corruption will help attract foreign investment.
“Restoring Growth”: This will be an ongoing process that builds upon the earlier efforts.
Infrastructure investment, of course, will be integral to all this work. Working with us, the Guaido government, other partners, and experts have identified more than 20 critically important energy, infrastructure, and environmental projects for the economic stabilization of Venezuela.
The key investment projects focus on immediate need for rehabilitation and modernization, in areas like electricity, gas, sewage, and water. The bus system needs immediate attention – and spare parts for repairs. Physical infrastructure (roads, ports, and bridges), rehabilitation and, in some cases, completion, is necessary to ensure connectivity of large cities with the country’s interior.
Expanding the bandwidth and the capacity of key ports and bridges is vital for the mining and the oil and gas sector. And so, we are already engaged with the private sector and international financial institutions to move these projects forward. Let me reiterate, the support, expertise, and investment of the global business community will be crucial to these projects and to the economic restoration of the once great country of Venezuela. We believe wholeheartedly that its current fate need not be a permanent life sentence.
We are pleased that CG-LA has convened this meeting, so we can strengthen our relationships with you, and learn what are your preconditions to the huge amount of infrastructure investment needed and the logical time phasing of projects.
I look forward to hearing the discussion and getting your input.
Thank you again, and let us begin.