Layoffs from the largest private company in Venezuela reach 10,000

Oil & Gas 360 - Venezuela elections

The nightmare of shopping in Venezuela – NPR

Many of the smaller OPEC nations have been hit hard by the current commodity price environment, but none seems to be struggling more than Venezuela.

Ranked as the country with the world’s largest oil reserves at almost 300 billion barrels (the CIA World Factbook), with 95% of its export revenues coming from oil, the downturn has left the country in a difficult situation as it tries to combat a draught, a power deficit, triple-digit inflation, and most recently—the loss of beer production in the country.

Venezuela’s largest private company, Empresas Polar SA, which produces 80% of the beer consumed in the country, has shut down its production plants because it has been unable to buy malted barley for the brewing process because the government of Venezuela will not release the U.S. dollars needed to make the purchase.

“Polar is a very strong company, of course, and they can pay their suppliers,” said Yvan Schaepman, CEO of Boortmalt, a Belgian company that supplied barley to Polar. Despite the company’s strength, said Schaepman, the government’s reluctance to give the company foreign currency to purchase goods has left it unable to pay its suppliers, including Boortmalt. Polar says its foreign suppliers are owed more than $380 million, with many having awaited payment for as long as three years.

Polar said 40% of its sales come from beer, and that the closing of its fourth plant will increase layoffs from 6,500 to 10,000, reports The Wall Street Journal.

The situation in Venezuela has become so dire that all government employees have been told to take five-day weekends. The short work-week was instituted in the hope that it would reduce the load on the country’s hydroelectricity system, which has been badly strained by the draught.

Very little currency to go around – lower crude oil production in all regions – $10 billion debt in 2016 – Maduro’s government has no trust

The government exercises heavy control over the allocation of foreign currency in Venezuela, but there is little to go around these days with oil revenues in the gutter. Compounding the problem of low oil prices is production falling throughout the country. For the first time since 2008, Venezuela reported lower crude production in all regions in the first quarter of 2016.

The government is holding on to its dollars and other foreign currency as it tries to meet its debt obligations, which total $10 billion in 2016 alone. The country made a $1.5 billion payment in February, but analyst still expect Venezuela to default in the future.

The tension between Polar and the government runs deeper than the recent round of plant closures, however. Venezuelan President Nicholas Maduro has accused the company of waging economic war against his government. Officials from the Labor Ministry accompanied by National Guard troops inspected the Solar production plant to find out whether the company had truly run out of barley.

Maduro called the plant closure a criminal act, saying that prosecutors should act. “It’s a serious crime, very serious,” he said. “Plant closed, plant reclaimed, a plant that we’ll put into production with the law in our hands,” Maduro said in a televised speech.

Oil production down 188 MBOPD

Venezuela’s production fell 188 MBOPD in 2015 to 2.59 MMBOPD in the first three months of 2016. Completion times have quadrupled to 60 days from 15 days

Venezuela’s state-owned oil company, PDVSA, said earlier this year that it would be interested in refinancing its debt, as it struggles with its own bond payments.

“If the conditions are favorable, of course we’re interested,” Eulogio Del Pino said about potential refinancing as he exited the country’s National Assembly, adding the company was talking to international banks.

RANK COUNTRY (BBL) DATE OF INFORMATION
1 VENEZUELA 298,400,000,000 1 JANUARY 2015 EST.
2 SAUDI ARABIA 268,300,000,000 1 JANUARY 2015 EST.
3 CANADA 172,500,000,000 1 JANUARY 2015 EST.
4 IRAN 157,800,000,000 1 JANUARY 2015 EST.
5 IRAQ 144,200,000,000 1 JANUARY 2015 EST.
6 KUWAIT 104,000,000,000 1 JANUARY 2015 EST.
7 RUSSIA 103,200,000,000 1 JANUARY 2015 EST.
8 UNITED ARAB EMIRATES 97,800,000,000 1 JANUARY 2015 EST.
9 LIBYA 48,360,000,000 1 JANUARY 2015 EST.
10 NIGERIA 37,070,000,000 1 JANUARY 2015 EST.
11 UNITED STATES 36,520,000,000 1 JANUARY 2015 EST.
12 KAZAKHSTAN 30,000,000,000 1 JANUARY 2015 EST.
13 QATAR 25,240,000,000 1 JANUARY 2015 EST.
14 CHINA 24,650,000,000 1 JANUARY 2015 EST.
15 BRAZIL 15,310,000,000 1 JANUARY 2015 EST.

Source: United States Central Intelligence Agency


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