This week Venezuela experienced one of the most severe and widespread blackouts in recent memory. The city of Caracas and nineteen of Venezuela’s twenty-three states were plunged into darkness for nineteen hours initially, with the blackout continuing for another day in most of the country. Every aspect of Venezuelan life was affected - Caracas’s metro and international airport shut, hospitals couldn’t function, and schools closed.
Like the rest of Venezuela’s creaking infrastructure, its power grid has fallen victim to decades of political mismanagement. In 2007, ten state-owned and six private-owned electricity companies were nationalised to form the giant Corpoelec. Competent leadership of this massive and vital company was essential. However, the installation of Chavista managers chosen on political grounds rather than merit led to mismanagement on an epic scale. The power grid cannot match demand, nor can it guarantee any amount of reliable electricity.
Mismanagement in the energy sector was compounded by dwindling revenues. Price controls steadily detached revenues from costs over the years. The economic collapse of recent years now means that there is little money available to fix problems. However, even when Venezuela rode high during the oil boom of the 2000s, the electricity sector was neither improved nor made more resilient. Instead, as with every other Venezuelan state enterprise, it was looted by unscrupulous and corrupt managers and politicians.
A long list of politicians and political favourites have been involved in looting the sector. They include: Nervis Villalobos, deputy minister for electricity under Chávez from 2004 to 2006; Javier Alvarado, former deputy minister of energy and petroleum and director of Corpoelec from 2007 to 2010; Diego Salazar, cousin of former energy minister (and former ambassador to the UN) Rafael Ramírez. Rocio Maneiro, current Venezuelan ambassador to the UK and associate of several leading British politicians, is alleged to have hidden $4m in Andorra between 2012 and 2015.
In one case, a group received at least $2 billion in bribes from Chinese companies in return for awarding infrastructure contracts, many of which were never completed. Court documents reveal the lavish way they spent their ill-gotten gains: €493,573 worth of Chateau Petrus 1990 and Dom Pérignon, €953,000 on bespoke suits, €1.7 million on 107 luxury watches, and €516,012 on helicopter hire. Following the Chavista model of wealth redistribution, establishment officials have been siphoning off funds from the many to their relatives and associates across the world.
Another case involves the company Derwick Associates, owned by youthful Chavistas close to the then head of the state electricity company Javier Alvorado. Following Chavez’s declaration of an ‘electricity emergency’ and despite Derwick Associates having no experience in the energy sector, it was awarded 11 contracts without competition to the value of $2.9 billion. Derwick Associates invoiced $5 billion, and much of the work remains incomplete.
The regime’s record on major energy projects is truly dreadful. After a two year investigation, National Assembly Deputy Julio Montoya reported in 2016 that of the $30 billion of works financed by the Chavista government to address the electricity emergency, 96% had either not started or were not operational. No progress has been made since then. Seventeen years have passed since Chávez announced the construction of the huge Tocoma hydroelectric dam in 2002. Thirteen years have passed since the construction contract was awarded to a consortium led by the corrupt Brazilian firm Odebrecht. Billions of dollars have vanished. And there is still no electricity being generated.
The failings of the Venezuelan energy sector are mostly the responsibility of Hugo Chávez. Chávez nationalised the private electricity companies, introduced price controls, politicised management, failed to maintain the power grid, and responded to the inevitable failures in supply by authorising massive corruption in the procurement of new capacity. Chávez’s legacy is one of shadows and darkness.
More information on the Venezuela Campaign can be found on their website.